In This Article

For investors who have sat quietly on their portfolios, weathering the storm of high interest rates over the past three years and accruing equity, the reward for their patience may soon be here.

With interest rates down and the Fed green-lighting the second of what could be multiple rate cuts, the opportunity to refinance and release capital to deploy into more investments or upgrades in existing properties to boost cash flow could present a financial sea change. 

Freddie Mac, the government’s mortgage underwriter, reports the average 30-year fixed mortgage rate has dropped to its lowest level since October 2024, and now sits around 6.19%. According to the Mortgage Bankers Association (MBA), many homeowners and investors have already begun the process, with refinance activity up 81% year over year for the week ending Oct. 17.

“The lowest mortgage rates in a month spurred an increase in refinance activity, including another pickup in ARM applications. The 30-year fixed rate decreased to 6.37% [now 6.19%], and all other loan types also decreased,” said Joel Kan, MBA’s vice president and deputy chief economist.

“We’ve seen increased demand for refinance as homeowners look to take advantage of lowering rates or opportunities to tap into the home equity they’ve built,” Bhavesh Patel, consumer channel executive at Chase Home Lending, told CBS News on the eve of the first rate cut in September. 

Desperation for Landlords to Refinance

Refinancing is a part of many landlords’ investment strategies, if rates are significantly lower (the refi metric has traditionally been a 2% difference between the old and new rates, but some websites have been touting 0.75% more recently). However, such has been the barren period of investing with high interest rates and soaring insurance costs that landlords and homeowners have thrown trusted metrics to the wind and looked for any opportunity to lower their monthly payments.

When the cost of a 30-year home loan fell 0.3% to 6.26% over the three weeks through Sept. 17, marking the lowest rate in 11 months, refinancing activity jumped up over 80%. However, it died down again once rates rose, the Wall Street Journal reported, adding that investors who buy houses to flip or rent out made up around 30% of purchases so far in 2025.

Pulling Equity Out of a Primary Residence to Buy an Investment for Cash

The opportunity to tap into home equity through a cash-out refinance not only appeals to existing investors but also to those who have amassed a nest egg in their personal residence and want to deploy it strategically through an investment. This presents an opportunity to make an all-cash purchase, depending on the amount of equity locked away.

Ruth Bonapace, mortgage loan officer certified in private wealth lending for US Bank, told BiggerPockets:

“I’m doing a mortgage right now for a couple in New York who have no mortgage on their primary residence, but would like to buy a modest place in Vermont to use for vacations and to generate income via Airbnb. Instead of paying a rate in the upper 7s for an investment or second home, they are taking the mortgage on their primary and paying cash for the new place. Having a cash offer will also give them an edge over other buyers when negotiating price or in a bidding war.”

It also allows them to take advantage of a lower interest rate on a primary residence, rather than a higher rate on an investment.  

Creating More Liquidity by Refinancing a Primary Residence

Bonapace says that the rate fluctuations of the past two years have made it challenging for her to map out a concrete investment strategy for many of her clients. However, the current downward path has eased the decision-making. She stresses that following the herd into refinancing is not a wise move, as each investor’s situation is unique. Sometimes, simply being creative with refinancing a personal residence can create more liquidity with less hassle than buying an investment property.

“A client of mine has a $2.2 million mortgage at 6.25% on a primary residence they bought two years ago,” Bonapace says. “They refinanced into a seven-year ARM at 5.5%. By taking advantage of the kind of wealth management relationship pricing that many major banks offer by opening an account with $500,000, they got another 0.375% reduction, bringing the rate to 5.125%. “

“At 6.25%, their payment is $13,545,” Bonapace adds. “At 5.5%, it is $12,491. At 5.125, it is $11,987. The difference between 6.25% and 5.125% is $1,467 a month or $18,804 a year.”

To generate $1,500 in cash flow with a mortgage rate of 5.5%, an investor would need to buy a property for $440,000, putting down 20% ($48,000) to secure a $352,000 loan. Despite the tax advantages and equity appreciation of owning an investment, an investor would need to weigh insurance costs, repairs, and the hassle of dealing with tenants to decide whether leveraging their money was worth it. Many might decide that simply refinancing a personal residence and saving the cash to deploy at a later date could be a better, less stressful move.

Why Size Matters When Refinancing 

Refinancing is not free. Bonapace stresses that the decision to refinance or not often comes down to how long you plan to keep an investment, and whether you can pay back the refinance costs with the added cash flow, factoring in rent increases. Equally, small rate drops of 0.25% won’t move the needle much on a small mortgage when factoring in closing costs; however, on a larger mortgage, it can make a significant difference to the monthly payments. 

A study by Neighbors Bank showed that most borrowers with a 30-year mortgage needed about a 0.67-point rate drop to see meaningful savings and break even within three years. Homeowners with 15-year mortgages, however, could benefit from smaller decreases; even a 0.50% drop could add more than $1,500 in savings over three years, depending on the loan amount.

Final Thoughts 

Choosing whether to refinance for a primary homeowner comes with clear-cut advantages: dropping an interest rate significantly, getting rid of PMI, pulling cash out for essential repairs, and, of course, having money to invest.

For existing real estate investors, it all comes down to one metric: cash flow. If refinancing reduces cash flow, it’s rarely worth it, despite the temptation to use the extra money for cosmetic upgrades. Unless they result in substantial cash flow, it’s best to save the funds from a rate-and-term refi rather than a cash-out refi, and to do the repairs with cash.

However, when cash-out refinancing, whether on an investment or personal residence, can result in substantially more money and decrease a tax burden in the process of buying a new investment, it’s worth looking into. Just remember to factor in all possible expenses, and be careful about ARMs unless you have a specific investment plan.

In This Article

This article is presented by Steadily.

It’s 11 p.m. when your tenant texts: Water is pouring through the ceiling, and it’s not stopping. Or maybe it’s Saturday morning, and you’re staring at photos of shattered windows and graffiti covering your vacant rental.

Insurance claims don’t just happen to careless landlords. They happen to be diligent, experienced property owners who thought they had everything covered. The difference between a minor inconvenience and a financial disaster often comes down to knowing what risks you’re really facing, and having the right coverage before a disaster strikes.

Most landlord insurance claims fall into just three categories. Operate with these three items in the back of your mind, and you’ll be better prepared when it comes to protecting your portfolio.

Let’s dive into what causes the most common (and costly) claims, how to prevent them, and how to make sure you’re properly covered—because the best claim is the one you never have to file.

1. Weather-Related Damage

Mother Nature doesn’t ask permission before wreaking havoc. Hail and windstorms are the leading causes of weather-related insurance claims, and they can turn a profitable property into a financial headache.

Imagine a severe storm rolls through. Your roof loses shingles, a tree branch crashes through a window, and water starts pouring inside. The storm may only last an hour, but the aftermath can look like weeks of coordination, costs, and chaos.

How to protect yourself

• Schedule biannual roof inspections: A $50 repair now beats a $15,000 claim later. Check for loose shingles, obvious damage, and worn materials twice a year.
• Trim trees aggressively: Any branch within 10 feet of the structure is a liability. One good gust is all it takes.
• Document everything: After any weather event, take clear photos and videos before touching a thing. Keep receipts and estimates. Adjusters love documentation.

Most landlord policies cover sudden weather events, but limits can vary, especially for emergency repairs or temporary tenant housing. Know those details before you need them.

2. Water Damage

If weather damage is the dramatic villain, water damage is the silent assassin. It starts quietly (a drip behind drywall, a tiny pipe crack, a clogged drain line) and ends with thousands of dollars in repairs.

Burst pipes and roof leaks account for most water-related claims, and by the time you notice them, the damage has usually been happening for days.

How to protect yourself

• Inspect plumbing seasonally: This is especially important for systems older than 20 years. Corrosion and weak joints are early warning signs.
• Winterize in cold climates: Frozen pipes are among the most common claim triggers. Insulate exposed pipes and keep heat on in vacant units.
• Maintain gutters and downspouts: Clogged gutters force water into foundations and walls. Clean them at least twice per year.
• Service HVAC systems regularly: Condensate drain lines clog easily, often causing unnoticed leaks.
• Educate tenants: Make it part of your lease that all leaks, no matter how small, must be reported immediately.

Standard landlord insurance covers sudden water damage, but not floods. If your property is anywhere near a flood zone, you’ll need separate flood insurance.

3. Theft, Vandalism, and Malicious Mischief

Few things sting more than pulling up to find your property vandalized or broken into. Theft and vandalism can shake your confidence, stress tenants, and eat into your returns fast.

Common scenarios include:

• Break-ins targeting appliances, copper wiring, or HVAC units
• Graffiti or broken windows on vacant properties
• Intentional damage from former tenants or trespassers

Vacant properties are especially vulnerable. One weekend of vandalism can result in thousands in losses and insurance red tape.

How to protect yourself

• Invest in visible security: Cameras, motion lights, and alarm signage deter opportunistic criminals.
• Light up your property: Darkness can sometimes invite trouble. Bright LED lighting at entry points and driveways makes a big difference.
• Screen tenants carefully: Not all vandalism comes from outsiders. Solid background checks reduce the risk of damage from your own tenants.
• Check vacant units weekly: Hire a manager or neighbor if needed. Vacant doesn’t mean unmonitored.
• Build neighborhood connections: A watchful neighbor can be your best early warning system.

Most landlord policies cover structural damage from theft and vandalism, but not tenant belongings. Require tenants to carry renters insurance, and always file a police report for documentation.

The Real Cost of Landlord Insurance Claims

Many landlords underestimate the true cost of a claim, which goes far beyond repairs. For example, a $15,000 roof claim might cost you $2,000 in deductibles, $3,000 in lost rent, and higher premiums for years. Multiply that across a few claims, and your so-called safety net becomes a drag on your returns.

Typical claim averages:

• Weather-related repairs: $5,000 to $15,000
• Water damage with remediation: $10,000 to $20,000
• Vandalism or theft: $2,000 to $5,000

Every dollar you spend on prevention could save you thousands in future costs. 

Why Specialized Landlord Insurance Makes All the Difference

You can’t prevent everything, but you can protect against the fallout. The key is working with an insurer built for landlords, not homeowners.

That’s where Steadily comes in.

Unlike traditional insurers who treat rentals like side projects, Steadily was built specifically for real estate investors. Their coverage is designed for landlord realities: storm damage, tenant-caused losses, and loss of rental income.

Why landlords choose Steadily:

• Fast, digital quotes (usually within five minutes)
• Transparent, investor-focused coverage
• Scalable policies for single properties or portfolios
• Nationwide support and a simple claims process

Steadily understands how you operate, whether you own one door or 50. Their policies are written in plain language, tailored to your needs, and backed by service that moves as fast as your deals.

Prevention keeps your properties safe. Steadily keeps your investments secure.

Don’t wait for a storm, leak, or vandalized unit to reveal your coverage gaps. Get ahead of the risk now.

Get your free Steadily quote and protect your rentals with insurance built for landlords like you.

In This Article

This article is presented by Coastal Equity Group.

Something’s in the air down South, and it’s not just the humidity (it’s not going anywhere, unfortunately). The Southeast is still one of the hottest real estate regions in the country, and some cities are absolutely dominating right now.

From Florida’s booming ports to the tech triangle of North Carolina, this region continues to pull in jobs, people, and investors at a pace few others can match. Homes are selling fast, rents are rising, and population growth is booming.

Coastal Equity Group is the expert in this region, and we dug into the data to see which Southeastern cities are leading the charge. These five cities stand out, not just for their growth, but for the staying power that makes them some of the best bets for 2026 and beyond.

1. Jacksonville, Florida

Jacksonville is Florida’s largest city by land area and is a logistics powerhouse where the St. Johns River meets the Atlantic. In 2024, the metro added about 10,100 private-sector jobs (a 1.4% year-over-year increase).

Jacksonville’s population is still growing at an above-average pace each year. The metro jumped from about 1.72 million in 2023 to roughly 1.76 million in 2024. 

Home values continue to tick up, and the rental market is showing signs of a reset. For investors, this means opportunity. With jobs, population, and infrastructure all moving in the right direction, Jacksonville should be high on your watch list for the Southeast.

2. Savannah, Georgia

Savannah looks like a Southern postcard, but it’s running a full-blown logistics empire behind the scenes. The Port of Savannah is one of the fastest-growing in the country, and the area’s job growth and population gains show it. Since 2020, the region’s population has jumped more than 6%, and unemployment sits comfortably below 4%.

Companies like Hyundai and Amazon are building (or have built) massive facilities nearby, creating a housing crunch for workers and families. Investors are finding steady returns in small multifamily properties and older homes being renovated for long-term tenants. Savannah has the rare mix of charm and industry: cobblestones out front, forklift traffic down the road, and profit potential.

3. Nashville, Tennessee

Nashville has been on fire for years, and it’s still going. The metro area now employs more than 1.2 million people, with an annual job growth rate of about 1.3%. The population has jumped more than 6% since 2020, and the housing market hasn’t cooled much despite higher rates.

Median home prices hover near $440,000, and rents continue to climb as people move in for jobs in healthcare, entertainment, and tech. Investors keep finding new ways to make money here, including duplex conversions, midterm rentals for traveling healthcare professionals, and more creative strategies.

4. Charleston, South Carolina

Charleston’s unemployment rate is around 4%, and the population has grown more than 8% since 2020. Home prices rise by about 3% to 4% each year, while average rents hover near $2,000.

The economy here is a solid mix (aerospace, tourism, and manufacturing), and that balance keeps Charleston steady even when other markets wobble. Investors appreciate that reliability. You can expect consistent rent growth, long-term appreciation, and tenants who tend to stay put. 

Charleston’s not the next big thing—because it’s been consistently great all along.

5. Raleigh, North Carolina

The Research Triangle (Raleigh, Durham, and Chapel Hill) might be the most exciting economic story in the region. Employment rose 1.3% this year, unemployment is around 3.5%, and the population has exploded, up 7% since 2020.

Home values climbed another 2.4% last year, and average rents are close to $1,850. The area continues to attract engineers, scientists, and start-up founders who want the Austin lifestyle, but with less traffic and cheaper homes. Investors see it as one of the safest bets in the Southeast: a city built on stable jobs and long-term growth instead of speculation.

Work With an Expert in the Southeast

Coastal Equity Group helps investors move quickly in the markets that matter most. They focus on real estate investor financing throughout the Southeast, offering both short-term and long-term funding options tailored for active investors. Their programs are designed to make closing faster and more flexible, helping you take advantage of opportunities when they appear.

In Jacksonville, Savannah, Nashville, Charleston, and Raleigh, Coastal Equity Group brings a local understanding of each market’s trends and challenges. Whether you are renovating, refinancing, or growing your rental portfolio, their team offers practical lending solutions and real market insight. 

Final Thoughts

The Southeast’s story comes down to a few simple truths. People are moving where their money stretches further. Businesses are setting up shop where costs stay low and talent is easy to find. And investors who buy smart here are still getting both cash flow and appreciation.

Jacksonville, Savannah, Nashville, Charleston, and Raleigh each offer something a little different. But they all share the same DNA of steady job creation, population growth, and affordable entry points compared to major coastal cities.

And according to the team at Coastal Equity Group, the fundamentals are only getting stronger. The data backs it up. The demand proves it. The only thing missing now is your next deal.

