This article is presented by Cost Segregation Guys.

Ask 10 real estate investors to explain depreciation, and you will get 10 different answers. Some will get it mostly right, while others will confuse it with something else entirely. A few will admit they just let their CPA handle it and have never really dug into how it works.

That is more common than you might think, and it’s also a real missed opportunity. Depreciation is one of the most significant tax advantages available to real estate investors, and understanding it at a basic level makes you a sharper investor, regardless of how many units you own.

What Depreciation Actually Means

In plain English, depreciation is the IRS’s acknowledgment that physical assets wear out over time. 

A building is not going to last forever. The roof will eventually need replacing. The plumbing ages. The structure itself has a finite useful life. Because of this, the tax code allows property owners to deduct a portion of their property’s value each year to account for gradual wear and tear.

Think of it like this. If you buy a piece of equipment for your business that has a 10-year lifespan, you can deduct one-tenth of its cost each year rather than writing off the whole thing up front. Real estate works the same way, just on a longer timeline. You paid a certain amount for the property, and the IRS lets you spread that cost out as a deduction over the course of several decades.

One important note: Land does not depreciate. You can only depreciate the structure itself, not the dirt under it. When calculating depreciation, the land value gets separated from the building value, and only the building portion counts.

Residential vs. Commercial Timelines

The IRS assigns different depreciation timelines depending on the type of property. For residential rental properties, that timeline is 27.5 years. For commercial properties, it is 39 years. 

These numbers are not arbitrary. They reflect the IRS’s general assumption about how long each type of structure has a useful life.

What this means practically is that each year, you can deduct 1/27.5 of your residential building’s value, or roughly 3.6%, as a depreciation expense on your taxes. For a commercial property, that works out to about 2.6% per year over 39 years.

These are the standard timelines. There are strategies, like cost segregation, that allow certain components of a property to be depreciated on much shorter schedules. But as a baseline, 27.5 and 39 years are the numbers most investors start with.

Why Depreciation Does Not Mean Your Property Is Losing Value

This is one of the most common points of confusion, and it is worth addressing directly. Depreciation for tax purposes has nothing to do with what your property is actually worth in the market. A building can be depreciating on paper while simultaneously appreciating in value. These are two separate things.

Tax depreciation is an accounting concept. It exists to reflect the theoretical wear and tear on a structure over time, not to track market conditions. Your property’s actual value is determined by what buyers are willing to pay for it, which is influenced by the market, location, condition, rental income, and dozens of other factors that have nothing to do with the IRS’s depreciation schedule.

Many investors have owned properties for 20 or 30 years that have tripled in value while being fully depreciated on paper. The two things simply live in different worlds.

How Depreciation Reduces Taxable Income

Here is where depreciation becomes genuinely powerful. When you own a rental property, the income you collect from tenants is taxable. But you are also allowed to deduct legitimate expenses against that income—like mortgage interest, property taxes, insurance, repairs, and property management fees.

Depreciation is another deduction you can stack on top of those. And unlike most deductions, it does not require you to spend any money in the year you claim it. It is what accountants call a noncash deduction. The wear and tear on your building is assumed to be happening whether or not you wrote a check for it.

The result is that many rental property owners show a loss on paper even when they are cash flow positive. Rent comes in, expenses and depreciation are deducted, and the taxable income left over is often significantly lower than the actual cash in their pocket. Depending on your situation, that paper loss can also potentially offset other income, though the rules around this involve income limits and passive activity rules that are worth discussing with a tax professional.

Where Most Investors Get This Wrong

The most common misunderstanding is not about the mechanics of depreciation itself. It is about what happens when you sell.

When you sell a property, the IRS requires you to pay back a portion of the depreciation you claimed over the years. This is called depreciation recapture, and it is taxed at a rate of up to 25%. 

A lot of investors are surprised by this at the time of sale because they either forgot they were taking depreciation deductions or did not fully understand that those deductions were not free. They were more like a deferral.

The second most common misunderstanding is simply not claiming depreciation at all. Some investors, particularly those who are newer or working with generalist CPAs, end up not taking the deduction they are entitled to. The IRS still counts it as if you did, which means you could end up paying recapture taxes on depreciation you never actually benefited from.

Final Thoughts

Depreciation is not complicated once you understand the basics, but it does reward investors who pay attention to it. Knowing how it works, what it affects, and what it eventually costs you gives you a clearer picture of the real financial performance of your properties.

If you’re ready to go beyond the standard 27.5- and 39-year schedules and uncover faster write-offs hiding inside your property, Cost Segregation Guys can help you do it the right way. Their team makes the process simple, identifies the components that qualify for accelerated depreciation, and helps you maximize deductions while staying aligned with IRS rules. You can reach out to Cost Segregation Guys to see how much you could potentially accelerate, and start keeping more of what your properties earn.

Traditionally, townhomes were often starter homes for singles and young couples, becoming rentals by default when the owners decided to upgrade to a single-family home. That is changing.

Previously, the additional cash from a townhouse starter pad-turned-rental and its tax benefits were crucial first steps toward building wealth. Now, however, amid the affordability crisis, Realtor.com reports that they have played an increasingly important role in homebuying, serving as both starter homes and long-term residences for owners due to their lower price points.

