Ashley:
Today’s rookie reply is about a question almost every beginner has. When the numbers are not perfect, how do you know if the deal still makes sense? A house hack might not cover the full mortgage. A rental might only break even and return expectations can get confusing fast.

Tony:
Today’s questions come from the BiggerPockets forums and we have someone trying to house hack in a really expensive market. We have a rookie asking what does breakeven really mean? And a first time house hacker wondering what returns to expect in today’s…

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

Tony:
And I’m Tony J. Robinson. And with that, let’s get into today’s first question. So our first question today comes from Dominic, and Dominic says, “House hacking is an amazing way to get into real estate and the most promoted benefit is if the tenant pays the mortgage or most of it while there’s also a low down payment. But I live in Portland, Oregon and a duplex goes for 450,000 bucks to sometimes quite a bit higher. After doing some numbers, I would still be paying a hefty portion of the mortgage even after taking into account market rent on the other half. An example, the purchase price is 450,000. One unit is being rented for about 1,150 and the other unit I would be living in. The monthly mortgage payment is 3,321 with 5% down, which means I will be paying 2,171, about 2,200 bucks. This doesn’t even take into account repairs, et cetera.
This defeats the entire goal of house hacking. So I was wondering how house hacking is being done when property prices are so high. Is house hacking a thing of the past in these markets or is there some tactic that I’m missing? Dominic, great question. And I don’t think, Nash, I’m sure you’d agree, I don’t think house hacking is a thing of the past. I think we just need to redefine what a successful house hack actually means. And yes, when prices were much lower and interest rates were much lower, maybe you could get a bunch of cash flow on top of your house hack. But I think today the bigger question is, can you either A, subsidize the costs that you’re already spending to live somewhere or B, even if you’re paying the same, can you at least have that same payment go towards an asset that you own as opposed to paying some other landlord’s mortgage balance down?
So for you, you said that your mortgage would be about 3,300 bucks and you’d be paying about 2,100, 2,200 bucks per month to offset the rest of the mortgage. So the question is, if you were to go rent a comparable place somewhere else, would you be spending more or less than 2,200? And if you would also be spending 2,200 bucks somewhere else, still kind of a win, right? You’re spending the same amount that you’re already spending, but it’s going towards something that you own. So I think just redefining what a successful house act actually means is probably what I focus on.

Ashley:
And then on top of that, besides just paying towards your own mortgage payment and owning the asset, you’re getting other advantages like the tax advantages of owning real estate compared to renting a property. You’re having your tenant pay down part of your mortgage and you’re getting appreciation in the property. Plus you own the property so you can kind of make the rules and do with it what you want to. So there’s other factors to think about instead of just your housing cost also. But most of the time you can decrease your living costs or even if you can’t decrease them and they’re staying the same, there’s all these other things that come into play that make it such a benefit to you as an investor, not only financially, but also kind of for your life too.

Tony:
I think the other piece that I’d add also is, is there a way, Dominic, for you to increase the revenue potential on this property? Because if you said like, “Hey, the one unit’s being rented for 1,150, is there a way to increase that 1,150 to some other number? And maybe instead of just doing a traditional long-term rental, can you rent by the room?” If it’s a three bedroom or a two bedroom duplex on the other side, rent out both rooms individually. Can you go from 1,150 to maybe 1,600 or 1,900, whatever it may be. Can you switch the strategy? Can you furnish the place and maybe do a midterm rental where now instead of 1,150, maybe you’re covering your entire mortgage with just the rents from that other side being a midterm rental or a short term rental, whatever it may be. So I think maybe also getting creative on the ways to increase the top line revenue on the other side.
And then even on your own side, right? It’s like maybe – We got to

Ashley:
Come up with a name for this, like a super house hack

Tony:
Or something. The super house hack. Yeah, the mega house hack, right? But you stack these strategies together. So it’s like even on the side that you’re living in, you didn’t mention, but maybe you’re a single guy, can you rent out the other rooms on the side with you? So you’re midterm renting the other side, making three grand a month, then you’re renting out the other rooms on your side. So you’re also generating revenue and now you’re at a point where you’re not only covering your own living expenses, maybe you’re making some additional on top of it as well.

Ashley:
The last piece that I’ll add to this too is if it does need some renovation so that you can increase the rents is that if you are living in the property, opposed to you living somewhere else and having a vacant unit and you’re renovating, if you can live in the property while it’s being renovated, maybe you’re doing renovations slowly over time, overall that is going to decrease your expenses because you’re not paying for a place for you to live and you’re not holding onto a property that has a vacant unit that’s not bringing in any income. So if you take out your living expense and you put yourself into that duplex in that unit, you just eliminated a big expense for yourself by not having to have a vacant unit sitting. And then you can go ahead and do it over time, YouTube university or get contractors in there to be able to renovate it and then you can decide to move out and then you have a renovated unit that you can rent for a lot more than that 1,150.
Then you could even switch sides and go to the other side and do the same thing too if you wanted.

Tony:
Ash, I want your opinion because as stated right now, he’s saying like, hey, 1,150 on one side. So if you rent out both sides, what is that? 2,300 and the mortgage is 3,300. So it’s a net 1,000 negative if he were to run out both sides. To me, I’d say I probably would move forward with that specific deal because once you do move out, I would hope that it’s at least paying for itself and paying for itself mean it’s covering all expenses. So I would say leverage some different strategies to get that revenue ceiling up. But would you agree with that?

Ashley:
Yes, I would absolutely. And that’s why you got to have an estimate, a timeframe of when you would actually move out of the property. So if this is something you only want to be there for a year, you’re probably not going to, unless you’re doing a big renovation, adding a ton of value, you’re probably not going to be able to make up for that thousand dollar difference. But if you’re planning to live there for some time, you could see an increase in rents, you could see you add some value, there definitely could be room for improvement. So it really depends on the property type, how it sits now, if you have a lot of value that you can add to increase those rents to cover it. But if you’re already planning to move out in a year and you’ll know you’ll be cash flow negative a thousand dollars, then no, I wouldn’t do this deal.
Okay, so coming up, a rookie asks, what about breakeven? What does that actually mean? So we’re going to break it down, which expenses count, which ones the rookies forget and when a breakeven rental can still be a smart first deal. We’ll be right back.
Okay, so Dominic is wrestling with what counts as a win when the cash flow is not obvious. Our next question zooms in on that same idea. What do investors really mean when they say a property breaks even? And this question comes from a BiggerPockets Forum member. So while listening to the podcast, I keep hearing people say you are doing well if you are breaking even on a long-term rental year one with the way rent to price ratios are in most areas. Can anyone weigh in on what they’re including in breakeven? Is it just your mortgage, property taxes, insurance versus the rent you bring in? Or are they also including a reserve for stuff that breaks capital expenses, et cetera, in their calculation? Thanks for help with the rookie question. So we can’t tell you what people are including because investors are probably including lots of different things where some are probably just including their mortgage payment, their insurance and their property taxes and saying, my rent is 2,000, my mortgage payment is 2,000 and I break even.
For us, that is not breakeven. Breakeven includes all of your fixed, all of your variable expenses. So it does include the repairs and maintenance. It does includes the capital improvements. It does include any utilities you’re paying. It does include the person you’re paying to cut the grass in the summer. So that’s end of the day, bottom line, income minus all of your expenses. If you are breaking even and there’s no surplus and you’re not negative, that’s what we consider a true breakeven number.

Tony:
And I think just to also define, because there’s the gross revenue generated by your rental and there’s the net income at the end of the day. And in reality, when we talk about breakeven, it means that your gross income minus all expenses, your net income becomes zero. But your gross income is just like the rent that the property produces. So in a long-term rental is whatever your tenant is paying you. In a short-term rental, it’s the combination of the revenue generated from all of your reservations. Same for a midterm rental, it’s the net coming from your leases. And then your expenses, to your point, ash are all the things we’re paying on. And then after that, after we take account all of those expenses, that is your net income.
But how do you make sure that you’re accounting for the right thing? My best advice is just to use the BiggerPockets calculator when you’re analyzing a deal because it’s going to force you to actually make sure that you’re accounting for everything. And Ash and I, we both talked about how early in our careers, that’s how we gained confidence in actually analyzing properties was going through the BiggerPockets calculators because it literally forces you. There’s a field that says, “Oh, hey, you forgot this.” Or, “Hey, if you’re not sure how to calculate this, here’s a good rule of thumb to make sure that you incorporate this.” So I think rather than guessing, just go to biggerpockets.com/calculators, take a deal you’re thinking about, plug it into that tool, and you’ll get a really good idea of what breakeven actually means for that specific property. All right. After the break, a Pittsburgh rookie is trying to house hack in today’s rate environment and is getting wildly different advice about returns.
So we’ll talk about what expectations actually make sense today. All right. Our last question comes from Ian Zuber and he’s looking for an FHA financed multifamily house hack in Pittsburgh and is just trying to figure out what return target is realistic in today’s market. So Ian says, “I’m a new real estate investor and after a few books and hours of YouTube videos, I’m knee deep in my search for an FHA financed multifamily househack in the greater Pittsburgh area with interest rates as high as they are and home prices elevated as well. I’m not sure where my expectation should be as far as cash on cash return and the total ROI percentages. I’m interested to hear what more experienced investors have to say. I’ve heard some people say that cash flow isn’t necessary while you’re living in the home and to analyze a property once you move out and it’s fully rented.
I’ve heard from others that cash flow is essential and they expect a 10% cash on cash return and over 25% of total ROI or else it’s not worth it. I think the viewpoints of my fellow investors will help me come to my own conclusions about what I can and cannot accept in a deal.” So please share your thoughts. I mean, we just hashed out in the first question about house hacking. Cash flow and what’s a good house hack versus a bad house hack? So we won’t rehash that here again. But the other part is what is a good return? First let me say every market’s going to vary wildly. Ashley’s market in Buffalo is going to be very different than here in Southern California. It’s going to be very different than the Midwest and the Southeast. Then name the part of the country, every market is going to operate in a slightly different fashion.
So we can’t say that a good return in Buffalo is also a good return in Pittsburgh and that the kind of return that Ashley expects may be completely unreasonable in Pittsburgh and vice versa. So I think the first thing is we just have to understand that every market has its own return that is reasonable. Now the bigger thing for you, Ian, is asking yourself, “Well, what kind of return do I want and what kind of return do I want on my money? What kind of deal is it that I’m actually looking for?” Set your own goals and expectations first. And then from there we just want to see does Pittsburgh actually align with what those projected goals and expectations might actually be? And if you find that, okay, after analyzing a few deals, Pittsburgh is terrible. I want a 10% return, but everything in Pittsburgh is like a 2%.
Well, then you’ve got your answer, but I think we can’t take this big national number. Let’s underwrite Pittsburgh specifically to get to that answer.

Ashley:
Yeah. And I got two things to say about this. First is what’s a good return to you and what’s a good return to somebody else could mean very different things. So this capital that you would invest in this deal, what else would you do with that money and what other type of return could you get? If you have another opportunity where you can make a 25% cash on cash return and you’re analyzing Pittsburgh deals and they’re not getting anywhere near that, maybe you need to take that other opportunity or maybe a different market you want to look at. So I think also understanding what makes it worth your while. Then the other thing is actually comparing the other elements that come with real estate investing. So you have the cash flow of the property, but there’s also the management of it. There’s your time commitment into it.
So how is the acquisition going to be on this deal? Is it going to be easy? Do you need to get permits for things? Do you need to do a heavy rehab that’s going to take time?
Is this in a high crime area where you’re going to need to put a security system in for the tenants? What are some of the headaches and the time commitment and the problems you will have to solve to be able to get that return? Is this just a set it and forget it duplex where you will not have to do anything and it is turnkey? So think about that. Think about other things that don’t have a monetary value to actually calculate into the cash on cash return, such as your time is a really big one. The next thing I want you to look at as in what are the other advantages to real estate? So even though we can say your cash on cash return is this, it’s not calculating all of the benefits that you can get from real estate such as the tax advantages.
If you are a high income W-2 earner and you have a stay at home spouse and now you’re going to buy this property, there are tax laws out there where you can get a huge, huge deduction in your taxes just from owning this one piece of real estate, which could make this a way better benefit for you than just thinking about the cash on cash return.

Tony:
I think the only other thing that I’d add is that Ian, you’ve got a decent buy box here, right? You said I want an FHA financed multifamily house act in the greater Pittsburgh area, which is a great starting point because a lot of other Rickies are just like, I want a deal. So this is more specific than something as open as I want a deal. But I think I would actually challenge you to refine the buy box even further. And once you do that, I think you have a better idea of what the actual cash on cash returns might be. And my approach for building out a buy box is I don’t start by going to look at what’s for sale in a city. I start by researching the supply that’s already active in that market in terms of the rentals, the rental supply in that market.
So go look at all of the other multifamily in that area and maybe you’ll start to see, well man, if I buy a fourplex, my per unit rents are going to be X, so my gross is actually this. If I buy a three unit, my per unit rents are going to be this and my gross is going to be that. So even though the per unit on the two bed is lower, it’s actually a better deal overall because the price of the two bed. So there’s different ways you can skin that same cat, but go do research on the market, understand, hey, what types of multifamily perform the best? Is it a side by side? Is it an updown? Is it a threeplex, a fourplex, a duplex? What type of specific property should I be targeting? Once I have the type of property, what area of town should I be focused in?
Do I need to be on the southeast and in the northwest? Is there a river that goes through Pittsburgh? I feel like there might be a river. Do I need to be close to the river away from the river?What does that look like? Narrow it down to specific zip codes, to specific neighborhoods, construction quality. Are these all high-end finishes or is it more like traditional builder grade? Get really, really clear location, construction quality, architectural styles, and from there you have a much, much better picture of the actual rent potential and then you can do a better job of backing into what your returns might be. So that’s the only thing that I’d end with is just get even more clarity on the buy box.

Ashley:
Today’s episode is about not letting perfect numbers kill a good first deal. If the property improves your housing cost, protects your downside, and it can become a solid rental later, that can be a real win for a rookie investor.

Tony:
But the real key is just knowing what do you mean by good, right? So define breakeven, include reserves and compare the deal to your real alternatives before you pass on it or jump in too fast.

Ashley:
This has been an episode of Real Estate Rookie. I’m Ashley, he’s Tony, and we’ll see you guys next time.