Dave:
The fed cut rates on Wednesday and mortgage rates went up. So what gives, hasn’t every person on the internet been saying that there will be lower mortgage rates because the Fed will cut rates? Well, haven’t I’ve been saying mortgage rates aren’t moving that much and that hoping the Fed will make investing easier is not a viable strategy for 2026. So today I’ll make this confusing situation make sense underneath all this noise about fed rates, about mortgage rates and home prices, there is opportunity for investors. Let’s unpack. Hey everyone, welcome to the BiggerPockets podcast. I’m Dave Meyer. Thank you for joining us on the show today. We have a good episode here for you. In today’s episode, I will talk briefly about what happened this week with the Fed and why my thesis about rates has been right so far, but we’re going to focus more on how to invest in an environment where rates might not be coming down.
So first and foremost, I just got to say this, I get it. I know that people want mortgage rates to come down. I know that they want homes to be more affordable. I want homes to be more affordable too, and I get that people have been eyeing fed rate cuts as these magical periods where all of a sudden things are going to get easier. But hopefully now you see that that is not the case four times in a row. Now when we have the fed cut, the federal funds rate, we’ve actually seen mortgage rates go up. Now they’ve gone down leading up to those decisions, but hopefully you could see that these events, these magical days don’t actually exist. And I know that can seem confusing because there are a lot of counter narratives out there about how the Fed is going to push down mortgage rates and then it doesn’t happen.
So I get that that can be really confusing. But if you listen to the show, I’ve been saying this would happen all year because people who actually study the housing market knew that this was a relatively likely scenario. So we’re going to talk about that today, why rates haven’t really budged and why it might not happen for a while. But I think focusing solely on rates in this episode is a mistake. It’s important, but people are sort of obsessing over the wrong things. Instead, people should be focused not just on rates, but other fundamentals and how to invest even in this higher rate environment that we’re in. People in my opinion, should be focused on finding great markets, taking advantage of the better inventory levels that we have, using their leverage to negotiate great deals, positioning themselves for long-term growth because people have been investing in real estate for decades, for centuries really, and rates do what they do, but the real investors, they find ways to make it work regardless of the rate environment.
And in today’s episode, you’re going to learn to do the same thing. Alright, so first let’s talk about what actually happened. They cut the federal funds rate 25 basis points on Wednesday the 29th of October. 25 basis points just basically means 0.25 percentage points, so a quarter of a percentage point, and this is basically a foregone conclusion. There are actually markets where people bet on this stuff and it was actually like a hundred percent odds that this was going to happen. So this was not a surprise at all. And with that, we saw all these people on social media and honestly in some of the regular media too, pointing to lower mortgage rates. But unfortunately those people don’t understand how this work, and that’s okay. It is kind of complicated, but let me explain to you how this actually works. The Federal Reserve controls one interest rate and this does influence other borrowing costs, but what it impacts is short-term borrowing costs.
In the world of finance mortgages, the things that we as real estate investors care about are long-term borrowing. These are long-term loans and long-term loans are less influenced by the federal funds rate. Sometimes they do move together, other times they don’t. Like in the last couple of years they are loosely correlated, but that correlation has been weakening over the last couple of years. But there is something that we can track if we want to understand mortgage rates and those are yields on the 10 year US Treasury. That’s why I talk about this. If you listen to our sister show on the market, we talk about this a lot and I should mention if you like this kind of nerdy stuff where we dig into how these things really work. Check out on the market. We talk about this all the time, but it’ll give you a high level overview, which is basically that the yield on a 10 year US treasury is controlled by bond investors who are very different from real estate investors.
These are people who manage pension funds or hedge funds or sovereign wealth funds or family offices. Huge amounts of money. And what really moves the bond market are fears of recession and fears of inflation. When people are generally afraid of recessions, they put their money into bonds and that lowers bond yields and takes mortgage rates down with them. When people are afraid of inflation, they demand a higher rate on bonds to lend money to the government and that pushes bond yields and mortgage rates up. What’s so frustrating, what’s making this so hard for the housing market is that both of these things, inflation and recession are riskier than usual. Right now, in a normal market, you’re usually afraid of one or the other. If you’re in a really good economy, you’re kind of worried about inflation, things getting too hot. If you’re in a bad economy, you’re worried about a recession, things getting too cold.
But it is unusual to be in the situation that we’re in right now where there is fear of both. You have fear on both sides of the market and that is sort of locked in bond yields. In a way, the bond market is a bit stalled. It’s kind of like having this tug war where half of bond investors are really worried about a recession and then the other half are really worried about inflation and they’re pulling against each other and no one is going anywhere that’s going on in the mortgage market right now. So despite what happens with the federal funds rate, bonds just aren’t moving that much and that’s why mortgage rates aren’t moving as well. So yes, we got a rate cut from the Fed that should actually help commercial real estate a little bit more tied to short-term lending. But in the residential market, for the majority of our investors here, the BP community are buying one to four unit properties.
It’s not going to mean lower mortgage rates, at least right now. And just remember as we get more rate cuts in the next year or so, I do think we’ll get more rate cuts. That does not mean more mortgage rate declines and you cannot count on that happening. I think that’s the big takeaway right now is that no matter what the Fed does, it doesn’t equate to better investing conditions for us. And so what we need to do is look at the conditions on the ground today and figure out how to optimize for the existing market, the existing rate environment, and still make good investments because that is absolutely possible unless you’re getting distracted by the rates. So let’s not get distracted by the rates. Let’s not wait around for something that is completely out of our control. We got to take these things into our own hands.
That’s what I’m going to do. I know people do want to know what’s going to happen with rates. I will just say that for the rest of 2025, I’m expecting things to be pretty similar to what we’ve seen recently. Probably low to mid sixes we might see unless we see some big change, if we see some huge change in the labor market, if we see some huge change in inflation data, then mortgage rates could actually move. But that’s going to be pretty difficult, right? Because the government is shut down. So we don’t even have inflation data. We’re not even getting half the labor market data that we normally get. So it’d be pretty hard for those things to move in any direction when we just don’t have reporting on it. So most likely we’re stuck with mortgage rates through the end of the year. I will be giving a forecast on mortgage rates for 2026 in a couple of weeks, but as of today, I don’t see much changing in the next year.
Which brings us to our main topic for today. How do you invest in a higher rate environment? We’re going to get into that on a very strategic level. So not big picture, but also on a super tactical level of the things that you could be doing each and every day to build a better portfolio even in a higher rate environment. And we’re going to do that right after this break. Stick with us. This week’s bigger News is brought to you by the Fundrise Flagship Fund. Invest in private market real estate with the Fundrise Flagship fund. Check out fundrise.com/pockets to learn more.
Welcome to the BiggerPockets podcast. I’m Dave Meyer. Thank you all so much for being here. I’m excited about this episode. I feel like for years now, the whole real estate investing community was talking about lower rates, lower rates, lower rates, and I wish they were lower. I wish things were more affordable, but I’m hoping that by now people are seeing that the Fed is not coming to save us, and that means we have to do the work of figuring out how to make our portfolios work in a higher rate environment and that is absolutely possible. So I am excited to talk about this. I think by the end of this episode, you’re all going to see the opportunities that lie in front of us. Now I want to sort of break down the rate thing and why people are so sort of obsessed with it right now.
Rates matter because they are a critical function of affordability. That is the thing that is holding up the housing market right now. It is why we have low transaction volume. It’s why we’re shifting from a seller’s market to a buyer’s market is because things just aren’t affordable. But rates aren’t the only function of affordability. They’re one of three sort of big variables that go into the affordability of a home. You also have home prices of course, and you have wages, basically how much people are earning. And those three things combine are what make up housing affordability. Now, I’m going to say something that is probably going to surprise most people, but housing affordability has actually been improving just for the last couple of months, not for a long period of time. I think it’s like three or four months in a row now, and not by huge numbers, but even though mortgage rates haven’t moved down in the way that a lot of people wanted or were expecting, we are still seeing improvements in affordability.
This comes from a combination of these three variables, right? We’re getting slightly lower rates, actually more than slightly in January. Mortgage rates are at about 7.1 right now as of today, a day after the rate cut, we are at 6.25, so that’s 0.9, right? Almost a full percentage point lower. So they’ve actually come down. That really does matter with cashflow and affordability. The next thing is we have higher wages than we did a year ago. They’ve been growing faster than the pace of inflation, faster than the pace of appreciation in most markets that makes homes more affordable. And then on a national level, we have pretty stagnant or correcting prices. Some markets are down, some are up, but on a national level, we’re seeing prices pretty darn close to flat. And if you look at them in inflation adjusted terms, they’re down about 2% from the peak that they were at in 2022.
Looking at all those things together, that means we’re actually getting better affordability. So this even without the lower rates people wanted from this fed rate cut is a good sign for the housing market. And personally, I think for at least the next six months or so, we’ll have to see what happens after that. I think affordability is going to improve. Wage growth is still up a little bit. I’m a little worried about that with AI and the state of the labor market, but I do expect prices to decline modestly for at least the next couple of months. And although mortgage rates could go up a little bit, I doubt they’re going to go up a lot. And so I think we’re going to at least stagnant affordability or modestly improving affordability. That might not sound exciting, but that’s after what 5, 6, 7 years of affordability declining.
This is a good improvement. I know some people want it to happen all at once. Personally, I don’t. I think we need to get back to better affordability, but I’d rather have that gradually. So there’s not a lot of pain in the housing market and that is starting. We don’t know if it’ll continue for how long, but the signs and the data are there right now, and to me that is pretty encouraging. But I am talking a lot about affordability. I think it’s sort of the key to our investing strategy. I’m talking now about how to make things work, how to build a successful portfolio in a higher rate environment and affordability is sort of the key to investing right now. At least that’s been my hypothesis, my thesis about investing over the last three years and I’m sticking with it because it’s been working for me.
So yeah, things are getting a little bit more affordable, but on a broad high level, it’s not going to improve that much. And that does create challenges for investors. That does mean it’s harder to get in, but it also means that we are entering a buyer’s market. And who does that favor? Buyers or investors? So this is the key thing I want people to remember is there are trade-offs in every single market. The high rate environment that we’re in right now, the trade-off is that things are more expensive and that is a real challenge, but it also means that you’re going to have more leverage. You’re going to be able to buy assets at a discount, you’re going to be able to be patient, you’re going to be able to get concessions from sellers. These are things that are absolutely in your favor. And so you just need to think about in that high rate environment, what is the market giving me?
What are the advantages I have as an investor in this higher rate environment? Because there’s never a perfect market ever. It doesn’t exist. And so right now we’re in just like every market, one with trade-offs and the trade-offs are between, yes, things are less affordable, but have all these other things that I can be taking advantage of and those are the things you must take advantage of in order to be successful in this environment. So how do you invest in this higher environment? What are the literal steps that you should be doing, the tactics that you should be employing? Step number one, you got to leverage what the market is giving you. You can’t just wait around for market conditions to return to 2021. It’s not going to happen. I’ve been saying this for years and I’ve been right. It’s not going to happen everyone.
Instead, you got to adjust to what the market is today and think critically about how you can take advantage of the conditions the market is presenting to you. What does that mean? I said it before. Negotiating leverage. This means you can be very patient, you can choose the deals, be very surgical with the kind of deals that you’re looking for, and be really patient and really disciplined about only buying at the right price and getting the right on your deal. Next, look for great assets at better prices. You always want to do this. Everyone wants to buy prices at a discount. Everyone wants the place in a great neighborhood. You couldn’t do that in 2021. It was super hard. You could not negotiate. You were buying whatever came on the market. And yeah, that worked out for some people, but it was really hard too.
In other ways, deal flow was bad. The opposite is going to happen in this higher rate environment. We are going to get better deal flow, which means we can get better assets at better prices, and that’s what you need to be focusing on. The other thing that I think is going to happen, maybe not in the next six months, maybe not in the next year, but over the next two to five years, cashflow prospects I do think are going to get better. I expect I’ve talked about this before, that we’re going into a great stall where prices are going to be flat or modestly declining. Rent growth is pretty flat right now, but even during big corrections, even during the great recession when prices declined a lot, rent stayed sort of flat. And if that happens again, prices go down, rents stay flat. That means better cash flow if prices go down and rents go up, and I do think there is a decent chance that happens, that means much better cash flow prospects.
So look for those opportunities to find great cashflow in a market that’s offering potentially better cashflow than we’ve seen over the last couple of years. That’s step one is really focusing in on what the market is giving you. That is the mindset that you need to take into this high rate environment. Don’t see high rates as your enemy or something. You have to battle. See it as just a shift and an adjustment that you need to make. Step two here is about affordability. Remember I talked about, and you’re probably tired of hearing me talking about affordability. I really just think it drives everything in the housing market. And although I said I don’t think affordability is improving much on a national level quickly, I think it will get better over time, but it’s going to take a little while. I think that relative affordability is extremely important.
Now, let me explain what I mean by that. In any given city, there are areas that are more affordable than other areas. In any given state, there are certain cities that are more affordable than others, and I believe that areas that are affordable to the average person in that area, whether to people who are homeowners and home buyers or people who are renters are going to perform the best over the next couple of years, I think they’re going to be more insulated against downside risk than other places. I think when things turn around and start heating up again, they’re going to heat up the quickest. And so for me, I am always looking for relative affordability. Think about it this way. Could the average person living in this neighborhood or within this radius of this house afford this home? And if the answer is yes, you’re going to find that it is more insulated against any downside risk and probably has better long-term upside because pricing in a home or for your rents are all a function of demand.
And demand comes from people being able to afford the product that you’re putting out there. So yeah, you can make tons of money in luxury stuff, but there’s going to be less demand for that. There’s going to be less people who can afford the luxury stuff. You can still make money that way, but when you buy affordable stuff, that’s sort of the most people can afford that product and that’s going to have the most demand that’s going to push up prices. That’s just how supply and demand work. So think about that in your neighborhood. We got to take one more quick break. Stick with us.
Welcome back to the BiggerPockets podcast. I’m Dave Meyer here talking about the things that you should do or at least the things that I’m doing, and I recommend to a lot of people that you should be doing to be successful in a higher rate environment. I’m tired of people saying that you can’t succeed in a higher rate environment. You can. You just need to adjust your strategy and here are the ways that I think make sense to adjust your strategy and your portfolio plan going into 2026. Step number three, and maybe this should have been step number one given the context of this episode, but underwrite using today’s rates. That is something I really want to stress. Do not count on cuts. Don’t even count on a refinance unless you’re doing a burr. If you’re doing a burr and you’re going to build equity, you’re going to force equity.
That’s okay. You can absolutely count on that kind of refinance, but do not buy a property saying, oh my God, it’s only getting 1% cashflow today, but if rates go down, it’s going to be 6% cashflow. Don’t do that. Or you might be doing that. That’s fine if you’re okay with that 1% cashflow, but do not assume that rates are going to come down and that’s magically going to make your deals better. That is just wishful thinking. That is not a strategy. That is not good investing. That is just speculating. The good thing is you don’t need to do that. You can find deals that work using today’s rates, so absolutely do that. That is step number three. You got to underwrite using today’s rates. Step number four. This is a big thing that I’ve been harping on all year, but you got to protect against downside risk.
I would call this underwriting scared. I think you need to assume not worst case scenarios. I’m not underwriting deals projecting that we’re going into 2008. That to me is a little bit dramatic. There is really no data that suggests that that’s happening, but I am underwriting assuming that I am not going to get appreciation for the next two years. At least maybe I will, but I just don’t think it makes sense to underwrite with that assumption. I’m also not assuming that rents are going to grow, and I’m also assuming that vacancy is going to go up. I don’t know if we’re going to a recession. I don’t even know what that word means anymore, but we are seeing weakening of the labor market. That means vacancies could go up, it means rent growth could stall out for a while. It means appreciation could stall out for a while.
I know all these things sound scary, but you could still do good deals in this kind of environment if you plan for it, so plan for it. That’s where the underwriting comes in. When you’re analyzing your deals, that’s where you mitigate risk. You put it into your assumptions that you’re not going to get appreciation, that you’re not going to get rent growth, that you’re going to have higher vacancy, and if the numbers still work with that and today’s mortgage rates, those are the deals you buy, and I know that means that you’re going to have to say no to a lot of deals. Good say no to a lot of deals right now. That is absolutely what you want to do. The whole goal here is to get great low risk assets during a time when fewer people are competing. You’re going to be able to find great assets, but you’re going to have to sift through a lot of garbage to get it.
That’s the job of an investor. If you are expecting to go out, just be able to underwrite deals and write offers on most of them, you’re going to be disappointed. That is not the right mindset to have. What you need to be thinking about is how do I find that one in 50 property, right? That’s what you should be looking for, and you should take that as a point of pride, right? I know it’s frustrating to have to look at 50 deals, but when you go and buy that, you’re going to feel good about yourself. You’re going to think, wow, I did the hard work to find the best deal on the market in my city. For me, that’s a good feeling. That is better than just being like, oh, I just went on Zillow. I clicked a button and I bought something. So that is the whole point of this underwrite scared.
Make sure that you are finding the best possible deal for yourself because you can right now. That’s something that you can take advantage of. There are good deals out there. Go find them. That’s step number four. Step number five is targeting upsides. We’ve been talking about this all year, the upside era and how you can mitigate risk and still get great returns. You underwrite scared. That’s the way you protect yourself against downside risk, but the way you get the big benefits from real estate is targeting those upsides. These are things like zoning, value add, owner occupancy. These are all things that can take these deals that are very safe. They are offer good risk adjusted returns and make them into amazing risk adjusted returns. Zoning, as an example, look for ADUs, the ability to add a lock off and add a second unit to develop something in the backyard.
Value add. This is just real estate investing 1 0 1. How do you find a property that’s not up to its highest and best use? Bring it to its highest and best use and get paid for it. That’s value add investing owner occupancy works in the short run. Rent is still super expensive. Can you lower your living expenses by buying a great asset during this kind of market? That’s amazing. That’s a great way to have a ton of upside in your deals. So step number five is targeting that upside. Now, step number six. The last one here is a little bit nerdy, but I really want y’all to think about using fixed rate debt. Now, this is sort of tactical and in the weeds, but I really think this is important right now, and I’m sorry if this sounds like being a downer, but I actually think there’s a chance that mortgage rates will be higher in five years than they are today.
I’m not trying to discourage you. I’m trying to prepare you for this. I want to tell you what frankly, a lot of other people in this industry are refusing to say with our national debt, with a lot of what’s going on, the likelihood of higher rates is sort of getting bigger and bigger every year. Now, obviously, I don’t know for sure there so much is going to change in the next five years, but I’m just saying that there’s a chance that in five years people will be talking about how they wish they had locked in that 6% mortgage. Of course, things could go the other way. In that case, you can always refinance, but I do really feel most people should consider only doing deals with fixed rate debt right now. I think it makes a lot of sense. Also, I just want to call out to people that everyone loves seller financing these days, right?
Oh yeah. You get seller financing, you get a lower rate Sometimes that is true, but most seller financing deals, the seller is not willing to carry a 30 year note. They’re not giving you a 30 year fixed rate debt like the bank. They might not be alive in 30 years, so a lot of times what they do is they say, I’ll give you seller financing for the first five years, and then you have a balloon payment. Then you have to refinance. This is also a form of variable rate debt because you are going to have to refinance that deal. I’m not saying that you can’t do it, I’m just saying be cognizant of that and watch mortgage rates closely if you’re doing that, because again, in five or 10 years, we just don’t know. And so the idea that you could buy something and have to refinance your rate up, that’s dangerous.
That’s tanked multifamily over the last couple of years. That’s what’s tanked retail in office. That’s why prices in those markets are down 20, 40% depending on the asset class. I don’t want that to happen to anyone here, and I’m not saying that it’s definite, but you can protect yourself against this by locking in fixed rate debt, and if you have that opportunity, I would take it. So that’s what we got today, guys. I know that a lot of people are going to be celebrating the Fed rate cut saying, oh my God, this is some magical turning point in the housing market. I think it’s the opposite. I think we need to be saying, okay, we’re in a higher rate environment and that’s okay. That’s fine. We’re going to work around this because investors have been working around mortgage rates much higher than this, and hopefully you can see that there are tons of things that are actually in your control that can positively impact your portfolio about the environment that we’re in.
There are ways to make money. There are ways to do good deals. There are ways to pursue financial freedom in a good risk adjusted way, even in a higher rate environment. I gave you some of the steps that I’m following, but if you have your own thoughts, share them with us. Share them with the BiggerPockets community. That’s what being a part of a community like BiggerPockets is all about. Go on the forums and share your ideas. Share them in the comments below. If you’re watching on YouTube, share them with us on Instagram. We would love to hear how you’re navigating the higher mortgage rate environment so we can all share these ideas and learn together. Thank you all so much for being part of the BiggerPockets community and for listening to this episode. I’m Dave Meyer. We’ll see you next time.