With a greater number of townhouses on the market and those looking to live with lower housing costs, such as the 55+ community and singles, increasing in number as well, townhomes’ role as investment vehicles could also take on greater significance.

“Townhomes now make up the largest share of the for-sale homes on the market in our data history,” explained Realtor.com senior economist Joel Berner. “And they appear to be picking up steam as builders push forward with smaller and more affordable projects to meet the demand of buyers who are struggling to make a purchase in the detached home (single-family) space.”

Townhomes Are Being Built at a High Rate

New Census construction data showed townhouses are being built fast and steady, up 3.8% year over year, offering investors the chance to buy new homes that require less maintenance at far lower price points than single-family homes.

From a wide lens, townhome starts were up 37% from the second quarter of 2019 to August 2024, according to homebuilding research and data platform Zonda.

“In today’s challenging housing market, consumers’ growing interest in townhomes is a direct response to two primary pressures: affordability and lifestyle preference,” said Ali Wolf, chief economist at NewHomeSource, which is owned by Zonda.

Realtor.com’s Berner explained:

“Townhomes are generally lower-priced than single-family homes and sometimes offer community services and amenities that single-family homes (especially those outside HOAs) may not. They also tend to be concentrated in more urban areas and closer to city centers. The drawbacks are that they are generally smaller and, by definition, share walls with other homes.”

The low cost of construction has made townhouses a winner with builders. According to the National Association of Home Builders, after the second quarter of 2025, the previous four quarters saw 179,000 homes built. The four-quarter moving average market share is the highest on record for data going back to 1985.

The Appeal of Townhomes to Buyers and Renters

Townhomes work as rentals for the same reason that they work as owner-occupied homes. Affordability and low maintenance make them appealing to a wide demographic. They also have some advantages over single-family homes. 

Here are some of the demographics who are looking at townhomes and why.

Single women

According to NewHomeSource, single women often prefer the sense of community and safety that a townhome offers, with shared walls and neighbors close at hand. Data from the American Enterprise Institute’s Survey Center on American Life shows more Americans, particularly young women, are single.

Single-parent families

Single-parent families are on the rise in the U.S. According to U.S. Centers for Disease Control and Prevention data, as cited by NPR, 40% of all babies in the U.S. were born to single mothers raising children on their own, often without partners. Increasingly, these women are over 30, can afford to buy or rent on their own, and are opting for townhouses.

Millennial appeal

Millennials enjoy living in walkable communities with access to amenities.

55+ buyers

Empty nesters enjoy the low-maintenance lifestyle that living in a townhome offers, especially those that appeal to their aesthetic values with high-end design, while also being a part of a community.

Townhomes as an Investment

Not every townhome community is a great investment. One downside of living in an older townhome community with poor management is that, as an owner, you are clustered with other homes. So, even if your rental is in great shape, if the surrounding homes are beat up, it’s not a good look for potential tenants.

On the upside, townhomes generally have lower property taxes than single-family homes, but they usually have HOA fees, so you’ll have to weigh the two against each other, along with additional expenses, to work out your final cash flow numbers.

Pre-Construction Pricing, Multiple Homes

For investors looking to build a manageable portfolio of doors near one another, approaching a building to negotiate a pre-construction price for multiple units might be a viable opportunity. You’ll own brand-new rentals next to one another, requiring minimal maintenance. 

There might be some caveats to this approach, however, if the HOA laws state that investors can only own a certain percentage of homes in the development.

Low Maintenance

While dealing with HOA fees eats into your cash flow, it also means that owning a townhome is great for passive investors who don’t want to be bothered with day-to-day upkeep issues like lawn mowing, roof cleaning, landscaping, pest control, HVAC inspections, trash collection, and snow removal.

Townhomes as Short-Term Rentals

According to AirDNA, the platform that analyzes the short-term rental market, some townhome markets offer homes costing less than a single-family property and—for STR purposes—earn more. 

It might sound too good to be true, but AirDNA whittled down the list to the following:

• Savannah, Georgia
• Seattle, Washington
• Key West, Florida
• Philadelphia, Pennsylvania
• Denver, Colorado
• Pensacola, Florida

For purely short-term rental purposes, townhomes located in popular vacation spots can be high earners. AirDNA did the number crunching to analyze the top townhome STR markets in the U.S in terms of annual revenue. In May 2024, when the survey was compiled, they were:

• Vail/Avalon, Colorado: $125,872 annual revenue potential (ARP)
• Park City, Utah: $111,874
• Key West, Florida: $100,094
• Steamboat Springs, Colorado: $97,399
• Savannah, Georgia: $94,715
• San Diego, California: $83,449
• Breckenridge, Colorado: $75,443
• Santa Rosa/Rosemary Beach, Florida: $68,554
• Nashville, Tennessee: $66,898
• Sarasota, Florida: $64,631

Final Thoughts

Like any investment, townhomes as rentals are highly dependent on location. Being near universities, hospitals, and other employment hubs means you’ll have a steady supply of tenants. This is where the advantage of owning a townhome kicks in—they are about 10% less expensive than single-family homes, require less maintenance, and can earn decent rental income.