Dave:
Do you want to pay less tax and keep more of your hard earned money? If you were to get a raise at work, let’s call it $2,500 a year, after a 22% federal income tax, 7.6% payroll tax, and 5% for state tax, your take home pay would be just 1,640 instead of 2,500. But if you earn that same $2,500 in real estate rental income, you’d probably pay almost zero tax and keep most of that $2,500. That’s cold, hard cash in your pocket that you can use to keep growing your portfolio. This is a hidden but absolutely huge benefit to real estate investing. The IRS just treats real estate differently from almost everything else, and almost anyone can use the US tax code to save on taxes and keep more for yourself. So today on the show, we’re breaking down the many, many ways real estate gets special treatment from the IRS and how you can use this to your advantage.
I’m going to pull out the whiteboard and show you real examples and real numbers so you can start planning your next move.
Hey everyone, welcome back to the BiggerPockets Podcast. I’m Dave Meyer. Some benefits of real estate investing are obvious, things like cash flow and appreciation and value add investing, but some are a little more subtle. And today’s show is about the biggest one of all of these subtle advantages, taxes. So today on the show, I’m going to break this thing down in detail. We’re going to walk through several concrete examples with real numbers and show the different strategies you can use right now to optimize your tax situation. It’s going to be fun. I think it’s going to be eye-opening and it’ll lower your tax bill. So let’s do it. But before I get started, I’m going to use one single example, one deal for the entirety of this episode just so you can follow the potential tax savings on a single deal. And then of course you can extrapolate that and how powerful this can be for an entire portfolio.
So I just kind of want to write out what my sample deal is to get things started. So for our deal, we’re going to look at a property that we’re going to purchase for $300,000. So it’s a little bit below the national average, but as investors, this is the type of sweet spot I actually look for. I like to look for properties that are 125 to 150 a unit. So let’s just assume that this is a duplex that we’re going to be buying. Then we’re going to put down payment. We’re going to put 20%. We’re going to get a mortgage at 7%. That’s about where they’re sitting today. For this property, our rent is going to be 2,800 bucks and our operating expenses are going to be just under $12,000 a year. I actually ran the math and I figured it would be about $11,600.
So as we’re going through this entire episode, remember that this is the deal that we’re looking at. And if you actually calculate this out, I’m just going to get to this now, our cash flow for this deal would be about $2,840 and that comes out to a cash on cash return of 5%. So a solid deal in today’s market, not a home run, not a bad deal. If you can get 5% cash on cash return in most markets, you are doing very, very well. So let’s just say that you find a great deal as we talk about how to do all the time on the podcast, and now you want to figure out how you can make this deal even better by optimizing your taxes. So the first tax strategy that you should be using, and this is probably the most common one, is known as depreciation.
Depreciation is basically part of the tax code that allows you to deduct the gradual decline or deterioration of your property over time. In the IRS’s eyes, everything out there, every physical object has a useful life. And for residential real estate, the government has decided the useful life for a house or a duplex or a three unit is 27.5 years. It’s very specific, but they say that every 27 and a half years, you’re going to need to essentially replace your property. And that decay over 27 and a half years is seen as a business expense that you can deduct in a given year. And this deduction counts against your rental income and lets you keep more cash flow. So let me just show you how this works. So remember that our income for this year, our profit or cash flow was $2,840. And if you were to pay your normal income on that, if this was just regular income you got from your job, you might pay up to about 40% in taxes, in which case you’d get $1,704 after tax.
That’s still cash flow, right? That would still be money in your pocket, but it definitely lowers the return.You’re no longer getting a 5% cash on cash return. It’s probably something like a three or 3.5% cash on cash return. But luckily in our example, we’re talking about rental income. And so what you do is subtract the depreciation. So you can take again that decay and subtract it from your income and that’s how much you pay in taxes. So let’s figure out what the depreciation would be for our property. Now, an important distinction when you’re figuring this out is that you do not get to depreciate the entire property. When your taxes are assessed, the tax assessment will have a land value and it will also have a building value. And so you need to know what this is. Usually it’s like 80 / 20 building to land.
So I’m just going to use that because this is just an example. So our land value here would be about $60,000 and our building value would be the remainder of our purchase price. So that would be $240,000. So all we got to do now is take 240,000 and divide that by the oddly specific 27.5 years, and that gives us $8,727. This is the amount. $8,727 is the amount that we can deduct from our rental income. So you take your $2,840, you subtract this $8,727, and that equals a negative $5,887. This is now in the eyes of the IRS, that’s your taxable income on your rental property. So instead of paying taxes on 2,840, you are paying taxes on negative 5,887, which is to say you are paying zero tax on your rental income. It’s amazing, right? So basically you’re paying no tax on your rental income.
Now, there are a few things I need to explain, a few caveats here. So first, you’ll notice we are not using our total depreciation, right? We’re only using a piece of it. We could deduct more than $8,000, but we only deducted 2,840, but we’re going to get back to that. Remember that this was negative because we’re going to talk about that in a couple of minutes. Second thing, just keep remembering that you depreciate the building value and not the land. So this is public data. You can go up and look at the land value versus the building value and only do this calculation on the building value. Third thing to remember is this is just residential property. If you’re using a commercial property like large multifamily, you absolutely can still use depreciation, but commercial is depreciated over, again, an oddly specific 39 years, not 27 and a half.
And then there’s the big one. This is really, really important and it’s something I think a lot of people forget about and miss, is that eventually you do have to pay this tax. There is something when you go to sell your property called depreciation recapture, which is basically you paying this back eventually. And so if you’re wondering, what does it matter? Why even do this if I am just going to repay it when you sell? Well, first and foremost, if you look at the time value of money, it says, I’m not going to totally get into this, but basically time value of money tells us that the current value of cash is more value than money in the future. So a dollar today is worth more than a dollar in 10 years. Why? Because you can invest that dollar today, and if you invested that and it compounds in 10 years, that dollar is probably going to be worth $2 or $2 and a half dollars or $3.
And so having money now allows you to invest that over time. And so if you think about a rental property that you might own for 20 years, you just saved $2,840 that now you can compound for 20 years. And then when you go and sell your rental property 20 years from now, the depreciation recapture is probably going to be a drop in the bucket compared to all the appreciation you’ve had or the money that you’ve made compounding your savings on taxes. So this is absolutely still worth it with depreciation recapture, but if you’re only holding onto a property for a few years and you’re not going to get a lot of appreciation, it’s something to really remember that you’re going to have to pay for. But depreciation is awesome. It’s amazing advantage that you can use on any sort of rental property. All right, so let’s move on to tax strategy number two, and I’m actually going to just lump two together because they’re related.
We’re going to talk about bonus depreciation, so even better than the depreciation I just talked about and cost segregation, which I’m just going to call cost seg just for short. So as we talked about, standard depreciation treats the whole $240,000 building as one asset, right? The whole thing, one building is one thing we depreciated over 27 and a half years. Doing something called a cost segregation study, which is you can do yourself, but usually go out and pay someone to do this for you. This is a process that allows you to look at that building and say, that’s not one thing. A building is actually made up of dozens or hundreds of different components. There are appliances, there are floors, there are water heaters, there are hot water boilers, all of those things. And you shouldn’t depreciate all of those things on the same 27 and a half year schedule.
Instead, you should depreciate some of them faster because some of them have shorter useful lives. Just think about a fridge or a hot water heater. They last seven to 10 years, something like that, not 27 and a half. And so anything that has this useful life of 20 years or less qualifies for bonus depreciation. And bonus depreciation has been around for a couple of years. It came about during the 2017 jobs bill, but then it was phased out as part of that bill. But in the One Big Beautiful Bill Act, that actually has brought it back. Bonus depreciation is back to 100% and it is permanent for properties acquired after January 19th, 2025. Before that bill, it was scheduled to sort of phase out over time, but it is back. So this is really important. And so the way that this would work is if you want to do depreciation, someone would come in and help you.
I mean, you could do it yourself, but I recommend having someone come do this for you, is you’re basically going to break all of the components of your home into different buckets. So certain things are five years. So if for five years we have carpet, we have fixtures, stuff like this, we have some appliances, that would be depreciated over five years. And as you’ll notice, the good thing about that is that would mean you get a higher percentage of the depreciation upfront. Instead of dividing the cost of a carpet by 27 and a half and depreciating it, you’re dividing it by five and depreciating it. There are seven year things. We have things like a driveway, fencing, landscaping, stuff like that. And then we move on to 15 years and we have stuff like a roof and so on and so forth. I think you all get the point.
And so it just basically allows you to break down your depreciation faster. So this is really useful if you have a ton of rental income. If your rental income on this hypothetical property that we’re talking about was $15,000 or $20,000 of cash flow, remember our depreciation for that year was just about 8,700 bucks. And so you would get a big tax benefit just from regular depreciation, but you’re not going to pay zero tax. If you do bonus depreciation, I’m not going to do the whole math here because again, usually a professional goes out and does this, but let’s just say your bonus depreciation came out to $30,000 in year one, then you would be able to depreciate all of your rental income and get that tax bill on your rental income back down to zero. I just do want to call out that cost segregation studies, having someone go out and do this for you costs money.
You can do it on the cheaper end, I think like 1,000, 1,500 bucks, but they can go up to 5,000 bucks. It sort of depends on how professional it is, if you’re doing it online, how big your property is, how complicated it is. So if it’s only going to save you a couple hundred bucks a year, it is not worth doing a cost segregation. But if it’s going to save you potentially thousands of dollars, if you have high rental income and you want to depreciate against it, then it’s definitely worth it. So definitely think through that before you go out and do this. Now again, you’re probably wondering about that negative depreciation, our negative income. Because even on our first example, we had negative, I think it was about $5,000 that we weren’t using in depreciation that we could have. It was negative $5,887 that we could have been using.
So what do you do with that? Can you actually use that in some productive way for your tax bill? You can, and I’ll explain exactly how, and I do think this is an unbelievable tax unlock, but we got to take a quick break. We’ll be right back. Imagine if real estate investing was easy, all the benefits of owning properties without all the complexity and expense. That’s the power of the Fundrise Flagship Fund. Now, you can invest in the $1.1 billion real estate portfolio starting with as little as $10. Visit fundraise.com/biggerpockets to explore the portfolio, see historical returns and more. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund before investing. This and other information could be found in the funds prospectus at fundrise.com/flagship. This is a paid advertisement.
Welcome back to the BiggerPockets Podcast. I’m Dave Meyer. Today we’re talking about how real estate can save you money on your taxes. Just as a reminder, we’re walking through an example of a deal that is $300,000, down payment of 20%, mortgage rate is 7%, our rent’s 2,800 bucks. Our cash flow on this property is about 2,840 for a cash on cash return of 5%. And as we’ve shown, depreciation, both regular depreciation and bonus depreciation can save you a ton of money on your taxes today so that you can reinvest that over time. But as we’ve shown in our example so far, there are times, it’s quite common, where you can depreciate more. You can take a bigger deduction than your income, and so your taxable income on paper becomes negative. And the question then becomes, is there something that you can do about this? And that brings us to our third tax strategy, which is called real estate professional status.
A real estate professional for tax purposes is a specific IRS classification. It allows qualifying people to treat their rental income, their rental activities as non-passive. The IRS splits your income if you’re a real estate investor. Anything like my job, my W-2 job at BiggerPockets, that is my active income. My money that I make for my rental properties in the eyes of the IRS is “passive income.” I cannot take the losses I take on my passive income. So any of that depreciation, I cannot take that and say, “I want to take that negative $40,000 I earned from my rental property cost seg bonus depreciation and apply it to my salary at BiggerPockets.” That is not allowed. So when I get Dave Meyer, when I have negative depreciation, I can’t do anything about it. And it’s frustrating, but that’s the way it is. But if you qualify for this thing called real estate tax professional status, you can take it hypothetically, all of the rental, the losses, the depreciation from your passive investments like rental properties and apply it to your active income.
And that is incredible because you can actually get your entire tax bill closer to zero. So rather than for me, I rarely pay tax on my rental income because of depreciation or I defer it, I should say, until I sell the properties, but I still pay full taxes on my income. If you’re a real estate professional, you get to carry it over. So it’s unbelievable for tax purposes if you’re investing in real estate. But again, the qualifications are very strict and it’s not something you can fudge. You will get audited, you’ll get in trouble, don’t do that. You need to actually qualify for real estate professional status. So here’s what the IRS says is real estate professional. There’s a bunch of different criteria. The first is the 750 hour test. You must perform more than 750 hours of services during the tax year in real estate property trades or businesses in which you materially participate.
So this is really important. First of all, you have to be in real properties or trades. So these are things like being a real estate agent, being a property manager. I think even maintenance or contract work would count for this. Those are just usually some of the more common examples of this stuff, but you also have to materially participate in the property that you’re using the depreciation for. So you couldn’t be a real estate agent. Do 750 hours of services and then take depreciation from a syndication that you’re not involved in and apply it to your income as an agent. But if you owned a rental property yourself, let’s just say you did a cost seg, you get $40,000 negative from your rental income, you can then take that and apply that against the income you make as an agent. So let’s just say for our bonus depreciation, we had negative 40K.
Then as an agent, you made in commissions, let’s call it $100,000. So you subtract, you now take your 100K and subtract the 40K. And so now your taxable income, not just on your rental property, but on your other income is going down. So now when you go and pay your ordinary income tax, the IRS is only looking at $60,000. You are deducting $40,000. And if you’re paying, let’s say 33% tax, if you’re paying 33% on your tax, this would come out to one third of 40,000 is roughly $13,333. So you just save another $13,000 on your ordinary income. That’s absolutely unbelievable, right? So if you can do this, it’s great. I should mention the other parts of the test. Again, you have to do 750 hours. You have to materially participate in these properties. And then there’s also something called the 50% test, and this is that more than 50% of the services you perform have to be in real trades or businesses.
So basically what this is saying is it has to be your main job. You can’t have a corporate job working 40 hours a week and be an agent on the side and do this. Even if you’re an agent for 750 hours, you cannot do that. It has to be the majority of the hours that you work in a year. But if you are an agent, if you are a property manager, if you are a contractor, this is magic. You get to count your rental losses against active income. I’m so jealous of this. I wish I can absolutely do it. I think it’s probably the greatest tax advantage for real estate investors over the lifetime of your portfolio building. It will save you hundreds of thousands of dollars, if not millions of dollars over the lifetime of your investing. If you can qualify, you should look into this.
All right, so that is another great tax benefit, but we have more. We have a lot more. One of the most popular ones that real estate investors use, I love this and use it myself quite frequently, is the 1031 exchange. So the 1031 exchange allows you, when you go and sell your property, to take the profit that you have earned owning and operating that business and pay zero capital gains tax on it if you go and invest it in a new property, it’s called like for like investing into a new investment property in a specific period of time. So there are a bunch of rules about it, but the big picture here is you do not pay capital gains tax on your property sale if you reinvest it. And hopefully you can see why this is so beneficial. It’s similar to what we talked about with depreciation.
It’s not that you never pay those taxes. Eventually you might, unless you die, frankly, that is the way you get out of it if you die owning these properties, but you get to defer your taxes indefinitely. You could keep 1031, 1031, 1031 for your whole life and never pay the capital gains tax. So that allows you to reinvest and compound your income over time. So let’s go back to our example. Remember we bought this property for 300K and let’s just say we held it for 10 years and it appreciated at 3% and that of compounding over 10 years, our property would be, I’m just going to round here, it’s going to be worth $403,000. So that’s the value of our property. We need to account for 7% sales costs, that’s commissions and just getting the house ready and all that kind of stuff. So that would give you about $375,000, right?
So that’s where we would be. But then we need to account for the depreciation. Remember that still you do have to pay when you go and sell this property. Let’s just say the depreciation recapture is $40,000. So I’m just making this up as an example, right? But we have 375 minus 40K. So now our real, what we’re walking away with is 335K, right? So we have 335K, then we have to pay off our mortgage. It was originally a $240,000 mortgage. I’m going to keep the numbers simple here and just say we paid off $40,000 of our mortgage. So we then have to subtract $200,000 and we have to subtract our down payment because that’s equity that we put in, that was 60K. So if we subtract 260K from 335, that gives us $75,000 in profit, roughly. I’m rounding, just so you know, but $75,000 in profit.
Now, if you were not to do a 1031 exchange, you would pay capital gains tax on this at 20%, meaning you would pay $15,000 in taxes on this, right? So if you didn’t do a 1031, you would pay capital gains, you pay $15,000, and at the end of the day, you would walk with 60 grand. Still awesome. You owned a cash flowing rental property for 10 years, you made money that way, now you’re walking away with 60 grand. That’s 100% return on your 60% equity in 10 years, pretty good. But if you do a 1031, you don’t pay this $15,000. So instead you get to reinvest $75,000 instead of $60,000. Just think about what you can do with that. Obviously it’s 15,000 more dollars, but if you were to go out and put 25% down on your next investment property, if you paid the capital gains tax, what you would be able to afford is $240,000 because you’re putting 25% down on 60,000, you divide 60,000 by 25%, that’s $240,000.
But if you do the 1031 exchange, you can afford something worth $300,000. So just by doing this 1031 exchange, you can afford a bigger property. And this is how real estate investors scale up, right? Because you do this enough times, maybe this is the difference between buying a two unit and a three unit, but you do it again, maybe that’s the difference between buying a four unit and eight unit, an eight unit and a 10 unit, a 10 unit and a 15 unit. And this is probably the most common way people really start to scale up is they do something like a burr, they hold onto these properties, they build that equity, and then when they go to trade up, they get to keep all the equity. They don’t pay the 20% in tax. They get to keep rolling it into future properties. So the 1031, again, it costs money, but it’s not that much.
It’s a couple thousand dollars. It’s really, really worthwhile. The thing that is stressful about it is the rules about how quickly you have to buy a property, and there’s this whole process where you have to “identify properties” within 45 days. So once you go and sell your property, you have 45 days to pick the properties that you’re going to 1031 into. You don’t actually have to close on them for 180 days, so you have six months, but that part’s easy. You have to find the properties that you want. And so in certain kinds of markets, that can be hard if you’re in a really strong seller’s market. During COVID, it was hard to do a 1031 because you would have to find properties to buy in 45 days when deals were scarce and you didn’t have a lot of negotiating leverage. So you might bid on a lot of properties and not get them.
Now it’s a lot easier to do a 1031 because your ability to get things under contract is a lot better in my opinion. So you have a better predictability when it comes to 1031, but just remember those rules. There’s also some rules about how much debt you have to put on the property. You should look into all of this, but it’s all very specific. Usually you hire someone called the 1031 intermediary who can help walk you through all of these things. But if you’re an investor, you’re selling a property, absolutely look into a 1031 exchange. It is a very powerful tax tool. All right, so that’s the very powerful popular 1031 exchange, but we have three more tax advantages that you can use that we’re going to get to right after this break.
Welcome back to the BiggerPockets Podcast. I’m Dave Meyer. Today we’re talking about taxes and how you can save tons of money as a real estate investor. So far, we’ve talked about depreciation, bonus depreciation, real estate professional status, and the all popular 1031 exchange. I’ve got three more strategies to go through for you, and the first two here are things that people just overlook. They’re pretty simple, they’re not complicated, but they’re things that you should remember that you benefit from as a real estate investor. So tax strategy number five is mortgage interest deductions. This is something that a lot of people just forget about, but you are able to deduct the interest you pay on your mortgage from your expenses, from your tax bill. This is kind of similar to how you can do it on your primary residence. The rules are a little bit different.
There’s no state and local tax cap, but luckily it doesn’t require you to itemize. So it’s actually pretty easy to use, but just remember when you’re calculating in your head, when you’re underwriting deals, remember that this is money that you get back at the end of the year. A big portion of your payments on your mortgage, especially in the beginning, are interest. The way that a mortgage works is your payment stays the same every month, but at the beginning of your mortgage, most of it is interest and that percentage that goes to interest versus principal changes over time. In the beginning, it’s very heavily interest. So you can get pretty substantial tax deductions from mortgage interest. And so this is something to just remember as a way that makes your deals a little bit better. Make sure you’re accounting for this in your underwriting because it really can go from taking a deal from okay to a good deal.
So remember that tax advantage too. Number six, I’ll just go through these ones quickly, is operating expenses. When you If you’re running a business, all of your expenses are tax deductible. So these are things like if you’re going out and buying equipment to do maintenance on your property, if you are paying for things like property management software or bank fees or home office, you can deduct using a home office. You can deduct the mileage on your car if you’re driving to and from projects that you’re doing. You can even deduct things like BiggerPockets Pro or BPCOM because that’s professional development or software tools that you use for your business. And so remember to deduct all the stuff that you need for your business from your operating expenses. These are things that really help. Now just remember the way this works. If you go out and spend $1,000 on tools for your rental property to do DIY stuff, you don’t save $1,000.
You deduct $1,000 from your taxable income. And if your tax rate is 33%, you would save $333. You save 33% of that $1,000. So remember that, people get confused about that. That is important to remember, but this is meaningful. It makes it cheaper, especially in the beginning, at least when I was starting, it was really nice because I did my own property management for 10 years. You need a lot of stuff. I needed to buy and invest in tools. I needed to invest in banking and property management software, and I had to build a home office so I could run it. I could deduct all of that. And that was really powerful and popular. The last tax strategy I’m going to go through today, we don’t talk about it a lot on BiggerPockets because it’s been up and down. It’s sort of subject to political whims, but they are coming back.
And that’s something called opportunity zones. It’s really cool. It’s similar to a 1031 exchange where when you go and sell an asset, instead of paying your capital gains, you can reinvest it into real estate and defer the capital gains tax in different ways. The 1031 exchange is great. I really like it, but you have to do sort of like for like real estate and a tight clock. Opportunity zones accept capital gains from any source. So if you went and sold stock and had a taxable event, capital gains, you could put into, instead of paying taxes on that stock, you can put it into an opportunity zone. If you sold the business, if you sold crypto, all those things can work. Or for example, if you don’t find a property for your 1031 exchange within that 45-day window, that is a tight clock. So if you can’t do that, you can look into opportunity zones.
The way it works is they’re basically areas that are designated by the government for economic development. They want investors to invest in these neighborhoods to revitalize them. And so there’s literal physical boundaries. You can go Google the boundaries and areas that are opportunity zones in your state and you can find if you can find properties. So you can invest in individual properties or a lot of people, what they do is invest in opportunity zone funds. And there’s no right or wrong way to do it. I recommend you look into this, but it can really be beneficial. The thing about opportunity zones is you kind of have to hold onto the property for a long time. There’s basically three different benefits and they have three different timelines. So if you invest in an opportunity zone, you can basically defer your taxes for five years. If you hold onto your new property for five years, again, allows you to compound your principle five years.
That’s beneficial. Number two, you get a 10% step up in basis. A step up in basis basically reduces your overall tax because in the eyes of the IRS, you paid more for your property essentially. And so when you calculate what your profit is, it lowers your profit, that lowers your taxes. That’s great. Or the big one, I mean, this is kind of why I think people do it, is if you hold something for 10 years, the appreciation on the investment that you make is permanently excluded from capital gains. That’s unbelievable. So it’s really, really nice. Permanent untaxed appreciation is totally different category than deferral. Deferrals are good, but this is really great. Look into these things, but the One Big Beautiful Bill Act did make these permanent, but it restructured it. So you got to go and make sure you understand all of this. There are a lot of experts out there.
Go to BiggerPockets, biggerpockets.com, talk about it on the forms. People are always talking about it there. So look into opportunity zones, get some advice, but it can really be beneficial for people who are looking to buy and hold things long term. So that’s it. Those are the seven benefits to real estate. There are more for tax benefits, but these are the seven that I recommend investors take a look at. It’s depreciation, regular depreciation, then bonus depreciation and cost seg, real estate professional status, the 1031 exchange, mortgage interest deduction, operating expense exclusions, and opportunity zones. And as you can see, all of this is written into the tax code. It is perfectly legal. It is encouraged. It is encouraging investment. So if you are a real estate investor, I really encourage you to take some time and think through how this can benefit you because so many people get into the game looking at buying as many properties as possible, scaling as quickly as possible, and they overlook one of the easiest optimization hacks out there, which is just keeping more of the rental income that you already have.
There are tons of tools and ways that you can do it, so don’t ignore them. That’s our show for today. Thank you all so much for watching and listening to the BiggerPockets Podcast. I’m Dave Meyer, and I’ll see you all next time.