 

Ashley:
What if the biggest mistake new investors make is waiting too long to buy their first property?

Tony:
And what if the fastest way to lose money isn’t a bad deal but a bad contractor?

Ashley:
Today we’re answering three questions. Every rookie needs to hear how to start when you feel stuck, how to avoid getting ripped off by contractors and how to capitalize when you stumble on a potential cash cow. This is the Real Estate Ricky Podcast. And I’m Ashley Kehr.

Tony:
And I’m Tony j Robinson. And with that, let’s get into today’s first question. So this question comes from Corey in the BiggerPockets forms, and Corey says, I’m completely new to real estate and would like to know if someone could help me and guide me through getting my first deal. Great question, Corey. And that’s the entire reason that the Real Estate Rookie podcast exists is to help guide you through your first deal and beyond, obviously. Now, that said, it is also a very loaded question because there’s a lot that goes into guiding someone through their first deal. So I think the goal for me and Ashley isn’t to give you a super tactical step-by-step for every single thing you need to do, but give you a general overview of the big things you should focus on and some of those more major milestones. I think the first step, and Ash, lemme know if you disagree with this, but I think the first step is just to clarify what is your why and what is your end goal? Because every person who invests in real estate has a slightly different mix of motivations and resources and skills and abilities and goals, and those mixes can lead to slightly different plans in terms of what should you be doing within real estate.

Ashley:
And I think oftentimes people aren’t getting niche enough. So you could say, well, my goal is to my why. The reason is because I want to quit my job or I want to build wealth for my family. But what you’re not think about is the actual steps and the lifestyle to get to that. So if you want to quit your job, does that mean because you want to go and you want to live on the beach and you don’t want to work anymore, you want to be retired? Or does it mean you want to work for yourself and you’re going to? So the difference between the two is you’re most likely going to be able to quit your job sooner if you’ve put yourself into a new job where you’re working for yourself. So maybe you’re becoming a co-host, you’re managing all of these short-term rentals, you’re an operator, maybe you are flipping houses, which is a very active income, or maybe you are buying long-term rentals.
We had a guy on not too long ago that was an out-of-state investor and he set up property management and he had his long-term rentals just sitting there accumulating appreciation. They had some cashflow and he was really just banking on them, building wealth, and he was still working his full-time job with no reason to actually quit anytime soon. He liked his job, he wanted to stay into it because the strategy that you pick I think really depends on not only what your why is, but what you want to be doing to actually get to that point, to reach that goal too.

Tony:
And I think once you have clarity around that why and what that end goal is, the next step is to understand, and actually you kind of touched on this, but understand your strategy and your niche. And I think oftentimes we confuse those two things that they’re actually slightly different. The strategy would be long-term, traditional, long-term rentals, midterm rentals, short-term rentals, obviously flipping wholesaling, but within even, let’s talk about flipping because I think when a lot of people think about flipping, they only think about flipping single family homes. And while that’s true that that’s probably the most popular form of flipping, we’ve met and interviewed people who flip raw land and they buy land, they sit on it and they flip it later for some sort of profit. We’ve met people who flip land but improved land. So they’ll buy the land, they’ll do all of the initial work to get it ready to get built on, and they’ll sell it to a builder and the builder can plug and play. We’ve met people who buy small parcels of land. We’ve met people who buy large parcels of land. So even within the strategy of flipping, there are different niches in terms of what you can flip. You can flip apartment complexes big or small. You can flip hotels if you want to. So just understanding both the strategy and the niche that makes the most sense for you given your current resources, abilities, goals, et cetera.

Ashley:
Yeah, and I think a big motivation for people to get into real estate is because they want to do something they love. They want to have a passion and designing a house excites them or flipping a house. And there are two ways to take this as to you hate your job, you want to do something that you enjoy, but you actually have more of an opportunity to be successful at first and to make more money if you take advantage of your current resources. And when I first started, I was working as a property manager. I knew everything about property management. I had a mentor that was a long-term investor. So right there I had an advantage because I had those skill sets, I had that network, I had all of that where if I would’ve said, you know what? Doing an Airbnb that actually looks more fun and I would really like that more, designing it, coordinating with the guests, I wouldn’t have even have known where to start with an Airbnb and it would’ve taken me longer to accumulate all of that knowledge.
I didn’t know a single person that was doing a short-term rental at the time. I would’ve had to learn everything from the ground up. So eventually I did pivot. Eventually I built my foundation of long-term rentals and I was able to pivot to try some short-term rentals. The first one, I went $40,000 over budget. If that would’ve been my first deal, that would’ve bankrupt to me. So as much as you want to pursue your passion and do something that excites you and love, see if there actually is an opportunity and you have an advantage doing one of the strategies that will actually propel you to reach success even faster.

Tony:
I think the other piece of getting started is building out your team and for Ricky Investors, the people you should focus on initially, a good lender, and I say lender maybe even first because I think before you can focus on markets or properties, you need to understand what can you actually afford? What is your purchasing power? So you know how much cash you have to deploy for a down payment, closing cost, renovation, set up, whatever it may be. But you need a good lender to tell you what loan amount can you get approved for. So talking to a great lender, working with a great agent, someone who knows the market or can expose you to different markets. And luckily BP has the resources to help you find both of those folks. We’ve got the agent finder biggerpockets.com/agent finder. We also have the lender finder. So go in there, go talk to some folks and get a sense of what can I afford? How much can I actually buy? And then once you’ve got that idea, then go start talking to agents who fit within your purchasing power.

Ashley:
So I think if you start to think about all these things and actually take the time to write them down, there’s actually a really great journal. What is it called that Brandon Turner had created the intention journal. It’s on the BiggerPockets Bookstore, and it is just like a great resource to actually build out why is what your goals are, but also action items that you can do every single day to move the needle. Highly recommend checking that out at the BiggerPockets bookstore.

Tony:
The next thing that we will touch on is, and this is more so mindset, but it’s that momentum beats perfection and we can get so caught up in analysis paralysis, waiting for the absolute, and I’m using air quotes here, perfect deal that we end up waiting forever. And now you looked up and it’s been a decade and you still haven’t gotten started and I think in action has killed more real estate investing dreams than slightly misaligned action, right? More people just not doing anything has stopped more investors from becoming investors than maybe buying a deal that didn’t pencil out exactly how they wanted it to. So momentum, momentum is what we want to focus on, and that’s how we get from no deals to one deal, from one deal to five deals, from five deals to 10 deals and so on.

Ashley:
We need to take a short break here. But the last thing I’ll add to this is building confidence. And that can be with just making very small moves, low risk moves and networking, analyzing deals, shadowing someone, finding a mentor. Those can all help you get to the next step. So coming up, if you’re worried your contractor is overcharging, how would you actually know? For sure. We’ll break it down right after this with a quick word from our sponsor. Okay, welcome back. Our next question comes from Matthew in the BP forums, newer to house flipping and also just moved to Charleston, South Carolina. I’ve got a 2 1 900 square foot house that needs a full rehab including new roof, all new drywall flooring, adding plumbing for washer dryer and dishwasher, getting electrical up to code, full kitchen and bathroom remodel, et cetera. My general contractor is estimating 90 K in rehab. This is about $100 per square foot. Is this reasonable for the area or is he pricing this way too much? Even for a heavy rehab, I was expecting closer to $65 per square foot totaling a 60 K rehab. So this is roughly 30 k more than what I was expecting. Would appreciate a fellow investor familiar with the region’s opinion on pricing. Are you familiar with the region’s pricing in Charleston, South Carolina?

Tony:
I actually know nothing about pricing for rehabs in Charleston, South Carolina.

Ashley:
I am going to say don’t think, I think you’ll agree with me. I don’t think that we need to answer this question as in a full gut rehab. So new roof, let’s say it’s 900 square foot house. So let’s break this down. Tony, if you were doing a 900 square foot house in, we’ll say Tennessee because that’s closer than Joshua Tree to South Carolina, what would the cost of a new roof be about?

Tony:
I actually haven’t had to do a new roof in Tennessee, but we got quoted on a new roof for a property in California and it was like five or six grand I want to say.

Ashley:
Yeah, that’s exactly what it was for here. I did a duplex not too long ago and it was 5,000. Okay, so then flooring, my flooring guy charges, I think it’s four 50 per square foot, but that’s including the flooring plus labor. So if we got 900 square feet at four 50 a square foot, what does that come out to? My math genius,

Tony:
Oh, you’re pushing me right here. Nine times four, 360. It’s like a little over 5,000 bucks, give or take.

Ashley:
We’re just going to assume the whole place is getting LVP flooring, okay, adding plumbing for washer, dryer and dishwasher that I probably could say we have a really good relationship with our plumber and do a lot of work. So sometimes things are ridiculously cheap because they’re already at another property or something like that. But I would say to add that probably around 500, $600,

Tony:
It was reasonable.

Ashley:
Okay, so open another 500. I did skip the drywall, all new drywall. I’m trying to think of what, I did a property recently that we did a bunch of drywall. We had to rip it all out because we did some structural improvements to the property, but it wasn’t a full house that we did at all. But I don’t know, what do you think for the drywall on this?

Tony:
I don’t even have a good sense of that because anytime that we’ve done drywall, it’s been within the context of a larger rehab. So I don’t even have a good context if I just wanted to replace a drywall and a property.

Ashley:
Okay, we’re going to put, for drywall mudding, we’re going to assume every single wall, every single ceiling, we’re going to put 10 grand and then electrical up to code. So this can vary a breaker box to replace the panel. That can be about a thousand bucks.

Tony:
I was going to say like two grand maybe in my market.

Ashley:
But you’re updating the electric too, so it’s not just the panel most likely that you’re going to be doing. So let’s do two grand full kitchen. So full kitchen cabinets, countertops, it’s small kitchen. If it’s a 900 square foot house,

Tony:
I was going to say 900 square feet, it can’t be that large.

Ashley:
So some cabinets, a new sink, assuming new appliances, I’m throwing in 20,000 for the kitchen

Tony:
Even that feels like a heavy amount. But yeah, I guess 20 grand for being a little bit more, or not optimistic, but giving a little bit more room here.

Ashley:
And I mean, I guess it depends on the quality too. I am done with Lowe’s cabinets. I actually go to a cabinet place now, have them do the design order from them, so a better quality that’s going to last longer cabinet, I mean appliances, you’re looking at $5,000 just for appliances in a property. Really. This is a flip. We have to remember it’s not a rental. And then the bathroom remodel and

Tony:
He said it’s a two one bathroom as well.

Ashley:
Yeah, one bathroom. Okay, so let’s say small bathroom, five grand.

Tony:
So what total does that get us to you right now, Ash?

Ashley:
That gives us 5, 10, 20, 40, 45, 46, 46 50, 46 50.

Tony:
And correction on my math earlier, 900 square feet at 4.5 is actually just over 4,000, not 5,000. So we can knock that down to call it 45 grand.

Ashley:
We’ll say 45,000. Okay,

Tony:
45. Significantly less than the, what did you get quoted? You said 90 K, but I think even before we go on, just the thought process that Ash and I just went through, you can do that even if you’re remote, even if you don’t step foot into the market that you’re flipping in, you can still look at the pictures, get an idea of the changes and improvements you want to make. Call around to subcontractors or companies that specialize in installing kitchen cabinets like Ashley just talked about. And you can get a ballpark quote on what that total renovation would be without even having to walk into the property. But I think Ashton, let me know if you disagree here. I think the absolute best way to know if 90 K in that market is reasonable is to go talk to three other contractors and see what the ranges are in those bids. And if everyone comes back at 90 grand, either they’ve all colluded to try and make sure that you spend as much money as possible in this rehab. Or maybe for whatever reason, just the cost of labor in Charleston, South Carolina is higher.

Ashley:
The most recent flip that I did was $30,000 just for the labor. It was bigger. It was a three bed, one bath, but we also finished off the basement too and added a bathroom into the basement also. And that rehab altogether was I think 80,000 with materials and labor, but it was way bigger than this two one. And we did really nice tile all throughout the kitchen on the backsplash on the floor, we did tile surround in the bathroom, tile on the floor. We did really nice finishes in this property too, and that was still less than that 90,000. And there’s a lot of things that aren’t even included that he didn’t write out because you can get even more niche. So maybe in this it is closer to 90. I mean, you still got trim work, you still have paint light fixtures. Maybe it could get there depending on how rough of shape this property is. In

Tony:
Our last flip that we did, it was just over 1000 square feet and we spent about 65 can the rehab. So we’re at about 60 bucks a square foot on this renovation that included fully redoing the kitchen, new flooring all the way throughout. We didn’t do any electrical work. We redid the bathrooms, we redid a lot of the decking and yeah, we were all in for about 60 bucks a square foot on that property. And that’s in California, one of the more expensive higher cost living areas to rehab in. So I think my gut is telling me that 90 K is a little high. What’s your take ash?

Ashley:
Yeah, I think you can go back to the basics of estimating out the rehab materials at first. So make a list of every single thing that you would need as a material, a toilet, a vanity, a tub, a surround, everything you need, go room by room and then go on Lowe’s. This is going to take forever. It’s super time consuming. But if you really want to learn your numbers and learn estimating and learn what prices are in your market, you can at least get really, really close to the materials and knowing how much the materials are. So if this contractor is saying 90 K, but you go and see the materials are only 30,000, okay, that’s a lot of labor costs that you have. And just go down your spreadsheet and put in, okay, at Lowe’s a toilet, is this cost a vanity? Is this cost?
And even if you don’t even know what toilet to pick, you want an oval one. Do you want a round one? Do you want one that’s low? That one said high. Once that’s heated, just pick the average price of them and put that in there. So that’s one thing that I did for a very long time, and that’s how I learned the cost of materials. Now I have somebody that runs all of this that for me, that rehab stuff, so it’s not as familiar with me, but at first, every apartment, turnover, rehab, that’s how I was doing it. I was building out a spreadsheet of materials and then I was buying the materials and hiring someone just to do the labor.