If you own a townhome in a popular tourist area, you might be able to purchase it as a second home and deduct some or all of the mortgage interest, under the limits that apply to your main home, providing you live in it for more than 14 days of the year or 10% of the days you rent it out, whichever is greater. That means you can benefit from rental income and depreciation of the rental portion, even if it is classified as a second home, provided you meet specific conditions. 

For hands-off investors or those considering a short-term rental, townhomes offer a wide range of opportunities.

Dave:
48 trillion dollars of real estate could be changing hands soon as baby boomers age and bring their massive inventory of property to the market. Some have called this impending demographic shift, the silver tsunami, and have claimed it will cause a crash in the housing market unlike anything we’ve ever seen in the past. But those same people have been saying this for 10 plus years and clearly it hasn’t happened, but the situation is changing. Boomers are now on average in their 70s and the generational shift of property and wealth is already starting to happen. We can see it in the data. So will that lead to this long predicted crash? Will the market shrug it off like it has for the last decade? Today and on the market, we’ll find out.
Hey everyone. Welcome to On The Market. I’m Dave Meyer, Chief Investment Officer at BiggerPockets. Today on the show, we’re addressing a demographic issue facing the housing market as baby boomers wants the biggest generation in the country age and give up the very substantial portion of the housing market that they own in the United States. Either because they’re choosing to rent, they go into assisted living or they pass away. And this shift, which I should say is completely inevitable given the demographics and the sad realities of mortality, this shift is going to hit the housing market in a way that aging and people getting older doesn’t normally hit the housing market. It doesn’t normally create these structural shifts, but this one probably will. And that is just because of the sheer quantity of housing stock that Boomers own. We’re going to get into the details of that a bit later, but for now you should just know it’s a ton.
They own way more real estate than you probably think they do. And the generational transfer of these properties, either by selling them or passing them along to their heirs is going to impact the housing market. But in what ways? Is it going to be a crash? Like all the people calling for this silver tsunami have been saying for more than a decade now. Does it mean we’re going to have faster sales? Does it mean we’ll have slower appreciation? What will this demographic shift actually do to the market? People obviously have very different takes on this. Some people sort of just blow it off and say that the market’s going to absorb it, nothing’s really going to happen. On the other end of the spectrum, people are calling for a crash saying that boomers are all going to sell in a relatively short time period that’s going to create a supply and an inventory spike and that’s going to push down prices.
But today on the market, we’re going to find out what is most likely to happen. We’re actually not just going to spew some hype or blow things off. We’re going to dig into the actual data and trends and uncover what this situation will likely bring to the housing market and what it means for investors. We’re going to start by laying the foundation. We’ll talk about demographic realities and how kind of in crazy, insanely concentrated housing is right now in the boomer generation. Next, we’re going to talk about the timeline, because people have been calling for this generational shift for more than 15 years, at least. I think the term actually started coming around in the 80s, but it started gained ground in 2008 to 2011 is when people really started talking about it. Clearly that crash hasn’t happened yet, but given the inevitability, when will this actually start?
Next, we’re going to talk about inheritances because even if boomers eventually leave their homes, which they will, will it all hit the market or are they just going to pass it down to younger generations desperate to get a deal on housing? And then lastly, we’ll game out what is actually going to happen or what is likely to happen. I’m going to pull it all together for you using historical precedents, examples from other countries. And we’re going to bring in the other dynamics of the housing market that we talk about a lot on this show to give you actionable information about this upcoming generational shift so that you can actually do something about it and make decisions about your own portfolio. With that, let’s get to it. So first up, let’s just talk about what’s going on with demographics. You probably know this, but Boomers, biggest generation in the US for a very long time.
This was after World War II. There’s just a massive spike in births, and this created the largest generation we had ever seen. Actually, as boomers have started to age and unfortunately start to die off, millennials are now the biggest generation, but boomers for a long time were so big that it sort of created this economic force that changed the entire landscape of our country as they reached different periods of their life. When they were reaching peak home buying age, when they were in their peak earning age, when they were starting to retire, has had huge impacts on our economy. And housing, especially of late, is no different. What the boomers do because there are just so many of them and they have so much wealth impacts all of us. Just to drill into the housing piece of this, as of now, boomers own 41% of all US property, which is a lot.
For the first time ever, Americans over 70 now own a larger shale of real estate wealth than middle-aged Americans, people from 40 to 54. That is not normal. Normally people who are mid-age, who are at the peak of their earnings, who have families, they have the highest concentration of wealth when it comes to real estate. That has shifted for the first time only recently. Now it’s people over 70 that is very unusual. And it’s not just mid-life, middle-aged people who are negatively impacted. Actually, if you want what I think is maybe a sadder comparison, if you look at people under 40 years old, they own just 12.6% of real estate wealth. That is one of the lowest it has ever been and it’s been completely unchanged for over a decade. So it’s not like millennials and Gen Z are catching up. If anything, the opposite is happening where more and more of the real estate wealth is concentrated in older generations.
So if we’re just tracking the accuracy of these claims about a silver tsunami that’s going to crash the market, which I have been consistently hearing for so long, that just hasn’t been true as of yet. Boomers have not been selling en masse and they have largely held on to their real estate. But why? Why are they behaving so differently from other generations? We have some information about this, both from surveys and just some demographic data. The first reason they are not selling and they still hold so much real estate is just lifestyle preferences. Actually, there’s a real estate survey from Clever Real Estate. This was just back in 2025. They found that 61% of boomers, so the majority of boomers say that they never plan to sell their home. That is up seven percentage points in just a single year. It went from 54 to 61 in just a single year.
And the reason for that, that the survey is really good. It dug further into that and asked, “Why do you plan to never sell your home?” And more than half of them said, “They just want to age in place. They don’t want to go into assisted living. They don’t want to downsize or find a new home. They just want to age in place. And that’s pretty different from other generations.” On top of that, 34% of the people who said that they never will sell their home is because they plan to leave it as an inheritance. And actually 30% of them worry that they can’t afford a new home. That’s the lock in effect, right? Just impacting everyone across the board. The boomer generation is no different for a lot of people who own their home for a long time. Perhaps they’ve paid off their mortgage or they have a two or 3% mortgage rate.