Dave:
What is actually going on with AI right now? On one hand, the people building artificial intelligence just told us that it might kill us all. On the other hand, the president of the United States said that’s a hoax. The stock market holding strong pricing in AI perfection. So which one is it? This is a really important question, maybe the most important question for our economy right now and for investors of all types, including real estate investors. Just think about this. In the span of about two weeks, a researcher walked away from Anthropic saying the labs are gambling with our lives. Then CEOs of the two biggest AI companies called for a slowdown, OpenAI pushed its IPO out of 2026, and Congress, they just left town and did nothing. But here’s the thing, what these companies do matters a lot to our entire economy. There’s barely anything in our economy that it doesn’t touch and wouldn’t be affected if this AI situation implodes or if it explodes and goes the good way.
So we need to get a sense of what is happening here. So today on On the Market, we’re getting into the AI debate. We’re going to dig into whether this is a bubble or not. I’m going to give the upside and the downside case to this. We’re going to talk about what’s actually happening in the job market. I’m going to give you my honest take, a lot of it, about what I think is going on here. And of course I’m going to share what every real estate investor should be doing about it. This is On the Market. Let’s get to it.
Hi everyone. Welcome to On the Market. I’m Dave Meyer, real estate investor, economic analyst, and the CIO at BiggerPockets. Now, if you listen to this show, you know I don’t normally do full episodes on tech, but AI isn’t just a tech story anymore. It’s an economic story. By some estimates, AI investment is now about a third of all US GDP growth this year. It’s propping up the stock market. It’s reshaping the economy. It’s reshaping the labor market. It’s driving construction in dozens of towns and it’s moving interest rates. And to be perfectly honest, I have some very strong feelings about this. It’s going to be a little bit of the rant. I’m going to give you the facts first and then I’m going to tell you what I actually think is going on and what we should all do about it. Some of this you might agree with, some of it you might not.
That’s fine. I just want to share what’s going on and my take. Let’s get to it. All right, first up, let’s just set the table. Let’s talk about what actually happened because it feels like there’s been this sort of simmering conversation about AI going on in the background for years now, but it seems like it’s come to the forefront in just the last couple of weeks. The major spark here was on September 8th, a guy named Jacob Coxon, he’s a 27-year-old pre-training researcher who had worked at OpenAI and Anthropic for a couple of years. He quit Anthropic and made a post that said that basically both of these companies are not acting responsibly. They’re racing to try and reach super intelligence and in the process are “gambling with our lives.” Now this went viral to say the least. That post alone got 90 million views in 24 hours and it’s sparked a much wider debate.
Following this post, more people inside these companies, Anthropic and OpenAI, said the same thing. An Anthropic alignment lead is called Evan Hubinger and an OpenEye researcher, Marcus Williams, both posted support with Marcus Williams putting extinction risk at 70% without regulation or coordinated slowdown. 70% of extinction. Now we’ll get to whether or not we should be fearing extinction right now, but clearly this is causing people to start thinking about this when you hear this kind of prediction. It’s a little bit scary and probably should be talked about more. Now these announcements, we’ve heard a lot about the dangers of AI for a long time, but these specific announcements came following what’s called the hugging face incident. This didn’t come out of nowhere. Back in July, OpenAI agents, OpenAI by the way, is the company that creates ChatGPT. Anthropic is the company that creates Claude, if you’ve heard of those AI tools.
Anyway, OpenAI agents, they were trying to do an internal evaluation of cybersecurity. They “escaped their sandbox.” So basically they were supposed to operate in this little technological world and they got out and were on the open internet and basically were able to hack into another company called Hugging Face. And this is not debated. OpenAI confirmed it was its own models. It said no customer data was stolen. Sure, maybe. But anyway, they acknowledged that this actually happened. And so what we need to realize here is that an AI system did a real world hack no one told it to do. This is not sci-fi. This is actually what happened this summer. And right after these announcements, note it wasn’t before these other whistleblowers went public, but right after it on September 12th, Anthropic CEO Daria Amodi published a huge long essay saying that they need to slow down how fast AI capabilities improve.
And what he said is first, we need to have embedded independent third party evaluators with employee level access inside the labs. That’s what they want. They said Frontier Labs and democracies coordinate on safety and pace, which he said would need an antitrust waiver from Washington, convenient. And third, international agreements with a “speed limit on AI progress.” And within hours of this proposal, something else curious happened. We had Sam Altman, the CEO of OpenAI say, “I agree with Dario.” Elon Musk, who is the CEO of Grok, another AI company, said Dario is right. And Demis Hasibus of Google DeepMind also publicly backed it. So after all this competition from these companies for years, all of a sudden they’re saying we should work together. We should slow down. We shouldn’t IPO. It’s a little bit curious, and we’re going to get to that in just a minute.
But first I just want to call out that not everyone agrees. You’ve seen Jensen Wong, who’s the CEO of Nvidia, the most valuable company in the world, saying that the safety concerns are hyped up. President Trump said that he doesn’t buy into the safety concerns and that we don’t need any of this regulation. Congress has certainly done nothing about any of this. They actually just went on leave. And so right now, the only serious proposals about regulating AI are coming from the AI industry. So just to summarize what’s gone on here, there was a hack, the first known instance, there’s probably more, but the first known instance of an AI going on a rogue hacking mission, the companies really didn’t say anything about regulation for a while. And then once there were whistleblowers inside the company, all sorts of CEOs came together and say, “Actually, we need regulation,” after years of them saying that they don’t need regulation.
Now again, why does this matter? Because AI makes up so much of our economy. The S&P 500 right now is primarily made up of hyperscalers in AI. And if you actually boil it down, estimates is that the S&P 500, which is the majority of Americans’ life savings, it’s the majority of retirement planning in the United States is 30 to 40% an AI bet. And so what these companies do matters a lot to ordinary Americans. It will spill into real estate. It will spill into every part of the economy if this collapses. Of course, if it goes really well, it will benefit everyone as well. So which is it, right? Is it going to benefit everyone or is it going to crash? That is the big debate and no one knows for sure, but I’m going to give you my reaction. Big picture, I am very worried.
I think the whole thing is extremely volatile and incredibly risky. Not because I don’t think AI is amazing and useful. It is maybe not as useful as the biggest proponents believe, but if you’ve used it, you know it’s incredible technology. It’s going to change the world. But I am worried because first and foremost, there are real risks. This hugging face incident happened. It’s the one that we know about. Are there more? Probably. Are there going to be more? Almost certainly if there is not regulation. We cannot rely on these companies to self-regulate in a system where they’re competing against each other for potentially the most lucrative industry ever to come on earth. We cannot rely on them to self-regulate. So I do think some of these risks are real. Now, risks of extinction, I don’t know. I think that is really hard for someone like me who is not an expert in AI to extrapolate how we go from LLMs that are great researchers and good at making PowerPoints to us going extinct.
But I’ve read a bit about some potential areas, which are primarily the things I worry about are bioweapons, the ability for AI to generate superviruses or cyber attacks that sort of just disrupt society in general. I am particularly worried about those two things. I’m sure there are more risks that I don’t even know about. So that’s the first thing. The second thing is what just kind of grinds my gears about this and makes me worried financially and just for society in general is the complete lack of oversight in an industry that not just has the potential to create actual physical harm, but also one that could upend our entire labor market. Just think about this. I know people debate about how much regulation is appropriate in an economy, and I think some regulation is overbearing. There is some regulation that I am very happy to have.
No one is upset that the FDA reviews pharmaceuticals before they’re released to the market. No one is upset that the FAA checks on your airplanes before you get on one of them, right? The idea that we have something that could do harm and it is not regulated by people outside of the industry is honestly insane. I am not an expert. I do not know exactly what the right regulatory framework is, but I know that doing nothing is not the right answer. And some people say, oh yeah, if we regulate it, then China will win. Here’s my response to that. Experts in this industry are saying that if we do not regulate, we are heading towards potential disaster. What does it matter who wins? It’s a race to destroy society. What does it matter if China comes up with the super intelligence that leads us to extinction or the US leads us to extinction?
It’s also just a false dichotomy. You can have regulation and still win an AI race in a way where it doesn’t actually destroy society and is a productive tool to enable and better our society. I think AI has that potential and I do not think that regulation stops us from achieving that beneficial outcome of AI. I truly believe it is essential. It is vitally important that we have some sort of regulatory framework for it to become beneficial. I think unregulated, things can go really bad. The third reason I am worried is economic. As I said before, so much of the US economy is now banking on AI. So much of our GDP growth, almost all of it, is coming from capital expenditures in AI. So your retirement account, your index funds is a bet on AI. Whether you know it or not, you are betting on AI if you own index funds.
That is enormous. So much of index funds are made up of AI stocks. And I’m going to get into some details of that in a little bit, but those are the main reasons I’m concerned. I think there are real risks. I think the lack of oversight is deeply concerning. And the third is economic. And maybe there’s a fourth, right? I also am just generally very skeptical of the people who are running these businesses, how the government is handling this, and what is actually going on behind the scenes. It all feels honestly pretty fishy to me, very suspicious the way things have gone on in the last couple of weeks, and I want to explain why.
Why all of a sudden do these companies all want regulation and agree to slow down? After years of competing against each other, what’s going on here? Did they all just grow consciences one day? I don’t buy it. I don’t think that all these leaders are agreeing now on a slowdown in regulation because they think it’s in the best interest of society. I don’t think that just happens overnight. So what is actually happening here? And I have a couple of theories. They’re not just my own, but I’m just going to share a couple of theories by very smart people who understand this industry about what’s going on. First is they want regulation because it’s a competitive advantage and it’s a barrier to entry. Let’s go into this. Every regulatory framework that you create creates compliance costs, right? It costs money for Boeing to have their airplanes reviewed by the FDA.
You need to invest in infrastructure and people and technology and tools that allow you to meet those regulatory frameworks. And these companies, big companies like OpenAI and Anthropic and Google that are investing literally hundreds of billions of dollars into this industry may welcome some regulation because it will stop smaller companies from competing to that. In a lot of ways, the real threat to OpenAI and Anthropic is not each other. It’s what are known as lightweight models. They’re smaller, they’re cheaper, and they’re often Chinese that get good enough results from AI at truly a fraction of the cost. If you look at the economics of this, how much money OpenAI and Anthropic are pouring in to get you marginally better results from your LLM, it does not make sense from a business model. And so one theory about what’s going on here is that these CEOs magically all agreed on it.
It’s a little bit of cartel behavior where they’re all getting together to say, actually, let’s get some regulation in because that will make it so much harder for any new competitors to come up and we can battle it out amongst ourselves, but we’re already so far ahead of everyone else that will just cement our position as the leaders in this massive industry. Just look at what Dario Modi said. He called for this framework. He came out and said, “We need a framework where all the different labs get to work together.” Well, in what industry would you allow the CEOs of all the industries to come up with their own regulatory framework? You can’t grade your own homework. It’s a ridiculous proposition. And as part of that, as part of the collaboration he called for, he said, “We get an antitrust waiver.” He’s basically saying, “We’re going to create a monopoly.
The government gives us a right to create a monopoly.” It’s not so subtle when you call for that regulation and an antitrust waiver and the same thing kind of makes sense to me that maybe what they’re doing is trying to put up a defensive mode. Okay, so that’s theory number one that’s going on. Theory number two is that this slowdown, OpenAI pushing out their IPO to next year is just cover for the fact that they’re not making money. Let me just put this in perspective here. OpenAI now through 2030 has committed, openly committed 750 to $856 billion, unbelievable, almost a trillion dollars in infrastructure buildout. Their revenue in Q1 of 2026, it’s estimated they’re not a public company, was six billion. So if you extrapolate that out, maybe 25, $30 billion in revenue against what they’ve already committed to, which is like 30 times that, that is a very risky business.
Maybe they get it, maybe they don’t, but one of the theories about why they’re openly calling for a slowdown and why OpenAI pushed out their IPO is not because of safety concerns. Sam Altman had no safety concerns three weeks before all this stuff started coming out. A lot of people believe that they’re pushing out their IPO and the public stock offering because they just don’t have the numbers there. Their internal projection is that they’re going to lose $14 billion in 2026. Outside estimates of cash burn run as high as 27 billion this year and 63 billion in the next year. They don’t expect to be cashflow positive for at least another three or four years, and that is with very rosy projections. So you’ve got a company that reportedly couldn’t hit its target valuation, and then it says, “Actually, we’re going to delay for safety.
It’s for safety.” Sam Altman has openly said that he thinks AI is going to lead to the end of the world, but quote, “There’s going to be some great companies in the meantime.” There’s not a guy who seemed very concerned about safety. I don’t buy it. I don’t know if it’s because of the defensive moat or if their earnings aren’t stacking up, but I have to believe that this is all self-serving. That said, I do want to call out that Anthropic is still planning to go to market IPO. So I’m mostly talking about OpenAI with this theory and all of this. It just feels wrong. It does not feel like we’re getting the right information about what’s actually going on here. And there’s seven to 10 people who are just making massive decisions that are going to impact all of us. And that’s what just frustrates me about this and why I think whether it’s government or third parties or whatever, there needs to be some people not from the industry looking at what’s going on here and relaying that information to the public.
So all this still, we need to get to the question, is this a bubble? What is going to happen to the economy? We got to look at some of the numbers, so let’s get into that now. First, let’s just talk about spending. Combined in 2026, CapEx plans as capital expenditures, similar to real estate, you’re building out infrastructure, building data centers, you’re buying chips, that kind of stuff. The plans for Amazon, Alphabet, who owns Google, Microsoft and Meta are up 77% and combined are going to spend $725 billion. Just for reference, that is bigger than the economies of all but 25 countries in the world. It’s bigger than the economy of Argentina, of Singapore, of Austria, of Norway, of Thailand, of Columbia, Vietnam. You get the picture, that is a lot of money. And this CapEx, the money is not coming from earnings. Well, it depends.
You kind of have to split these hyperscalers. OpenAI and Anthropic, they’re funding this off debt. Companies like Amazon and Alphabet have a lot of cash flow that they can use to reinvest in Meta as well, but there are estimates that 93% of their operating cash flow is going into AI CapEx. So they are going all in on this. In fact, Alphabet, Google, basically posted its first cashflow negative number since it IPOed in 2004. So that’s the expense side. Let’s look at the revenue side. Revenue in AI is absolutely growing. Do not get me wrong, this is absolutely growing. For the public companies like Google, if you look at Google Cloud, that revenue is growing. If you look at AWS, that revenue is growing. From what we understand of what’s going on with OpenAI and Anthropic, their revenue is growing. But the problem is valuations in the stock market because when you look at how pricey these AI companies are becoming, you need to get basically what estimates say is that revenue by 2030, so in the next four years, AI revenue needs to reach $2 trillion.
That is so much money. Well, we’re comparing two trillion to countries that is bigger than all but 14 countries in the world, and it is bigger than all of tech combined right now. I just want to put that in perspective. That means AI in the next four years needs to get bigger than all technologies companies combined. So this is what I said at the beginning that the stock market is sort of pricing in perfection. If AI companies hit their numbers, then the stock market valuations are justified, but these are big, big guesses. We don’t know. We really don’t know if the revenue is going to take off. What happens if China starts dumping lightweight models, easy to use cheap models into the United States? What if new cheaper competitors come up in the United States and these companies don’t reach their revenue numbers? Well, that’s going to be pretty bad.
You can imagine this turning into a bubble because yeah, there is an optimistic case that AI does everything great. It says it was. I think that might have negative implications for the labor market, but if you’re just talking about stock prices, maybe. But I don’t know if that’s true. It is pretty hard to say right now that AI is having a super big impact on businesses. It’s definitely impacting the labor market in certain industries, but there have been a couple of surveys of executives. There is a survey of 6,000 executives in the United States, Great Britain, Germany, Australia, and what it found was that 89% of executives reported no productivity gains at their firms over the past three years. Now that’s backward looking and the technology has improved, so I bet that number would go up if they did it again. But if you ask them how they’ll expect productivity growth in the next three years, they said a 1.4%, not exactly a lot.
There was another survey in May of 2026 from Globalization Partners. They surveyed 2,850 executives, 73% called AI returns quote, “underwhelming.” So when you look at all these things together, to me, it just feels super risky. I can’t say for sure what’s going to happen, but to me, there are just a lot of risks piling up here.
And I’ll just give you my gut instinct. Again, I’m not claiming I know what’s going to happen, but my gut instinct is that AI is genuinely useful and we are in a bubble. I do believe that we are in a stock market bubble and it is going to pop at some point. I can’t tell you when. Is it going to be three months or three years from now? I don’t know. But I think both of those things can be true. AI can be a transformative technology and it can also lead to a bubble. I’m worried about the stock market valuations for all the reasons I mentioned from taking on a lot of debt, the lack of revenue, the incredible spending. I forgot to mention the fact that they’re building these data centers at enormous costs and the estimates of how long they’ll last are somewhere around five to six years.
So the idea that we’re going to spend less money on these things as we go forward, I don’t know. So for me, that feels like a lot of risk. Not to mention, by the way, I don’t know how much people like AI. I think there is a serious backlash growing. We see it manifesting in data center pushback across the US. You see certain industries really pushing back against this. You see this is AI adjacent, but you see huge pushback on things like flock cameras in the United States. And I don’t think people like the way AI is being implemented in the US without regulation, being told constantly that we’re going to lose our jobs and that that is inevitable, which drives me nuts by the way. I think it’s so self-serving that all these CEOs are like, “Oh, we’re just going to take all your jobs.” Clearly that benefits you, so you have an interest in having everyone believe that and accept it as inevitable.
But anyway, I digress. So for all those reasons, I think that it could be a bubble. And it also, there’s historical precedent for this. I think that I’ve spent a good amount of time looking into similar situation because history rhymes, right? And what we’ve seen throughout history time and time again is when a transformative technology come out and change the world, it often leads to speculative bubbles and collapses. This most notably happened not just in the US, but throughout the world with railways. We saw this in the 1840s in Britain where share prices of railway companies doubled in two years, and then shortly after they were worth less than half. The US had a similar bubble and burst in a railroad panic back in 1873. There was just massive new track being laid throughout the country. Then the financier of Northern Pacific went bankrupt. The New York Stock Exchange had to close for 10 days.
89 of the 364 railways failed. 18,000 businesses failed by 1875. Unemployment rate hit 14%, which is massive. And so clearly there was a bubble there as well. Most recently, we saw this in the dot-com bubble. We saw a lot of companies investing in telecom, laying fiber optic cable. There was $500 billion spent from 1996 to 2000, peaking at about $213 billion, which is like one to 2% of GDP just for scale. We are way bigger than that. We are three times that right now. And the telecom fiber thing collapsed. The whole thing was predicated on this idea that internet traffic doubled every hundred days. It actually doubled about once every year, and there was just a huge bust. The stock market lost more than 50% of its value, and it took a very long time, more than a decade for it to recover. So these ideas, the internet clearly transformative, railways, clearly transformative, important technologies.
But when people see these technologies, they often bet on them before the business model is fully developed. That’s exactly what we saw in the dot-com bubble. The technology is amazing. The business model wasn’t yet, and people were rushing to invest in it. They wanted a piece of the pie before these were real businesses. And I don’t know if that will happen for sure, but when you look at what’s going on here, it feels the same. We are investing so much money into data centers when we don’t really know that they can pay themselves off. We don’t know how long they’re going to last. It’s a whole nother topic, but we don’t even know if LLMs, the current iteration of AI, is the right way to pursue AI. There are just so many open questions right now, but people are putting money in and pricing for perfection.
And I don’t know, as an investor and real estate investor, stock investor, whatever, pricing for perfection is risky. And so I do think, if I had to guess right now, will we see a big fall in stock prices in the next one, two, three years? My guess is yes. I don’t think they’re going to hit perfection. I think it’s almost impossible. It’s not just necessarily them. I just think it’s crazy to think that you can come up with this new technology and master the art of bringing it to market and monetizing it and productizing it in a way that returns capital to investors that quickly. It just doesn’t make sense to me. Maybe I’m wrong, but I don’t know. After researching this a lot and thinking about this for weeks, this is just where I come out. AI can be used for incredible good. That is clear.
It is solving amazing math problems. It’s helping with healthcare and personalized medicine, discovering new antibiotics, forecasting severe weather. There’s amazing things that it can do, but there are also really bad things that it can do. That is very clear. Technology in itself isn’t really good or bad. It’s up for society to decide how it should be used. And right now, there’s no voice for society. Right now, it’s a bunch of people, CEOs who have frankly are just self-interested, like every business. I’m not saying they’re unique and that they’re self-interested, but when a technology is this important, you cannot let the people who stand to gain the most from letting it run rampant, let it run rampant. It is crazy. I was listening to a podcast the other day and someone was likening it, and I think this makes sense to nuclear weapons. Would you allow Robert Oppenheimer to take nuclear weapons, the technology that he developed and go just regulate it on his own?
Of course not. You have to have other people in the room looking at this and at least providing some level, one, of transparency to the public about what’s actually going on, and two, helping steer the industry in a way that it is beneficial to people and is not just going to consolidate knowledge and capital and money into the hands of a few people who may or may not be that concerned about what happens to the rest of society. Go listen to Sam Eltman’s buddy. That guy, I don’t think he cares about what happens to the rest of society. And I just think if there’s no regulation, the beginnings of this AI sort of backlash that we’re seeing, whether it’s opposition to the flock cameras or data centers, I think it’s going to boil over. And this is clearly possible. If you look at AI optimism in the United States, I forget the exact number, but it’s low.
People are not optimistic about AI. It’s like in the 20s or 30s or percent. If you look at the way China is doing it, that does regulate AI in pretty significant ways. They have 75% optimism about AI. They have made rules, particularly around how children can use AI, but also about replacing human workers with AI, about what can be developed, who has access to it. I’m not boosting China here, but I’m just showing that countries, you can do it, right? You can come up with a framework that regulates something and makes it safe. Look at airplanes. The fact that air travel is so safe is amazing. It’s a miracle. And yes, there is regulation in that industry. And no, I’m not saying that every industry needs to be regulated. It doesn’t necessarily need to be heavy-handed, but something needs to exist. If there are people at these companies, the CEOs themselves are saying, “This can cause extinction.” They cannot regulate themselves.
Someone else needs to do this because if it doesn’t, I just think it’s going to go bad. Whether it leads to some physical harm or just some economic catastrophe that will start probably in the stock market, but will lead to large levels of unemployment that can probably lead to significant trouble in the housing market because if we see unemployment rise rapidly, if we see just net worths fall from stock prices deflating, that is going to have negative impacts on housing, whether it’s from higher vacancy rates, people unable to pay rents, housing prices going down. These things cascade. We saw this in the housing market in 2008. It started with the housing market then, but it spread to the stock market. This would be the opposite. It would start with the stock market, but it could spread to the housing market. So I just think there’s a better way forward.
I think the call for international cooperation is strong. People are always saying, “If we don’t do this, China wins.” But what if we just created international regulations? We haven’t even tried. So people are like, “Oh, that’s not possible.” Well, we could try and there’s obviously clear historical precedent for that kind of stuff working. Nuclear non-proliferation for large part has worked. We got together on things like fixing the ozone layer. That worked. This is a technology that needs international cooperation, and the United States has an opportunity to lead and to help create the frameworks that allow for economic and societal benefit without creating unnecessary risk for our country and for our economy. So that is my rant about AI. I’ve been thinking about this and researching it a lot. And this is, to me, the big thing hanging over the economy right now. It’s hard to get excited about investing in the stock market or even buying rental properties or being in the housing market when there’s just this impending worry about will the stock market crash or will AI disrupt all of our jobs?
And the fact that we don’t have information about what’s really going on in these companies makes that worse. It makes it harder to trust what’s going on in the economy, and it’s so much of the economy. And so I hope you’ll indulge my divergence from our usual discussion of real estate here, because I do just think this is a major economic question. And I’ve shared my opinions with you clearly and very loudly, but I’d love to hear yours. I am not an expert on AI, but I do think I have a good grasp on how this could cascade throughout the economy. But I would love to hear what you think. Are you bullish on AI? Are you bullish on the technology and the economic opportunity right now? Or are you sort of like me that you think the technology is great, but also comes with massive risk that need to be mitigated?
Or maybe you hate it all and you just think it’s all terrible. Let me know in the comments below. Thank you all so much for listening to this episode of On the Market. I’m Dave Meyer, and I’ll see you next time.

Dave:
You don’t need to be the smartest person in the room to build wealth through real estate, but you do need patience, discipline, and a willingness to play the long game. Apollo Ono understands this concept better than most, having dedicated his entire youth to becoming a short track speed skater. He reached the pinnacle of the sport competing in three different winter Olympics and taking home eight medals. But when his skating career ended 16 years ago, he faced a challenge he hadn’t trained for. He calls it the great divorce, separating from an identity that had shaped nearly every part of his life. Thankfully, many of the skills he had spent decades honing translated to real estate investing. Now, Apollo operates at the intersection of high performance business and wellness, helping entrepreneurs achieve their goals in a more sustainable way. And today, he’s sharing the lessons that helped him weather tough times, why your investing network is your single greatest advantage, and how to avoid burnout on the road to financial freedom.
What’s up everyone? I’m Dave Meyer, chief investment officer at BiggerPockets. And today we have a very special guest, eight time Olympic medalist, Apollo Anton Ono. Apollo has devoted a lot of his time to investing since retiring from speed skating 16 years ago, and he’s going to share the key business lessons he’s learned here on the show today. Let’s bring on Apollo Ono. Apollo Ono, thank you so much for joining the BiggerPockets Podcast. It’s great to have you here.

Apolo:
Yeah, thanks for having me.

Dave:
I remember your Olympic run very well, but for people who might not know of you yet, maybe just introduce yourself and tell us a little bit about your backstory.

Apolo:
My name’s Apollo Anton Ono. I was a short track speed skater. I competed across three winter Olympic games. I had a very blessed career. I was able to walk away from the sport with eight winter Olympic medals. I retired 16 years ago, believe it or not, over 16 years ago. It sounds crazy just to say that. There’s been multiple reinventions both inside of the sport that I was so passionate and I love so much. And then obviously when I retired, there was the big transition or something that I call the great divorce from the previous identity into forming the new one. I spend a lot of time now focused on high performance at this kind of center of high performance business and wellness. And I’m sure we’ll talk about all the investing stuff in our convo today.

Dave:
I’m curious about this great divorce. Tell me more about that. I imagine after dedicating your entire life to a sport, transitioning to doing something else must be really difficult.

Apolo:
I think every Olympic athlete probably goes through some format of this in their each own kind of way or story, or even just people who’ve done particularly one thing for a very long time that the world has signaled, your check in the mail has signaled, your fees, whatever, have showed that this is what you’re really good at and this is what you were put on earth for. And then sometimes either by force or by choice, particularly in the world of sport, it’s usually you age out or you get injured or you decide to go on another path. And it feels like that. It feels like a finger snap in which everything you’ve done has revolved around this one particular thing and you’ve said no to effectively every other thing and opportunity that’s not allocated towards, does it make me faster? Does it make me stronger?
Does it help me recover better? If no, then it’s not in the sphere of where you operate. And then seemingly overnight after you get back from the closing ceremonies at Winter Olympic Games and the calls start to get more quiet, perhaps the agent stops calling as much, people stop working for you as much that you think is this kind of endless supply of deals and opportunities. But more importantly, you just don’t really know what the hell you’re good at. So for me, there was this great divorce from the previous identity. I had this person who I thought that I was, the world had signaled to me that this is why it thought that I was going to be on this earth and that was gone. That version of myself had no longer or was no longer going to serve me in the same way. Wearing spandex and going in circles is not exactly the way I want to run my business.

Dave:
I think there is relatability here to people who go from a W-2 job or just following one path and then figuring out, like you said, by choice or by force, time to do something different. It can be a really jarring experience. For you, Apollo, were you ready when you retired from speed skating? Was that by choice or by force?

Apolo:
I though that I had been prepared. I had went to university. I didn’t pay any attention when I was there. My mind and energy was totally spent on the world of speed skating. And so when I had really had time to come to terms with what I call the inner voice, the inner voice is really when no one else is around and you’re not putting on the facade or the smile or playing the game of poker to show that you’re fine and okay and transitioning. It’s really just you and your own thoughts. So as a young man, when that voice started to get louder because the world became quieter for me, I really had to come to terms with, I don’t have the skill sets yet. I need to identify what I’m going to do in my next pivot.

Dave:
Were you after something financial? Did you want to build something for the sake of building it or what was driving your next steps? Were you able to use a goal to sort of narrow down what you did next?

Apolo:
It was financial in the beginning, but I think that pure drive of financial also was a big part of why I made mistakes because I was more willing to say yes to certain types of risks that perhaps didn’t resonate with me as an individual. And everyone has their own story. So this is not in any way, shape or form advice to anyone. But for me, what I’ve noticed is that when I chase something purely on a capital basis versus trying to have synergy between does this make sense financially and does this fit with the synergy of the attributes that I bring to the table? Does it fit within the sphere of the thing that I think that I could do even for a couple years or three, four, 10, whatever it might be, if those are totally mismatched, almost always it has resulted in a complete failure.
And forget about misallocation of capital, that tuition that I have paid was very expensive, more expensive than all the universities probably that you could add up many times over because of either rushing, wrong business partners, wrong timing. And something that I had to learn that many folks would probably resonate with. Coming from the world of sport, one of the key skills that you develop is never giving up, having this insanity of work ethic, drive and grit to create resilience over long durations of time and never stopping. And eventually you will compound that into having an amazing result at the Olympic Games, which is a four-year cycle, sometimes an eight-year cycle to getting there. In business, you need to learn how to spot when to pivot very quickly, cut your losses and then begin again. I was not accustomed to that nor was I accustomed to asking for help.
And that’s another part, that’s my second part, Dave, where looking back, if I could speak to a younger Apollo, it would be like, dude, you don’t have to do all of it alone. There is so many resources out there and mentorship. I mean, I’m such a big believer in mentorship and guidance and community because that’s how you learn. People are there and they want to help, they want to teach, they want to guide to help you sidestep those landmines. And for me, I was almost playing whack-a-mole like, let me step on every single landmine known to man. Let me figure this out. All

Dave:
Right. So we got to take a quick break, but we’ll be back with more from Apollo Anton Ono right after this. Welcome back to the BiggerPockets Podcast. Let’s get back to my conversation with Olympian Apollo Ono. You talk about this divorce and making a lot of mistakes. How did you go from trying out different things and experimenting a little bit into finding your calling and what you feel you’re good at in business and as an investor?

Apolo:
It took me a long time because even though I cognitively understood the concept, behaviorally, I still found myself to be making the same types of mistakes. So for example, blind trust, right? My father had told me at a very early age, he’s like, “Trust but verify.” I heard the words. I didn’t feel the impact of what that meaning could really be. In real estate, I think it’s almost pretty cut and dry. You can get every piece of information you need to get before you go to any type of a closing. You can really dig deep. And I was not sure what that was like because I was not willing to do those things. So just to give you backstory and context, I started investing in real estate back in 2006, 07 and 08. 2006, 2007 and 2008, right before this

Dave:
Devastating…

Apolo:
Yeah. So I was buying real estate through a fund. I was writing promissory notes, I was writing loans, and unbeknownst to me, because of my blind faith in this particular group, they had been doctoring and changing. They were doing all of the mortgage do not dues.

Dave:
Like full on fraud. Full

Apolo:
On fraud. Coming out of the crisis, they had survived, they changed the names and done their thing and they had gone through bankruptcy. I only found out about this because someone that I knew in the state of Utah had called me and said, “Hey, do you know those guys that you’re investing with? They actually both filed for personal bankruptcy and you’re not listed as a creditor.” I was such in denial. I was like, “Oh, how can that be true?” Because I had consoled some of these people on their marriages and it was a gnarly time. And so I got complete eviscerated and blown out while I was still training and competing. I was much more of a passive investor, but I didn’t understand the concept of understanding how to bring in the right type of legal teams to monitor, to adhere to the right type of principles that are required when you do these types of deals.
So I learned the really, really hard way and it was painful, man. It was really painful.

Dave:
I bet.

Apolo:
And so the moment that I went from pointing the finger to then saying, “Well, this was your decision, this was your making.” And yes, did I get taken advantage of? Sure. All those things. But at the end of the day, I had to radically own that mistake. And only upon then could I really say, now I’m willing to move forward and do I want to allocate my time towards something that’s going to be potentially really negative on a mental perspective that I have no control over or I’m going to use that mental space to progress in a way where what is the hard life lesson here? How do I move forward in the right way? And how do I make moves so that I can compound my next generational move in the same way? And so I look at that as
We all love to hear about these overnight successes, these people that like, oh my God, I want to do what they did, but we forget to peel back the layer of that onion to see it was really hard and really difficult for long duration of time, but they didn’t do anything. They stayed with it. And I think that to me has always stood as the test of truth, especially for folks that decide to go into real estate is it will not fail you if you stay with it long enough. It’s a really powerful asset class and it’s a beautiful story too. You’re a steward of capital that provides immense value to this country.

Dave:
Yeah, it really does. And you’re totally right. Real estate people see it as risky and it is capital intensive. So it’s totally understandable when people say, putting in my only $50,000 or $20,000, that is scary. But it is a much more forgiving business over the long run than I think people give it credit for. You can make mistakes in this industry and if you stick with it, I mean, I can tell you I’ve made plenty of mistakes as well. Apollo’s talking about mistakes he’s made. If you stick with it, it is pretty forgiving over a long period of time. But Apollo, you must have liked something about real estate, right? Even during that negative experience, was there some kernel of it that got you excited and helped you endure through that difficult time and get back on your feet and say, I’m going to try this again?

Apolo:
Yeah. I mean, I would say the following. I mean, first and foremost, real estate is not what I do on a day-to-day basis, but it’s something that I believe in. I would say 80% of the Olympic athletes that I know from my cohort that have since retired, the ones that have gone on to be successful are in real estate today. They’re either in development, they’re commercial real estate brokerage down in Southern California. My really good friend, he works for Cushman Wakefield. His name’s Rusty Smith. He does amazing work down there in the Long Beach area. Chad Hedrick does… He’s a residential real estate agent in Houston and in the surrounding areas. Ryan Bedford owns his own real estate development company. I mean, all of these great people that I train alongside with, what they did really exceptionally well was they applied the same rigor of hard work, discipline, consistency, and they just went like this and took those attributes and just said, “I’m going to do real estate.
This is where I’m going to go.” So for me, I have so many different interests. I mean, my real passion is, like I said, living in this intersection of high performance business and wellness and trying to communicate and get not only the current American business community to understand their own reservoir potential that has not yet been tapped into, but also the next generation, the kids that are in youth sports, the kids that are in K through 12, to realize and recognize entrepreneurship, critical thinking, learning how to get stronger, better, faster, more resilient, not even through sport, but through their own decision-making process. That’s what I get excited about. And I take those monies that I earn from those companies that I work with, and then I reinvest them back into really two categories. One, which is health and wellness technology companies. And the second would be companies and/or funds with people who I have built long-term relationships with, like my friend’s company that focuses mainly on industrial real estate.
They call it, it’s almost like the bond portfolio of real estate. It’s consistent. If you believe in the American economy and that people are still going to do specific types of things and behaviors, which I would agree that we will for a long period of time, it’s an amazing asset class. I have learned tremendously a lot about what’s happening here, but what I love more importantly, Dave, is the interaction because I’ve been to some of their offsite meetings and some of their meetings when they bring their AGM, all their general partners and all their investors and their LPs, and I get to meet them. I hear about the story. It’s this doctor from Northern California, it’s this optometrist, it’s this person who’s also in real estate. It’s this person who runs a family office. It’s this person who just started, they just left the W2, they’re trying to get into real estate, they’re learning their ropes, they’re doing it this specific way.
It’s fascinating. That spirit of entrepreneurial activity in the United States is still very vibrant and strong. It is capital intensive. It’s not easy. Rates don’t help, but there are deals I think to be had and opportunities will always present themselves. So that’s where I try to keep my eyes peeled as much as possible for those opportunities.

Dave:
Couldn’t say it better myself. There are always deals to be had. The cycles change, residential, commercial, industrial, all these different things. They cycle in and out. There are different opportunities, and the whole goal is to spot what the market’s giving you. At certain points, it’s giving you cheap deals. At certain points, it’s giving you negotiating leverage. At other times, it’s giving you runaway appreciation that’s going to make everyone look like a genius. There’s just different things, and that’s why you need to stay informed and understand what’s going on in these individual markets. But Paul, I’m curious, I think obviously not everyone in our audience is an Olympic athlete, but I do really see a lot of corollaries between your story and people in our audience who are trying to shift. Even if they don’t want to quit their W-2, they want to build something on the side.
They want control over their financial future and they’re turning to real estate to do that. You’ve obviously invested in real estate. There are some lessons you can help teach us both as an investor and as an Olympic athlete, maybe just personality traits or skills or habits that our audience could learn from you that you think will help them in their business.