Tony:
So you’ve got a few options here, I think, to identify what should the correct price be, but even more so for the rickeys that are listening, hopefully now you’ve got a framework on how you guys can validate prices for rehab work in whatever market it’s that you guys land in. So we’re going to take a quick break before we hit our last question, but while we’re gone, be sure to subscribe to the Real Estate Ricky YouTube channel. If you guys are listening to this on audio, you can find us at realestate Ricky and we’ll be back with more right after this. Alright, we’re back with our last question and this one comes from Chris. Chris says, I managed properties for my father for 20 years, a long time, and I’m prepared to do what it takes to renovate, manage, and maintain my own portfolio. I have $100,000 in cash saved up to begin investing.
I found a property. This is the opportunity. It’s a 10 unit. Each unit is one bedroom and the purchase price is $550,000. The exterior needs a lot of work, but the interior is finished and ready to go with less than a week’s worth of renovation. Each unit has historically rented for 800 to $950 and is in a desirable area. There are no active tenants, but this appears to be the opportunity I’ve been waiting a long time for. I promised my wife I would not purchase any rentals with a personal guarantee to protect our house and our livelihood, but I cannot see a path toward getting the loan for this property that gives me a couple of months to get it renovated and occupied. My personal credit is over 800, but the LLC is only a few months old and I have no collateral beyond the 100 k. I do have experience managing and renting for others, but this would be my first personal company owned acquisition. What is the smart,

Ashley:
I like this question. It’s one we really haven’t gotten before. This is a new one, refreshing, and pretty much on every loan that I’ve done, whether the property is owned by me personally or an LLC, I still have been a personal guarantor on the loan. Even if the LLC is on the mortgage, you’re getting a way better interest rate and it’s a lot easier to actually get the mortgage too on the property. What about in your case?

Tony:
Yeah, I don’t think I’ve done any loans that don’t have some sort of personal guarantee. Actually, the hotel, there’s no personal guarantee on that note. It is just for the hotel.

Ashley:
And that’s seller financing, right?

Tony:
That was seller financing. Yeah, yeah, yeah. So that

Ashley:
An option, that’s a good negotiation technique.

Tony:
Yeah, maybe that is an option, right? It’s like instead of going to the bank, if you go the seller financing route, they’re not going to be checking for things in the same way that a large publicly traded corporation is going to be checking for things. So maybe that is the right move here is you go to the seller offer seller financing, it’s going to be your LLC that’s going to be carrying this debt and see what they say. You can draw up your own promissory note, your own mortgage security document that would protect you and make sure that if there is any default that they would only be able to go after the property. So I guess that is one option I didn’t even think of. But I think another option there is non-recourse debt. And I get that the LLC is somewhat newer, but I would imagine there are some lenders out there who work with newer entities and specialize in non-recourse debt. So I think the question is how many lenders have you actually spoken with specifically about non-recourse debt and what is the feedback that you’re getting? Are you assuming here that maybe you wouldn’t be able to get approved or have you actually knocked on the door of a hundred different lenders? And they all said the same thing of like, Hey, you’re, your LLC isn’t seasoned enough.

Ashley:
Whenever I open a new LLC, one thing I do within the first three months is I get a credit card so I can get the signup bonus so I can get travel points. It is not that hard to get credit for your LLCI think there’s this big misconception that you have to build credit in your LLC, but if you open one and you open your LLC whatever and it’s tied to your name on the application for the credit card, you’re putting your information on it. Also, if you want to start building credit, you can open a credit card for your LLC. It’s very easy to do to get that. But I think question is, and this is when I first started, I always had this big fear that if something went wrong, I would get sued and my house would be taken away and all of these horrible things would happen.
And I guess really think about what is your wife’s worst case scenario? So she said she doesn’t want to affect your house or your livelihood. So what does that mean? Is that more like she doesn’t want to get sued and somebody comes after your house, comes after your savings? Is it because she’s afraid that you’re going to foreclose on the property and you’re not going to be able to pay and the bank’s going to come and take that property? And then do you think there’s not going to be enough equity in that property that they’re going to come and take your house too? So I guess really, is there a way that you could address her concern? So if it’s a liability thing, whether you’re a personal guarantor or not, if you have the LLC, as long as you’re following the LLC rules, you still have that LLC protection.
You can go and get an umbrella policy, an umbrella policy on the LLC and umbrella PLC on your house. So you can have those multiple layers of insurance protection, but the LLC is still going to do its thing whether you are a personal guarantor on the loan or not. Reliability four, if she is worried about the bank coming in, taking the property because you didn’t make the payments or couldn’t make the payments, is there some kind of plan that you could put into place for her to actually show her what it would look like if he missed a payment on the property? In New York state, it takes two years to foreclose on a property. So you could have two years to kind of figure out what to do. Okay, so obviously you don’t want to start going into foreclosure and getting behind on your property, but I think maybe if you explain to her what the risk actually are of being a personal guarantor, and I think ask the lender because honestly I don’t even know, do they start coming after your savings account first before they foreclose on the property?
I honestly don’t know. And I would think ask that, find out what does a personal guarantor mean if I stop making payments default on this loan, do they foreclose on the house? And then if it’s not enough equity to cover the loan, they go and come after my life savings, my personal house, do they come and garnish my wages? What does that actually mean? And I think to some extent, if your wife is this worried about this and maybe you need to have the conversation of how does she become more comfortable? Because I think if she’s worried about this risk, you need to find a way to kind of ease her mind and make her more comfortable because potentially it could cause more issues down the road that she’s already nervous about you doing this and setting these kind of limitations on doing the deal too.

Tony:
Yeah, so I just quickly did a search on, hey, what happens if I were to default on a loan where I’m the personal guarantor? And again, go fact check all of this. This is just a quick search on my side. I’m not an attorney. But basically what we said, Ash, if the equity in the deal satisfies the loan, then potentially there’s no liability left for you. If there’s not, say there’s a balance of a hundred k and they would have to go through, get a judgment against you. So there’s some court proceedings involved in that, and if they win that judgment, then they would have the ability to go after potentially bank account, other investments, other real estate, you own personal property, future income through garnishments. So it does get pretty dicey if they are able to win that judgment. But that would be the worst case scenario. So is there some risk there? Possibly, but what it get to that point, maybe, maybe not. Do you guys have the cash just to pay it off if things go awry

Ashley:
Or just the W2 income to cover the mortgage payments, if all of a sudden, what was it, a 10 unit property, all 10 units become vacant and you can’t pay the mortgage anymore. So I think showing your wife too, the deal analysis and actually laying it out in this scenario is what it would look like and that I can’t afford the mortgage payment. That means that half of the property is vacant, so I have to have five vacant units for me to have to take money from my W2 to pay for the property and then kind of go through, here’s what the risk is of that, the chances of that, here’s my reserves I have in place, here’s my contingency plan. You’re doing a pitch, do the presentation, and we haven’t talked about this in a long time, but in our partnership book we actually wrote out how a visual presentation or just putting it down on paper can really help a partner, a spouse, really visualize what this can do for your life and what this can do for your family.
So say, hey, worst case scenario five, vacant and I can’t make the mortgage payment. Best case scenario, we’re cashflowing $2,000 a month. So I think if you can write all that out and explain that, and a visual thing gives people more time to absorb it and it becomes more real actually visually seeing the numbers on paper than just hearing you and the numbers going in and out. One ear when I tell Tony to do math real quick for me, that’s how it’s coming in and out of me, but he’s absorbing it and he is calculating.

Tony:
I think one last way to mitigate risk on this type of deal, or at least maybe make your spouse feel more comfortable, is to bring a partner. Because if you’ve already found the deal, if you’ve got the cash, but you just don’t want to be on the hook for the mortgage, there might be someone out there who says, yeah, dude, I just got to sign on these loan docs and you’re fine bringing the cash and you already found the deal and I’m going to get X percentage just for putting my name on the loan numbers look pretty good. We’re probably not going to have to go to that point anyway. Sure, I’ll do that. And that could be a way for you to still acquire this deal, giving up a percentage of the equity in exchange for someone else to actually carry the debt that comes along with that. That’s one way.

Ashley:
Real quick on that one, don’t some syndications do that where they take a partner that actually has a very high net worth to actually sign on the loan and be the personal guarantor and that’s what they bring to the table for the partnership.

Tony:
Hundred percent your key principle, right? So say I’m a new syndicator and even if you’re going out and get commercial debt, they usually want to see someone with the net worth to be able to kind of guarantee this loan. And a lot of times you’ll get a percentage of the deal just for signing on the loan docs and you don’t have to do anything else. So yeah, it’s definitely something

Ashley:
Which to me it’s scary,

Tony:
But if you know the operator and you underwrite the deal, but there’s always some risk. But that’s why if you’ve got the net worth, maybe it’s not as scary, right? But I think the final piece on just mitigating the risk is maybe it’s the right call to start on something smaller. Maybe 10 units is too big of a leap for your wife to say, yeah, that actually feels good. Maybe start with a very inexpensive burr somewhere in the Midwest where you can buy it for less than a hundred grand, put in 20 grand into the renovations and you can either flip it, bur it, whatever, with the cash that you actually have. That way there is no worry about guarantees or loans or anything to that extent. So if the type of deal that you’re going after is causing the friction, then maybe just a shift in what you guys are going after could be the solution you need to actually get that first deal done.

Ashley:
Thank you guys so much for joining us on today’s rookie reply. I’m Ashley. He’s Tony, and we’ll see you guys on the next episode.

 