It is more expensive for them to downsize. This is something we talk about on the show all the time. This is holding up the housing market a lot right now, and the boomers are experiencing that the same as everyone else. So the point here is that one of the main reasons is people just want to age in place. You see at least a third of boomers saying that they will never sell their home because they are going to age in place. And that is significant impacts for what’s going to happen in this demographic shift. So that’s something we have to keep in mind. But the second reason we haven’t seen this flood of inventory on the market is really economic because as boomers started to age, starting to hit retirement age about 10, 12 years ago, rates for the 12 years they were in their age when they were going from working to retirement, we had this epic run of low mortgage rates and they were able to refinance into very affordable payments even without their salaries, right?
Even just using social security or pensions or pulling out money from their 401k because rates were so low when they had to make these decisions, they have affordable payments probably locked in, but that’s not all. Actually, less than half of Boomers even have a mortgage in the first place. 54% of them own their homes outright, meaning they are under very little pressure to sell and they have very low cost of living. So unless something forces them to sell, why would you? You’ve lived in your house probably for 30 years, you’ve paid off that mortgage, and if it’s more expensive to go somewhere else, why would you do that? And so they’re under very little pressure to sell. So when you look at these two things together, they don’t want to move for lifestyle decisions. And for the most part, they don’t have to move because they have the economic wherewithal to stay in place and not sell.
That means that this silver tsunami people have been saying is going to crash the market for 10 years has not materialized because boomers have largely held on to their property, but they’re aging. That still happens, right? They keep getting over. And so is the math going to change? And will we finally start to see the impact of this generational shift in the housing market? We’ll get to that right after this quick break. We’ll be right back.
Welcome back to On The Market. I’m Dave Meyer talking about the generational shift that we’re seeing in the housing market where boomers are aging and eventually, although it hasn’t happened yet and calls of a crash from a silver tsunami have been way overstated, this is going to happen at some point, right? There is a certain inevitability that boomers are going to die and they’re going to pass along their housing either by selling it or passing it down to their children, but that inventory will move in some way or another over the next decade or two because as of right now, the oldest baby boomers are starting to turn 80 in 2026. We are seeing that the average baby boomer is about 72 years old. The average lifespan in the United States is about 74. So we are in that time when I think this is probably going to accelerate.
And that means that this inventory may finally start to hit the market, right? If more boomers are dying each and every year, won’t we see all this inventory hitting the market? Well, it could be, but there’s also one way that it doesn’t actually hit the market. What if they don’t sell? What if they just pass along their homes to their children who, I should say, will probably be very grateful for a home with a low basis or potentially even one of those half of Boomer homes that actually don’t even have a mortgage at all. This trend of passing along properties to your children is increasing and will play a large role in how big of a quote unquote silver tsunami or generational shift actually hits the market. So let’s dig into this for a little bit. I said this at the top of the show and it is true that this transfer that we are seeing from boomers to millennials or to Gen X is already starting to happen and it is accelerating.
According to Cotality’s database, really good data source of property deeds, they showed that in 2025, a record 34,000 homes were transferred through inheritance in the 12 months prior to that. That is actually 7% of all transfers. So if you’re looking at all movement from one owner to another, 7% of it is now from inheritance, which may not sound like a lot, but that is the highest share ever recorded. So this is real and it is starting to accelerate. Now, of course we should mention that’s 340,000 properties that might otherwise have hit the market increasing inventory, but it didn’t happen. That’s kind of the point I’m trying to make here is that a sizable amount of inventory is never hitting the market because it’s being inherited and that is likely to continue. As of right now, 62% of younger Americans expect to inherit a property. And if you just presume that’s right, which I think some people are going to be very unpleasantly surprised to find out that they don’t actually inherit a property, but let’s just for now presume that about two thirds of all inventory boomers hold could never hit the market, just pass right on to their children.
That will definitely suppress the impact of this demographic shift because inventory may never truly spike. If only a third of Boomer owned properties hit the market and that drips out over the next 10 or 20 years, market probably going to absorb it just like it has for the last 10 years. But of course there are some caveats there, right? Like I said, I think 62% of people inheriting property, probably too high. I imagine that people will be disappointed to find out that even though their parents want to get out of their home, they still have costs like moving into assisted living or they have healthcare costs and they need to sell their home to actually finance those things. So I think it’s probably less than half, but I’ve looked at a bunch of different surveys. I think it’s probably going to be 30 to 50%, which is still a lot, right?
That’s still a ton of inventory that’s not going to hit a market unless, because there are a lot of caveats here. We talk about 30 to 50% of homes just being inherited and never hitting the market, that is a presumption that the people who inherit those properties don’t actually just turn around and sell, that they hold onto them. And that is another question that we should explore. I actually tried to find data about this and LegalZoom did a survey and found that 42% of young Americans don’t feel financially prepared to keep and maintain an inherited home. Just think about that for a second. We’re talking about what I think most people, at least on paper or in their heads, would dream of as a windfall, right? You’re getting a property either with partially paid off mortgage, maybe an entirely paid off home owned free and clear, but because property taxes and maintenance costs and insurance costs have gone up so much, 42% say they don’t feel prepared to inherit that home, that’s a lot.
We actually had a recent guest on Melody Wright who said that she saw that 70% will sell. I think that number is a little high. I wasn’t able to find great data on that, to be honest, but my guess is that even if the historical trend is 70%, like 70% of people sell when they inherit a home, that that’s going to shift. The housing market is just so unaffordable. I don’t think there has been ever a more attractive time to inherit a home versus going out and buying one for yourself. I think for most millennials, just speaking as a millennial and how expensive it is for my peers and colleagues and friends to afford homes, I think almost everyone I know would do whatever they can to keep the homes that their parents might pass down to them. Not everyone’s obviously getting that, but anyone who might get a home passed down to them, I think are going to try pretty darn hard to be able to hold onto that.
So even if it’s still a lot, I don’t think it’s going to be 70%, I’d say at least 50% hold onto them. So if we do all this together, and again, I am extrapolating a lot of data here. This is not precise, but I’m just saying maybe 50% of people pass their properties down onto their heirs and then 50% of them hold on. That means that 25% roughly of the inventory that boomers hold will never hit the market, but that means 75% will hit the market, and that is still a lot of property coming to market over the next couple of years. Now, that might sound like the silver tsunami that people have been predicting, but there are three important things to remember here. First, people aging and downsizing or dying or having someone inherit a home and sell it, that is not new. All the stuff we’re talking about are things that happen every day for years.