Apolo:
There’s something that we call the gas principle in athletic performance. So it’s general adaptation syndrome. So it’s alarm, then resistance, then exhaustion. Growth happens when you recover a little bit before the complete exhaustion. We don’t train as athletes 100% every single day. We basically use periodization, large blocks of volume of training followed by large blocks of real recovery. Many entrepreneurs, and I have been guilty of this too, retiring, we run never-ending block cycles until we start to see the quality of our decisions begin to fall apart, and we don’t actually notice it because we are so used to grinding. Real estate people typically are grinders. They’re up early, they go long hours. I know the type, I’m around them, and I love that aspect of it. But something that I’ve learned from sport is that you, with a refreshed mind, it’s almost like if you’ve been writing something for a long period of time, you get eye fatigue when you see the same thing over and over again.
If you’re looking at homes, it’s a purchase for yourself as a single family. After five or six homes, they all start to look the same. That’s just eye fatigue. You need to refresh that system in the same way. So that’s something that I’ve learned as you transition or as you go into this next phase, know that your ability to persevere, to go do long periods of work need to be followed because you’re a human being, you’re not a robot, so you need to follow with some formats of recovery. Also, performance is cyclical, just like in stocks, just like in any other market in the world, it’s not linear. Sports was identical to that.

Dave:
What do you mean by it’s cyclical and how do you counteract that or how do you mentally prepare yourself for that kind of up and down life of an entrepreneur?

Apolo:
You zoom out. It’s the number one reason why I think we see folks either overtrade if they’re in the markets, they overtrade themselves, they exit positions they shouldn’t have. It’s actually like this, where you have an uphill swing, you fail, you revert back, you learn, you begin again.

Dave:
Right. It’s not like hills, it’s circular.

Apolo:
It’s like small little circles where you feel like you’re going backwards, you take a couple steps forward, maybe two or three steps backwards, but you’re getting momentum again and you’re going up in the same cycle. Because that performance is cyclical, I think we have to realize when you press and when you start to, I think, either coast or have the ability to be, I think not resistant, but be patient. Patience is a key attribute towards a sport like short track speed skating, and the same thing in real estate. And then the last part I would say, Dave, is for all the people that are making a big transition, I
Believe deeply in the physiological change. So if you want to have a big change in your life, the fastest way to do that is you change the body’s feeling first, then your behavior will follow. So sleep, fueling, training, breath, all those things you can control. All the other stuff that’s happening either in the government, in the market, you cannot control those things. You are always going to be defensive and moving and dynamic based on that information that comes towards you. So the things that you can are when you’re optimally performing… When I was an Olympic athlete, my mental acuity and processing was so high. Man, I was reading information so quickly. I felt like I was neo from the matrix. Everything was slowing down. I was in flow state. It was amazing. And that was because we had a combination that I was living a life that was really attuned to being at my physiological best.
And so my brain also had the ability to make really, really good decisions in the same way. And so I’m no longer competing as an athlete. I’m 16 years retired and I still take it really seriously because I want to perform my absolute best. I know that my behavior can be predicated upon the way that I make those moves and that energy forward. So for those folks that have not yet made that change, do so. And no one’s trying to be an Olympic athlete. I get it. Just

Dave:
Being

Apolo:
Consistent with your movement, your food, your sleep and the like.

Dave:
100%. I think it just gives you a lot of self-confidence too. I, in college, gained a lot of weight. I was not in a place I wanted to be, and then just dedicated myself to going to the gym every single day. I’ve lost 60 pounds. I’ve been doing the same thing every single day since then. I don’t really care about the weight anymore. It’s just the self-confidence. I can do something that takes a lot of discipline over a long period of time, which is exactly what entrepreneurship is. It’s just, you got to grind it out. Some days it’s going to suck. Some days you’re going to feel on top of the world, you get a great workout in, you do a good deal, you’re going to feel great, but it does give you that sort of ability to balance your emotions over long periods of time.
I think for me, it’s just been the absolute confidence boost that I needed to succeed in my career. I understand not everyone’s doing that right now, but I’m with you personally. For me, it’s been probably the biggest difference maker in my life over the last 15, 20 years.

Apolo:
Yeah, same. I would say in the same realm, my consistency of trying to take care of my mind and my body have resulted always in me feeling better. When I feel better, I usually perform better. Then I would say in addition to that, something that I’ve learned over the many years of competing was that if I can shorten the decision time or what I call the negotiation time between do and do not. So for example, when you get up in the morning and perhaps you don’t really want to go do something and you’re thinking about, “Well, what should I wear and what kind of shoes should I wear?” That should be all pre-planned the night before, so that’s one less decision in your mind space and you just pick it up, you put it on, and you go. The faster you do that, the shorter that really is.
I used to do that when I was competing. I had Monday, Tuesday, Wednesday, Thursday, Friday training outfits for the morning already folded and ready. I would do it every Sunday. Had my bandanas folded, everything was ready to go. It was completely automatic robotic clockwork. I would wake up and there was no thought. I never gave myself space to think I don’t want to go today or

Dave:
The bed

Apolo:
Is too warm. It’s just like, okay, it’s time to get up. Now it’s time to go to the

Dave:
Room. Yeah, automatic. Step

Apolo:
One, step two, step three. I think what we can realize is over time, that habituation and consistency start to form real behavior patterns. I think we all know someone in our spheres of relationships who we are like, “I wish I was like that person. They make it look so easy.” And maybe genetically it does come easier to them, but doesn’t mean that we also can’t rise to the level of our potential. And that’s what I’m passionate about reminding people is that your

Dave:
Inner

Apolo:
Power is incredible.

Dave:
Yeah. I mean, I don’t know if you’ve read that book, Atomic Habits, but they talk a lot about this. Yeah. It’s been the bestselling business book for 10 years in a row for a reason. It’s a fantastic book, but it’s the same kind of thing. You kind of are what your habits are, and if you just take the decision making out of it and habitualize it, you don’t even think about it. It’s no longer like, “Oh, I got to go do this. I got to go look for deals. I got to call three contractors.” It’s just, “I call three contractors every day. That’s who I am.” And that just becomes who you are and it really does make a difference. I know if you haven’t started that yet, it feels like a grind, but in a couple of weeks, it actually, it really does reform your brain a little bit.
We got to take a quick break everyone, but we’ll be right back with more from Apollo Ono. Welcome back to the BiggerPockets Podcast. Let’s get back to my conversation with Apollo Ono. I want to come back to something you said a little bit about rest and recovery, because that is so counter, in my opinion, to the hustle culture that we hear. How do you strike the right balance between putting in a lot of effort for something that you genuinely care about and also finding the space to rest and recover because that will help your next grind, right? Is that kind of how you think about it?

Apolo:
The one piece I think that’s perhaps missing that we don’t talk about enough is I think burnout is a direct reflection of doing long durations of hard work and failing repeatedly without feeling like you have progress. That is when you feel burnt out and you start questioning your existence and if you should continue on in business in general. So the rest and recovery is really a defense mechanism against that. So if you are in this situation and perhaps you’ve got debt service and you’ve got all these things that it’s hard to see the light at the end of the tunnel, you need to have times where you can have these micro moments, even if it’s not like you’re going to take a week off. Obviously, not many people have that luxury, but you need to find times to create recovery, micro recoveries throughout your day, throughout your week.
And you have to discipline the schedule to allot that in order to be your best and your body will compound that rest period. We can churn and burn for long periods of time, but eventually I believe those decisions will start to falter in terms of the quality. And so the goal is to maintain that consistency of good decision making and good thought process.

Dave:
Yeah. You said something earlier about your efficacy, your decision making goes down at a certain point. And this sort of narrative that’s in, I think a lot of modern entrepreneurial culture is just keep throwing time at the problem, bang your head against the wall as much as possible. I respect the hustle for sure, but it’s not helping. It’s actually hurting you. And you can realize rather than throwing another three hours at a problem when you’re not at your best, to take a step back, say, “I need these three hours to go do something else, and then next week when I hit it, I’m going to be so much better at this and I’m going to solve the problem in an hour instead of three hours.” And you’re just much more efficient at problem solving or whatever it is that you’re trying to accomplish.

Apolo:
It’s a fine line, right? There’s times where you need to tap into your internal David Goggins, your internal Jocko Willink, and you know that it’s time to use these guys as amazing aspirational and inspirational figures for what they stand for and what they do. But then I just believe there’s also time where you have to treat the body and the mind and you got to give it a bit of relief.

Dave:
I love that advice. Any other advice that you have? You work with a lot of successful businesses. I know you do a lot of coaching and mentorship and advising. What are some of the traits that you see in successful businesses that our audience and mostly small entrepreneurs could apply to their own businesses?

Apolo:
The things that I felt have helped me the most are, number one, if it’s uncomfortable or it doesn’t come natural to you, you should probably either identify someone who can do that job for you or learn to force yourself to do those things when you have to. I used to hate networking. I’ll give you an example. I used to go to these conferences and I was like, “This is a waste of time. I don’t want to spend time with these people. I don’t like this. I don’t want to introduce myself. I don’t want to shake anybody’s hand.” And then I realized very quickly, it doesn’t matter. It doesn’t really matter what you really want to do. If this is a prerequisite as a part of your business, you need to treat it as if you hate running, but running is a really big part of your training cycle, and therefore it has a spot in the system.
It doesn’t matter if you’re excellent at it, but you are going to do it and you’re going to do it consistently. Over time, I think someone who I really look to a lot of his great writing, Tim Ferris wrote about fear setting, the thing that you are the most afraid of by stating it, by writing it down, by really saying, “Okay, what is the absolute worst thing that could happen here? How would I deal with that?” You actually articulate that your body can respond in a much different way versus, “I’m so scared of the thing that may happen, which may probably or could never happen.” And then the last thing that I really try to tell a lot of folks is the way that you show up is a really, really big, I think, leading indicator of how people want to do business with you.
Whether we like it or not, the first initial five to 10 minutes of you interacting with someone, you’ve already prejudged, “Does this person fit into my sphere of can I do business with this person? Do I like this person? Does this person like me? Do we fit together synergistically?” So if you show up and subconsciously you are in a really bad place, that’s going to effectively reflect upon the other person. So I think whether you’re going for a networking event, whether you’re going to go do a deal, always remember this is the first time someone is meeting you. They don’t know anything about what you’re going through. They probably just don’t really care either, right? That’s the reality. Everyone’s thinking about their own stuff.

Dave:
Yeah, right. Yeah, it’s true.

Apolo:
So when you show up and you go through this, everyone has a bad day, I get it, but I think the more that we can be mindful about how we are showing up to these meetings, how we’re showing up to deals, we’re showing up even to our own families, it goes a long way.

Dave:
I love that advice for real estate investors in particular because we say it a lot on the show, but it’s a people business. I know you can look for deals on Zillow, but the best deals, the best opportunities come from your agent. They come from a contractor, a property manager, a friend. And if your agent gets a good deal, they’re going to call the person they like, the person who has treated them well, who has shown up for them when they need something in the past, who has treated them as a member of their team. I could tell you, I’m sure this is true of you, Paula, those are how you find deals. It’s through networking. It’s through being A reliable person. To bring it back to what you talked about in the beginning, to being someone that you can trust, to be a trustworthy person in this industry.
You will find trustworthy people if you’re trustworthy yourself, if you actually go out and show up in the way that Apollo is talking about. I think that’s fantastic advice. And probably even more important than the tactical stuff we talk about on the show. Obviously running your business well is important, but I think you’ll get a lot further just having a great network and great community. And to your other point, just forcing yourself to get through some of that initial discomfort. Because a lot of the things I personally found uncomfortable at the beginning wound up being some of the most rewarding parts of my business. So thank you for sharing that with us.

Apolo:
I saw this front and center. I went to ICCS a few years in a row in Las Vegas. It’s like a commercial real estate mainly for retail, and it was amazing. Everything that I saw with the big booths, the big presentations, everything was actually all about people handshaking, going to grab a drink, going to grab a meal and talking. How is your family? How are your kids? Humans are still highly receptive and we would much rather do deals with people that we like versus some unknown large scale corporation that has no soul. That’s my personal belief.

Dave:
I agree with

Apolo:
You. And especially if you’re someone who is an entrepreneur and you’re not dealing with institutional grade capital yet, this is like your superpower. So learn the niche, carve that personality, showcase to people who you are. And I think you’ll be really surprised at how much can be done. That doesn’t seem like it’s work, which actually turns out to be amazing deal flow.

Dave:
I know you haven’t been, but we’ll get you next year to BPCON. It’s like our big event similar.

Apolo:
I’ve heard it’s amazing.

Dave:
That’s the whole thing is people do deals right there. The amount of progress you make in these in-person things, it’s great to listen to the podcast.That’s how you get a foundation and background and knowledge and inspiration. That stuff is important. But transacting comes from meeting people. If you want to actually go out and do a deal, you got to go meet those people face-to-face. It’s why I always recommend even if you invest long distance or passively, go meet the person face-to-face.That’s an investment in your business and in yourself that you need to do. All right. Well, thank you so much. This has been super helpful. Any last advice for the audience out there?

Apolo:
It’s not really business advice. I would say listen to your true north. We have a finite amount of time on this planet and many of us, me included, we live and sometimes we operate as if we have an unlimited amount of time. Know what your purpose is, identify where you receive fulfillment from. If you’re in real estate, I think it’s a really great start. And really, I think when you do the right thing consistently, when you show up as your truest and full self, you will have success. It may not be in the timeframe that you dreamt of, but it’ll be faster than you think. And I think that understanding that you’ll pave the way towards everything that you want and more, but you got to step up and you got to show up.

Dave:
Well, thank you, Apollo. It was super fun hanging out with you and thanks so much for sharing your story and experience and advice with the audience. People want to connect with you, where should they do that?

Apolo:
I write a lot on LinkedIn. A lot of my thought, my brain dumps for the week. I spend a lot of time there, but I’m on all the regular social channels at Apolloono. You can find me. But really LinkedIn, for some reason, has been my outlet, a little bit longer form. I find a lot of business folks that I interact with and I partner with are on that.

Dave:
Awesome. Well, thank you so much again, Apollo, and thank you all so much for watching this episode of the BiggerPockets Podcast. We’ll see you all for another episode in just a couple days.

Tony:
Ever wondered how investors buy dozens of rental properties? The truth is most of them didn’t start with big trust funds or nest eggs or even a lot of cash. They just used a version of a very simple but proven strategy.

Ashley:
If you’re a new investor, financial freedom can seem so far away, but you could go from a single rental property to 10 rentals in just a few years, and that’s by using the stack method. This is probably one of the easiest ways to build a rental portfolio in 2026.

Tony:
And the best part is you don’t need hundreds of thousands of dollars to do this. If you can save up for a modest down payment for one single family home, you’ll have everything you need to set the strategy in motion. And before you know it, you’ll have your own rental portfolio and most importantly, a proven blueprint for scaling as far as you want to go.

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

Tony:
And I’m Tony J. Robinson. And with that, let’s talk about the stack method. So let’s explain what it is and how it works. So the idea of the stack method, 30,000 foot view, is that you start with a small property, single family home, and you basically with every acquisition, buy a slightly larger property. So for example, let’s say the first thing you buy is just a regular old single family home in year one. Then in year two, instead of buying another single family home, you buy a duplex. And then in year three, instead of buying a duplex, you buy a fourplex. And then in year four, instead of buying another fourplex, you buy an eighplex and so on. So you go one, two, four, eight, six, 32, 64, 128. I don’t know what comes after 128 times two, but you get the point there, right?
It’s like every time we’re doubling and in just a few years, you can actually build a decently sized real estate portfolio.

Ashley:
Sometimes this is also done by selling a property too. So you buy one property and then you do a 1031 exchange into a duplex, then you do it again into a bigger property. So instead of keeping all these properties, you can just exchange into bigger and bigger. But I think today we’re going to focus more on you’re actually going to keep these properties in your portfolio so that at the end of these years, you have a really nice nest egg that you’ve built for yourself over time. And I think one thing people get really caught up on is the how to get rich quick. And in real estate, there are ways you could flip a house and make a lot of money in that one transaction. But one of the safest bets is to use the stack method. It’s a proven method that will build you wealth, builds you cash flow.
It will create all of these financial opportunities for you, but it will take time. But this is a proven path that works that you can take if you want to be a real estate investor and build a nice portfolio.

Tony:
I think the other benefit too is that by stacking it up in this way, it’s just easier for a rookie investor to digest and believe as possible because telling someone, “Hey, you’re going to buy an eight unit when you’ve never purchased anything,” for a lot of people that might feel a little intimidating, but telling someone, “Hey, you’re just going to buy one single family home as your starting point.” It allows someone to learn the ropes. They gain the important skills and the confidence to then go on and buy the next deal. And Ash, we see it so often where we interview folks in the podcast and they’ve spent years thinking about buying that first property. And then when they finally get the first one, they get the second one super, super fast right afterwards. It’s like, “Hey, I’ve been listening to the podcast for five years.
Didn’t do anything. Bought my first one and six months later I was under contract on my second one.” So even just that momentum of getting into the first deal will help the stack method move you quickly toward a bigger portfolio.

Ashley:
Another advantage of this is if you’re buying every year, every couple years, you can actually use primary residence loans if you’re keeping this property as your primary residence for usually the loan product will require a year. So that means you could be putting down as little as three to 5% on the property. And then you live in there for a year. First year you have your single family, live there for a year, you move out, you turn into rental, and then you’re moving on to a duplex and you’re living in one unit renting out the other unit. And you can do this all the way up to four units. So five unit, it becomes commercial and you wouldn’t be able to get a residential loan on that product anymore. I mean, you could still probably… Actually, I don’t know if a commercial loan would allow you to live in one of the units with a five unit.
Do you know that?

Tony:
I actually don’t. I would believe so. I feel like we’ve interviewed people on the podcast who’ve purchased larger properties and they’re like, “Yeah, I live there to help save on costs.” I even think about Heather Blankenship when she bought her first RV park. She was like, “I was literally living in the back office.” So I would assume that there’s probably some place where it makes sense to do that.

Ashley:
But yeah, that’s another advantage as to using this method too, is the financing that you can get by spreading it out over time. DSER loans have become very popular where they’re not looking at you personally, they’re not looking at your debt to income. They’re looking at the actual property and the revenue it generates and what its expenses are and making sure that the property can actually cover the mortgage and the expenses. And with that, you can go ahead and get a lot more loans because they’re not looking at you personally, but you’re also paying way more in closing costs. There’s a lot more fees associated to get this loan product and you’re also paying a higher interest rate than you would if it was your primary residence or if you went to a small local bank and just got a conventional loan for an investment property too.
Okay, so the stack is sounding pretty good. This is a path maybe you want to take and we’re going to show you how to do it. We have to take a quick break, but when we come back, we’re going to give you the full playbook. So right after a word from our show sponsors.
Okay, welcome back. Now let’s get stacking. Sorry guys, Tony made me say that to be corny, but here’s the full stack playbook. Okay? So here’s a little side note. If you can house hack while stacking, you’re going to have a huge advantage. So like we talked about earlier, that down payment is going to be easier to achieve by only having to put three to 5% down if you’re doing an FHA loan or if you’re doing a primary residence conventional loan. And it will be easier to save up for those down payments because you’re not putting down 20% for each property. But you don’t have to do that for the stack method. If you only want these as investment properties and you don’t want to house hack, this can happen for you too if you don’t want to live in any of the properties. And I guess I should clarify on that.
When I say house hack, you don’t have to live with other people in that first unit because you’re buying a single family home. But if you’re going to stack the method into a duplex, a triplex, you’re most likely going to want to rent out the other units at least. So just keep that in mind as you decide which path you want to take as to how much you actually want to house hack and be involved. But you could always house hack the first one, single family home, and then going forward, you could always just buy those as investment properties and not house hack them.

Tony:
Now, one of my favorite ways to also kind of leverage, especially in a single family home, the house hack is called the Craig Kurlap method where our friend Craig who wrote the BiggerPockets book on house hacking, he talked about the first time that he house hacked. He bought, I don’t know, a four bedroom house as a single guy and he rents out every single one of those four bedrooms and he slept on the couch. So that is like house hacking to the extreme, but it worked out really well for him and he sacrificed for a few properties and he was able to build a pretty meaningful portfolio. So if possible, rent out the other rooms in the single family and then just try and save as much of that extra cash as you possibly can so that once your occupancy period does end, you now have the ability to hopefully have some cash shape to then step into that next one.
And again, at three and a half percent down, depending on the market that you’re in, if you’re not spending anything on your first mortgage because you’ve rented out all the extra space, your ability to accelerate this becomes a lot easier. So renting out the room, super helpful.

Ashley:
So now we’re going to go into step two, and that is you’re going to buy a duplex next. So you could decide to house hack this again where you’re putting three to 5% down or you could just have this as investment property and put 20% down. So your timeframe is going to be how long it takes you to actually save up the down payment for this next property plus having the money in reserves and money for closing costs. One thing that you should do, which Tony just did this, and this is a very smart move to do before you acquire and move to the next property, is get a HELOC, a home equity line of credit on your current primary residence. So if you’ve only lived there a year, there’s probably not a ton of equity available in that property, but some is better than none.
Even if you’re taking a $20,000 line of credit, that’s $20,000 that you can use for your next deal. That’s $20,000 that can help cover a rehab that you’re going to pay off. So get your line of credit because it is much harder to get a line of credit on an investment property and you’re not going to get as great of terms. Tony, on your line of credit that you just got for your primary residence, what was the introductory rate? What was the discounted rate they gave you for six months or whatever it is?

Tony:
I want to say it was like 4.99% was the introductory rate. It was a pretty reasonable rate. And after that it’s variable based on one of the index rates, I can’t remember which one, but 4.99 for the initial term, which I think was like six months.

Ashley:
Yeah. And on my commercial loans, I think my lines of credit, one is at 7.75% right now and the other one’s at 8%. So as you can see, a big difference right there that he’s getting that introductory rate on those lines.

Tony:
But even at 8%, you compare that to other types of credit, like tell me a credit card that’s going to give you 8%. So even at the elevated rates, it’s access to really, really solid terms to then be able to go out and fund your next acquisition. And that’s exactly what we did. We pulled the HELOC on our first primary and we just took that money and use that as a down payment on our second one. And the rents from the property we’re moving out of will cover the initial mortgage payment and the HELOC payment. So we’re not out of pocket anything for this HELOC, so it worked out really well.

Ashley:
So in step two, you’re going to get your HELOC on your property before you close on your next one or move into your next one. If you are not moving to the duplex, then not a rush because this other property will stay your primary, but you want to do it while it is your primary. Then after that, you can go ahead and close on your next property and move into it and you can still keep that HELOC. You don’t need to close the HELOC if it is no longer your primary residence. You still can keep the HELOC open for the life of the HELOC, whatever the term is and your mortgage acts there, their line of credit docs. So next, if you’re going to continue to house hack, you’re going to move into the duplex, rent the other side out, and make sure that you rent out your single family home, your first property.
If you’re not going to move into your next investment, then you’re going to want to get both of those units rented out.

Tony:
So then the next step is to, again, slightly scale up the size, go from a duplex to a triplex. And we don’t need to belabor this, but basically you’re going to move out, rent out the whole duplex. Now you have your single family home, which maybe you’re still renting by the room to really juice the cash flow. You’ve got your duplex, but now you’re renting out.

Ashley:
So then you only have to rent out your room.

Tony:
Yeah, that’s what I’m saying. It’s just your room you got to rent out. So you rent out your room, then you rent out both sides of the duplex, and then you move into the triplex and repeat that same process. 3.5% down, 5% down. You rent out the other two sides. If you’re someone who can even do it, rent out the additional rooms in your third of the property as well. And we just repeat, rent and repeat. And then step four becomes the same thing where you buy a fourplex, rent out your space inside the triplex and repeat that same process. And guys, in the span of just a few years, you’ve got a 10-unit portfolio. Now, just the thing that I’d add to, because someone might be thinking, “Well, Tony, Ashley, sure, this sounds great, but am I really going to be able to make enough in 12 months to then have enough money for a down payment?” Maybe not.
Even if it takes you two years, three years to save another three and a half percent, the process is still the same. But the thing that I would challenge you on is think through the ways that you can juice more cashflow out of the properties. So again, we already talked about renting by the room in the single family home. Well, can you expand that same strategy to the duplex and the triplex? Instead of doing a traditional long-term rental, can you do a furnished midterm rental in your market? Can you do a short-term rental in your market? There are other cashflow levers we can pull within these rentals to more quickly get you to the point of being able to have another three and a half to 5% down. So focus on that as opposed to, “Hey, this doesn’t feel super realistic for me.”