Dave:
We are in a housing correction, at least on a national level, but everyone knows real estate and real estate investing are local. What happens in one market can be totally different from what happens in other markets. Where BRRRR works may not be great for short-term rental investing, where short-term rental investing works might not be great for flipping. It all comes down to what you’re trying to accomplish and what’s happening on the ground in your individual market. In today’s episode, we’re going deep into the dramatic regional differences we’re seeing in the housing market across the US and how you can plan your own investing accordingly.
Hey everyone, welcome to On the Market. Thank you all so much for being here. I’m Dave Meyer, and today sort of going back to my roots, this is one of my favorite things to study and talk about real estate markets. We’re going to talk about the regional trends that we’re seeing the opportunities to be had and the risks you probably want to avoid. You might already know this, but there isn’t really such thing as unquote the real estate market on the show. We cover the national market a lot because it’s helpful to understand some big macro trends, but what really matters most to your actual portfolios, to the profits that you’re actually generating is what’s happening on the ground in your local market. And of course, we cannot cover every market in the US and today’s show alone, but in this episode we are going to do a deep dive into housing prices, into different regions, different states, different cities across the US, and help interpret what it all means.
We’ll start with just talking about what has been going on in 2025 and what we know about regional markets as of today in October, 2025. Then we’re going to talk about this sort of interesting and fascinating paradox that’s going on in the investing climate right now. Next, we’ll talk about rent growth and how regional variances there should factor into your investing decisions. Then we’ll even talk about forecast because we just got brand new forecasts showing where prices are likely to go by Citi across the US into 2026. And lastly, I’ll just go over my thesis about markets in general and just remind people what I recommend you do about all the information that we’re going to be sharing in today’s episode. Let’s do it. We’re going to start with the big picture. You’ve heard this on the show a lot recently, but everything is slowing down.
That’s what’s happening on a national level. Of course, we’ve seen regional differences across the years, but the main thing I want everyone to know is even the markets that have been growing the last couple of years, these are your northeast, your Midwest, places like Milwaukee and Detroit and all across western New York and Connecticut. They are still up year over year in nominal terms, but their growth rate, which is something we’re going to talk about a lot today, is slowing down. And in case you’re not familiar with the difference, when I say the growth rate is going down is that maybe last year Milwaukee was up 7% year over year, and now it’s up 3% year over year. So still positive growth, but the amount of growth is less and the trend continues to go down. That is the big broad trend that we’re seeing pretty much everywhere in the United States.
And just to hammer home this point, I want to show that in previous years, well obviously during the pandemic we saw places with 10 15% year over year growth. That’s not normal. Actually, normal appreciation in the housing market is about 3.5%. And so what we’re seeing now is the hottest markets are now at normal. For example, I call that Milwaukee. That’s been a really hot market the last couple of years. That’s now at 3.2%. Detroit’s at 3.7 Rochester, New York at 3.2, Hartford, Connecticut, which has been on fire at 4.2%. So I’m not saying that there’s no pockets of higher growth, I’m just showing that these years of abnormally high growth appear to be over in almost every market in the United States. There are obviously smaller markets, but I’m talking about big major metro areas and almost all of those are now at normal or below average for growth.
And as we’ve talked about in recent episodes where we talked about the difference between nominal, not inflation adjusted prices and real prices, we are also seeing that almost every market is negative in terms of real prices. Inflation right now is 3%, and so any market where prices are up less than 3%, nominally you could argue, is actually down because it’s not growing as fast as the pace of inflation. So that’s where we’re at right now with the hot markets. But obviously there’s the other end of the spectrum too, and I hate to pick on Florida, but when you look at what is going on with Florida, it really is getting pretty bad. I am pretty measured, I feel like about these things. I have not called for a crash the last four years like everyone else has, but what’s going on in Florida specifically is getting to that territory.
In some areas you see in Punta Goda for example, it’s down 13% in just a year. Cape Coral is down 10% in just a year, and we’ll talk about forecasts in just a little bit, but they’re not forecast to get better. And what I’m looking at a map right now as I talk, it’s from Zillow, it just shows basically what’s happened year over year in all these markets. And a lot of states are a mixed bag. Even states like Texas, which has a lot of declining markets, a lot of them are just kind of flat and there are still some markets that are positive, there are pockets of good that’s not happening in Florida. Florida has been just hit by so many different things, whether it’s the oversupply issue, the insurance cost issue, the special assessments going on with condos there, the overbuilding issue. There’s just so much going on there that I think it would be safe to say that Florida is on a statewide sort of crash watch.
It’s not there yet, but I think there is a decent chance that we will see double digit losses across the state of Florida from the peak of where they were to the bottom, where they will eventually bottom out. But I don’t think we’re close to that right now. Other areas of weakness, like I said, are Texas and really along the Gulf Coast with Louisiana seeing pretty weak areas too. Arizona’s also been struggling, and then on the west coast it’s kind of just all flat. There are some markets in California that definitely aren’t doing well. There’s some that are mildly up. Same thing’s going on with Oregon. Same things going on with Washington, Idaho, all along there. You’re kind of seeing just a mixed flag of mostly flat stuff. I want to also just talk quickly about a recent report that I saw from realtor.com talking about the hottest markets in the US because realtor.com, they can look at this stuff in real time, which properties are getting the most listings, have the shortest inventory, shortest days on market, and so they put out this report for the hottest markets in the US and I want you all to think about what the common thread is while I read off a couple of these things and we’ll talk about it.
Number one, Springfield, Massachusetts. Then we have Hartford. So again, Hartford, hottest growth last year, still really hot. Kenosha, Wisconsin, Lancaster, Pennsylvania, Appleton, Wisconsin, Wausau, Wisconsin, Racine, Wisconsin, Rockford, Illinois, Beloit, Wisconsin, green Bay, Wisconsin, all in the top 10. Then we have a couple others, I’m not going to read them all, but in the northeast like Manchester, New Hampshire, Providence, Rhode Island, Worcester, Massachusetts, Milwaukee, all of this. So what do you notice about these markets? Well, yeah, a lot of them are in Wisconsin. Wisconsin is on fire right now, but what I notice here and has been my thesis about the housing market for God years now is affordability. All of these markets, all of the markets that are still doing well that are still hot are relatively affordable, meaning the people who live in that market can afford to buy homes. It’s not like you need inbound migration or you need massive amounts of job growth right now it’s just that regular people who are gainfully employed in this market can go out and buy a home.
Those are the markets that are doing well, and I believe it’s the markets that are going to continue to do well. And you might be thinking, wow, the Northeast is very unaffordable. Why are you calling those markets affordable? It’s all relative because even with a generally expensive region like New England or the Northeast, there are more affordable options that are hot right now. For example, new Haven, Hartford, Connecticut, new London, Connecticut, all these places in Connecticut. Why are they so hot right now? Well, they’re directly between Boston and enormous economic hub that is very expensive and New York City, an enormous economic hub that is very expensive. So if you’re looking to live in this region and maybe you only have to go into the office a couple of days a week, Connecticut is looking like a very attractive option because it is relatively far more affordable than these other options in the Northeast.
That’s why I say it’s all about affordability. Providence, Rhode Island been a very, very hot market the last couple of years. Same with Worcester, Massachusetts, and yeah, the median home price in those markets is way above the national average at $550,000, but it’s not Boston where the median home price is over $800,000. So to me, what’s happening is it’s all about relative affordability. And this is a really important takeaway because people say things like you can’t invest in the Northeast or California or Washington state. Well, clearly there are pockets of places that are growing, and I am not saying that affordable markets are going to be completely insulated from the correction that we are in because I believe a lot of these markets are going to decline, but affordable places in my mind are going to see the least dramatic dips in the coming years. So look at Austin, that is an awesome market, but it got way more expensive for the average person who lives there over the last couple of years.
Combine that with supply issues and you see a big correction. Same thing went out in Boise. Same thing going on in Las Vegas. And actually that brings us to the next thing I wanted to talk about, which is the other side of the coin. We just talked about the top 20 or so markets that are the hottest right now. What about the coolest or if you want to frame it in positive terms, you could call it the strongest buyer’s market in the United States right now. Number one, I didn’t even plan this, but is Austin, Texas shocking, shocking, where you were in a place where sellers outnumber buyers by 130%? This is wild. Think about this. So this is a report that came out from Redfin and it shows that right now in Austin there are 17,403 sellers right now, how many buyers are there? 7,568.
That’s a difference of nearly 10,000 buyers. There are 10,000 buyers missing in Austin right now. So if you want to just peek ahead to what we’re going to talk about soon about where these prices are going in a market like that, they’re going down. See similar things in Fort Lauderdale where it’s 118% West Palm Beach, Miami, Nashville, San Antonio, Dallas, Jacksonville, Las Vegas, and Houston. Those are the top 10. So pretty much all in Texas and Florida, you also have Nashville and Las Vegas thrown in there, but those of the biggest markets in the country are seeing the biggest imbalances right now, which means buyers have the most power, but prices are also likely to drop. And this situation actually brings up this kind of interesting paradox that’s going on in real estate right now where there are some really good markets that are in deep corrections. So does that make that a really good opportunity or a lot of risk? We’ll get into that right after this break. Stay with us.
Welcome back to On The Market. I’m Dave Meyer going over some regional trends that we’re seeing in the housing market right now. Before the break, we talked about what’s been going on with prices. We talked about some of the hottest markets, mostly in the Northeast and in Wisconsin specifically, we talked about the coolest markets, which are mostly in Florida and Texas. We had Vegas and Nashville on top of that, but I wanted to talk about this a little bit more. I think there’s this interesting paradox that’s been going on for a couple of years and I think it’s just going to get more dramatic, which is that some of the markets that are experiencing the biggest corrections and are likely to go into further corrections are markets with pretty good long-term fundamentals. Austin, Texas, it gets picked on a lot because it’s been beat up for three years right now, but there’s still a lot of good stuff going on in Austin.
It’s still a very desirable place to live. It has good job growth. It’s the state capital. There’s a giant university. There are a lot of things to like about the Austin market. The same thing goes with Nashville, right? That’s been one of the hottest, most popular cities in the country. Dallas has a lot of great fundamentals and the list goes on. I invest in Denver. It’s not on this top 10 list, but the same thing is absolutely going on in Denver where prices are going down a little bit. Rents are even going down in Denver, but it’s a city with really good long-term fundamentals. And so this is something I just think that you should consider as an investor. I’ll talk about this a little bit more at the end when I talk about what to do about this, but if you are an investor who is willing to take risk and wants to take a big swing, you’re going to be able to buy good deals in these markets.
Good deals are coming in Austin, they’re coming in Nashville, they’re coming in Dallas. I can tell you that if you are looking at a market like Dallas where there’s 32,000 sellers and only 16,000 buyers, you’re going to be able to negotiate because for every single buyer there’s two homes. So there is going to be tons of opportunity to negotiate. Now of course, you’re going to have to protect yourself and you nudity to take a long-term mindset because we don’t know when these markets are going to bottom out. But I do think this situation is going to become even more dramatic where I’m going to borrow a word from the stock market, but some of these markets might become what you would call oversold, the supply and demand dynamics just shift in a way where prices go down probably more than they should. A lot of these markets do need to come down in terms of affordability, but I think you’re going to be able to find good deals in these markets in the next couple of years if you are willing to take on a little bit of extra risk to realize what will potentially be some outsize gains in the future.
Now, I want to turn our attention now to some forecasts for what is likely to happen over the next year because Zillow actually just put out their forecast for metro price changes between September, 2025, September, 2026, and I know people like to hate on estimates, but Zillow has been pretty good about this. They’ve been pretty accurate about their aggregate macro level forecasts, and it’s something I definitely look at and what they’re forecasting is a lot more of a mixed bag. So we are going to see the Northeast and the Midwest that have been pretty good, still be pretty good. They’re probably still going to lead the country regionally, but it’s going to come a lot closer to flat in the next year. And they’re also forecasting that even the markets that are down Austin, for example, they’re also going to come closer to flat. Just as an example, Zillow believes that the fastest growing market over the next year will be Atlantic City, New Jersey with 5% growth.
We have Rockford, Illinois, and Concord, New Hampshire at 5%, Knoxville, Tennessee at 5% Saginaw, Michigan at 5% Fayetteville, Arkansas. Shout out to Henry at 4.8% Hilton Head, Connecticut, and then more places in Connecticut. But we’re getting some other places. Towards the bottom of the list, Jacksonville, North Carolina, we’re seeing Morristown, Tennessee. So a lot of places in the Northeast, they’re projecting that the Midwest cools down a little bit, but the Carolinas and Tennessee, which have been really strong for the last decade, but a little weak in the last year starting to rebound. Meanwhile, if you look at what they’re forecasting for the lowest performing markets, it doesn’t look good for Louisiana. The bottom five markets are all forecasted to be in Louisiana, Huma Lake, Charles Lafayette, new Orleans, Shreveport, you skip a couple, and then Alexandria, Louisiana, Monroe, Louisiana, all told seven out of the top 10 are in Louisiana.
The rest are mostly in Texas. We have Beaumont, Odessa, Corpus Christi. Then we see San Francisco, California, Chico, California, Punta Goda, Florida. Mostly what they’re projecting is a year of more flatness. They’re not projecting most markets to go down by more than one or 2%. The majority of markets in Zillow’s forecast or between negative 2% and plus 2%. So that’s where Zillow thinks we’re going. And most other forecasters don’t put out monthly forecasts like Zillow. That’s why I like this, is they are just constantly looking at new data, taking it in and updating their forecast. Whereas a lot of the other companies put this out annually, and so we will get a lot more forecast towards the end of the year, but this is the most recent one we have, and I do think it’s pretty reasonable. Obviously they’re not going to be right about everything, but I think they’re generally in the right direction based on the other data that I’ve been tracking, inventory levels, housing dynamic levels across the country. I think they’ve done a good job here. Alright, we got to take one more quick break, but when we come back, we’re looking at rents and how that factors into the equation, regional differences there, and we’ll talk about what you should do about all this and how you should be making investing decisions based on this information. We’ll be right back.
Welcome back to On the Market. I’m Dave Meyer going over regional data that we’re seeing in the housing market. We’ve now gone deep into prices in the us. We’ve talked about what happened over the last year, what’s happening right now in the hottest markets, biggest buyer’s markets, and then we looked at Zillow’s forecast for what’s likely to happen over the next year. I want to turn our attention to one more dataset before we do the whole. So what of this whole thing and talk about what you should be doing about this and that’s rent because obviously this is going to matter a great deal in your own investing decisions. What we see over the last year is largely similar regional trends. There are some differences that we are going to talk about, but if you look at where rent growth has been the hottest it has been in the northeast and in the Midwest.
I’m looking at a map of it right now, and they’re showing they’re using a color code where anything that grew is red. It’s all red. There’s no place in the northeast or the Midwest, maybe one place in Iowa, but the rest are all positive. Meanwhile, if you look at the place where rents are declining the most, you see Arizona and the Phoenix area is bad. The west coast of Florida, which is just getting hammered, Denver, which I alluded to before, Houston and Dallas, and in places like Georgia and in Tennessee as well. If you want the official list, the fastest year over year rent change, this is going to surprise you guys. You are not going to guess this because it’s not in the northeast and it’s not in the Midwest. Fastest year over year rent growth in the country goes to San Francisco, California at 5%.
It’s interesting because prices are going down there, but rents are going up. We also see Chicago at 4%. I’m always boosting Chicago. This is why 4% year over year. Other rent growth really strong in California, Fresno and San Jose, Providence, Rhode Island, Minneapolis, Virginia Beach, Pittsburgh, New York, and Richmond, Virginia. So not huge surprises there, but I didn’t expect San Francisco and Chicago to be at the top of that list. Meanwhile, the slowest year over year rent growth, this one doesn’t surprise me at all. Number one, sorry Austin, but you are taking the top spot again, or I should say bottom spot because negative 6.5% year over year. My own portfolio is feeling it with the number two spot in Denver, Colorado, negative 5%. Then we see Arizona, Phoenix, and Tucson, new Orleans and San Antonio at negative three and a half and we have Memphis, Orlando, and Dallas as well.
Now I’m calling this out because I think again, there are some really interesting dynamics here. I’ll call out my own portfolio and just admit that I am seeing rent declines in my bad apartments. Any of my units that are really great, unique properties that have a lot of value, those are renting fine. Nothing has happened to those. But for example, I was just renting a basement unit. It’s just kind of a bad unit. I’ve tried renovating it. The layout just doesn’t work, but it’s a basement and it can’t move the walls and it just kind of stinks and the rent has fallen there from 1900 bucks a month to 1700 bucks a month. That’s what I was just able to lease it out for. So that’s a pretty significant decline I could have maybe held on longer, but I didn’t want vacancy. But that’s the kind of stuff I’m seeing in my own market.
Now that worries me about buying in Denver right now because I am not really that worried about price declines, but price declines combining with rent declines. It’s not the best. That’s not exactly what you want to be investing in. Now, you still can find pockets where things are growing. For sure there are going to be neighborhoods and areas for sure, but if I’m just looking on a metro level, that worries me a little bit. Meanwhile, when you look at some markets like in California or in Washington, or actually a bunch of markets in Texas for example, or South Carolina, we’re seeing this as well. Prices are flat to falling, but rents are still going up. And this is something that I feel like is lost in all this discussion about what’s happening in the real estate market right now is that in some of these markets, arguably in many of these markets over the next two to three years, cashflow prospects will finally be getting better after years of getting worse.
We are definitely seeing this across a lot of the country and I think it’s a trend that is going to continue. So I really recommend as we sort of move into our next section here, talking about what to do about this, looking at these things in conjunction because again, you can invest in a market with declining rents and declining prices, but you got to get a killer deal. You have to get a smoking deal for that to work. Meanwhile, if you’re buying in a market that’s flat, which I think is going to be the majority of markets for the next few years, I think they’re going to be relatively flat. You’re buying in a market that’s flat, but rents are going up. That’s still a good deal to me. Obviously you still want to try and get a great deal, but if you can buy something at a good price and prices maybe don’t appreciate for a couple of years, but rents are going, I still think that has a lot of upside potential and those are the kinds of markets and deals that I would still personally be interested in.
So that is one of my takeaways. But just a couple other takeaways before we get out of here. I personally believe affordability is going to continue to drive market divergence. This has been the thing I’ve been harping on for years, and I’m sorry if you’re tired of me saying it, but it’s still true. I will be wrong about many things, but I have been accurate about this, that affordability is going to drive market divergence, and I think this is still going to be true, and I encourage you to not just look at home prices, but look at total affordability because again, people might look at a $550,000 home in Providence, Rhode Island and say, that’s not affordable. But for people who live there who make good salaries and where the tax burden isn’t as high as certain places, it is relatively more affordable. And I think this is what’s happening to Florida right now.
Prices went up, insurance went up, special assessments went up. It is expensive in Florida right now, and that is a major reason that we’re seeing those corrections there. So I would really, if you want to be a conservative investor and if you’re worried about price declines, I really think affordability is probably one of the two best ways I would look at data to try and mitigate risk. So affordability is one. The second one I alluded to a minute ago, which is supply. You need to look at places that are not going to have massive increases in supply. The reason we’re seeing bad conditions in Florida or in Nashville or in places in Texas, because they’re also overbuilt. They’re having the combined issues of affordability and too much supply. That’s why they’re seeing corrections. And so if you want to find places to invest, I think looking for places that are affordable with limited supply risk is probably going to be the lowest risk potential for deals over the next couple of years.
But I want to call out that that’s not the only way to invest right now because if you’re a buy and hold investor, it really is a question of preference because with bigger risk often comes bigger reward. If you want to take more risk and pursue more reward with your own investing, now is a decent time to do it. There’s going to be risk, but can you buy something in Austin, 10 or 15% off peak? Maybe? What about in California? In Florida you might be able to buy something 20% offbeat. I don’t know for sure, but those kinds of numbers are intriguing. And of course you’re going to have to set yourself up so that you have cashflow, you have sufficient reserves so that you can hold onto that for a long time. But that is not an unreasonable strategy right now. I think we’re probably going to see institutional investors that have a lot of capital start to try and do these things.
Looking at markets like Nashville that have been super hot over the last couple of years, if they could start buying those at 10%, they’ll wait three or four years to the appreciation returns. Not saying this is for everyone, but that is an option that you have as a buy and hold investor. Now, I’m not saying just go and buy in any of those markets. Don’t just buy the dip. Don’t buy in Punta Gorda, Florida right now. One of the reasons Punta Gore is going down so much is because it doesn’t have an economic engine. It was a lot of people moving during COVID for the lifestyle, which is fine, but when that pulls back, when there’s return to office, that market got hit. Nashville, Austin, Denver, these are places with very strong job markets. These are places that have a high quality of life that people want to live there.
And so if you want to take these risks, look for the ones that have these strong fundamentals like the ones I mentioned, and those can be decent options for investing right now that’s buy and Holt. I think flipping is going to be risky right now, especially in correcting markets. But an interesting thing happens in flipping during corrections like this where the price of distressed C-Class homes go down more than a class homes. And so actually sometimes you get a widening margin. So the opportunity for flipping actually gets better. You just have to prepare for your property to sit on the market for three months or six months instead of two days or three days we’ve seen over the last couple of years. Last thing I want to say is that I think just generally over the next few years, we’re going to be going back to more normal regional variation because we’ve seen some very, very abnormal stuff over the last couple of years.
It is not normal for all markets to be going up all the time. It is not normal for any market to be growing more than 10% year over year. It’s not normal for most markets to be up over 7% year over year. This stuff that we’ve seen over the last four or five years is not normal. I think instead what we’re going to see is a move back to sort of this traditional tradeoff that has almost always existed in real estate investing, which is the trade-off between appreciation and cashflow. I think Midwest affordable markets are going to go back to being better for cashflow. They’ll still have slow and steady appreciation, but I’m not sure we’re going to see this outsized appreciation for years in the Midwest. I think if you want to sort of summarize it, I’d say the Midwest is going to be easier, doubles, harder home runs when then you look at these other markets like the ones we’ve talked about in Austin and Denver and Vegas and Phoenix.
These are markets where you could take bigger swings right now. You might hit a home run, but you could strike out. So you definitely need to mitigate risk in those markets, but I think that’s sort of what we’re going to get to. So that’s what I would prepare for. And to me that’s good. I want that. I would love to just see a market that we could say for the next three to five years, we’re probably just going to see normal three to 4% appreciation. That would be fantastic. We’re not there yet. We’re in a correction. We don’t know when it’s going to bottom out, but my hope is that because this correction exists, because affordability needs to be restored, that once we’ve been in this correction for a little while, we can get back to a normal housing market on a national level. And to me, that also means we’re going to return to those normal regional variances where markets that have strong economic engines, strong population and household growth are going to see the appreciation where the other markets that are still good markets are going to be more cashflow centric markets. And that’s okay. And as investors, if it becomes predictable again, we can absolutely work with that. I would love to work with that. Let’s all hope that’s what we see after this correction in the next couple of years. Alright, that’s what we got for you guys today on the market. I’m Dave Meyer. Thank you all so much for listening. If you like this show or think that your friends would benefit from knowing some of this information, please share it with them. Thanks again. We’ll see you next time.

In This Article

With the Federal Reserve lowering interest rates by 0.25% on Oct. 29 for the second time in succession, on the back of already falling mortgage rates, the holiday buying season may have come early for real estate investors. 

The rate drop comes as there’s a lack of economic data due to the ongoing government shutdown. However, one key piece of information was released that may have proven pivotal in swaying the Fed’s decision. The Consumer Price Index, released by the Labor Department, showed inflation rose at a 3% rate in September—below expectations, given the tariffs that have gone into effect. 