That is always happening. So it’s not like we’re like, “Oh, we have normal inventory now.” And then as boomers start to die, we’re going to have 75% of their inventory hit the market on top of what we already have. We are already starting to absorb some of this. And although I do think we will see an upward pressure on inventory because of this over the next couple of years, it is not additive. You’re not adding all this on top of existing inventory. It is part of existing inventory. The second thing is that in addition to this being an important part of inventory already, even though this new upward pressure on inventory is coming, it’s not like they’re going to list all their sales for once. That’s why I hate this term, the silver tsunami. It makes it sounds like it’s this wave that’s going to come through and crash everything, but really what’s going to happen is that health decisions or family decisions are going to play out over the next 10 or 20 years, and this will be a long and sustained upward pressure on inventory, but it’s not all going to come at once.
I just really don’t like this idea of a tsunami. I think it’s more like the tide, right? If you think about a tide going in or out, it happens slowly and it happens almost imperceptibly at any given time, but over the long run, the market will change. And I do think that we have this long-term upward pressure on inventory, which we’ll talk about more in a minute, but that means downward pressure on appreciation when there’s more inventory. But just remember, this isn’t going to be event. It is something that is going to happen over the course of a decade or more. It’s already been happening for several years and will probably happen for at least 10 more years according to the data and research I’ve done. So that’s number two thing to keep in mind here. Number three here is that, as I said at the beginning, even though boomers own a lot of property, they are no longer the biggest generation.
Millennials are the biggest generation, and millennials are at their peak home buying age. So even though we’re going to have this upward pressure on inventory, we also have a demographic tailwind that’s working with us. They’re sort of counteracting forces, right? The baby boomers were so big, but they’re selling, which means there’s going to be more supply, but the millennials are even bigger right now and they’re buying, which means that a lot of that inventory could get absorbed. Now, it’s going to be different in different kinds of markets. It’s going to be different for different asset classes, which we’re going to talk about in a minute, but those are sort of the big picture things I want everyone to remember here. Yes, more inventory probably will come to the market over the next five to 10 years, but there are many reasons to believe this isn’t going to be a one-time crash, and that’s because boomers have already been selling for several years and it hasn’t caused a crash.
They are not going to do it all at once. This is going to stretch out for a decade or more, and we have demographic tailwinds helping us because millennials are now the biggest generation in the US. So it’s not a tsunami. There’s no single event that’s going to come and rock the real estate and market, but what will happen? What does this mean for real estate investors? We’ll get to that after this quick break.
Welcome back to On The Market. I’m Dave Meyer, talking about the generational shift happening in the housing market. Before the break, I said I don’t think it’s going to be a tsunami. I have not liked that word for a long time. People have been calling for it for 10 years, at least hasn’t happened because as we’ve discussed, the transfer of boomer property to other generations is going to happen slowly, even though it will add upward pressure on inventory for I think at least the next five to 10 years, maybe even longer. But if it’s not a tsunami, what is it? How is this going to shape out? Of course, we don’t know exactly what will happen, but we can extrapolate. We know what’s happening in the housing market, how inventory and demographic and demand dynamics are shaping up. And we can also actually look at what’s happened in other countries.
And I want to dive into that just for a second here because there are other advanced economies that have similar demographic situations playing out a few years ahead of us. And so we can actually sort of look a little bit at specifically Japan and Germany. There’s a pretty good comps just demographically speaking as to what’s happening in the US. So let’s just look at Japan for a second because they also had a boomer equivalent after World War II. They also had an increase in births, but it actually happened a little bit earlier. And so almost a decade in advance, we might actually see what might happen in the United States. And what you see, if you look at property values in Japan, and they do have a lot of different rules, they have different tax incentive, different structures, all this stuff, you actually saw home prices go down.
It wasn’t a crash, but you did see home prices go down as their baby booner generation turned 75 plus. We are between 68 and 80 right now in the US who were right in that time. Now, there are some key differences between Japan and the United States. Japan has had a total declining population for a while now. The US still has a rising population for now, but if you listen to the episode I did on this a little while ago, it was a couple weeks ago, I did a whole thing on population decline. It is very likely as of right now that the US population is going to start to decline. So we could see some of the shifts that happened in Japan in the US as well. We also can look at Germany really quickly. Actually, we saw some research across the 22 OECD countries as some of the largest advanced economies in the world.
And basically what it showed was that aging will decrease real housing prices on average by around 80 basis points per year, so 0.8 per year. So that is pretty significant, right? That is a headwind to housing increases. Now, it’s important to remember that the US is starting from a structural supply deficit, right? So even though we might see more vacancy, we are starting from a negative, right? And so some of this might just get us back to a balanced market. But as we talk about on this show, all of these things, all these variables, none of them are a silver bullet. None of them are going to change the market unto themselves. What happens is some things put upward pressure on prices, some things put downward pressure on prices. And our demographics in the United States, which have been huge accelerants for housing prices over the last several decades and still are today, and I believe still will be for the next five years or so.
And starting the 2030s, maybe beyond that, it might become downward pressure on pricing. Doesn’t mean you can’t invest, doesn’t mean that housing prices are going to crash, but it’s sort of a flip. It’s a flip of a switch from a tailwind where it was helping appreciation to a headwind where it was going to hurt appreciation. That to me is sort of the big takeaway here is that it’s probably going to be a tailwind for appreciation, but let’s just game out a little bit what actually might happen here. As I do with housing predictions every year, I like to just offer different scenarios. I’m not going to sit here and pretend I know exactly how this is all going to play out, but I’ve done a lot of research on this and I do think I can share what’s the most likely scenario, at least the way the data looks today.
Similar to where we are in the Great Stall, I think this is going to play out very slowly, sort of like a slow grind, right? It’s the wave, it’s not a tsunami, like I said, it’s this sort of rising tide of inventory. Boomers probably going to continue aging in place for as long as they can. They’re probably going to transfer property to their heirs gradually, and many of those heirs I think are going to choose to occupy or to rent out. Again, they don’t have to move into it. They can rent it out rather than sell. And I don’t think we’re going to see this massive tidal wave that everyone’s predicting. Not all of this inventory is going to hit the market. I think it’s probably closer to 50 to 75%. That is also going to happen over 10 to 20 years. And what I think that means is that over the next 10 to 20 years, we’re going to see more inventory and slower appreciation.
Now that is on a national basis. And as you all know, that is not really how things play out in real estate. It’s not really what matters to most of us as real estate investors. I actually think that we are going to see the biggest downward pressure on pricing in rural areas and in age dense suburbs. So if you look at places, I’m going to just call out Florida, right? They have a very old population. In those suburbs, they’re probably going to have the most downward pressure on pricing out of all of the markets. You also see that a lot of older folks live in more rural areas proportionately, or I should say rural areas are disproportionately made up of older people. So the pressure prices are going to face are probably going to be more in rural and suburban areas and much less in urban cities.