Ashley:
And a couple notes too, as you’re going from property to property, don’t forget that you can do that HELOC on each one if it’s your primary residence. So at the duplex, the triplex, you can go before you move on to the next one is to pull more lines of credit. And even that’s the nicest thing about a line of credit. If you’re not using them, you’re not paying anything. So they can just sit there and you may never use it, but at least you know you have that money to tap into if you want to. And I think too is a lot of line of credits, especially if you’re going to small local banks, is they won’t charge you for an appraisal. They won’t charge you any fees. It is literally free for you to go and get these lines of credit. And then some of them have mine has if I close the line of credit, so if I sell the property or I close the line of credit and don’t want it anymore within, I think it’s three years, I owe them 1200 bucks because I didn’t use the line of credit for as long as they wanted me to or have it open for that long.
So there are a couple things like that, but you keep it open. And in our kind of scenario here, you’re going to have the property, you’re not going to sell them right away, so that shouldn’t be an issue. But that’s another thing to keep in mind as you’re going step to step, you’re going to do these other little things too. With the HELOCs, they will be looking at your debt to income. With the mortgages on these properties, they will be looking at the debt to income. Sometimes when you are house hacking a property too, they’re only going to take into consideration a percentage of the rental income that you’re getting. So even if the tenant is paying you $1,000 a month and say your mortgage is 2000, so that’s half, sometimes they won’t take into account the full thousand dollars. Sometimes it may only be like 70% of the rent they’re actually going to include and count towards your income to offset the mortgage payment too.
So in this scenario, if you are doing house hacking, you will have to be careful of the lines of credits and the mortgages with your debt to income as you go along. So don’t quit your W2 job on the triplex in year three. Keep it until you finish the stack method to really help you qualify for these loans to be able to get these properties too.

Tony:
So guys, that’s how the stack method works and how we’ve adapted it for the rookie audience. But next, we’re going to dig into some numbers so you can see the real power of the strategy. So stick around. We’ll be right back. All right guys, how does the stack method compare to just buying a bunch of single family homes? Let’s do the math. So we’re going to talk about scaling with the stack method that we just walked through versus just buying more single family rentals. So for the single families, let’s assume that it’s a $300,000 single family home and you’re making between 1,800 to $2,200 a month in rent at 20% down, let’s say $60,000 investment. Guys, the truth is that you’re unlikely to cash flow in a lot of markets with just kind of like the vanilla strategy in this way. There are also a lot of markets where it will work.
So there’s 20,000 cities in the United States.This isn’t us saying that there aren’t any markets in the country where traditional single family homes don’t work, but there are also a lot of markets where the numbers are pretty tight given where prices and interest rates are today. And even when putting down 20%, it’s just sometimes tough to find properties that’ll cash flow. So you might need 20 or 30 of them to actually achieve financial freedom. So just a much bigger portfolio and maybe some more headaches around managing it as well.

Ashley:
So let’s go through an example of the stack from year to year. And we’re going to start off buying 300,000 single family home, making 1,800, 2,200 in rent, and say we needed 10,000 to 15,000 for a down payment if we’re thinking of three and a half to 5%. So this might not cash flow at first, but while you’re living there, you can save a lot of money in rent, you’re getting mortgage pay down on the property. Then once you move out in a year, you’re going to rent out the property. 20% down was 60,000. So we went from like 10 to 15,000 to 60,000 if you’re just going to have it as an investment property and that can be unlikely to cash flow in many markets. But then we’re going to skip to the duplex. We’re going to save 400,000 for a duplex. This is making 1,500 to $1,900 in rent per a unit.
So if we’re going to house hack it, we’re looking at 14 to $20,000 down. 20% down, we’re looking at $80,000. So again, these numbers will depend on how much you want to save or how fast you can save these amounts of money and how much you are willing to sacrifice by house hacking. For example, in order to get a duplex sooner, are you willing to house hack to spend $60,000 less on your down payment? So how long will it take you to save that $60,000? If you’re saying you can save $20,000 a year, you could get into this duplex in a year compared to waiting three years if you have to save another 60,000, four years actually. So the next we’re going to the triplex 475,000. That’s saying again, 1,500, 1,900 per a unit. 3.5 to 5% down is 16,000 to 23,000. 20% down is 95,000.
And when you’re putting down the 20% down payments, the property is more likely going to cash flow because your mortgage payment is going to be less because you’re putting more money down. So also your risk should play a factor in tier too. As we’re comparing these numbers, yes, it sounds great to put less money down, but also you have less risk if you’re putting more money down. So just something to think about too as to what your risk tolerance is also. And then we’re getting to the quadplex purchase for 550,000, and that’s the same 1,500, 1,900 in rent per unit. So if you’re doing three and a half to 5% down, that’s 20,000 to 27,000. And this will most likely cash flow in a lot of markets at this price, and you could potentially live rent-free for here while you’re in this property. And then the next one 20% down would be 110,000 to be able to get into this property.
Now remember, while you have these other properties stacking over time, you should have cash flow from them, at least something, and you can be using that cash flow to save for each additional investment that you’re buying for each down payment going forward too on these properties. All

Tony:
Right. So let’s talk a bit about which markets this strategy will work best in because not all markets are made equal. So first, and I alluded to this earlier, is that not all markets have a bunch of small family inventory. Again, where I’m located in Southern California, we just simply don’t have a lot of small multifamily properties, a lot of large multifamily, big apartment complexes, but the duplexes, the triplexes, those just aren’t super common. We’re very kind of suburban sprawl type area where there’s more single family homes or large apartment complexes. But if your market does, I mean, you could give yourself a big advantage through house hacking. Otherwise, you might need to consider investing out of state. So we’re really looking for markets where there are affordable home prices and really where the price to rent ratio is strong. So if I look at what the properties can rent for and I compare that to the purchase price, is there a strong ratio there?
Day one cash flow, can we actually get in today and make some meaningful cash flow? And then also maybe to a lesser extent is the appreciation potential. Because if the stacking method of the goal here is like, hey, can we quickly build up cash flow? Then maybe appreciation’s a lesser important metric, but still something to at least look at. And then in terms of the markets that we might want to consider, actually BiggerPockets guys, they just put out a kind of summer 2026 rent to payment report. And these are markets across the country where you can still sell cash flow. So if you just search rent to payment report BiggerPockets, I’m sure it’ll pop up for you for summer 2026. But in there, we’ve got cities like Indianapolis, Cleveland, Memphis, Kansas City, Missouri, Birmingham, Pittsburgh, St. Louis, Columbus, Oklahoma City, Cincinnati, Louisville, Detroit, Milwaukee. So all in a similar part of the country.
We’re not seeing a whole heck of a lot on the West Coast. Actually, nothing on the West Coast, nothing in the Northeast, nothing even in the Southeast really. So we’re all kind of up and down in that Midwest corridor there. Those markets tend to be a little bit better as it relates to cashflow.

Ashley:
Now, just a couple things to remember before you start stacking is you don’t have to buy a property every single year. Even if it takes you several years to purchase that next property, you’re still going to be better off than somebody that’s not starting, even if you take longer to grow and scale. And honestly, there are days that Tony and I both regret growing and scaling as fast as we did. And I didn’t even grow and scale that fast. It took many years to acquire my properties, but in one year I acquired eight properties, I think. I think Tony did 20 in one year and that was overwhelming and that we didn’t have the systems and processes in place. So sometimes the slow and steady actually can make you better off in the long run. So don’t feel rushed that you have to hit any kind of timeline, that you have to meet any expectation for this to work, that this is on your own timeline.
This is when you’re ready to execute on the next deal, when you have that down payment saved, when you have reserves, when you’re ready to move. And then also, even if it takes time to find better deals, that’s better than rushing into a bad deal. So even if you’ve got the down payment, you’re ready to move, you’ve got someone that wants to rent your house, don’t rush into the next deal. Make sure it is a good deal before you go and purchase that property. Well, thank you guys so much for joining us today on this episode of Real Estate Rookie. I’m Ashley, he’s Tony, and we’ll see you guys in the next episode.

Dave:
This has been an insane week in the bond market and subsequently in the housing market, we have seen bond yields rise to the highest they’ve been in over 20 years. And if you listen to this show, you know that has direct implications on mortgage rates and on the housing market. And so today I have Kathy and James here. And although we were supposed to do our traditional headline story, we got to talk about what is going on in the bond market, what it means. Should we all be panicking or is this actually an opportunity? I’m Dave Meyer. This is On the Market. Let’s get to it. Welcome to On the Market, everyone. Kathy, how’s it going? Good to see you.

Kathy:
It is going so great. I think I’m over my jet lag and back to normal.

Dave:
Glad to hear it. After a glorious European wedding for your daughter, congrats again. Thank you. James, how are you doing?

James:
I’m not as rested as Kathy. I’ve been kind of in the trenches. It’s been a grind the last couple weeks.

Dave:
Yeah. Well, that’s kind of what I want to talk about today. We were planning to do our normal headline episode, but I just want to talk to you both about what’s going on right now in the housing market and mostly in the large economy. Because I’ll be honest, yesterday I had a couple of moments of just sheer panic. I was just getting a little bit worried about what’s going on and I can share why. But before I get into the data, are you guys worried? What is your overall vibe maybe about housing, maybe about the economy or how are you just feeling these days about business?

James:
I mean, right now, whether you’re doing a BRR or a flip property and you’re in the middle of it, it doesn’t feel very good.

Dave:
So that’s why you’re tired.

James:
Yeah. And that’s because you got to shift things around as things change, but your performance is only as good as what you know when you’re underwriting that deal. When you’re looking at the investment, you’re checking all your different data points, whether it’s for rent or for resale, but when you get a big shakeup on interest rates, it throws the performance out of fit. And so you got to grind through it and get rid of things. And I will say people are losing some money right now, including myself, and you’ve got to have to push through. Now what I am excited for is what I’m seeing on the buy side, but you got to get through this inventory. And if you got a lot going on, which I always do, you just got to grind through it. But it doesn’t feel good. Last Saturday, I had the same.
I was sweating Saturday. I went into full tunnel reshape investment mode.

Dave:
I think sometimes a little freak out is necessary. I woke up today, I was like, okay, I’m fine. It’s okay. But yesterday I saw something that freaked me out. But Kathy, how are you feeling?

Kathy:
Well, there’s so many perspectives. So I’m going to give several. There’s my personal portfolio, there’s my business, there’s our syndication business. So I’ll start with personal and really it’s doing fantastic. So short-term rentals, oh my gosh, we hit new record highs and these are high end. So I’m just mind-blown.

Dave:
That’s where you have to

Kathy:
Be. It’s incredible. That’s been super good for us and carrying us through some of the things that are more difficult. Our long-term rentals, they’re just long-term rentals. They just are rented, nothing’s changed there. Now our business is selling investment properties to investors, so that is shockingly doing great. And I’ll tell you why, concessions. I mean, there’s headline news about seller concessions. They are amazing. Not great for James, not great for our syndication side. If you’re a seller, it is hard. It is so hard to sell. And again, depending on where you are, I’m sitting here in Park City at our development here, and actually Park City’s doing pretty good right now. Prices are going up again, but we’ve got our Oregon one that is just sitting. It’s crickets. There’s nothing happening there.

Dave:
Well, the whole Pacific Northwest is rough right now.

Kathy:
It’s rough. So that’s hard. But then the Florida one, ticking away, just still going.

Dave:
Florida’s coming back.

Kathy:
Florida’s coming back, right?

Dave:
Yeah, it is. Yeah, totally.

Kathy:
I mean, we have a lot of rentals there and we haven’t experienced all the issues people talk about, insurance costs going up, but we don’t buy in flood zones. We buy newer insurance rates are lower. So we’re not even experiencing that. They’re just steady rentals and rent’s going up.

James:
You know what? The key phrase is Florida’s coming back. So whatever market you’re in right now, they’re all kind of doing different things. Yes. They do come back. That’s what everyone has to keep on top of their brains because I mean, Florida I know was rough and so was San Francisco 12 months ago and they all rebound. And so you got to put the strategy around what you think is going to happen over the next six months.

Dave:
Okay. But can I tell you what really freaked me out

James:
Yesterday? Yes, please do.

Dave:
Okay. Two things. There’s actually two different things. So the first thing that freaked me out, you guys know Michael Zuber from One Rental at a Time.

James:
Yeah.

Dave:
He got a popular podcast. He put out something and it’s from Twitter or X or whatever, but there was someone, just an analyst from BlackRock apparently came out and said that within BlackRock, they’re testing their financial models for 9%, not mortgage rates, treasury yields. I was like, “Holy shit, we’re all going to die,” was my reaction

Kathy:
To that. Wait, explain it to me. What are you saying?

Dave:
So they’re basically saying that within BlackRock, huge private equity firm, one of the biggest in the world, they’re basically running models to try and understand what would happen to their position if treasury yields went from five where they are today to nine, which would take mortgage rates to 11 or 12%. So I was like, “Oh my God, it all ends.” The whole world

Kathy:
Ends. But we’ve been there. You weren’t, but I survived the ’80s and there were double digits. When I started investing, it was double digit interest rates. I mean, we didn’t die.

Dave:
But if you look at in the ’80s when mortgage rates were that high, the income to price ratio was like three to one. It’s like five and a half to one now. So the affordability is just going to get completely depleted. So I’m not even worried about the housing market. The whole economy would’ve collapsed if the whole government would collapse if yields went to 9%. We cannot afford that as a country. That’s a very good point. That freaked me out. But it’s like they’re just probably doing worst case scenario stress testing that’s not around the corner. But Kathy, this is the thing I was going to tell you. Logan Modashami, who I really love, and I know you do too, Kathy, I’m not sure James, if you know him as much, he’s a housing wire analyst and he’s pretty much always right about everything.

James:
He’s

Dave:
Very good at this stuff and understands the bond market a lot. And he came out with something that said the case for 8% rates. And he was basically saying mortgage rates are going to 8%.

Kathy:
Oh boy. I did see that. I did not read it.

Dave:
Yeah. It just blocks the back of my mind. Yeah, I understand that sentiment right now. But yeah, that could definitely. I mean, they’re at 7.4 right now, so it’s not that crazy a stretch, but I just think that’s worrisome.

Kathy:
We are in an inflationary environment. It’s a different game.

Dave:
It’s scary. I put out a reel yesterday about what I think is going to happen. Basically, mechanically in the housing market, when rates are going to go up, what I think is going to happen is demand is going to drop. We all know that. That’s a pretty measurable thing. We saw mortgage purchase applications. I think they dropped 20% in one week. We’re also going to see new listings go down, in my opinion. So fewer people are going to choose to sell their home because this is what everyone in the doomers get wrong is that it also impacts supply and supply will come down as well. But I do think inventory is going to go up because the stuff that does go on market is going to sit on the market and that’s going to put downward pressure on pricing. And so even if it goes to 8%, maybe instead of one to 2% declines next year, it goes to three to 4%.
But I still don’t see the ingredients for a crash because as of the last months of data, there’s still very little distress. Maybe James, your friends, maybe flippers are in distress, but the average American homeowner still paying their mortgage on time, delinquencies were actually going down. You might see some data about foreclosures going up, which is true, but you have to think of foreclosures as kind of this long cycle. And after COVID, a lot of people entered the foreclosure process and they’re finally actually getting to that end where they’re getting foreclosed on. But if you look at the beginning of that process, people going into delinquencies and early stage foreclosure, it’s going down, which is wild. It’s

Kathy:
Incredible.

Dave:
I guess I feel like 8% mortgage rates are different this time than it was two years ago when they’re 8%. Do you guys feel that way?

James:
At least in the local market where we are, there’s been a lot more economic changes and layoffs. It’s like a combination of the two. Some markets are still doing pretty healthy right now. But I do feel like it’s different. The sediment’s changing because people just, it’s like they’ve been waiting. You know when you’re waiting for something bad to happen and then it’s like, “Oh, it’s coming,” and then it doesn’t come. So every time it comes back, your fear gets bigger. And so we’ve now gone through this a couple different times with the. I mean, when the interest rate shot up, we all had that fear and nothing happened. I mean, that, in my opinion, should have broke the market a lot worse than what’s going on now. Two, three years ago. I mean, that was a huge increase in cost of capital. And we saw a moment of time dip, but then it rebounded right up and people were still buying.
And that’s what I try to keep in the back of my mind is the market was rebounding when the rates were in the sevens.

Dave:
That’s right.

James:
We saw a big, big dip. And so it’s very, very irrational. And that’s where as an investor, you can’t let fear make your decisions and you got to go, okay, what can I do? If I’m in a deal now, how do I mitigate this loss and how can I try to make this better? I mean, I know this is what I spent all day last Saturday doing, going to every deal, looking at my comps again, going, this is my exit. Where’s the velocity behind that exit? And if there’s no velocity, I’m switching the plan. Dave, that house, remember that gem of a house that me and you walked through in Columbia City?

Dave:
Yeah. The one that had all that different options. You could have developed it, you could have flipped it, you could have turned it into a duplex and rebuilt it.

James:
Yeah. My original strategy was to actually sell novelty and sell this big yard, but that’s at the top of the price point now. I’m like, no, that’s not what I’m swinging for anymore. And so I just literally pulled the trigger on this this week to where now we are doing a dadu in the back because now I can drop the price on the front house from a one four value down to 1,050, because that’s where the velocity is. And so you want to go, where are people buying? Because people are still buying, they just got to be able to afford it. And so you got to put the plan together that is affordable.

Dave:
Yeah. All right everyone, we got to take a quick break, but me, Kathy, and James will be right back. Stick with us. Welcome back to On the Market. I’m here with Kathy and James. We’re talking about what’s going on in the bond yield, whether or not you should be worried and what you should do with your portfolio. Maybe it’s just me, but I feel like there’s just a psychological difference now. I think a lot of people, in my mind, wrongfully, I don’t like this, but a lot of people were just banking on refis. They were buying in 2023 and 2024, assuming maybe on bad advice or maybe it was their own decision that you’re going to be able to refinance and you should just date the rate, marry the house kind of thing. There was a survey of people who bought in the last two years, so just the last two years, and apparently 50% of them say they cannot afford their mortgage without a refi.
So that’s scary in itself. But I think for the other people who have been sort of tire kicking now, there’s no longer a narrative that’s like, oh, you could just refi, which is good. I think they should only buy when they can afford it, but now people maybe aren’t stretching as much. So I think demand is just going to be harder to come back without a real sustained path forward down for rates. And the only two things that can happen are the war in Iran ends and the Strait of Hormuz opens and oil prices drop 30%. Or there’s a serious recession, which has its own problems. And I am not a geopolitical expert, but I’ve been reading a lot about this stuff and the war in Iran’s not going to end. There’s no good

Kathy:
Outlet at this

Dave:
Point.

Kathy:
It doesn’t seem to be.

Dave:
What do you do? Right now we’re just in a stalemate and oil prices are up. No one’s even talking about the fact that Russia and Ukraine are just blowing up each other’s diesel depots and now diesel in Seattle is almost $8 from now. I’m laughing, but it’s not funny. It’s insane. It’s crazy. Anyway, I feel like people are recognizing that there’s no quick fix, and so you have to be careful. Everyone, us too, you just kind of have to assume this is going to get worse. Not that it’s a disaster, but I don’t think we’re about to take some upswing. I feel like it’s going to get a little worse before it gets better. And I don’t see the pain yet with the sellers, which is going to come.

James:
It’s going to be a cold winter.This is going to be a dead, dead winner on velocity sales. Now I do have a little bit of hope for the spring coming in because the spring always helps you get a little bit of a jolt in there, even in a bad market. But it’s a cold winter for sellers, but a great winner for buyers. And I can say I probably have more capital out than I’ve had out in 24, 36 months. It’s coming back and we’re just going to do whatever we can to get that money back because I do think the opportunities coming this winter, it’s going to be buy mode. You can’t think about the deal you have. Investing is the long term. What can you do? How can you change your portfolio? What deals can you get into? Because I am ramped up looking to buy.
Even though I don’t feel good about it right now, I’m buying. I can tell you because when people are freaked and spooked and you’re going in those dark winter months, that is where you can really get into some good buys.

Dave:
For sure.

James:
No one else wants to buy this winter?

Dave:
I would buy long-term holds for sure. Flips, I don’t know. I would be a little worried about flipping.

James:
Buy and hold deals, they’re coming together too. I mean, we’re closing on a property and it’s just appraised for $2 million higher than our purchase price. I have not had that happen in a long, long time on a bigger multi-deal.

Dave:
Is that a syndication one?

James:
Yeah. It’s like we bought it right. And that’s the thing, you just have to buy right and don’t have FOMO just because you want to go buy, just take your time. I was talking to somebody on Tuesday at this walkthrough thing and he’s like, “Yeah, I’m getting in.” And he was a full-time pharmacist and he had 120 grand. I’m like, “Hey, there is no rush to get into this market.” I agree. The most important thing is just take your time, build your teams, get the resources behind you, then go find the deal. Where people make a mistake is they find the deal and then they backfill the rest. But you need to set the foundation, which is who’s going to finance you? How are you going to stabilize that property? Are you going to rent it out? Are you going to use a property manager?
Are you going to sell the property? Who’s going to sell it for you? Get that set up because when you have a better foundation, you can make it through turmoil and a market. If you’re just kind of guessing and firing and shooting, that’s how you can really get clipped.

Kathy:
As far as buying this fall or if interest rates continue to rise, it’s kind of more of the same, a lot more of the same where affordability gets worse. People still need a place to live. Sellers will have to do more concessions if they want to sell to make up for that difference to get back to that affordability level. So I think it’s going to be an incredible time to buy. Again, if you’re flipping, that’s different because you’re both a buyer and a seller. If you are buy and hold, you just get to be a buyer in what is definitely going to be more of a buyer’s market.

James:
Again,

Kathy:
More concessions. And you see these reports of, what is it, $18 trillion in home equity or something like that. So there’s a lot of home equity out there. There’s room for sellers to lower prices. They don’t want to, but they might have to.

Dave:
That’s a really good point. Yes.

Kathy:
There’s room for it. It’s not like everybody’s underwater. We’re not negotiating with a bank in a short sale type thing. You’re negotiating potentially with a seller who needs to sell.

Dave:
It’s psychology. Yeah. They anchor in their head to some price, but it’s still all gravy for them.That’s what eventually they’ll have to realize.

Kathy:
And that’s what people have to understand when rates go up, prices have to go down unless the economy’s booming. If wages are going up at the same pace that rates are going up, then it’s okay. But if that’s not the case, then there has to be some kind of balance there. It’s the same if rates are low, the prices tend to go up because that cost of financing is lower. When the cost of financing is higher, either prices stabilize or come down. So I couldn’t agree more, James. It will be an amazing time to be a buyer. It’s going to be really tough for renters and people trying to buy their first home.

Dave:
Yeah. I think a lot of boomers are about to find out that their homes are not worth what they think is what’s going to happen.

Kathy:
And that’s okay because they have so much equity.

Dave:
Yeah, exactly. I listed a house for sale, a rental that I’ve been wanting to get rid of for a while and I just eventually got around to it. And it’s not selling for the price I want, but I’m looking at when I bought it 12 years ago, I’m like, it’s still a home run. If you just lower the price by 20 grand, it’s okay. It’s hard because you want the 20 grand of course, but no one times the market perfectly. You never always sell at the top. I think James, your point, it’s like this is just the cost of doing business

James:
Is there is

Dave:
Some volatility in the market and it’s so important, as James said, to not count that as your money until it’s in your pocket and then it’s probably going to go out and go into another investment. So it’s just like you can’t get anchored to what you think it’s worth because the market is constantly shifting right now. All right, we got to take a quick break, but we’ll be back with more right after this. Welcome back to On the Market. Let’s get back to it. So before we get out of here, can I ask you guys a personal question before I soft pitch this to Jane?

Kathy:
Sure.

Dave:
So I live in a house that I bought in Seattle. I’ll just give you the numbers. James knows because he was my realtor for this. I bought it for $1.365 million. The intention of maybe doing a live in flip, maybe living in it forever, and I’ve gotten it all modeled out. It’s going to be quite expensive to renovate this home. And I’ve been reading a lot of Morgan Hausel. I don’t know if you guys know Morgan Housel, but I’ve just been thinking about how do I lower my cost of living just from a values perspective. I just want to live a cheaper life. Should I do the opposite of what I tell everyone to do and try and time the market and sell the house now because I’m worried about the Seattle market, maybe rent for a little while and then buy in a year or two when I think the market will bottom out?
Is that a terrible idea?

Kathy:
Would you sell it for profit?

Dave:
Probably not.

Kathy:
Probably not. Okay. If you rented that house out, would it cover costs?

Dave:
No, because it needs the renovation still. It’s not in bad shape, but it couldn’t command high rent.

James:
I don’t think that’s a bad idea.

Dave:
Oh, okay.

James:
I think you bought your house fine and it’s in a really good spot and it’s a cool architecture. And what me and you just realized on our flip is when you have the right house, the right style and the right neighborhood, even in a slow market, it sells quick. And so I think you get the right product, but the cost of rent is a lot cheaper than owning in Seattle. It’s so

Dave:
Much cheaper. My mortgage is like, it’s a lot. It’s like 7,600 bucks a month. And I can rent in the same neighborhood, almost the exact same house. It doesn’t have the view, but it’s nice. I think it’s like 4,500,
Which is not all that different when you think about it, because after the mortgage tax deductions and the principal pay down, it’s not really $3,000 savings. It’s less than that. But there’s something about the flexibility of it I like, because I do feel like to buy again, I don’t know if I want to deal with moving out of my house, staging it to sell it, trying to probably renovate a new home, move into that. And I’m like, maybe I just do it in pieces. And Kathy, I got to be honest, one of the things I’ve been thinking about is how do I house hack again? Can I buy a big lot and build a ADU? It’s pretty fantastic. It’s great, right?

Kathy:
It’s crazy. I do it. It’s crazy. I literally live for free.