Low inflation has enabled Fed chief Jerome Powell to win favor with the government. In doing so, a buying bonanza could be on the cards for homebuyers and investors alike.

Mortgage Rates Have Been Trending Down

Mortgage rates have generally been trending downward throughout 2025, with 30-year mortgage rates in the low-6% range and 10-, 15-, and 20-year rates in the high 5s—a first since the post-pandemic rate hike, according to data from Bankrate and Freddie Mac. Overall, it’s a nearly full percentage-point drop from the 7.04% rate on a 30-year mortgage seen at the top of the year. 

“Mortgage rates continued to trend down this week, hitting their lowest level in over a year. This dynamic has kept refinancings high, accounting for more than half of all mortgage activity for the sixth consecutive week,” stated Freddie Mac.

Rate Cuts: The Big Picture

Reductions in the Fed’s federal funds rate often affect short-term borrowing costs, such as credit card rates, more than fixed mortgage rates, which are more closely tied to inflation expectations and bond market activity. However, despite this, Fed rate cuts tend to support an overall environment favorable to lower mortgage rates.

Other types of home loans, such as adjustable-rate mortgages (ARMs) and home equity lines of credit (HELOCs), are more closely tied to the Fed’s moves.

How This Translates to Homebuyers 

Homebuyers and real estate investors are different animals. While the rate cuts will undoubtedly stimulate homebuying confidence, which has reached its highest level in six months as of October 2025, according to the National Association of Home Builders (NAHB) via Reuters, the latest rate cut might still not force homebuyers off the fence, especially those locked into 3% and 4% interest rates.

“While recent declines for mortgage rates are an encouraging sign for affordability conditions, the market remains challenging… Most homebuyers are still on the sidelines, waiting for mortgage rates to move lower,” Buddy Hughes, NAHB’s chairman and a builder from North Carolina, told Builder Online.

A new housing market survey from CNBC supported this, finding that 49% of respondents view the current market as favorable to buyers after recent interest rate drops. However, affordability remains a concern for many, with buyers waiting to see whether the Fed will lower rates further, as has been predicted.

Real Estate Investors Should Move Differently

Conversely, real estate investors generally don’t have the luxury of waiting to see how far rates will fall when deciding to get back into the market. Staying ahead of the curve is one of the best strategies to make money. If the downward rate trajectory continues—which most forecasters expect—buying early and riding the rate train down while watching values rise ensures equity.

Refinancing when rates hit rock bottom allows investors to either use the equity for repairs and future investments or increase cash flow. 

Look for Emerging Markets

Deciding when to invest or not, as rates come down, depends heavily on each market and the cash flow a lower rate can generate. That will largely depend on the rents in each market. Those areas with higher demand for jobs and housing will attract higher rents. 

Jeff Herman, an investment advisor who works with residential and commercial buyers, told Realtor.com:

“Across the country, every state is trying to attract capital, talent, and innovation to fuel sustainable economic growth. But the truth is, it’s hard to do. I’d recommend identifying your target markets by researching those states that are successfully investing in infrastructure, education, and business climate to create the kind of ecosystem where entrepreneurs want to build.”

Investing in Preconstruction in Booming Markets

A recent report from the International Monetary Fund highlighted that many of the emerging markets for start-ups and data centers exist outside Silicon Valley, increasingly in the South and Western states.

Herman advises:

“Be first in line for presales. Developers often need early buyers for new projects. Look for news articles about new developments, do your research, and follow the companies that will bring them to life. By being one of the first to show interest, you can secure properties at a lower price, and even score upgrades that boost your property’s value. Once the project is completed, if you want to, you can sell for a profit before you ever set foot on the property.”

While flipping a preconstruction property comes with risks, the advantage of owning one in a hot market when rates are dropping is that they can always be rented, allowing the investors to generate both cash flow and equity.

Safe Plays for Mom-and-Pop Investors

Rates are not where they were in 2021 and are unlikely to get there even after a few more rate cuts, so speculative buying, hoping for a dramatic rate drop to boost cash flow, is not a wise move. Small investors with limited funds should always protect the downside, which means investing in less expensive markets, where they can cover payments in a pinch if rents won’t.

Investor buyer share data from a Realtor.com report in June showed that, amid higher rates, the smaller cities in the Midwest and South, such as Missouri (21.2%), led the nation in investor buyer share in 2024, followed by:

• Oklahoma (18.7%)
• Kansas (18.4%)
• Utah (18%)
• Georgia (17.3%) 

The sweet spot for many investors is combining the stability of year-round tenants with the lucrative hit of short-term rentals, which could explain why investor ownership rates are through the roof in tourist-friendly destinations like Maine (31%), Montana (31%), Alaska (27.2%), and Hawaii (26%), where small landlords dominate, according to a recent report by BatchData.                                     

Final Thoughts

Bearing in mind that even with the latest rate cut and another one predicted in December, cash flow is still predicated on house prices, rents, taxes, insurance, and if your property needs repairs—the cost of those—and they all have to work in tandem. A drop in rates could be offset by a decline in rents or an increase in any of the other factors. 

The rate cuts will not be so meteoric as to trigger an automatic windfall of cash every month. However, the buying climate is as good as it’s been in a while, so buying right—without overleveraging, and investing in a market on the move—could be prudent, with future cuts and tax benefits in mind. 

In This Article

We all love hearing about “hot” markets, but by the time they’re called hot, they’re already cooling off. 

As investors, we need to take the emotion out of buying decisions and follow the data. If you’re reading this now, you might still be early enough to grab a deal before everyone else’s spreadsheet catches up. For this breakdown, I pulled data from Rent to Retirement’s latest market insights, along with FRED, Zillow, and some good ol’ investor instinct, to find the markets showing real signs of growth for 2025–2026.

Quick-Hit List of Markets Worth Watching

• Atlanta, Georgia: An appreciation powerhouse
• Columbus, Georgia: Steady rent growth and rising jobs
• Canton, Ohio: Population and job growth 
• Goddard, Kansas: Low-entry, high-yield market
• Tuscaloosa, Alabama: University town and manufacturing growth
• Albuquerque, New Mexico: Affordable with rising demand

These markets might not make you a millionaire overnight, but they’re the kind that make you start opening Zillow tabs at midnight. Maybe it’s the caffeine talking, but a few of these got my heart racing…like I just found a duplex under asking. 

Here are three to consider.

Atlanta, Georgia

Atlanta has always been a quiet overachiever in the Southeast. While everyone was talking about Austin and Nashville, Atlanta was stacking Fortune 500 relocations, population gains, and infrastructure growth. I personally like the fact that there is a Waffle House on almost every corner, but I don’t think that moves the needle for most investors.

What did move the needle is that in 2025, Georgia’s economic development office announced $26 billion in new investment commitments. That means more than 23,000 new jobs. Big names like AIG, Duracell, TriNet, and CRH all expanded across the metro, while companies such as Microsoft, Visa, and Boston Scientific grew their existing campuses.

The Bureau of Labor Statistics (BLS) reports that education and health services alone added 23,500 jobs this year, achieving a growth rate of 5.3%, which is above the national average. Atlanta’s metro population now tops 5.28 million residents after adding about 64,000 newcomers last year. That’s the size of a small city, moving in annually.

For investors, that means the fundamentals are solid. You might not get 15% returns, but you get diversity, growth, and long-term upside. 

Atlanta is the perfect mix of cash flow and appreciation. Think of it as a market where your equity does the heavy lifting, while your tenants cover the monthly bills.

Goddard, Kansas

Goddard, Kansas, sits just outside Wichita, and it might be one of the most under-the-radar cash flow markets in the country. We are actually in Kansas, Toto. 

The population in Goddard has grown by almost 19% since 2020. Median household income is around $92,000, which is high for a city of 6,000 people. The median home price sits around $200,000, roughly half the national average. That means you can buy a solid home for less than the down payment on a condo in Austin.

The employment base is built on healthcare, manufacturing, and education. Wichita’s aerospace and industrial sectors spill over, creating steady local demand. Job growth was about 11% last year, which may not sound like much, but in a small community, it’s meaningful.

This is the kind of place where you buy, hold, and breathe easy. There isn’t any trendy hype or unpredictable regulation. Goddard offers dependable tenants and strong yield. Investors here report 12% to 14% cash-on-cash returns, with straightforward management.

If Atlanta is where your portfolio grows up, Goddard is where it retires early.

Tuscaloosa, Alabama

Tuscaloosa doesn’t fit into one category, and that’s what makes it stand out. It’s a university town, a manufacturing hub, and a stable long-term rental market, all rolled into one. Nick Saban isn’t returning anytime soon, but the Tide is still rolling.

The University of Alabama brings in about 38,000 students, creating a steady pipeline of renters. Additionally, the city’s manufacturing sector has quietly exploded, led by Mercedes-Benz, which employs more than 6,000 workers locally. When you add in steel, healthcare, and logistics jobs, Tuscaloosa’s unemployment rate is one of the lowest in the state, at 3%.

The city’s population sits near 116,000 and continues to grow, thanks to steady job creation and expansion in the auto industry. The university adds predictability, while the industrial sector brings stability.

The beauty of Tuscaloosa is flexibility. You can run a traditional long-term rental and count on consistent tenants. You can lease to students for higher yields with a bit more turnover. And you can even test short-term rentals around football season or university events. Few markets offer that kind of optionality.

Tuscaloosa might not headline the next viral YouTube video about “The Top 10 Hot Markets,” but it has the kind of steady performance that keeps portfolios strong through market cycles.

Working With an Expert

If you want to invest in one of these markets without dealing with the usual headaches, Rent to Retirement makes it simple. They help investors purchase fully renovated, tenant-occupied properties that cash flow from day one. Their team handles everything from identifying the right market and securing financing to coordinating property management and maintenance. It’s a true hands-off approach that lets you build a portfolio in top-performing markets—while keeping your time and sanity intact.

Final Thoughts

Markets come and go, but good fundamentals stay. The best places to invest share three simple traits: job growth, population growth, and manageable prices. If a market hits two of those three, it deserves a look. If it hits all three, it deserves your money.

Atlanta, Goddard, and Tuscaloosa each tell a different story, but the ending is the same: People are moving there, working there, and paying rent there—and that’s what matters.

Before you chase the next big headline market, look at the quiet ones. They might not make the news, but they’ll make your portfolio stronger. 

In This Article

This article is presented by NREIG.

Your tenant hosts a weekend barbecue, and a guest trips on a loose deck board, falls down the stairs, and breaks their wrist. Three weeks later, you get served with a lawsuit demanding $150,000 in medical bills, lost wages, and pain and suffering.

The crazy part is, you could be personally liable. And even if you have homeowners’ insurance, it often does not cover this sort of loss or lawsuit.

Most landlords focus on finding great tenants, maintaining properties, and maximizing cash flow. But without the proper liability insurance, you could be setting yourself up for a costly endeavor should an accident occur. The moment you rent out a property, you’re opening yourself up to lawsuits that can wipe out years of profit in a single claim.

Landlord liability insurance exists specifically to protect you from these scenarios. Most investors don’t realize that they could be dangerously underinsured.

We’ll break down what landlord liability insurance actually is, why you can’t afford to skip it, what it covers (and what it doesn’t), how much you need, and how to find the right provider for your portfolio. Protecting your investment shouldn’t be an afterthought, and that goes beyond property insurance.

What Is Landlord Liability Insurance?

Landlord liability insurance is specialized coverage designed to protect rental property owners from lawsuits and claims arising from injuries or property damage that occur on their rental properties.

Think of it this way: If someone gets hurt on your property, whether it’s a tenant, guest, contractor, or even a trespasser, and they decide to sue you, this coverage steps in to handle the legal mess and financial fallout.

Here’s what liability insurance typically does:

• Covers legal defense costs: Even if you win the lawsuit, attorney fees can run tens of thousands of dollars.
• Pays settlements and judgments: If you’re found liable, the policy covers the damages up to your coverage limit.
• Protects you from financial catastrophe: Without this coverage, a judgment could force you to liquidate savings, sell properties, or put your home at risk.

Why Landlords Shouldn’t Skip This Coverage

Again, you might be thinking that you’re covered because you have homeowner’s insurance. Homeowner’s liability insurance is designed for owner-occupied properties. The moment you convert a home into a rental, the risk profile changes dramatically. You’re no longer just protecting yourself; you’re now responsible for tenants and their guests, which creates much higher risk exposure.

Standard homeowners policies often exclude rental activity entirely, or provide minimal coverage that won’t hold up when a serious claim hits.

Liability coverage is not property insurance. Property insurance protects the physical structure of a property from fire, storms, and vandalism. Liability insurance protects you from financial loss and expenses associated with lawsuits.

These two insurances serve completely different purposes, and you need both to be fully protected as a landlord. And that’s even if your policy covers some rental activity; the limits are often dangerously low.

A single slip-and-fall claim can easily exceed $100,000 when you factor in medical bills, lost income, and legal fees. If your homeowner’s policy only provides $50,000 in liability coverage, you’re personally on the hook for the remaining $50,000.

The standard recommendation is a minimum of $1 million per occurrence and $2 million annual aggregate per location for premises liability.

The Property Manager Misconception

Another common mistake landlords make is thinking that hiring a property manager transfers all liability to them. Yes, property managers handle day-to-day operations, tenant communication, and maintenance coordination. But you’re still the owner, and you could still be considered liable in the event of an injury on the premises.

If a tenant or guest gets injured due to a hazard on your property, it’s your name on the lawsuit, not just the property manager’s.

Good property managers carry their own errors and omissions insurance, but that doesn’t replace your need for landlord liability coverage. You both need protection because you both face exposure.

Real-World Scenarios Where This Coverage Could Save You

Let’s look at a few instances where landlord liability insurance becomes absolutely critical.

Scenario 1: The slip-and-fall

A tenant’s guest arrives for a dinner party, slips on an icy walkway you didn’t salt, and fractures her ankle. She sues for $80,000 in medical expenses and lost wages. Without liability insurance, you’re writing that check out of pocket.

Scenario 2: The dog bite

Your tenant has a dog, even though your lease prohibits pets. The dog bites a delivery driver, who requires stitches and physical therapy. Guess who’s getting sued? You, the property owner.

Good landlord liability policies provide coverage for dog bites, even when the lease says no pets allowed.

Scenario 3: The carbon monoxide incident

A faulty furnace leads to carbon monoxide exposure. Your tenants are hospitalized, and they sue for medical costs and negligence. Without proper liability coverage, this kind of claim can bankrupt you.

Now that you understand why landlord liability insurance is essential, let’s break down what’s actually included in a solid policy, and what exclusions you need to watch out for.

What’s Covered 

Legal defense costs

This is huge because, even if you win the lawsuit, you still have to pay your attorney. Legal defense can easily cost $50,000 or more, and a quality landlord liability policy covers these costs from day one. That means you’re not draining your savings just to prove you weren’t at fault.

Settlements and court judgments

If you’re found liable or decide to settle out of court, your policy pays the damages up to your coverage limit. This keeps a single claim from wiping out your investment portfolio.

Bodily injury claims

Landlord liability insurance covers injuries that occur on your rental property, whether it’s a tenant who trips on a broken step, a guest who slips on a wet floor, or a contractor who falls off a ladder. Medical bills, lost wages, and pain and suffering are all covered by this insurance.

Property damage liability

If you or your tenant accidentally damages someone else’s property—such as a neighbor’s fence or a visitor’s car—your liability policy can step in to cover the cost of repairs or replacement.

Dog bite liability (even if your lease prohibits pets)

Many landlords don’t realize that you can be held liable for dog bites—even if your lease explicitly says no pets allowed.

If your tenant sneaks in a dog and that dog bites someone, you’re still exposed as the property owner. A solid landlord liability policy covers canine liability, giving you protection even when tenants break the rules. 

That said, some insurers exclude certain breeds they consider high-risk (pit bulls, rottweilers, German shepherds, etc.). Make sure you understand any breed restrictions in your policy.

Carbon monoxide incidents

Carbon monoxide exposure can lead to serious injury or death, and lawsuits stemming from CO poisoning can be devastating.

Many standard insurance policies include broad pollution exclusions that could leave you unprotected. Quality landlord liability policies specifically cover carbon monoxide incidents, recognizing that CO is a common and serious risk in rental properties with furnaces, water heaters, and other gas appliances.

What’s Not Covered

Intentional acts

If you intentionally harm someone or deliberately create a dangerous condition, liability insurance won’t cover you. This is standard across all policies.

Certain dog breeds

As mentioned, some insurers exclude coverage for specific dog breeds deemed high-risk. If you allow pets, make sure your policy doesn’t have breed-specific exclusions, or at least you understand which breeds aren’t covered.