On top of Florida, also call out other places where retirees tend to move, places like Arizona or parts of California. You also see parts of the Midwest, even though they are not sunny, do have high concentrations of baby boomers. And so those are all places where I think you need to look at and rethink what appreciation in those markets might be. We might see flat markets there for a very long time. So I think we really need to consider that in those specific regions. I’m not saying that on a national basis, but just in these specific places. That’s what I think is the most likely scenario. Is there a scenario where it causes a crash? Yeah, I kind of just did a thougt exercise to try and think of like, can I think of a way where there is a big crash? And I think it has to be some sort of black swan event where all of a sudden, maybe there’s a massive stock market crash where boomers are losing some of their wealth and need to tap into their home equity to pay for day-to-day expenses and they sell their homes.
That’s something I can imagine happening. There could be some healthcare shocks, right? Boomers are in their 70s right now as they get into their 80s. We all know the price of healthcare keeps going up and up and up. And so maybe in five, 10 years, a lot of these boomers are in their 80s. They need money to pay for long-term care. They start to sell in mass in more of a concentrated fashion. Could those things happen? Yes, but I think that might probably be part of a bigger economic crisis. And so it’s not like the boomer situation alone would cause a housing market crash in that situation. It would probably add to it though, right? If we had a massive unemployment, massive stock market crash and boomers will be impacted that just like everyone else. So it’ll be another thing contributing to some challenges for the housing market.
But I don’t think. I have a hard time seeing this situation alone without some other external catalyst causing a full on real estate crash. I think the much more likely scenario is the more boring scenario where it puts downward pressure on pricing, modest downward pressure on pricing over the next five, 10, maybe even 20 years. So that’s not great news for appreciation, but again, gradual, not all at once. So with all that said, what does this mean for real estate investors? I’ll just recap this quickly, but basically what I said before, I think we’re going to see more inventory. We’ve been in a very low inventory for the last couple of years, and I do still think it’s going to take years to recover. I’m not saying this is going to happen in 2026 or 2027. I talked about this earlier. I think this is more in the 2030s, but we’re going to be moving towards there gradually.
Over the next couple of years, I think we’ll see more inventory recover. So that’s going to put some downward pressure on appreciation, but it also means more deals. I’ve said this for a while, but I think appreciation is going to be subdued for a while. It’s going to be slow. We might have flat prices for years to come. We may not see real home prices, inflation adjusted home prices for many years. I actually, we had Mike Simonson on the show from Altos Research knows a lot about this. He said he thinks it could be 10 years. And I know that seems frustrating and I know it can be scary, but it really just means you have to change your approach to investing. It means you have to change your approach to underwriting deals. I personally believe underwriting for very low or even no appreciation is smart.
I think I might even start doing that indefinitely. Actually, when I was writing my book, Real Estate by the Numbers, I wrote it with Jay Scott, great investor. He and I were sort of debating this because I underwrite for appreciation or have for the last 12 years, very modest, two, 3% appreciation for most deals, just because that’s what the long-term average is. But I actually think for the next five, 10 years, although it probably will still have some positive appreciation, as an investor, if you want to be conservative and protect yourself, I’d underwrite for little to no appreciation. That’s what Jay Scott does. He told me he’s never underwritten for appreciation. And that just means you’re going to have to look at a lot more deals. You’re going to have to be a lot more discerning. But if you do that and you can find those deals, which you can, it just takes patience and practice.
But when you find those deals, they are extremely low risk because you’re not counting on any appreciation. You’re counting on all those other benefits that real estate can bring to you. So that’s a takeaway number one, more inventory, lower appreciation, but we are going to get better deal flow. That is the trade off. That’s how it works. When appreciation is high, deals are hard to find. Then the pendulum swings back and deals are easy to find, but appreciation is low. And I think we’re sort of in the middle right now. I don’t think we’ve reached that sort of reality check time when sellers are lowering prices and rent to price to ratios start to improve, but I think we are heading in that direction. This is one of the reasons I am personally going to start focusing more on cashflow than I have in the recent years.
And that’s my plan indefinitely because as we all know, real estate makes you money in four or five different ways. We got cashflow, we got appreciation, taxes, value add, amortization, right? And because appreciation I think is no longer reliable, hopefully it comes. I could be wrong about that. Hopefully it comes, but I just don’t think it’s reliable. It is not obvious that it’s going to boost your returns. So that just means as an investor, what you need to do is just look at those other four things. How do you create a deal where some combination of tax benefits, value add investing, amortization and cash flow get you the return that you are looking for? I’ve been saying this for years, but I look at total return. I look at how my total return is among those five different ways you make money. And so if appreciation’s going to contribute less to my total return, that means those other things are going to have to work a little bit harder.
And for me, cashflow and value add are the things that you can really control. Tax benefits for some people, I’m not a real estate tax professional, so I have limited options on tax benefits. If you have those options, I would recommend getting creative there. But for someone like me or if you’re a W2 employee, cashflow and value add, those are the ways to make money in real estate right now. That’s how I plan to make money in real estate right now. It’s why I flipped the house last year, not because I want to be a flipper, because I want to get better at value add investing. And because I’m making that shift, it does mean it’s harder for me to find deals right now. I haven’t pulled the trigger on anything this year. I do want to try and buy some real estate this year, but I haven’t been able to find anything that has the right return for me.
But I will just say anecdotally and talking to friends that better and better deals are coming. I’m looking at more that are interesting and I firmly believe that more are coming. Like I said, that’s the trade off. The pendulum is swinging back in the right direction. This may sound like a bold claim, but I actually think over the next couple of years, cashflow will get easier to find. I think that prices are going to stagnate. I think they’re going to fall this year. I don’t think they’re going to grow a lot in the next couple of years. But if you look historically, rents typically don’t fall as much during these types of periods. They might even grow. And so what that means is rent to price ratios will actually get better, meaning that your prospect for cash flow is going to get better. I don’t think it’s going to get us back to where we saw rent to price ratios after the great financial crisis, but it will get closer.
And that means cashflow will get better in the coming years. And so that’s sort of the shift that I am making. Take what the market is giving you. It is going to give us less appreciation. It is probably going to give us more cash flow. Have we reached the part where cashflow is easy to find? No. And that’s frustrating. And that means you have to be extremely patient right now, which is what I am doing and what I recommend you do as well. That’s at least the way I’m approaching this, but I would love to hear your opinions on this and how you’re going to approach investing in light of this demographic shift that is going on. That’s what we got for you today for On The Market. I’m Dave Meyer. We’ll see you next time.