James:
But remember, Kathy’s also a Malibu, so the rent on hers is going to be a lot bigger than your ADU on your property. But

Kathy:
It’s phenomenal that I can make that kind of money on a primary.

James:
Oh, I’m so jealous.

Dave:
I don’t need to make that much money. A part of it is also Jane and my parents live across the country, and if we short-term rentaled it, then they could come and stay and have their space and then we can rent it out some of the other times. And there’s something just like, I’m like, I want to live in a cheaper house for some reason. It’s not like I can’t pay my mortgage. I’m just like, I don’t want to keep escalating and I want to take a step back mentally. And I feel like that would be just helpful for the rest of my life.

Kathy:
That’s the most important thing, is your family and where you are in life. And perhaps Jane wants to stay home with the kids and if moving and downsizing would allow that, that is more important than any kind of money you would make.

Dave:
Totally.

Kathy:
You can always make money later. Oh yeah.You’ll still make money as you’re doing that, but simplifying life, love that if it’s going to give you peace of mind and a better family life.

James:
I know how you could house hack, Dave.

Dave:
How? Tell me.

James:
There’s so many developers getting smoked in Seattle right now. It’s gnarly. I feel bad for the builders in Seattle really, and we’re one of them. We sell your house and we go find a half built duplex or two side-by-side townhomes, the cottage ones, and the builder will

Dave:
Hail

James:
Out. It’s framed. We finish it and you pick it up on rip.

Dave:
I want a single family though. I don’t want a townhouse. I want to downsize my lifestyle, but I’m a little bougie still. I want a house in the front and the ADU in the back. Can we find that?

Kathy:
Or us, our ADU’s in the front at the front of the driveway, so the back is still our private yard.

Dave:
Private. Yeah. Perfect.

James:
I mean, Dave, but just so you know, on your house, your pocket’s doing fine. It’s not doing what a lot of other Seattle’s doing. You have zero inventory.

Dave:
That’s the part that I didn’t explain is that my little pocket of Seattle is still doing great. I don’t think prices have dropped here at all. The rest of the city is doing pretty poorly because it’s a really nice area. The schools are good here. So it’s just like, I’m like, maybe get out while I can. If

James:
You’re thinking about it, I think you test it because you don’t want to think six months later, I didn’t do that. And if you really want to make that move, then make the move. But there’s even one that’s pending at 2.1 million in your zone. Cool house. Really? Things are moving in your pocket. You’re not going to lose money on it for what I’m seeing. So about what you’re presenting and value-wise. So if you’re going to move into our rental anyways and you make the decision, then just move in and I think this will move.

Dave:
Yeah. All right. Well, that was in my panic yesterday about anything. I was like, “I got to sell this house.” Now I’m like, “I’m totally fine,” but I think I freak out everyone. When you just spend too much time looking at economics like I do, you can focus on the wrong thing sometimes.

Kathy:
Oh, absolutely. Sometimes you

Dave:
Got to take a

Kathy:
Deep breath. I’m in Malibu where the freeway’s about to fall into the ocean. You got to go, “Maybe I should sell now before that happens.”

Dave:
Yeah. But anyway, we’ll all be fine. It’s going to be okay. Well, this is fun. I enjoyed this episode. I really like just chatting with you guys about what you’re thinking, but I’m glad to hear in the light of day, long-term optimistic, short-term, a little nervous, but the wheels are not completely falling off, but expect a little turbulence for the foreseeable future. I think that’s kind of the vibe.

Kathy:
Yeah.

Dave:
All right. Well, James, Kathy, thanks for being here.

Kathy:
Thanks, I think.

Dave:
Did I scare you? You’re like, “I’m never coming back.” All right. Well, thanks so much for watching everyone. Let us know what you’re doing. We’d love to hear what you’re thinking, how you’re managing your portfolio over the next couple of months or years as the market is confusing and it can be a little daunting, but also filled with opportunity. Tell us what your next move is in the comments below. Thank you all so much for watching. We’ll see you next time.

One of my tenants has never paid on the first. He pays on the fourth, every month, for two years, and he’s never actually missed. So for three days each month, I wonder if this is the one he skips.

I like the guy, and that’s the problem: liking somebody turns a late fee from a lease term into a moral decision I get to make twelve times a year. I didn’t charge him one for 18 months.

Eventually I got curious about what that was costing me. I went back through three months of texts, bank alerts, and my spreadsheet and added it up: four hours and 40 minutes a month.

Where the time actually went

I expected the number to be high. What surprised me was how little of it came from the tenant I’d have blamed if you’d asked me on the spot: he accounted for less than a fifth of it. I’d spent two years quietly resenting a guy who was, statistically, an ally.

• Checking for deposits (1st–6th): ~40 min. Not one sitting: six or seven separate checks, like refreshing a group chat.
• The day-four tenant: ~55 min. The text, the wait, “sending tonight,” the follow-up, and the 20 minutes I spend drafting a firmer message before deleting it.
• Late-fee math and the decision: ~30 min. What I’m legally allowed to charge, why this month is different, and talking myself into it.
• Reconciling what came in against what should have: ~50 min.
• Month-end spreadsheet cleanup: ~45 min.
• “Did you get it?” receipt requests: ~35 min.
• Random stuff: a check to deposit, some loose ends: ~25 min.

That’s 280 minutes, 56 hours a year, for three units. Some of you have 30. Maybe don’t run this exercise on a day you already feel behind.

The cost that doesn’t show up

None of that captures the real expense: rent week took up headspace whether I was doing anything or not. I’d be on a call about an RV park acquisition and think, did the Willow Creek payment hit? That’s not a task, so it never made the 280 minutes. It was still the most expensive line item.

The fix

I moved all three units onto Avail and turned on four things. It took one evening.

• Autopay. Tenants set rent to withdraw automatically on the due date. This solved my day-four guy: money was never his problem; he just needed rent to happen without remembering it.
• Automated reminders. Avail emails renters before rent is due, so the nudge doesn’t come from me. When it comes from software, nobody’s feelings are involved.
• Automated late fees. Avail assesses the fee based on the settings you configure. No more deciding whether to be the bad guy this month. One caveat: software applying a fee doesn’t make the fee legal. That’s still your lease and your state.
• FastPay. Standard deposits land in three business days; FastPay moves eligible ACH payments in as soon as one. It’s on the Unlimited Plus plan ($9/unit/month when I wrote this, versus the free Unlimited plan), so check current pricing before you build cash flow assumptions on it.

What it actually saved

I’m at about 20 minutes a month now:  opening the dashboard once to confirm everything posted.

Twenty minutes against 280 is roughly 52 hours a year back. More than a full workweek, previously spent on the administrative act of receiving money I was already owed.

The money side is smaller than the time side, and I won’t pretend automation made me rich. Two things changed: late fees get charged when they’re incurred, because software doesn’t have a relationship with the tenant. And deposit timing got predictable, which matters when a mortgage payment and an insurance draft are landing on their own schedule.

Avail’s own data says landlords accepting automatic online payments are five times more likely to be paid on time than those collecting cash or checks. That’s their number, not an independent study. Three doors can’t prove a multiplier, but the direction matched.

There’s a side benefit for tenants too: Avail’s CreditBoost lets renters report on-time payments to TransUnion ($3.95/reported month) to help build their credit score, giving them a reason to care about the due date beyond avoiding a late fee.

Your action items this week

Connect your bank account first: everything else depends on it. Build the payment schedule for each unit, including recurring charges beyond base rent; anything you skip stays manual forever.

Then set the grace period and late fee to match your lease and state law, before you invite anyone. Correcting a late fee setting after a tenant’s already been charged under it is a conversation with no good version.

Invite tenants last, and ask them to turn on Autopay in the same message. Don’t make it a separate follow-up they’ll ignore. If someone insists on paying by check, you can record it manually so your rent report stays complete at tax time.

Final thoughts

Nobody’s getting rich automating rent collection. You just stop burning 56 hours a year to receive money you were already owed. And get to spend that time somewhere it compounds.

Ready to stop chasing rent? Avail’s Unlimited plan is free to start, with online rent collection, automated reminders, and automatic late fees built in. Create your account at Avail.com.

I want to tell you about a puppy.

It was a mixed-breed puppy, which is the dog version of a mystery box (you don’t know exactly what’s inside, and I’m not convinced the dog does either). It was not house-trained. It was also staying at one of my properties, and nobody told me.

Someone snuck it in, so I found out about the puppy around the same time I found out about everything it had done. Those are two things I typically prefer in reverse order. This one chewed through baseboards, ruined floors, and kept going until the bill hit about $7,000. On a rental cash-flowing $300 a month, that’s almost two years of cash flow eaten by a puppy (in the baseboards’ case, literally).

(Before anybody from the rescue world emails me: I’m building a dog-first hotel, and this is a pro-dog article. It’s also an anti-surprise article).

What bugs me is how avoidable most of it was. If that puppy had been disclosed and screened, we’d have known what was coming and planned for it.

Every landlord eventually meets their own version of this puppy, and $7,000 turned out to be the cheap version. The expensive versions come down to what your paperwork can prove, which, for an animal nobody told you about, isn’t much.

You’re Not the Only One Who Got Surprised

PetScreening surveyed 673 property managers and leasing pros for its 2026 State of Pets in Rental Housing report. Unauthorized pets came out as their top pet problem. 

The same report found that only 43% of renters say they have a pet, compared with 71% of U.S. households, according to the American Pet Products Association. That’s a 28-point gap. Either renters are less into pets than everybody else, or plenty of dogs are living off the books, which is the report’s theory too.

Usually, nobody’s running a con. Someone adopts a puppy in month seven and never thinks to call you. A girlfriend’s dog comes over for a weekend in February and is somehow still there at Easter.

The Bills Come Later

Insurance usually won’t touch pet damage to the unit. Standard renter’s policies exclude it, and no adjuster in America considers a puppy an act of God (except maybe Air Bud). Chewed baseboards and a carpet that smells like a kennel get filed under preventable wear. That leaves your security deposit doing a job plenty of landlords assume insurance is doing.

Bites are the bigger number. Insurers paid $1.86 billion on 28,450 dog-related injury claims in 2025, averaging $65,450 per claim, according to the Insurance Information Institute and State Farm. On that same $300-a-month cash-flowing rental, a single average claim eats up about 18 years of cash flow.

The tenant’s renter’s policy is supposed to pay for a bite first. Plenty exclude certain breeds or any dog with a history of bites, and it gets messier if the tenant never told their insurer either. If you didn’t know the dog existed, you never asked for proof of coverage. Your own landlord policy may have animal exclusions, too, and it’s better to find that now than in a denial letter.

Disputes come down to paperwork

I’ll use Texas as an example because that’s where my properties are. Once a tenant moves out and provides a forwarding address, Property Code 92.103 starts a 30-day clock for the deposit refund. Anything you keep needs a written, itemized list under 92.104, and normal wear and tear doesn’t count. 

If they sue, 92.109 puts the burden on you to prove the deductions were reasonable. Miss the 30 days and the law presumes bad faith. That clock does not care how busy your month was. A bad-faith finding costs $100 plus three times what you wrongly kept, plus the tenant’s attorney’s fees.

Say you keep $600 for floor damage, your list goes out on day 34, and a judge rules against you. Now you owe $1,900, plus a lawyer you never hired.

If the animal were never disclosed, you would have even less to work with. There’s no pet addendum or description of the animal, and nothing signed showing the tenant knew your rules on pet sitting or adopting mid-lease. “I’m pretty sure those scratches weren’t there” won’t carry much weight when the burden of proof is on you.

(Outside Texas? Your state has its own deadlines and penalties. Look them up before a move-out forces the issue.)

That neighbor email is Exhibit A

In Texas, owning the house doesn’t automatically make you responsible for a tenant’s dog. Liability usually turns on what you knew about the dog being dangerous and whether you did anything once you knew.

Now picture the neighbor’s email saying the tenant’s dog charged her kid at the mailbox again. That email is evidence you knew. You can’t unread it. Attorneys in bite cases love a written complaint like that, especially next to a lease rule nobody enforced.

Three Houses, Three Rulebooks

Nobody sets out to run three different pet policies. It happens one house at a time. 

• House A has the good pet addendum and move-in photos. 
• House B has a one-line “no pets” clause. 
• House C is on a lease somebody downloaded in 2019. 

Each one looks fine on its own. Together, they read like a group project where the members never met.

That works until those leases have to back each other up in front of a judge or a fair housing investigator. They notice when similar situations got handled differently.

Assistance animals and ESA’s make this more urgent. HUD withdrew its assistance animal guidance in September 2025. A May 22, 2026, memo narrowed federal enforcement to animals individually trained for disability-related work or tasks. State laws didn’t change; residents can still sue on their own, and attorneys are telling landlords to be careful with denials. 

With the federal approach changing twice in eight months, this is not the place to freestyle. Have an attorney in your state review how you handle these requests.

One Pet Process for Every Door

The fix is boring: Run the same pet process on every property and keep the record. It’s free for housing providers, and more than 28,000 property management firms and communities use it. On a long-term rental, it looks like this:

1. Everyone Goes Through It: That includes residents with no animals. Their profile is free, takes a few minutes, and has them acknowledge your rules on pet sitting, visiting pets, and getting a pet mid-lease. That’s the signature you’ll want when the weekend dog is still around at Easter.
2. Every Animal Gets a File: Pet owners upload photos and vaccination records, then attest to your policies and their pet’s history, including bites. You get a FIDO Score, a paw rating of the pet’s housing risk built from more than 35 data points. It won’t make the decision for you, but it helps you make it the same way at every property.
3. Assistance Animals and ESAs Get Their Own Lane: Requests go to PetScreening’s in-house review team, which verifies the documentation with the healthcare provider. Residents don’t pay a profile fee, and you’re not improvising on a legal question that’s still moving.
4. Re-Up at Renewal: Have every resident refresh their profile every year. That’s how you meet the new puppy at renewal instead of at move-out.
5. One Dashboard for Every Door: Every animal and signed policy lives in one place, and it integrates with property management software, including Buildium, Rent Manager, AppFolio, and Yardi. When the neighbor emails, you can pull up that dog’s file instead of guessing.

If a property manager runs your doors, try this: Pick three random units (not the three you know are fine) and ask for the animal record on each. If it takes more than a few minutes, that’s your gap.

Back to That Puppy

None of that $7,000 was the puppy’s fault. A rescue that isn’t house-trained yet is just being a puppy. The problem was that no one on our side knew it was there, so no one had a plan.

So yes, still pro-dog, still anti-surprise. Most residents with pets will do this right if you give them a clear, single process, and that costs way less than the surprise.

Get the animals on paper before you have a puppy that has an appetite for baseboards.

Henry:
Today’s guest owns 40 rental properties, producing thousands in monthly cash flow, and he’s only been in real estate for a few years. Before real estate, Larry Guirguis thought he’d be spending the next 40 years of his life working on Wall Street, but one conversation with a regretful investment banker changed his trajectory and set him on a path toward financial freedom through real estate. Larry knew he wanted to buy rentals, but how? He was a college student living in California with no W-2 income, so he couldn’t possibly buy a rental property, right? But Larry wasn’t taking no for an answer. He sold his car, scrounged together a down payment and bought a duplex in a Midwest market he could actually afford. Then with proof of concept and a few hundred bucks lining his pocket each month, he moved to Cleveland, Ohio, where he has built a real estate portfolio of 40 single family homes and counting.
Today, he’s sharing how he bought deal after deal without qualifying for traditional bank financing, from focusing on low price but high cash flow rentals to locking in higher rents with Section eight investing. Landlord Larry has found a formula that really works today.
What’s going on everybody? I’m Henry Washington, co-host of the BiggerPockets Podcast. And today we have an investor story with Larry Guerguis. You might know him as landlord Larry on Instagram and TikTok, so let’s bring him on. Lawrence Guerguis, better known as Landlord Larry. Welcome to the BiggerPockets Podcast, my friend.

Larry:
Thank you very much for having me. Appreciate it.

Henry:
We’d like to start off by learning a little bit about who you are, what you do, and how you even got into real estate in the first place.

Larry:
My name’s Larry or Lawrence. Some people call me landlord Larry on the internet. I’m from California, Southern California. And I started investing in Section eight real estate, particularly during my junior year in college. And I did take a big leap from Southern California from the people that are from there. They know it’s a very nice place to live. And I moved to the Midwest to do it full-time right after college. So thank God it’s been a blessing to do it and I’ve been doing it for a little over three years now and it’s been great.

Henry:
What even sparked the interest in real estate? Because college is not that path.

Larry:
No, college isn’t that path. And it wasn’t always real estate for me. It was originally investment banking. I thought I was going to be the typical finance bro.

Henry:
Finance bros.

Larry:
Yeah, that was going to be my path, living in New York, working crazy hours. It’s a pretty funny story. I was actually just out at the bars with friends during my junior year of college, my first semester. And like I said, I went to college in San Diego. It’s a fun place to be, but we were at a bar and then we went to a pizza parlor right next to it. And there was some guy sitting next to me, looked a little down. He was just kind of on his own. And I was like, “Hey bro, everything all right?” And he was like, “Don’t talk to me. I only get two weeks out of the year off.” I was like, “Okay, what do you do by chance?” And he was like, “I’m in investment banking.”

Henry:
I was

Larry:
Like, “Okay. I’d love to talk to this guy. Okay, let’s hear it.” So I ended up talking to that guy in that pizza parlor. My friends leave for an hour and a half and he gave me some pointers. The thing that really stuck with me from that conversation, he asked me if I loved money, not liked, not enjoyed spending it, loved. And I said, “No, no, I don’t love money. Money’s great. I think everyone enjoys having a little bit more of that, but loving is something different.” And I didn’t love it. And he said, “Forget about investment banking. Forget about anything finance because that’s what you need to have to work these crazy hours and you make great money.” But he says he doesn’t even have the time to spend it. And I was like, “All right.” So after that day, I was like, “We’re going to figure out this real estate stuff out before we graduate so that we have some sort of path coming out of college.”

Henry:
All right. Okay. So you got tapped on the shoulder and you took it seriously. So how did you go from that moment to actually taking action and working towards your first deal?

Larry:
I ended up selling my car, my first car, and I sold it for around 16 grand. And I was like, “Listen, I don’t need a car. I use one of the family. I have a family hammer down car from 2008.” I still drive that car. I love that thing. And I was like, “I’m going to sell this and we’re going to figure out a down payment for something.”

Henry:
So you didn’t buy in San Diego,

Larry:
Is that what you’re saying? No. Unfortunately, I didn’t have the budget for it. Didn’t buy in San Diego, didn’t buy anywhere in California. Pretty much I just went on Zillow, Redfin, all those websites and I put my budget in. I put like 70 grand max purchase price. And the states that came up were Ohio, Missouri, Illinois, parts of Illinois, Alabama, all these Midwestern Southern states. I was like, okay. So now we’re not investing in our home state. We’re going to have to figure out management. For me, it was like, we’re going to figure this stuff as we get there. As long as I get the ball rolling, then I’m going to make a mistake. And even if I buy a house, the loan payment on it’s 400 bucks, that’s a $400 monthly mistake that I’ll figure out over 30 years.

Henry:
So

Larry:
Ended up coming across a place called Peoria, Illinois.

Henry:
Oh yeah.

Larry:
I’ve been there a couple times. It’s interesting. I didn’t go there to look at the property. I pretty much just trusted some handyman I found on a Facebook group. Seems legit.

Henry:
I see no problem with that.

Larry:
Oh yeah. Legit’s the word we’ll use. So yeah, I joined all the Facebook groups in the Peoria area and I just found a handyman and I was like, “Hey man, I just need you to go look at this property and see if it’s not awful.” At the time, even if he told me things that were wrong with it, I wouldn’t know. Like I said, I’m college finance. I don’t know what a water heater was, none of that. So I pretty much just needed a thumbs up or thumbs down from him. He gave me a thumbs up. Don’t know the reliability on that, but I took it and I ended up buying that house. I put around 15,3 down.

Henry:
Purchase price was 70?

Larry:
65.

Henry:
So you did a conventional mortgage?

Larry:
I did a DSER because I don’t have a W2. I have no pay stubs, no income. So the only one I applied for was DSER and closing took forever and even to get the pre-approval before took forever because I was looking for a lender that go down to that loan amount. And the place where I found them was actually BiggerPockets. During class I was scrolling through, you could even see my history. It’s just like sub 100K loan amount DSER. And I’m like, does anyone know a lender? Finally got connected one and bought through him.

Henry:
One thing you said that I liked was you though through what the fear was, the worst case scenario. What’s the worst case scenario? I buy a house and my mortgage payment is 300 bucks and if it doesn’t go well, I’ll just be stuck paying 300 bucks a month for a while. I can figure that out.
When we break our fears down sometimes and we figure out, okay, well what’s the real consequence to the action that I’m taking? We sometimes realize that the fear is not that big of a deal. So I like that approach you took and I want other people to do that. If you’re stuck in a decision, break down your fears. What’s the worst case scenario and can you survive that worst case scenario? Can you get back on your feet and not compromise your family’s wellbeing, the roof over your head? Those things are important. But if it’s just like, “Yeah, I might lose some money, but I’ll be okay.” I don’t know. Might want to rethink that calculated risk.

Larry:
Yeah, exactly.

Henry:
The other thing, you just started putting in your budget on the realtor to look for a place to invest and you landed on this property in Peoria. So purchase price, 65-ish thousand. You put about 15,000 down and you said it was fairly turnkey, so no renovations?

Larry:
Not much, no. I maybe put a couple hundred bucks and paint, painted some walls and stuff like that, and then that’s about it.

Henry:
And then you needed a tenant.

Larry:
Yeah.

Henry:
How long did it take you to find one?

Larry:
I needed not any tenant. I needed the perfect tenant because I couldn’t afford a non-payment, otherwise I wouldn’t make the mortgage payment. It took me a couple months, to be honest. It wasn’t immediate because I started advertising just on Zillow and I was getting a bunch of people and I was kind of messing around for the first time with tenant screening websites, which ones did I like, which one gave me the information I needed. I ended up just thinking, I was like, okay, if I need a tenant that’s going to pay me for sure, let’s look into Section eight. I was like, okay, let’s take a look at it. I mean, baseline, if I sign this government paper, I should get paid rent, right? And I was like, okay, so let’s start to advertise on affordable housing. I advertised on affordable housing, found a couple tenants that’s very light screening.
Screening wasn’t really good at all. I got one.

Henry:
How did it go? Was it a good tenant?

Larry:
So the tenant didn’t end up paying anything. Her portion was nothing. As a lot of people know, Section eight does pay 70 to 100% or even less depending on the tenant’s income. Her income was nothing. So I was getting 100% from Section eight, which was pretty sick and I was cool with that.

Henry:
So the government was your reliable tenant that you were looking for?

Larry:
Exactly. That’s what I was saying. I was looking for the perfect tenant. The government never misses a payment. So yeah, no, I ended up getting around 1,400 in rent and my payment was 480 something, which wasn’t bad.

Henry:
No, that’s pretty freaking

Larry:
Awesome. That’s

Henry:
Really

Larry:
Good cash flow. I was like, “This is sick.” And I’m still in my college dorm doing this. So I got a little bit of party money. It’s cool. I was like, “All right, my roommates ain’t doing this.” So I was like, “This is sick. This is sick.” But for me, in reality, that was the moment where it clicked. I was like, “Okay, this works.”

Henry:
Proof of concept.

Larry:
Exactly. Proof of concept. This works. And obviously one house, 700, 600, 1,000, whatever net is not life changing. It’s not going to do much for me. Not much for anyone, especially living in California, but if I can manage to scale up, there you go.

Henry:
All right. Well, made a few mistakes, but you came out clean on the other side, got some cash flow. And if you’re anything like me, once I got a taste of that proof of concept and it was working after my first deal, I was like, “How do I do a lot more of these right now?” Because I was ready to scale as soon as I did that first one. So I’m very curious what that meant to you, and we’ll learn about that right after the break. All right. Welcome back to the Victor Your Pockets podcast. I am here speaking with landlord Larry, and he just told us about his first deal that he did while in college. Pretty impressive, made some mistakes, but ended up with some good cash flow. What did you do next?

Larry:
So I’m still in college. Like I said, I just added that real estate major, so my college actually just got extended and that just wasn’t going to work, especially after seeing this work happen. After you

Henry:
Get the proof of concept,

Larry:
Now you want to get

Henry:
Out of there.

Larry:
So I kind of went to my academic advisor and I was like, “Hey man, we’re going to have to chop this up. How are we going to squeeze all these credits so I can graduate on time because I still want to graduate?” He was like, “You’re going to have to take a lot of credits every semester and then also do summer and winter classes. Let’s do it.” So that junior year, second semester, I did I think 18 credits. I did six credits that summer, and then I did three credits during the winter, and then another 23 credits my senior year, second semester. And thank God graduated on time.

Henry:
That’s wild.

Larry:
Yeah, it was a lot of – That

Henry:
Is a lot of class because

Larry:
What’s

Henry:
A full load? 12?