Business activities on the property

If a tenant runs a business out of the rental and someone gets injured during business operations, standard landlord liability may not cover it. Commercial activity requires different coverage.

Pollution (except carbon monoxide)

Most policies exclude environmental pollution, such as contamination from oil tanks or chemical spills. However, carbon monoxide is often an exception in investor-focused policies. Make sure your policy explicitly includes CO coverage.

The Bottom Line

The best policies offer comprehensive coverage with minimal exclusions, especially for the most common risks landlords face. Cheap policies might save you money upfront, but they can leave dangerous gaps when you need protection most.

How Much Coverage Do You Actually Need?

Knowing you need landlord liability insurance is one thing. But how much coverage should you actually carry? The answer isn’t one-size-fits-all.

What to Consider When Picking Your Coverage

Your ideal coverage amount depends on several factors, including the type of property you own, where it’s located, and how much risk you’re willing to take.

Number of units

The more units you own, the greater your exposure. A single-family rental has less liability risk than a 10-unit apartment building, simply because there are more people on the property and more opportunities for something to go wrong.

Property location

Properties in areas with harsh winters, high crime rates, or frequent natural disasters carry higher risk. Icy walkways, break-ins, and storm damage can all lead to liability claims.

Property type and condition

Older properties with aging systems, multiple stories, or deferred maintenance present more hazards. If you own a property with a pool, playground equipment, or steep stairs, your liability exposure increases.

Amenities and features

Pools, hot tubs, trampolines, decks, and balconies are all attractive features for tenants, but they’re also common sources of injury claims. If your property has these amenities, you might need higher coverage limits.

Standard Coverage Limits

Most landlord liability policies offer coverage in increments of $100,000, with common limits ranging from $300,000 to $2 million or more.

$300,000: Not enough coverage

Some landlords opt for $300,000, thinking it’s enough. But a serious injury claim can easily exceed this amount once you factor in medical bills, lost income, pain and suffering, and legal fees. While $300,000 might sound like a lot, it can disappear fast in a lawsuit.

$1 million: The bare minimum

For many landlords, $1 million in liability coverage is a solid baseline. It provides ample protection without completely breaking the bank.

This level of coverage is usually sufficient for single-family homes and small multifamily properties in moderate-risk areas.

$2 million and beyond: For higher-risk properties

If you own larger multifamily buildings, properties with pools or other high-risk amenities, or rentals in litigious markets, $2 million or more could be a smart move.

Some investors will add umbrella policies on top of their standard coverage to create an extra layer of protection.

Why Higher Limits Are Worth It

Increasing your liability limits is surprisingly affordable. Going from $1 million to $2 million in coverage might only cost an extra $50 to $100 per year, a small price to pay for double the protection.

When you compare that fee to a single lawsuit that exceeds your coverage, which could force you to liquidate assets, drain your savings, or even lose properties to satisfy a judgment, the additional coverage is completely worth it.

Umbrella Policies and Extra Protections

If you own multiple properties or have significant personal wealth, you might consider adding an umbrella policy on top of your standard landlord liability coverage.

Umbrella policies come into play after your primary coverage is exhausted, providing an additional $1 million to $5 million (or more) in protection. Umbrella policies are relatively inexpensive and offer peace of mind, especially if you’re building a large portfolio.

The Bottom Line on Coverage Amounts

Don’t underinsure. The cost difference between adequate coverage and inadequate coverage is minimal compared to the financial devastation of an uncovered claim. When in doubt, err on the side of higher limits. Your future self will thank you.

Finding the Right Provider: Why Investor-Focused Insurance Matters

So you know you need landlord liability insurance, and you know how much coverage to carry.

Now comes the most important decision: choosing the right insurance provider.

Not all insurance companies are created equal, especially when it comes to landlord coverage. Many traditional insurers treat rental properties as an afterthought, offering cookie-cutter policies that don’t address the unique risks real estate investors face. Lucky for you, you know what unique risks you face as a landlord, and can search for the right coverage for you.

What to Look for in a Landlord Insurance Provider

When comparing providers, you want to make sure you have coverage that is investor-specific and comprehensive, with customized solutions for various property types. It doesn’t hurt to create a relationship with your insurance provider and understand how responsive they are when handling claims. A solid referral can help you find the best insurance provider for your needs. 

Investor-specific policies

You need a company that understands real estate investing. Generic policies designed for homeowners won’t translate to your investment properties. Look for providers that specialize in landlord insurance and offer coverage tailored to rental properties, including liability protection that addresses the real risks you face.

Comprehensive coverage

Make sure the policy covers the essentials, including legal defense, settlements, dog bites (even with breed restrictions), carbon monoxide incidents, and adequate liability limits. Don’t settle for bare-bones coverage just to save a few dollars.

Responsive claims handling

When a claim happens, you need a provider that responds quickly and handles the process efficiently. The last thing you want is to be stuck in limbo while legal bills pile up.

Customized solutions for different property types

Your single-family rental has different risks than your 20-unit apartment building. The best providers offer flexible coverage options that can scale with your portfolio.

Why NREIG Is the Go-To for Real Estate Investors

National Real Estate Insurance Group (NREIG) isn’t just another insurance company. They specialize exclusively in working with real estate investors, which means they actually understand the nuances of real estate investing and the risks you’re dealing with. From single-family homes to large multifamily complexes, they provide customized landlord liability coverage that’s designed to protect your investments.

Here’s what sets NREIG apart:

• Comprehensive landlord liability policies with robust coverage limits and minimal exclusions
• The Tenant Protector Plan®, which adds an extra layer of protection beyond standard liability coverage
• Specialized coverage for short-term rentals and unique property types
• A dedicated team that understands the real estate investing business

With NREIG, you’re not just buying a policy; you’re partnering with a company that has your back.

Protect Your Investment Today

You’ve worked hard building your rental portfolio, so why would you leave it exposed? Don’t wait until a lawsuit lands on your doorstep to realize you’re underinsured.

Get a personalized quote from NREIG today and ensure your properties have the protection they deserve. Visit NREIG to learn more and secure the coverage that gives you true peace of mind.

Dave:
The housing market is stalled out. Prices and mortgage rates are flat. Nobody seems to want to buy, but maybe you should. There are always good deals available for people willing to do the work. When it’s easy, anyone can find those properties and grow their portfolio when it’s harder. Like right now, there’s less competition, but even more opportunity. Today we’re talking about how to identify those opportunities, grow your portfolio and advance towards financial freedom even in a slower housing market. Hey everyone. I’m Dave Meyer, housing analyst and head of Real Estate Investing at BiggerPockets. Our guest on the show today backed by Popular Demand is Investor and BiggerPockets author Brian Berg. Brian is going to share his views on where we stand today in the real estate market cycle and whether home prices are likely to rise in the near future. We’ll talk about what types of properties and investing approaches represent the best deals in this environment, and Brian will tell us how property he bought opportunistically a couple of decades ago and just held onto is now paying for his vacation home in Maui. Brian is one of the most successful investors we have on the show. He has a proven track record of understanding market cycles, so this conversation is full of valuable insights. Let’s bring ’em on. Brian Burke, welcome back to the podcast. Thanks for being here.

Brian:
It’s great to be back. Dave,

Dave:
For our audience who hasn’t heard your many appearances on this podcast, can you just tell us a little bit about yourself and your track record as a real estate investor?

Brian:
Yeah, well, I’ve been investing now for 36 years in real estate. Started out in single family homes as a house flipper pretty much like everybody else. Grew up into the big leagues and small multifamily, which was big leagues to me at the time, and then eventually grew up into larger multifamily. In my 36 year career, I’ve bought what about 750 houses, about 4,000 apartment units, a billion dollars worth of real estate. I just crossed that milestone here last month.

Dave:
Wow.

Brian:
And a couple things I’m most proud of is in all the years I’ve been doing this, I’ve never lost investor money, and second is I’ve managed to dodge and navigate market cycles fairly successfully. I think having sold three quarters of my multifamily portfolio right before it tanked here in 2020 via two and similarly avoided the worst of the great financial collapse and yet still took advantage of the run up. So I think my track record is one that I’ve been able to read markets at least. Okay,

Dave:
So share with us, Brian, tell us what you’re thinking broadly where we are in the cycle. Of course there are different ones for commercial and residential real estate. Maybe give us an overview of where you see residential real estate right now.

Brian:
Yeah, you’re right about that, Dave. There’s a lot of different cycles in real estate. I think residential real estate is in kind of this odd phase of a cycle where there’s a bit of a standoff between people who own homes with 2.75% mortgages who refuse to move because they’re locked in, and buyers who are trying to figure out how they’re going to be able to buy with 5%, five and a half percent mortgage rates, even 6% mortgage rates, so single family, I think it’s in a phase of a cycle where if you’re a long-term holder buyer, this might be a really good time to start making some moves and accumulating a portfolio without having to fiercely bid against everybody under the sun to find reasonably priced real estate that you can hold for a long period of time and use somewhat of a retirement vehicle.

Dave:
I agree. We’re in this very strange market that feels quite flat to me and sort of just neutral in every way. When I look at the data, and of course things can change to me it feels like this might last a while though it might not just be a moment in time where things are flat. I kind of see this dragging out a little bit. Do you see it differently?

Brian:
Everybody’s waiting for something to happen, right? Your sellers are waiting for better interest rates before they’ll go on the market and buy another house with a new loan at a higher rate. Buyers are waiting for lower interest rates. Buyers are waiting for better prices, like lower sellers are waiting for better prices, meaning higher. Nobody really wants to do anything, and when you get something that’s in kind of a state of equilibrium, it’s like a nice glassy lake. When there’s no wind, there’s no ripples on the water, something has to get thrown in the water, Augusta wind has to come along, something has to happen to make the water choppy, and right now there’s just nothing like that happening in the residential real estate space that I can see.

Dave:
Me neither. And although that could change maybe the labor market if unemployment really gets bad, but there’s no signs that it’s really heading to a catastrophe yet, it’s probably going to weaken a little bit. Personally, I don’t think mortgage rates are going to move much in any direction because if you extrapolate this out, nothing’s really moving the bond market either something needs to get tossed in there for the mortgage rates to move, and frankly, I just think that we’re in a stalemate there too. If you sort of think about how mortgage rates are created, we have bond investors, half of them are very fearful of a recession, half of them are very fearful of inflation, and until something gives there mortgage rates probably aren’t going to move in either direction either.

Brian:
Yeah, this time reminds me a lot of 19 93, 94. During that period around 1990, home prices fell just a little bit, 10 or 15%, and then they just didn’t move until 1997. So from 93 to 97, there was this long stretch of time when real estate just did absolutely nothing, and it was a great time to accumulate a portfolio even though it didn’t feel like it, because at the time you’re like, well, the values aren’t going anywhere, but by 99, prices were clearly on the rise, and by the mid two thousands we all saw that bubble and what ended up happening there. But even after all that played out, prices now are much higher than they were in the nineties. So if you bought, then you look really smart, but this is just another one of those periods and you can have these long stretches where nothing really happens that’s normal.

Dave:
We’ve actually seen real home prices stall out for, I think it’s like 38 months now, three ish years, and I do think that can continue. You mentioned, Brian, that this is a good time potentially if you’re doing it right to accumulate a portfolio. Do you have any advice for the audience on how to go about targeting specific types of properties in this kind of stalled market?

Brian:
I think going to the old route of contacting brokers and looking at what’s listed and just looking for stuff that has some kind of a problem that you can solve is going to get you a better deal. I mean, there’s a lot of old housing stock, a lot of houses built in the seventies, eighties, even nineties that’s in need of remodel. Rehab roofs, landscaping fences, all that kind of stuff. And you can buy those properties at a little bit of a discount because they need that work and you can fix ’em up and rent ’em out for higher rent than you could have in their present condition. And that’s the old school tried and true mom and pop style real estate investing that’s been around for decades or centuries.

Dave:
Centuries. It is, yeah. We were talking about this at Epco, it’s like real estate investing. We went through this period where it was incredibly easy in 20 13, 20 22 is hard to miss, but you don’t need perfect conditions to be a successful investor. Literally, people have been making profits off real estate for centuries, like you said, in these very normal conditions, but you sort of have to adjust your expectations. The market is probably not going to give you these tailwinds that you got the last couple of years where even if you didn’t run a project super efficiently or you didn’t buy the exact right property, you could count on four or 5% real gains every year for a couple of years. We’re probably not going to see that. And so as Brian said, you’re going to have to work for that a little bit. That’s either by renovating, maybe doing the work in terms of going off market and finding a particularly good deal, adding capacity in the form of Aus or a second unit on top of things, buying into a great location. These are the kinds of things that you can work for and will make real estate investing still profitable for you, but it’s a little bit different from when you could just throw your line in the water and for the tide to push up values for

Brian:
You. Yeah, I think the difference is is that yesteryear, let’s call that over the last skip the last couple years, but the last five to seven years before that, investing was hard, but results were easy and now it’s the other way around where investing is easy, but results are hard. So it’s just kind of a different way that you have to approach what you’re doing and think about, okay, I don’t have to bid against everyone to buy this property, but once I buy it, I’m going to have to work a little harder to get the outcomes that I was seeking. Whereas before, boy, you’d spend all your time trying to find a deal to acquire and making offers and all this other stuff to get almost nowhere. Then you finally strike something and once you struck it, it’s like you could do absolutely nothing and you’re going to make a ton of money. So it’s a different season and things happen differently in this season than it did in the last season.

Dave:
I’ve been encouraged. I just see better and better deals coming on the market all the time right now, and I mostly look at MLS deals and the ability to buy cash flow, the ability to stabilize rents and generate solid cash on cash returns is better than I’ve seen since probably 2019, I’d say at least. And I do think it’s going to continue heading in that direction. And so for investors, it’s an opportunity to be patient and to wait and walk away from deals, whereas like you said in 2022, if you had something that felt sort of borderline, you might push it a little bit like, Hey, if I just get in the market right now, it’s probably going to do okay. Whereas right now, I think you have to kind of take the opposite approach. Be patient, wait, it’s hard for sellers, but if you are a buyer, take your time finding great assets because as Brian said, it’s going to take some work, but the results will come if you sort of leverage what the market is giving you right now.

Brian:
Well, I think it’s important to think different too. And so here’s my approach to investing in stocks. I’ll buy shares of a stock and my hope is that the shares go down and you think, well, why on earth would you want that? And it’s because then I can buy more shares and as the price keeps going down, I can keep buying more shares. Now obviously I don’t want this to happen in perpetuity. I want it to happen for some reasonable span of time where I can collect and accumulate a portfolio and I’d look at real estate, especially if you’re getting started in real estate investing. Look at this the same way where you want the market to stay flat for a little while if you’re just beginning to accumulate a portfolio, because the longer it stays like that, the more of a portfolio you can accumulate and position yourself for when the market does make a move because it will make a move and it’s more likely than not that move will be to the upside. And even if it does make a move to the downside and you get the opportunity to collect even more assets at even lower prices, it’s going to move back in a favorable direction at some point, and you’re going to be really glad that you did that.

Dave:
I sort of agree with you about that approach. The better basis, you can come in at the lower the price you can enter in if you believe long-term that prices are going to go up, that is absolutely the approach to do is to keep accumulating even if prices are falling.

Brian:
I would agree with that, the whole idea, right? You want to build a base of assets and then let that asset base grow over time. Real estate, even though it’s sometimes been called a wealth strategy or a get rich, some people think of a get rich quick strategy. It’s not a get rich quick strategy. It is a get rich slow strategy. The idea is you accumulate a base of assets, you wait for market movements, those assets go up in value, and then you have a variety of strategies you can deploy to take advantage of that. But this is a retirement strategy more than anything else, and that’s one of the primary reasons I got driven into real estate early on in my career is I felt like by the time I’m old enough to collect social security, it’s going to be bankrupt. No one in my family has a dime that I’m going to inherit, so what am I going to do to build myself up for a very secure retirement? And real estate is exactly that.

Dave:
Real estate investing, the whole point of being in this industry and putting your time and effort and money into it is you have a very high probability 10, 15, 20 years from now for being financially independent. And that’s not even doing anything fancy. That’s not even doing anything crazy that’s doing exactly what Brian said. You buy assets, you get into the market, no one really knows, maybe other than you Brian, but no one really knows when we’re going to see these pops of real gains, right? They happen every couple of years, but it’s pretty hard to know. I don’t think a lot of people saw the COVID pop coming, for example, but you had to be in the market. And so if you can buy assets that are good and stabilize and can sustain themselves and still provide a solid return during these flat markets, then you have the ability to take advantage of those pops when they do eventually come. And if you got two or three of those pops over your career, you’re probably going to be fine. They can be real wealth accelerators. You just can’t force them to happen.