Ashley:
If you’ve been around real estate investing for more than five minutes, you’ve probably heard the word syndication thrown around. And if you’re a rookie, you’re probably thinking, “What is that? And should I even be paying attention to it? ”

Tony:
Yeah, it’s one of those terms that gets sauced around like everyone’s just supposed to understand it, but no one explains it in plain English. What it actually is, how it works, whether it even makes sense for where you’re at right now. So today we’re breaking it all down. What a syndication actually is, how people make money with them, what risks are there, and then how it compares to owning rentals yourself.

Ashley:
And we’re also going to talk about the other side of it, what it really takes to run a syndication, because that part gets glamorized a lot and the reality is very different than what you see on social media. 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 what a syndication is like in plain English. So a syndication without any of the crazy jargon is basically a group of people pooling their money together to buy something together. You can technically syndicate anything. You could syndicate a racehorse. Our friend Mauricio Raul talks about syndicating race horses. You can syndicate a restaurant. You can syndicate buying a business. That’s what private equity is, is basically a big syndication of people pooling money to go buy businesses. But obviously this is the Real Estate Rookie Podcast. When we talk about syndications in our industry, it’s a real estate syndication. So generally speaking, you have two groups of people inside of a syndication. We talk about who’s involved. The first group of people are your general partners and the second group of people are your limited partners. Your general partners are the folks doing all of the work associated with the deal.
And your limited partners are the people bringing the capital to the deal. So generals are the ones doing all the work, limited are the ones bringing the capital. Those two groups work together to buy whatever asset it is being purchased through that syndication.