Larry:
12 to 15. Yeah.
Yeah. Wild. I did a double overload, especially on my last semester senior year. I actually took a class at the community college nearby. So we finished. We finished that god. And during this time, I’m doing all the backend because I was preparing to move out to wherever I was going to invest. So I wanted to get my set DSER lender, my lawyer, my real estate agents in whatever state I was going to go to. I’m still figuring this out at the time, but I did a lot of this on BiggerPockets too. It’s just finding connections so that wherever I did move out, I can hit the ground running. And also funding this portfolio that I wanted to do.

Henry:
What was that process like to get to the next deal?

Larry:
So like I said, I used all my money on that first deal and I didn’t have any personal assets to take money from. So I ended up kind of going around asking different people, but I’m very familiar with Discord. That’s my online presence. I love Discord. So I was going in different crypto Discord channels and for lack of better term, just trash talking these people.
So I was pretty much just telling them that their assets are not tangible and it could be gone tomorrow. You have no idea. Crypto’s great, but I have nothing against it, but I’m going to do what I can to tell these people that tomorrow could be worth nothing. And if all your money’s in crypto, that’s a little bit of a risk. So I just tell people invest in tangible assets, invest in tangible assets. And I was doing it to so many Discords with hundreds of thousands of people. And I got people that were serious, not serious. And I finally got some younger guy that came up on some crypto money. He messaged me on Discord. He’s like, “Yeah, I do agree with you. I have some money in crypto and I do want to take a chunk of it out to invest in something tangible.
What are you talking about?” And I make a pitch deck with Canva and bootstrap that. And I was like, “Hey man, you should really come down to San Diego and we’ll have a conversation about it.” He actually comes down to San Diego earlier in May. I’m graduating end of May. He comes down earlier in May, taking out to some Korean barbecue, which he doesn’t eat because he doesn’t like raw meats like that. So we were just talking the whole time and it ended up working out. We agreed to a certain start money and I ended up taking that and moving out. The first place I chose was Cleveland, Ohio.

Henry:
Okay. And what did you decide to do with that money? You said you moved to Cleveland. I’m assuming you researched Cleveland

Larry:
Before

Henry:
Moving there?

Larry:
Yeah. So that entire senior year while I was doing my classes, that’s where I actually needed to research where I was going. So I researched Chicago, which I turned, I wasn’t going to do that. I researched Alabama, Missouri. I actually had a friend in Missouri, so I researched a lot of Missouri and then Cleveland, Ohio. And Cleveland, Ohio just kind of, first of all, it was tolerable to live in. There was a downtown, even though I don’t really use it, but I’m here

Henry:
For work. Boosting Southern California folks.

Larry:
Yeah.

Henry:
It’s a decent city. It’s fine. It’s got character everybody. It’s not San Diego, but it’s good.

Larry:
Yeah. And it was an insane Section eight market and it still is. So I’d pretty much just after class go on Zillow and I felt kind of bad because I was kind of wasting these agents’ times, but I’d give them calls, the listing agents, and I’d ask them to send me video tours of the houses and then also answer questions about the area because my understanding of obviously there’s East Cleveland, which is pretty bad and different parts in the Cleveland surrounding areas. So I wanted to get an understanding of which areas are good or bad to buy in and now also understanding the insides of these houses. I probably did this to 50 agents, poor guys, I wasted their time, but I got the knowledge that I needed so that when I did move there, I went immediately. The first week I was there, I toured easily over 60, 70 houses.

Henry:
What did you learn by getting the video tours?What were you looking for and then what did you actually learn from that?

Larry:
For example, different video tours had older panels, older electrical panels, and some of them had new. I’d look at different basement walls. Some of them you could see condensation building up or horizontal cracks, vertical cracks. And I’d ask questions. I’d be like, “Oh, what is that?” Because I had no idea. And some agents are very knowledgeable about houses and some aren’t, that’s just normal. But the ones that were, which is how I found my agent, because he was answering every single question about the mechanics of the house. I was like, “This guy knows the stuff.” I’d be like, “Why does this water heater look different than this one? Oh, it’s an older one, so it’s due for however many years.” And now I just know the fact that they made that comment, it’s due to be replaced soon. Now I know, okay, water heaters are roughly need to be replaced every 10 or so years.
I had no idea. So just asking these questions kind of put those timelines for, or difference between three tab, two tab or whatever, shingle roofs. So these are all important things. I didn’t care about the cosmetic. These things are all cheap. It was understanding the mechanics behind homes. So asking these questions taught me kind of a baseline. And then when I was there, I can kind of connect the dots and be like, “Oh, I did see that in the video. Look it, that’s an older panel. I should probably be careful about this house.”

Henry:
All right. So you got familiar with properties, you got familiar with Cleveland, you moved, now you’re living there. How long did it take you to get your first deal? What’d you do?

Larry:
Yeah, so I moved to Cleveland 2024 end of July. Immediately, I had that agent that I was speaking with, one of the ones that I was speaking with asking for video tours and all that. And this guy was a dog. He knows everything about houses. I was like, “I’m going to move this day.” I believe it was a Thursday, and that Monday we started looking at houses. Nice. And I made a huge list that weekend. A poor guy. I mean, I probably put 50, 60 houses on that list. And on a sheet that I shared with him, I was like, “We’re going to tour all of these.” And that gave me a huge understanding of what areas were bad. I mean, I was walking around places in Cleveland, gunshots, two doors to the left of me. It was interesting. And I knew, okay, maybe this is an amazing place to buy, and then some other places were great.
So first deal was a duplex. I was planning on going in just single family, but it was actually a duplex in kind of a rough area. I’m not going to lie. But there were two Section eight tenants in there top down that had been there for, one was 16 years and one was for 11 years. They’d been there forever, and the rent was super low. It was like 650 bucks each unit. So from my understanding of studying the Section eight there, the authority there, I could increase the rents right away to the standard of 2024.

Henry:
Without doing any work.

Larry:
Without doing any work because they already passed Section eight inspections. So I knew that it was turnkey enough. I toured the property in person. It looked great. The tenants took great care of the property. I met the tenants. I still have this tenant to this day. He’s a great guy. And I was like, okay, let’s put an offer. I put a pretty aggressive offer on. And this was my first offer, so I was asking all the questions along the way. I read every single page letter by letter, and thank God we got that first one at 88,000 was for that duplex. Wow. Yeah.

Henry:
That cash flows without you raising the rent. That’s

Larry:
A

Henry:
Decent cash flowing deal without raising the rents.

Larry:
My mortgage was 675 on the dot 675, I remember. And I’m still making 600 bucks, paying water and sewer. They’re both very old, so the water and sewer was very minimal. So I’m making 500 and something dollars. Great, I’ll take it. But the HUD for that time, they were both three bedroom units, but they had two bedroom vouchers, so I could only get to two bedroom rent, were around $1,200 for two bedroom rent. Both of them, three months later, went up to that amount.

Henry:
Nice.

Larry:
And it cash flowed like crazy. I was like, wow, that is wild. So the first one was a home run. Even my agent to this day said those first six were home runs.

Henry:
It sounds like you found a kind of a niche opportunity there because if the property was a three bedroom, but only getting two bedroom vouchers, there’s obviously opportunity for you to get increased rent. Was the previous landlord just not on top of maintaining his rents? Is that an opportunity you can find if you look for it? Is

Larry:
That normal?
Yeah. Yeah. I actually recently bought two properties with tenants that have been there for a very long time and increases that haven’t been there for a long time. You could see that, for example, for that first property, it was being transferred from owner to owner to owner to owner, bought and sold, bought and sold. And no one really went because usually section eight, you need to hand in a rent increase in person. So maybe they didn’t have an agent in the area to hand in a rent increase or just didn’t think about it. So no one handed in a rent increase to the housing authority there. And I was like, “I’m just going to give it a shot and see what happens.” And still to this day, I mean, I recently bought two houses where it was a three bedroom, tenant has amazing income. The rent was 900 and it went up to 1600.
Geez. It’s a lot of out-of-state investors that just don’t understand the, and I don’t blame them, don’t understand the rules of the housing authority there, but I was like, “I’m going to ask.”

Henry:
Super cool. So you bought that duplex, then what?

Larry:
And then around the same time, it’s funny, the first six I bought, it was six houses in six months, and I bought them kind of in duos. It was pretty interesting how that happened. My goal was six houses in a year. So thankfully we bought the six houses in six months. I bought a single family at the time. That one needed a little bit of work. I didn’t know anyone there. So I actually have pictures of me doing the work myself.
And it was, I’m not going to lie, the work was kind of bad. The work was kind of bad. I mean, I was painting a room. I didn’t put any primer on it. I tried to re-sand wood floor. Didn’t go out right. But thankfully I did get another housing authority tenant. The numbers on that, the payment on it was 524 and I got a housing authority for 1850. So that one did really well. So I bought those around the same time. That one was already occupied, the duplex, and then the move-in date for the other tenant was October 1st. Right around October, I bought two more. One was a four bedroom, two bath, single, and the other one was a three bedroom, one bath, single in a nicer area, still section eight. The zip code for that area was really good, so I got really good rents on that.
The payment on that one was 709, I believe. And I got 1720. Nice. And then on the four bedroom, she didn’t have any income, but my payment was also like 540 something and the rent was 1300.

Henry:
These are great numbers for reasonably affordable houses that were not purchased that long ago. That’s why Cleveland is one of the most popular landlord markets because of the affordability versus rents that you can get there, which is really, really cool. And you funded all six of these through that private money partnership that you had?

Larry:
The down payments. Yeah. The down payments fell anywhere between 17,000 and 20,000 at the time. Those were my cash to close on all those.

Henry:
And how much equity were you giving up on each one of these deals?

Larry:
I was giving him 30%.

Henry:
And rent 70 / 30 split or fifty fifty split on rents?

Larry:
Fifty fifty.

Henry:
Okay. What was the long-term plan with the partnership and the loans? Do you still have these partnerships? Did you buy him out? How does it end?

Larry:
Yeah, so he’s actually a really nice guy. And the reason why I gave him equity, first of all, I’m a desperate college kid and I didn’t have any experience, and I knew that I could work it out with him. He’s a younger guy, so I was like, “We’ll figure it out later.” But obviously that’s not the right way to go about it. Definitely if you’re going into partnerships, don’t think that way. Have your long-term plan set from the beginning because once you sign that paper, you sign it. But he was a cool guy, so I kind of figured that once we get the ball rolling, then we can figure out moving forward. But yeah, the goal was to buy him out eventually when all these properties are cash flowing, give him his big check at the end and he’ll be happy. And that’s eventually what ended up happening.
I did buy out the equity and then I started getting all the cash flow from all these properties and then I dumped all of that back into now my personal portfolio.

Henry:
All right, Larry. Well, this is pretty cool. It’s a pretty cool story about getting started. I love hearing stories about how people got started at a younger age. I was an old fogey when I got started. The other thing that’s really cool is you did this while in college, and a lot of people think that they aren’t prepared or ready to get started, and you didn’t let that stop you. As a college student, you figured out a way to do it. You figured out a way to raise money, you figured out a way to find deals, all while taking two times the load of a normal college student. So that’s pretty impressive in itself. Do you mind giving us a breakdown of where your portfolio stands today?

Larry:
Yeah. So thank God I’ve been able to build it around 40 properties now.

Henry:
Wow.

Larry:
Impressive. Yeah. I still only have that one multifamily duplex, so I did that.

Henry:
All singles.

Larry:
Yeah, all singles. Yeah, all singles. My strategy’s pretty simple. I like three ones, three twos, maybe some four bedrooms. They’re easier to manage, longer term tenants. But yeah, I’ve been able to grow into that. And to be honest, I dump everything back into it. I love buying these houses. I’m passionate about it. So I try not to take too much home. I try to just buy every month down payments, down payments, down payments.

Henry:
Okay. And is this all in Cleveland or did you venture into another market?

Larry:
Yeah, so majority’s in Cleveland, and then I also have a bunch in St. Louis, Missouri. Like I mentioned before, I have a friend out there that went to college with me. So when we both finished, I was like, “Hey man, I kind of need my boots on the ground.” And he wanted to also learn Section eight. So I was like, “This is a great opportunity. We can work together. We have a partnership in St. Louis.” So I was able to buy out there because I had my friend out there.

Henry:
These are markets where people think it’s competitive because of the popularity of the markets for landlords. How has that impacted or not impacted your strategy going forward? Have you had trouble finding deals? What’s that look like?

Larry:
Yeah, so deals have definitely gotten more expensive for sure. I mean, the appreciation on the houses that I already own is insane, but it’s always kind of understanding now off-market deals, thankfully, obviously through social media, which is pretty cool. It’s a great opportunity to have. I’ve been able to meet a lot of wholesalers, meet a lot of people that have off-market deals. So I’ve been able to buy some off-markets, but even still on the market, it’s really just understanding the numbers. Yeah, a deal might be more expensive, but if the rent number’s out, number’s out. Buy the deal. My biggest regret in my first year, and maybe it turned out to be fine because those first six houses were home runs, but I was penny pinching. I was going crazy on deals. I had lost deals because I was a thousand, $2,000 away from what the seller wanted.
And in reality, what is that? On a small deal, that’s $5 a month different. And I was going crazy over it. I wish I bought every deal sooner.

Henry:
Set every investor ever.

Larry:
Literally. Yeah, exactly. I didn’t understand that when I first got into it and people, maybe older investors I was talking to at time, they’re like, “Get as much as you can, man. I wish I got more.” And at the time, they’re like, “At your age, it’ll turn out good. Just get the deal.” And I was being a little cocky. I was like, “I’m going to buy perfect deals all the time.” Unrealistic. Buy the deal, get it under your belt, because real estate, for me, I look at it if you’re buying these kind of assets, they’re pretty much forever appreciating.

Henry:
I think that there’s value in being cautious when you’re

Larry:
Deal,

Henry:
But there’s a very, very delicate balance of being overly cautious and it hindering you versus being cautious in order to protect yourself. So you definitely have to have the balance. That’s where having a network of other investors can come in handy to help you get out of your own head sometimes and know when to make the offer and when not to make the offer. I want to pivot before we get out of here because we call you landlord Larry, and that’s because of your social media handle where you’ve got a presence where you’re talking a lot about this. So I’d love to learn more about how that’s helped you and maybe how that’s not helped you, but we’ll do that when we come back from a break.
Welcome back to the BiggerPockets Podcast. I am here with landlord Larry. He has shared his journey from starting to invest in college to moving to Cleveland and buying six deals in six months, and then pivoting and doing some deals in St. Louis. So you’re very familiar with being an out-of-state investor. But the thing I’m curious about is you’ve built a social media presence as landlord Larry, and as someone who’s built a social media presence myself, there’s upsides and downsides to it. So I’m curious about your social media journey. What prompted you to even start creating a social media presence?

Larry:
It’s always kind of been in the back of my mind. I’ve always liked making videos, whether for me when I was younger, it was gaming and different vlog style, funny videos with my friends. I liked making videos. It was cool. So when it comes to the real estate side, I was like, okay, well, for me in Cleveland, I’m one of the youngest investors and I don’t see why that’s the case. I do think it’s possible for younger investors. And a lot of the questions I got just from my friends and different family friends were like, “How did you get into it so young or is it possible for me as a younger person?” And I’d be like, “Absolutely. You just need to understand some fundamental ideas and educate yourself just as you would like any other career. It’s really nothing special. Trust me, my friends that are becoming doctors, it’s harder to be a doctor.
No questions asked. I tell them all the time, God bless you, man. I can’t do medical school.” So if you took a percentage of that, any education into understanding real estate, for sure it’s possible, almost at any age. Younger, 18 and up. Some people that are younger than 18 get their parents to co-sign as possible. So I got these questions. I was like, how about I start making videos? I made this account, I told a couple of my friends, I’ll start posting consistently. I didn’t. The first eight months I didn’t post. I posted awful videos. If you scroll all the way down, it’s just me holding a camera, talking, just happened pretty much. But it wasn’t until January of this year is I was like, I’m going to post every single day quality content so I can genuinely teach these people, be completely upfront, show numbers, show rent amounts, bank statements.
I want people to truly understand that this is possible and it’s just understanding the steps to do it and then make it also quick because I understand that short form content, you need to keep these people glued to their phone for the 30 second max or else you lose them. So yeah, I truly have a passion for teaching. I’d eventually like to become a professor at my university just for fun. I think it’d be great time to teach a real estate class.

Henry:
I think that’s really cool and I hope you get the opportunity to do that in the future.
In terms of a direct return on your business, so think buying deals or finding lenders or finding contractors, what has having a social media presence brought you the most in your business? I know for me, I’ve bought a couple of deals from leads I’ve gotten from social media, but it’s marginal compared to the volume of deals I do from outside of social media. Where I’ve gotten the most benefit in my direct real estate business has been private money. Because of the credibility that you build online, it’s opened up doors for lenders to reach out to me and say, “Hey, I’d like to work with you.” So what’s the online brand brought to you?

Larry:
Yeah, so I’ve actually had some private lenders reach out to me and I haven’t tapped into that yet, but that is something that I am going to look forward into because I do want to amp up the volume a little bit. But honestly for me, it’s kind of been connections. I’ve been able to either lenders or other people in the social media real estate world, it’s been nice to meet them and learn from them. I try to learn from everybody really. And yeah, mainly that. And even the people that I don’t buy from, those are the people on my wholesale list and my Discord. So it’s cool to have that connection.

Henry:
Awesome. And one last question before we get out of here. There is no doubt someone listening to this episode who is in college, maybe just about to finish college and they’re like, “Man, I think I want to do this.” What advice would you give to that person?

Larry:
So I tell this to a lot of new investors, whether you’re going to get into Section eight, Flipping, Bird, anything, do yourself a favor because thank God I got pretty lucky with just going crazy at it and that’s not necessarily how it always goes. So do yourself a favor and educate yourself. Do your homework. School is boring, but so is real estate. The back end of it is all numbers. Absolutely. Yeah. It’s not all sunshine and rainbows and it’s understanding the things that you need to do. So educate yourself, whether that be books, articles, podcasts, mentors, whatever. First tap into that because remember, real estate is a high ticket career. If you’re going to invest, you’re going to spend money, right? A ton of it. It’s not free. So invest in some education of some sort. Understand just before you go crazy at it, because I’m telling you it is possible, but just having the steps, understanding the steps to go through it first is definitely a necessary aspect of getting into it.

Henry:
Landlord Larry, thank you so much for joining us on the BiggerPockets Podcast. Thank you for sharing your journey with us. It’s pretty impressive what you’ve been able to build and create. You should be proud of yourself, man.

Larry:
Thank you so much for having me, man. I really appreciate it.

Henry:
We’ve been talking about social media, so let everybody know where they can find you.

Larry:
Yeah, so you can find me at landlord.larry on Instagram and yeah, that’s about it. All

Henry:
Right. Landlord.larry on Instagram. And if you’re listening to this episode and you think you’ve got a cool story to share, well, you can always head over to biggerpockets.com/guest and fill out the form. Who knows? We could be talking to you very shortly and you could be sharing your journey on the BiggerPockets Podcast. As always, thank you for listening and we’ll see you on the next episode.

Ashley:
Most rookies are afraid their first purchase will become a money pit. Joshua Satimio bought a $38,000 house with termites, a tenant who had not paid rent in more than a year, and a renovation that quickly exceeded his abilities. Once the tenant left, the house sat vacant for another eight months while Josh and his wife wondered whether they had made a terrible mistake.

Tony:
Now, Josh eventually turned that property into the equity that helped fund his next two purchases. And today, he estimates his portfolio at roughly 70 properties across four partnerships. And we’re breaking down how accessible work in real estate helped him find his first deal, how he used seller financing, and an as completed appraisal after several banks rejected him, and the systems and landlord principles had helped him too.

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

Tony:
And I’m Tony J. Robinson. And with that, let’s give a big warm welcome to Josh. Josh, thanks for joining us on the podcast today, brother.

Josh:
Absolutely, guys. Thank you for having me. I’m excited to share.

Ashley:
Now, Josh, your first exposure to rental properties came from working at a beach service when you were in high school and college. What did you actually observe about the owner and his lifestyle that made real estate kind of feel different from taking a traditional career path?

Josh:
Yeah, it was probably one of the best jobs a high school student could have in terms of just being around the flow of money and also kind of getting to be paid to work out on the beach. But a lot of the times before we would actually do the beach service set up, there was weekly rentals where people were moving in and out for their vacation. And I worked doing the beach chairs and umbrellas for the owner of the beach rental home son. He actually owned the chairs and umbrella company, but his dad would always just need extra labor. Nobody would show up to do the cleaning on the moments and the days needed. So then he’d reach out to his son and his son would send me to go and clean these rentals hours before families were moving in. And it was just a fun experience because he was really wearing a Columbia shirt and flip-flops and sending me in his work truck that was filled with a brim with white monster energy drinks everywhere and cleaning supplies in the back of his old Chevy 2500.
And I’d just go down the beach at a couple different houses and enter these million dollar homes right on the ocean and Gulf Shores and clean the kitchens, clean the cabinets. I remember several times going up to the HVAC vents with a rag of bleach thinking this might take some years off my life. But from there, just getting a chance to talk with Mr. Young was his name about, “Hey, how’d you do all this?” And he just kind of told me about his journey in rural Alabama of buying properties and then getting lucky and then segueing those into the beach houses that really not just only paid his income, but kind of created his lifestyle of managing these properties, taking care of people and then working from there.

Tony:
I think you’re a much more mature high school kid because I don’t know if I’d trust my son who just graduated from high school to clean any of my vacation rentals and actually do a good job. So you end up moving to Arkansas for college to play some football, which is a dream of a lot of young folks growing up, make it to the big leagues, but you end up getting injured and that moment becomes a bit of a pivot point for you. So just talk us through, Josh, you get to college, injury happens and what comes next for you?

Josh:
Yeah. I think it was a pivot point in my life, but it also was kind of symbiotic and natural to everything that had happened maybe up to that point. Coming from that beach service lifestyle and seeing the margins and flow of money and again, also being rewarded financially for it, it would open my brain in the summers to just what’s out there if you kind of go and get it. And then going and playing football, I’d show up to training camp as an offensive lineman pretty much every year, 40 pounds lighter than I should have been from working on the beach all summer. And so there was kind of a weird relationship with the coaches. And this was a very small liberal arts college, NAIA line college. So there was never any NFL aspirations by any means, but it was still a job. I’d actually kind of learned some translating skills in the real estate game to actually get the scholarship to go up there is I would basically send my highlight tape out along with my unofficial transcript and just go to websites on NAIA schools, division two schools and division three schools, go to their offensive line coaches, their recruiting coordinators and email them, “Hey, this is me.
Here is my information. Please like me.” And I kind of created an artificial market for myself to talk to different schools and then learned early on with the guidance of a lot of mentors through even that beach service and through my parents and through coaches about not every opportunity is a good opportunity. There were schools that spoke about, “Hey, come play ball here.” And then I learned a lot about how scholarships actually work and how they can be partial. And I was able to take the best offer and get a full tuition scholarship to play football at a small school where they don’t really actually have a lot of those to access, but I kind of waited out, had planned on just going to the local junior college because I didn’t really get an opportunity where I wasn’t going to have to pay some money.
And then I guess some other recruits had passed up their opportunity. And then at the end of the signing season, they were like, “Well, hey, we have all this money in our budget. We really want you and here you go.” So I learned negotiation skills and market skills through that process to actually get up to Arkansas that I had never been to. And then going through that process of getting into college, being treated like an adult, I mean, I think everybody kind of has that first, “Oh my goodness, I’m on my own here. I have to make sure I feed myself. I have to just manage myself as a human.” There were just shifts of perspectives and getting the opportunities to learn the way the world worked and dealing with adults for the first time, it was like, “Oh, I’m at some point going to have to make money and support myself.”

Ashley:
So Josh, what did you go to school for? Did you have a plan for a career when you were going to college?

Josh:
Yeah. So I mentioned I had the full tuition scholarship to go to Lyon College. And then I actually went into a program called the Teach Program, which was basically learn how to get your teaching certification, excuse me. And they would pay basically like an unsubsidized or a subsidized grant of 6,500 if you went and taught in a low income area school for a certain amount of years after college. So that was how I ended up paying for housing my first year. Went into the teaching side of things, learned that they are very underpaid for what they do, what they have to go through, shadowed some schools locally. And then when I did get hurt and had the opportunity to look into the community at other opportunities and see where I could maybe make a better career path for myself, I ended up switching that teaching process to getting a psychology degree and a business degree.

Tony:
Josh, you have this interesting backstory of working on the beach and that becoming a big learning block in your life, but then it happens again. There’s a story where you got an internship at a local apartment complex. Can you walk us through that? I’ve never even thought about interning at an apartment complex. How does that happen? What was the goal behind that?