Brian:
And it works a lot better if you’ve already accumulated the assets before the pop, because what a lot of people do is they think that the pop is the time to buy. And that’s what kind of creates the pop and makes it a self-fulfilling prophecy is everybody starts going all in at the exact wrong time, which is if you need the cash, that’s the time to be a seller more than it is to be a buyer. But the pop, as you said, you can’t predict when it’s going to arrive, so don’t try to time your entry point right before the pop accumulate your assets, wait for the pop. Then when the pop happens, that’s your payoff.

Dave:
It is. Well, I think you’ve given our audience here today, Brian, a very good framework and way of thinking about investing right now. So thank you at least on the residential side. But I do want to turn our conversation to multifamily because earlier in the year you said you thought there was a sweet spot with certain parts of multifamily, other parts of multifamily, not yet time to buy. I’d love to get your updated take on that, but we have to take a quick break. We’ll be right back. They say real estate investing is passive income, but if you’ve spent a Sunday night buried in spreadsheets, you know better. We hear it from investors all the time, spending hours every month sorting through receipts and bank transactions, trying to guess if you’re making any money. And when tax season hits, it’s like trying to solve a Rubik’s cube blindfolded. That’s where baseline comes in. BiggerPockets official banking platform. It tags every rent, payment and expense to the right property and schedule E category as you bank. So you get tax ready financial reports in real time, not at the end of the year. You can instantly see how each unit is performing, where you’re making money and losing money and make changes while it still counts. Head over to base lane.com/biggerpockets to start protecting your profits and get a special $100 bonus when you sign up. Thanks again to our sponsor baseline.
Welcome back to the BiggerPockets podcast here with Brian Burke, spent the first half of the show talking a lot about the residential market, but Brian, maybe you can give us an update on how you’re feeling about the multifamily market.

Brian:
Well, I’ve been on this show quite a few times, really sacking on the multifamily market the last couple of years, haven’t I? Dave?

Dave:
Yes. I mean, I love your brutal honesty about it. You are, or at least a large part of your career has been as a multifamily operator, you raised money in this space and I love your brutal honesty about how rough it’s been.

Brian:
Yeah, I’ve raised at least 400 million for acquiring multifamily properties in my career, and I’ve been in multifamily for over two decades, so I’ve got a little bit of experience I can draw from, and I just think that it really depends, I think on what your goals and objectives are. So there’s a difference in my thoughts on multifamily, and the difference isn’t as much about the real estate as it is about you, the listener.
I probably need to expand on that. Going back to our discussion on single family and accumulating assets and a retirement plan and all that kind of stuff. Multifamily is really an extension of any other real estate investment objective, right? It’s just a way of getting larger economies of scale and accumulating more assets like you do in Monopoly. And if that’s your goal, then I think acquiring multifamily right now is a great strategy. The prices have come down considerably from where they were in 2021 and early 2022. The bottom fell out the market in the second quarter of 2022. I can almost time to the day when it happened. And values are down in some cases as much as 50%. And that may seem like dramatic, but it’s true. I’m actually seeing that. So if your goal is to do that retirement plan strategy and accumulating assets, this is a great time to be buying multifamily and it’s a great time to buy, especially kind of those mom and pop multifamilies, the five unit, the 10 unit, the 20 unit, maybe 30 or 40 even if you can swing it.
Those smaller multifamily assets oftentimes have owners who are just in all sorts of distress, all sorts of tired, all sorts of ready to retire and get out of the business. And there’s needles in haystacks out there that you can find that’ll be really good deals. You’re going to have to work for it and it’s going to take a lot of effort and you’re going to need to be patient. But I think you can find some real excellent opportunity and especially small multifamily right now. And I contrast that broadly to my thoughts about larger multifamily and other strategies, which I’m sure you’re probably going to ask me about before we finish up here today.

Dave:
I will. I just wanted for the audience, make sure everyone understands and make sure I understand the reason you’re drawing the difference there. One is just because the asset, but because people who buy large multifamily have a different business plan. It’s usually a syndicator who has to return capital to their investors and five to 10 years, or it’s institutional investors who have very different business models. So is that why you see the difference between small and big? Small might be an investor like me who’s just trying to retire off of this and hold onto this for decades, whereas the larger multifamily is usually trading every 5, 7, 10 years.

Brian:
Yeah, you nailed it. You nailed it in two ways. One is that yes, large multifamily is more of a business now. Most individual investors can’t afford to go buy a 400 unit apartment complex. Now, certainly there are some, but for most people buying a 400 unit apartment complex is a group sport that is a business much more so than it is an investment, so to speak. It’s more like a financial instrument or an investment in a mutual fund. And so the reason for the distinction is twofold. One is that when you look at where you are in the market cycle, if you want to be successful in that business, you have to generate a healthy return for investors. And I think because of where we sit in the market cycle, it’d be difficult to do that. And the second to your point, Dave, is that generally these assets get held for shorter spans of time, three to five years often is common in that business. And I don’t see a market recovery of meaningful nature in the next three years making those business plans just untenable at this point and just a little bit early. So I think that’s the distinction is one is a wealth collection strategy where you’re accumulating a base of assets for your long-term wealth, great time to buy contrasted to a business that’s in place to generate returns for investors in relatively short periods of time. It’s early.

Dave:
Thank you for making that distinction. Unfortunately for our audience, I think most of us fall into that first category. I’m sure there are a few people out there who are currently syndicating or aspire to become larger syndicators, but I think most of us are just looking for retirement. And so I’m glad and a little to hear you say that you think it’s a good time to buy. Is that just because values have fallen so much and have values fallen as much in that, let’s call it the five to twenty five, five to 40 unit kind of properties

Brian:
They have. And I think where you find the most distressed pricing wise is in that workforce tier housing. If you go to that class C stuff, nobody wants that stuff right now. Literally, nobody’s buying your 1960s and 1970 C class product. So if you’re a young energetic investor with a lot of ambition and you need to kind of grow your asset base a lot because that’s what you do when you’re a younger investor is you’ve really got to get pops, then those properties with a lot of hair on it is a really good place to be right now. And there’s deals to be had because us older lazier investors don’t want to fool with it. So I think there’s a lot of opportunity there in that

Dave:
Sector. Yeah, I’m noticing it myself in the markets I operate in just more of that inventory coming online. And I’ve talked to a few sellers and it just seems that there’s also a lot of mom and pop landlords who don’t want to gear up for another market cycle. They have just enjoyed a very nice growth in appreciation. We had huge rent growth and now there’s a little less juice to squeeze without doing the heavy work like you talked about Brian, and maybe they’re just not in it. Maybe it is like we talked about a couple years until we see that big pop and they don’t want to wait. So they’re just saying, I’m going to sell right now. And so I do think the inventory is going to increase, which I’ve been surprised it’s taken this long, honestly, into the tightening cycle to wait for that inventory hasn’t come online, but I think that’s starting to change. So maybe tell us a little bit about if you’re interested in this, what would you target for a buy box right now, broadly speaking? I know it’s different in every market, but what are some things that you think our audience generally speaking should look at?

Brian:
My very first multifamily purchase was a 16 unit property that I bought in connection with doing a 10 31 exchange of a single family home and a condominium that I both had as rental properties that I acquired at foreclosure sales. And I did a 10 31, but the proceeds of my ten one weren’t enough for the entire down payment on the 16 unit building, but the tired, retiring landlord wanted out and he agreed to finance half of my down payment and give me a note for half of the down payment. So I ended up being able to come in with 10% down, 10% from the seller, 80% from a bank. And so for not a ton of money, I bought this 16 unit property and got my entry into multifamily. And I think that’s a great place to enter is in that space. Another example, I bought an 11 unit property in Buffalo, New York of all places. And the reason that I bought there was because it’s a sleepier market. It’s not where everybody’s looking. And I bought an 11 unit property there for like $300,000.

Dave:
Unreal.

Brian:
And the seller financed it. And so I came in with just a small amount of down payment, and then I did some small minor renovations, increased the rents, and that was 20 years ago, or maybe 19 years ago. Well, just last month I made my last mortgage payment.

Dave:
Oh, awesome. I was wondering if you held onto it because Buffalo has really popped,

Brian:
It really has popped. I mean, so the building now is worth three or four times what I paid for it.

Dave:
Amazing.

Brian:
But it’s throwing off $11,000 a month in rent and now there’s no mortgage. So when I talk about using small multifamily as a retirement plan, that is exhibit A of what that looks like. And another example, that 16 unit apartment building I bought, I owned it for almost 20 years when I sold it and did a 10 31 exchange into a oceanfront condominium in Maui, and now I live there. That’s awesome. You can have the vacation home of your dreams, you can have passive income and all that with just two simple multifamily purchases that were both made at low basis at times when the market wasn’t really all that great

Dave:
Using

Brian:
Creative financing and help from sellers and tired landlords and renovation strategies. And you can have a life, you can build a life that you never would’ve thought imaginable or that you couldn’t have done without having made those moves early on.

Dave:
I love that approach. Actually, I a, it’s a three unit in Denver, but they’re big units, so it probably already generates eight, $9,000 gross in rent right now. And a couple years ago I was thinking about selling it. I had to replumb the whole house. It’s like 1925 kind of thing. And I was like, you know what? I’m going to do it. I’m going to do all this work because in a couple of years that will be paid off. I’ve owned it for a long time, and nine, $10,000 a month in rent is a very, very significant portion of what I would need to retire that one three unit just from holding onto it, right? It’s like that’s all you need to do is pay off your mortgage over a long period of time and you’re going to be sitting pretty. So I really appreciate that perspective on it.
So Brian though, earlier this year you talked a little bit to me about eight to 25 units. I’ve been curious about them. I see good pricing on some of those, but I need to be honest with you, the reason I have been a little hesitant personally about pulling the trigger on them is that this approach of owning things 10, 20, 30 years and the debt that you have to get on those properties often, which are adjustable rate or have a balloon payment on them, sort of seem at odds to me. And I have a hard time squaring that where I’m like, I want to buy this property and just sit on it and not think about it, which is what I’ve done with my small, I have fixed rate debt on them. But how do you do this? How do you buy these 8, 10, 12, 20 units and have that kind of debt and still sit pretty or do you buy fixed rate debt on it? How do you approach that?

Brian:
Well, I’ve got good news for you. You can get fixed rate debt on that stuff. For example, the property I told you about in Buffalo, I just made my last mortgage payment when I first bought that property, I think the interest rate on it was like seven or 8%. It was pretty high, and it was with a local bank and it was a fixed interest rate. And then about, I don’t know, some number of years later, interest rates fell dramatically. And so I called the bank and I said, I’m thinking of refinancing this property because interest rates have fallen so much. And they’re like, well, before you do that, what if we’ll just agree to drop your rate by 2% and just you can sign one paper and you’re done. And I’m like, done. Okay. Yeah. So they send me the form, I signed it, I got my rate lowered by like 2%, but I said, I want you to keep a C hing the same mortgage payment that you’ve been doing all along

Dave:
To pay down the principle.

Brian:
Oh, yeah, it paid down the principle. So that loan, it was a 30 year fixed rate, fully amortizing loan, and I think I paid it off in 17 or 18 years. Awesome. And so you can do stuff like that today, it’s a little bit of a higher rate environment, so rates are maybe 6%, but in two years they might be five and you could refinance and even lower your payments or maybe convince your lender to lower the rate for you. So there is fixed debt out there for some of this smaller multi stuff. Now, the disadvantage is twofold. One is you’re going to have to personally guarantee the debt. You’re not going to find fully amortizing, non-recourse, fixed rate debt. Two, you might have a prepayment penalty, but if you’re going to hold it for the long-term, who cares,

Dave:
Right?

Brian:
Three, you’re going to have to look around for that money. And I think one of the best places to look is local community banks. And this is a source of debt that’s oftentimes overlooked in the multifamily space because people want to go Fannie Freddy debt funds, bridge loans, easier to get DSCR, all the people that are on the internet advertising you to loan you money, and they forget about the corner bank in town that’s lending to all the local bigwigs. Don’t forget about those guys. They have some great products that you should look at.

Dave:
And that’s one of the benefits of this market. Like we were talking about in 20 21, 20 22, you had to close quickly, so you’d have to go get the loan that you could acquire in a week. Now, if you’re considering buying a multifamily property, you can go shop around for a loan, you can look for these things. And I’m glad you said that because I have really been thinking about this. I’ve looked at a couple deals, I’ve just been so busy this summer, but I’m starting to look at a couple more right now. And that’s sort of where I landed on it, is that because my strategy is long-term retirement, and if I buy an eight unit of 15 unit, I’m going to want to hold onto it for 10 or 20 years. I am willing to pay a little bit higher interest rate right now. I’m willing to personally guarantee my loan.
I’m willing to do the work of shopping around to just have the sense of security that I know my mortgage payments aren’t going to change because I agree with you. I think the most likely course for mortgage rates in the next year or two is probably slightly down. But I think there’s a lot of big questions about where mortgage rates are going five years from now, 10 years from now, 15 years from now. It’s anyone’s guess, right? And I don’t want to leave my retirement plan that I’m buying now to hold onto for 20 years to chance, whereas I could see a huge increase in my payments when my debt resets in five to 10 years. So that’s the way I’m thinking about is go find these awesome assets I want to hold onto forever, but focus on fixed rate debt rather than trying to eek every dollar of cash flow out of it.
Because as we talked about, that’s the advantage I have and a lot of us have as individual investors. I don’t need to show my LPs that I’m getting this great term on my debt so that they’re getting the best possible cashflow. I’m willing to eat the cashflow because I still work. I don’t need the cashflow today. I want a situation where that cashflow is going to be there for me 10 years from now, and I’m willing to sacrifice, honestly, a pretty small sacrifice in terms of cashflow in the short term to have the sense of security that comes in the long term.

Brian:
Well, I think that’s smart. And again, this always, it depends on your individual circumstance and yours is a little bit different than maybe somebody else’s. But this goes back to when I told the bank Keep Aach Hing my original mortgage payment. I didn’t need the cashflow. I was earning cash from somewhere else. I want to pay this loan off. I refinanced most of my other small rental properties with 15 year loans because I don’t need the cashflow right now. And I wanted to have ’em paid off because my goal was to have this as a retirement vehicle that was always going to be there, even if everything else I did didn’t pan out. And fortunately things panned out pretty well, but had they not, I wanted this backup plan. But everybody’s circumstances is a little bit different. And when you’re in a position like you can say, Hey, I don’t want to take on a lot of risk. I’m going to go get fixed rate debt, which the downside is it means that you’re probably going to have to have a little bit larger down

Dave:
Payment.

Brian:
And so that’s another one of the trade-offs. Now, somebody else listening to this right now might go, well, that’s great, Dave, but I don’t have a 25% down payment for a 10 unit apartment building. So you have two choices. If this is your situation, you can go buy a four unit building and the down payment would be equivalent, or if you want it more scale, but are willing to take on more risk, there are ways that you can get in with a lower down payment. And case in point, I’ll go back to my Buffalo property again just because such a great example for so many things. But when I bought that property, the seller financed it for me. So number one, as you alluded to earlier, people want to get that financing that’s quick enough to close so the sellers aren’t patient enough to wait for a better loan to go through. Well, if the seller’s willing to finance it, then that takes that off the table. Second
Is the seller financed a much larger percentage of the purchase price than any lender would, and that allowed me to go in and make improvements, and I borrowed money on credit lines to make these improvements, but I made improvements on the property, which increased the rent, which increased the value, which then I was able to go to the bank and say, okay, now the property’s worth this much. I owed the seller this much. I owe my credit line this much. Can you write me a loan for that much to cover? Both of those things. And that’s how I got the long-term fixed rate loan. So you don’t necessarily have to go straight into the deal with the long-term fixed rate loan. You can go in with other creative financing vehicles and improve the asset and then transition into that fixed rate loan if that’s the position that you’re in. And so I just want everybody that’s listening that’s in different positions to kind of see some different ways that they could still do the same thing just in a bit of a different way if they’re willing to take on that kind of risk.

Dave:
So we do have to get out of here now, Brian, but any last advice for our audience about how to navigate the current market cycle?

Brian:
I would say keep after it. Don’t get discouraged, and especially don’t get discouraged in a market like this because this is a market where you don’t get the instantaneous gratification. So it’s easy to get discouraged. Yet this is kind of the best time to actually collect assets so that you don’t get discouraged, even if that makes any sense at all. It does. It makes you discouraged. This is the time when you shouldn’t get discouraged. It’s just a weird of the market.

Dave:
I totally agree. Well, thank you so much, Brian. This is great stuff. As always, we really appreciate you being here.

Brian:
Yeah, thanks for having me. I really appreciate it.

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