Josh:
Well, it actually started out as just needing a job after I’d gotten hurt and deciding like, “Hey, I’m just sitting around doing the schoolwork and don’t have practices to go to, don’t have just the extra work and preparation and maybe realizing that, hey, it’s getting to be the end of the line of football. Do I want to have a knee surgery here or do I want to look to the next thing?” And there was a teammate of mine, his nickname was Meat, and he had started working for a local contractor doing landscaping, tearing up slabs and things like that. And he had mentioned to me that, “Hey, they’re always looking for folks.” So I was like, “Absolutely, let’s do this. There’s a walking path to a 40 unit complex from the college campus.” And he was like, “Just come on out. Don’t meet anybody. I’ll vouch for you.” And we get paid, I think at that time it was like 10 or $12 an hour, and we are basically going to re-mulch all the flower beds, dig stuff up, and we’re working for the contractor.
I said, “Cool, let’s do it.” And then while we were doing that, the property manager for the complex that worked for a local real estate company, he would just kind of show up out of the blue. I didn’t know who he was in relation to who was paying my checks, but he would come around, walk, and he was a just very sweet guy and a nice person who would engage with me and my teammate and talk to us about school, football, our next step. And then I kind of learned that there were more opportunities. He was talking about all the properties he managed, all the work that they have to get done and just what the next steps would be like from there. And then flash forward to the next year, I though back to that moment. I just kind of picked up the phone and called him and I said, “Well, hey, I have to do this internship for my senior year to graduate.
Can I follow you around, shadow you and maybe help with anything you would need help with?” And he said, “Let me talk to my boss.” He spoke to him, said, “Absolutely.” And I just kind of became a shadow to the property management side of the real estate company.

Tony:
Josh, incredible story, but we just kind of glossed over something. Did you say that your friend’s name was Meat?

Josh:
It was. That was his nickname. He was from Stockton, California, but he was a big man. He was about 6’5″, 340 pounds.

Tony:
Geez, man. I feel like I got to have a more specific nickname. Meat is just too ambiguous. I don’t know, call me ground beef or I don’t know, something, but just meat. I feel like I need a little more distinction.

Ashley:
You know what? You got it, Tony. From now on, welcome to Real Estate Rookie. I’m Ashley and he’s ground beef.

Tony:
That’s a new intro.

Josh:
Absolutely fit him if you know him.

Ashley:
That’s it. I’m already getting t-shirts made right now.

Tony:
The funniest part is I don’t even eat ground beef. I would have to be like ground turkey or something. But Josh, I want to go back to the internship piece. I think it’s so cool.This wasn’t a job posting. You just manufactured this out of thin air. And it’s so interesting because I feel like we see this theme across so many of our guests who manufacture these opportunities that weren’t necessarily there before. And it’s simply because they weren’t afraid to ask the question. And so many of our guest stories hinge on these moments of them just going out on a limb and putting themselves in situations maybe other people would be too uncomfortable to do. When you approached this person, were you nervous in any way? Like man, I don’t even know if this is a thing. Or had you built enough rapport with him already where it just felt like an easy ask?

Josh:
Yeah. I mean, I think I didn’t know him beyond the times he would show up and then later the contractor would call and say we either did good or bad based on probably him reporting back. And I think it was just a great opportunity of not knowing what I didn’t know and not realizing that that was weird to kind of call somebody and basically see if you can add value to them and if they can add value to you. And it became a theme for me and led to a lot of great things. And it’s probably the number one thing I encourage other people to do and have so many quotes and stories about it, I guess I would say.

Ashley:
Now, after you finished up this internship, how did that lead you into real estate? What was the next step?

Josh:
Yeah, it just, again, became the most natural thing for me. I had opportunities to graduate from college and go back to working at the beach service and make a great amount for a 20-year-old for the course of three to four months. But at the same time, I graduated a year early because I took some junior college classes in high school. And my now wife, who I met the very first day of college, she still had another year. She was from Northwest Arkansas, and I was just figuring out how I could stay as close to her as possible. And then along with that, all my friends back home in Pensacola, Florida were telling me about their first apartment, that they were essentially house hacking with my other friends and they were all spending $800 a month each to share a two bedroom house. And I was looking at my market and my rates and saying this is a place that I want to stay.
So after that internship, it coincided with my last semester of college. And throughout that process, I was just at this company who luckily enough was managing the apartment right next to my college and also a block away from Lyon College. And they were also the number one real estate firm in the area. The main brokers, I should say, were people who absolutely should know. If they weren’t already doing it for so many years, they would’ve been influenced by BiggerPockets. They had tens of doors then and then now I think have hundreds of doors. So it was just an environment where I was seeing myself in all the different areas I could just create and add value for them as well as them create and add value for me as mentors and then just people who were creating this, I guess, formation of what I wanted to do.
They were leading the path for me to follow to try to get as many doors as possible. And it was something that very ingrained in me that like, “Oh, I was just going to do this.”

Tony:
There’s something about proximity that I think gives us more confidence in ourselves. There’s so many rookies who are listening who are on this island by themselves. I was talking to another rookie investor yesterday and she’s like, “I feel like I’m on a boat by myself in the middle of the ocean.” And it’s such a normal feeling, but we don’t hear it often. But I love your approach, Josh, because you went the opposite direction where you just surrounded yourself with people who were already five, 10 steps ahead of you. How did being in that space actually lead to your first deal?

Josh:
Yeah. So leaving the internship, I ended up getting my real estate license, started working on that in that senior year to summer and came back in the fall and started on as a real estate agent. I think that would’ve been fall 2019. And I started just trying to add value to as many people as I could in the market as a real estate agent. And also through the internship, I realized that the property management and leasing side of things just needed some modernization and needed some assistance. So I just inserted myself in there and helped try to lease property to people. At that time, I thought there was no difference in the world and mindset between somebody who was going to rent something and buy something. They just didn’t know they could buy anything. And to some degree, that’s still a mindset I have, but I also think there’s a little bit more of a mental hurdle there.
So getting into my first deal was a lot of just trial and error of showing other people properties and listening to what people wanted in their investment goals. And then me building relationships in the community, trying to find deals for them, trying to do everything off market and on market I could to identify what clients were telling me they wanted. And then getting to the point where it was, “Hey, this is what you’ve said you want. Here this deal is.” And then a lot of the times them saying, “Oh no, nevermind. I’m a little scared to that degree.” And then I started working that process to saying, “Okay, well, I want to buy them.” But I quickly realized being six months into a 1099, I would talk to the local banks that my mentors were using and they would always be very gracious with their advice to what they could do or what I should do, but none of them were really willing to take that chance on doing a commercial loan for somebody with that six month job history.
And then of course, I don’t know that DSCR products were as available. I know they’re not available in the market here that we’re in. And it just became about, well, I don’t want to just bring 10 grand to the table that I don’t have, so how do I find a deal and how do I find financing for it?

Ashley:
Now, Josh, what was your solution for that? And I know you ended up finding your first deal kind of through your brokerage in a sense. So maybe start by walking us through how you found the deal and what was your solution to not being able to get financing and bringing a huge down payment to the table?

Josh:
Yeah. As a real estate agent, it was kind of ingrained in me that the right way to do things was to get your financing first. So I had spent a lot of time just trying to build the relationships with bankers and not knowing what I didn’t know still. And many of them would ask a common question that I now realize why they were asking this, but they were like, “Well, do you have a deal in mind that we’re talking about?” And I’d say, “Well, no.” And I guess fast forward to just being in the real estate office and hearing another agent who’s also one of those people I would consider a mentor and a friend who owns a lot of doors, but he was going to be actually listing a property of somebody who hadn’t received rent from their tenant in a year and a half, wasn’t really a conventional landlord and wanted to sell their property, but knew it couldn’t be shown because the tenant that was in there wasn’t going to let anybody in there.
So I basically just had that conversation with my fellow agent or yes, I had that conversation with my coworker and said, “Well, would he own or finance it? Because I don’t know that I can get bank financing, but I know I could probably put my effort and energy into it and figure out a way.” And he was very deal focused and said, “Well, why don’t you go out and look at it? Why don’t you see if it’s something you’re interested in? And at the end of the day, this person hasn’t gotten a dime on this property in a year and a half. I don’t know why you proposing to start paying them monthly on it, putting some money down wouldn’t be an option.” And so I said, “Awesome, let’s do it.” And then I don’t really remember how, but somehow Bobby was able to convince the tenant to let me do a quick little walkthrough of the property.
So I got in, just saw the distress you would imagine in a $38,000 property, but also didn’t know what I didn’t know in terms of seeing what termite damage looked like versus water damage and understanding what that would mean in terms of what could be behind the walls. But I was ready to get after it and just excited that there was an actual opportunity in front of me of somebody that would accept an offer and all of a sudden I would own real estate.

Tony:
Josh, was that quick walkthrough, is that the only time you saw the property before actually purchasing it?

Josh:
Yes.

Tony:
And did you have an inspector or a contractor or anyone walking it with you?

Josh:
I didn’t. At that time, I say I didn’t know what I didn’t know, but I was also trying to become the number one resource for landlords and tenants in our area. And through the property management side, had done just walkthrough after walkthrough and talked to owners and met owners and met other investors on their properties and seen things that they would look at. And I’d sold some properties as a real estate agent and seen the inspectors go around, turn the water on, look underneath, look on the roof. And I had a little bit of a template in my head as to what I would potentially be paying 350 to $500 for. And I was like, “Oh, I’ll just do it myself.”

Tony:
Looking back, would you have done it yourself again? Because you had the experience, right? I’m just curious, for me as a rookie investor, I feel like part of the way that I get confidence going into a deal was that I knew that I had the inspector going through and I knew that I had a contractor going through, but because this whole tenant situation didn’t have that same luxury, but knowing what you now know, would you have or do you feel like it actually worked out in your favor to be able to move quickly without the inspector and the contractors going through?

Josh:
I think, and this still is true on a lot of the deals I do today, is in the situation of distress with the owners, if I had even thrown out, “Hey, I’m getting a home inspection,” they probably would’ve been more off-put by also negotiating a seller financing deal. So I think just the version that existed of making that deal happen, it was something that I would’ve done the same exact way.

Ashley:
Now with this property, what was your plan for the future of it? Was this something when you started investing, was it something you wanted to hold long term? Are you planning on expanding your portfolio at this time as to you want to buy a ton of these different properties? As a rookie investor that just got their first deal, did you have a game plan in mind for the future based off of acquiring your first deal?

Josh:
Yes. I think if you’re asking more about my mindset into how this one was going to lead to the next one, I think that’s where the proximity really helped. I had a main principal broker of the real estate firm I was with was just always multiple steps ahead of me. So I was seeing what headaches he was dealing with and he would be very candid with me. I’d ask him like, “Hey, I’m glad I’m not dealing with your problems. How are you actually dealing with them and staying cool, calm, and collected?” And he would just be very encouraging to say, “Oh, well, you’ll get there someday. Keep building your capacity.” And either he had a saying or he quoted someone else, but I’ve kept it with me. And it was just that he would constantly say for himself and for me that one day you’re going to look back and the problems you have now, the future version of yourself is going to just kind of give a giggle and wish you had those problems then.
And so that was a mentality I just kind of decided to adopt. And then the personal superpower I tried to create within myself was that there’s not going to be anybody better in my market that will operate this deal in a way that honors this $38,000 property and honors this tenant situation. And I’m just going to continue to try to let natural market effects happen. I went into this specific deal with the mindset of like, “Oh, why isn’t this tenant paid in a year and a half?” And obviously this tenant allowed me to walk through and had all the choice words of the world for a previous landlord. And I think the lease was something like $400 a month. And I knew that after putting my money down, my payment was going to be about 390 a month before insurance. But I also knew that if I could get into this and learn things that I also always said buying property is at the very least cheaper than student loans.
So that was going to be my first experience to learn. And so having another candid conversation with the tenant in the process of being under contract, I was like, “Well, would you pay rent again if I agreed to fix things?” “Oh, absolutely. Of course. “And so that was my plan. My plan was I was going to operate it better and slowly improve it and make 500 a month and let it pay for itself while I got in there and approved it. And then once it got a little better, I’d have her pay $600 a month and we would just symbiotically work together to make the property so much better.

Tony:
Josh, there’s this Mike Tyson quote that I love. He’s like,” Everyone’s got to plan until they get punched in the face. “And it sounds like you laid out this really well thought out plan. How did that actually play out once you purchased the property? Did it go that smoothly?

Josh:
It definitely went out the window. Believe it or not, the previous landlord was not the only issue. The tenant just truly was not going to pay rent and was always kind of going to find a reason that the house wasn’t worth it. And very early on, I found myself negotiating that side of things again. And then so I had to learn where empathy ends and boundaries begin. And that process is still a day-to-day learning experience and still an evolving experience. Sometimes what you do in one situation isn’t going to be what you do in the next situation in many ways.

Tony:
Josh, can I ask, I love that. How do you draw that line? Because I think for a lot of investors, both new and Ricky, that they struggle with that, “Hey, I want to be a human. I want to be empathetic, but I also have to realize that I’m running a business.” What did dealing with this tenant teach you about how to actually draw that line?

Josh:
I think it’s. Start over. Dealing with that tenant on how to draw that line, it was very much just deciding when their monkey was trying to be placed into my monkey. Their issue was trying to be word. They were trying to circle the words to find a way that them not having the financial ability to do it meant that I wouldn’t be able to financially improve my situation, which I think the great thing about real estate is it’s a free market. It really is in more ways than one, at least in the residential side. And obviously the math for them having issues translating to me not being able to pay my mortgage was going to be a hard boundary. So at that point it became like, “Hey, here’s the law. If you do not pay this amount of money in three days, then you’ve got to quit and then we’ve got to work the unlawful detainer situation.” And once you threaten something, you actually have to follow through.
And so serving that three-day notice to quit and then following up with a planned 14-day unlawful detainer, which again, each step of the way I had no idea how to actually execute, allowed her to see, okay, I was going to be sticking to my guns. And then she finally peacefully left before I had to come out of pocket with an attorney or. Do anything else like that. And then I’ve just kind of carried that forward in a boundary world where, especially as a property manager, I had to decide, okay, when is this person calling me, but they need to hang up and call the cops? Or when is this person calling me, but they need to hang up and call their mother? And I think that there’s a very empathetic way to approach that, and that’s its own muscle that can definitely get destroyed at scale of having to deal with a lot of that.
And I’ve definitely dealt with that over the last couple years. But at the end of the day, it’s taking what the market gives you and accepting a free market approach and also recognizing that even though this is a business with cap rates and cash flow and valuations, these are still humans that deserve to be treated like humans.

Ashley:
Now, what was the end result of this tenant in this property?

Josh:
Yeah. Once we started that unlawful detainer process and no longer had those conversations about pay and it was get out because this is the process I’m working to get out, then it became just a new conversation where it was, okay, well, I’m getting out. No need to put this eviction on my record. And pretty soon, once I actually started that process, which I, again, just learned I should have started it earlier, they vacated the property. And then when you see a property empty for the first time versus when there’s pictures on the wall and when there’s kitchen tables, you really start to notice what that carpet was covering up or what that tenant was willing to live with that they weren’t telling anybody.

Ashley:
In New York State, if someone has an eviction, legally you can’t not rent to that person because they have an eviction on their record. So it’s very hard to get people to not want an eviction on their record because it doesn’t really do anything because you still have to rent to them if everything else qualifies. But I’m assuming in your state it’s probably different and that’s why the tenant didn’t want it on their record. But during that process, you had said that you wish that you would’ve started it sooner. Did you have to use an attorney or was this all information that you figured out how to do this process on your own?

Josh:
So this was also during peak COVID and I was dealing with a lot of the same problems I was dealing with as an investor. And I was dealing with them as a property manager or seeing the property management staff deal with them and realizing that I guess we were also supposed to be the experts on this already. And the thing about rural Arkansas is it’s actively behind the times, but you hope you just kind of keep getting into the future and slowly but surely. So the unlawful detainer process was something that the local police was unaware of and attorneys were unaware of. They thought if people didn’t pay rent, they’re just going to leave. And I did not have to pay an attorney. I tried, I spoke to about two different ones and just kind of learned that sometimes you can be the best person for.
Sometimes you’re going to care the most in those sort of situations.

Tony:
Josh, once the house was actually vacant, I’m assuming it wasn’t ready for the next person. You had the Senate who just didn’t take the best care of it. Walk us through what that rehab process looked like to get it ready for the next tenant. Did you have a budget in mind? Were you able to stick to that budget? Did you have a scope of work? Did it change materially? Just how did you actually get through the renovation portion of this?

Josh:
I think that was the process that I was just always most eager and excited to do, not because I felt like I had the information, but because I knew that information was available for me. The BiggerPockets forums, YouTube, the BiggerPockets Facebook page was a big resource on just trying to learn standardizations. We talked about the eviction process and I remember there was a flow chart that BiggerPockets put on for a while that the, do you approve this tenant? And no evictions, period, seriously, never. And if they had any on the record, then you don’t rent to them. Well, those were just processes that I started using as resources because we got this property back. The one good thing we did, shout out free termite inspections, is we knew that it was infested previously when we purchased it. We paid something like 15 to $1,800 to get all that termite or to kill all the active termites and to bait it and preventatively care so that there wouldn’t be future termite issues.
But from there, it was something that I had planned on learning how to do flooring myself, learning how to do painting. I painted for a couple high school jobs before, like I’m sure a lot of people have. And then I was going to finance a new HVAC and finance a new roof with some local contractors, which I’ve also since learned is there’s a cost to doing financing. Those bids were probably four grand each higher than what I could have paid if I was willing and able to go to a bank later and just get the cash from the bank and pay directly to a reputable company. But diving into the deal side of things, I noticed walking through it that, hey, these floors are pretty soft. That’s not a good thing. Hoping it was just kind of subfloor damage. But we removed all the subfloor in the house to see that a lot of the floor joists had a lot of issues and that the ground, this was a 1930s, 1940s house, the ground was about 12 inches from the floor joists, which was part of why our renewal contract for the inspection company was going to be about $900 a year on the termite side.
But they had told us basically if we can get it to, I think 18 inches or 24 inches, then they would lower that cost to about $300. So we started diving into it of, “Hey, I’ve taken the floor joists out.” My wife Kayla would bring me some Domino’s pizza at night and then the next day I’d wake up and go to work and then talk to the contractors in my network, talk to the other investors in my network, tell them what I was doing and they’d tell me why what I was doing wasn’t working or what they would do. And then I would talk to the right contractor, meet the contractors out there and just very quickly decide like, “Okay, I don’t want to put these floor joists on because I don’t trust myself, but let me do this prep work and then allow you to do the actual side of things that you really only want to do and let me throw this dirt out the window and get it to 24 inches so that we can save $1,000 in the termite contract.”

Tony:
Josh, like many real estate deals, as you start opening up walls, you start to find more issues. At any point during this process, did you fear that you had made a mistake buying this property?

Josh:
At many points. There were several times over the course of us owning it where I was doing work and it was sacrificing my next day as a real estate agent where that was a time during COVID where our market was seeing a lot of early retirees and I could put as much energy as I wanted out there to try to sell and help as many people as possible sell real estate. I was having to sacrifice my quality and abilities there to do the work on my own property. I was calculating things in my head as I was digging out the dirt, realizing I was losing money in more ways than one. And for that reason, we kind of just sat on the property and figured, “Hey, let’s just ignore this because it’s a problem and we can afford $390 a month in the mortgage payment and let me focus on trying to just make as much money in my day-to-day job as possible while we just try to use our brains and use our network and use our contracts or contacts, excuse me, to figure out how to solve this problem.”

Ashley:
Now, Josh, how long did this rehab actually take and was it within the timeline that you expected?

Josh:
Took about somewhere between eight to 12 months to do the rehab. The structural stuff and the things that just we knew needed to happen to the property with the floor joists and with some of the framing, we basically financed that slowly but surely ourselves through our income sources or through our jobs and let the property sit. We secured it. We made great friends with the neighbors so that they would call in the middle of the night if they thought something weird was happening. And they were just very adamant that we put better neighbors back in there. And probably about 12 months later, after just four hours at a time of me and my wife going out there and putting some elbow grease into it, it was finally in a spot where I felt comfortable reengaging with banks and saying like, “Okay, I actually have a property now.
I have a deal and I think it’s going to be worth something.” At that point, I felt like a cheerleader to this property that I hope nobody ever actually saw. And I would just say, “I have this 2-1 in Batesville, right in the heart of town, walking distance to the chicken plant and right down the road from where all the development’s happening on the historic Oak Street. And it is 1,100 square foot. It’ll rent for 850 after we remodel it, but I mean, it needs some work right now.” And I had those same conversations with pretty much the banks that I had spoke to before, the lenders that I had spoke to before, and only spoke to the ones that were maybe a little bit more gracious. And then finally, the largest local bank in our area had kind of sent me a beginning lender to talk to about the deal.
And he said, “Well, let’s meet about it. Let’s figure all this out.” And at that point, I’d been in the business now for a year and I’d been selling real estate and I’d been helping other folks work with these local lenders. And I think the night before I printed out this huge business plan or I created this huge business plan of this is why this is a great deal still, this is why this is a great property, this is all it needs, water heater, roof, flooring, things like that. And had this business plan meeting in the bank with a new lender. And he was like, “Yeah, man, this is great. No big deal at all. I’ll get this thing done.” And then all of a sudden I was like, “Why is this easy?” And I learned then that basically once you have the deal, once you have the property, you can kind of get financing a little bit easier from there.
And we did something called an as completed appraisal. So I submitted the business plan, which he asked me to refine into basically scopes of work of what I was actually going to be doing. And then at that time I’d still planned on, “Oh, I’m going to be the one putting the floors down, doing the painting.” So I made it really lean. If I had to do it over again and to get moving quicker, I would’ve probably added some funds in there to improve the quality and not have to do as much as the work. But the as completed appraisal on this property came back at like 86,000. At that time, we had been paying down on it. We always do this thing when we buy a property, we round up what the monthly mortgage payment is. So if it’s 490, we’ll pay 500 and then we split that every two weeks.
So it kind of attacks some interest as well. So we owed about 28. We got about $20,000 in repair money to actually put a new roof on it, to put a new HVAC, put a new water heater. And then luckily by not using the finance mere roof companies, we were able to save costs. And then there was a little bit extra for me to sub out some labor and finish the bathroom on it. And I think from the moment we refinanced it and had access to capital for the first time, we had it finished in two months, which was the summer busy season. And we got it rented for 850 a month, asked the appraiser to come back and do his final inspection. He said, “Oh, this thing looks top notch.” And again, in the back of my mind the entire time I’m like, “This isn’t going to work.
This isn’t going to work.” But then all of a sudden the banker reached out and he’s like, “Hey, you’re good. Here’s your new principal and interest payment. Let’s set this up. You owe about 46, $48,000 on the property.” And all of a sudden we had a tenant in there for 850 a month. And this was also the time of six and a quarter commercial rates maybe.
So we had usable equity. He asked me if there was anything I wanted to do with it and we said, “Yes, let’s take out a line of credit.” And then I started deal sourcing again. And there was two properties that were also close to the office that I worked and close to the college that I had been working with some investors from out of state and wanted them to purchase it, but they ultimately decided it operationally needed too much. And they were worried that it just wasn’t going to work out because it kind of sounded too good to be true. It was $45,000 for each house. And I told them I though they could rent for 800 to 750 a month with just improving the rents and fixing the operational issues that the tenants are experiencing. One of them had a lot of roaches in the kitchen that the tenants had been trying to get rid of for a while without the help of their landlord.
And then I was able to basically attack that property personally and use that 20,000 of usable equity to use as a down payment to purchase that.

Tony:
Yeah. Josh, I think the best part of that story is that you went and you spoke to so many different lenders and a lot of them were like, “Oh no, we can’t touch this thing.” And then you go to this last lender and he’s like, “Oh yeah, we can definitely get you. We can solve this today.” And we see that so often where if someone would’ve stopped at lender number one or lender number two or lender number five or lender number 10, and they didn’t talk to that last person, they maybe never would’ve even become real estate investors. But because you kept going, you were able to make that connection. And for every lender that says, “Oh, we can’t do that.” There’s another lender that say, “Oh, we do hose kind of loans all day.” So I just love that you were able to stay persistent enough to find the lender who could actually work with your specific situation.

Josh:
I was just going to add on one of my mentors during this time as well, he had a saying, he was a very big baseball fan and he was like the best players in that sport hit the ball one third of a time, one third of the time. So that’s just another little nugget that was ingrained in me of don’t have to be perfect.

Ashley:
Well, Josh, what’s one thing that’s next for you that you want to do next on your real estate journey?

Josh:
The next thing is here in a few days, my wife and I are going to be purchasing the biggest complex that we’ve ever bought without partners. It’s going to be a 20 unit, about 45 minutes away from here in a little lake town. It’s an old mom and pop motel that they’ve been kind of semi-operating it in a long-term tenant model. We’ve already done the rezoning and we’ve already got the local bank kind of in place for the financing and we are going to take on that for the next 12 months and just figure out where that takes us from there, I guess.

Ashley:
Awesome. Congratulations. That’s really exciting for you. Thank you. Josh, can you let people know where they can reach out to you and find more information and also follow your story about this new 20 unit that you’re about to acquire?

Josh:
Oh goodness. Yeah. As far as putting a lot of information out, I’m kind of always scared to get feedback from just locals that maybe don’t want that development right in their backyard. So I don’t know how much I’ll be posting about it, at least in the initial side of things. But I just kind of got on LinkedIn recently and have enjoyed learning a lot about commercial real estate with that and then Facebook and I don’t think I’m going to hand my phone number out, but I don’t know if my email goes out in here. I definitely answer my email every day.

Ashley:
Well, Josh, thank you so much for joining us today on this episode of Real Estate Rookie. We appreciated you taking the time to share your journey, share your stories and the lessons learned. I’m Ashley. He’s Tony and we’ll see you guys on the next episode.