Ashley:
So the next thing is a syndication, just a fancy word for using someone else’s money. If you’re pooling money, can you just say, “Hey, everybody, give me your money and I’m going to go and buy something.” But really there is a lot of more to that. There is the general partners and there are the limited partners. And depending what side you’re on, this could be a passive investment versus more active. When we think of your normal day real estate investing, you’re going out and buying. It is more active. When you are investing in a syndication, you are passive. You have no control. You may have some voting rights, right? Tony, compared based on different things in a syndication, depending how it’s structured. But other than that, you are not operating the deal, you are not finding the deal, and you really don’t get a say in much at all.
Also, there’s a difference in kind of control versus convenience. If you’re just buying a property yourself or maybe you’re in a small partnership with a syndication, you have no control, but it’s also convenient. You just give your money and you let them do all the work and hopefully you’re getting some dividends, you’re getting a return or you’re getting a big cash out when they sell the property in the end. So there are differences as far as that as to investing. So when you think of a syndication, really think about, first of all, what side of the syndication you would rather be on. And we’re going to break into that more as to what each side looks like. But first we’re going to talk more about the passive side when you are invested as a limited partner and you’re just giving money to be in the deal.
So this is a question that’s probably popping into your head. Do I need to be rich to invest in a syndication? We often see if somebody posts about a deal that’s saying it’s a $50,000 minimum, $100,000 minimum to invest. And there’s two different … Actually, there’s probably more that I don’t even know about, but there’s usually two SEC regulations. Okay? So that’s another thing we haven’t talked about is that syndications are regulated by the SEC. Where if Tony and I just went and partnered on a deal, we are not obligated to follow the SEC regulations. It’s when you pool a large group of people’s money and there are people that are not active. So even if it is a couple people, if they’re not active in the property, like Tony and I, if we invest in a deal, we both need to actually materially participate.
Even if that’s just Tony reconciling the bank account every month and me doing the rest, they have to have active and material participation in the deal to not be under … Sorry. To not be under the SEC rules and regulations. Tony, do you want to break down the two kind of … What is 50? Yeah, these are those.

Tony:
Yeah, I’ll break down the differences between the types of syndications that are most commonly used. So again, Ash and I are not securities attorneys, so go talk to someone who’s qualified. We’re just giving you some general education here, but there’s a 506B and a 506C506B, 506C. I like to think of the 506B as the 506 buddy, and the 506C is like the 506 commercial. So on the 506B, as Ashley said, you can raise money from people that you are already buddies with, your friends, your family, people who you have preexisting relationships with. Where if someone from the SEC came and said, “Well, hey, Tony, Ashley gave you a million dollars for your deal.” I can point to 700 plus episodes that we’ve recorded together, all of these text messages and emails, all the meetings we’ve been on together, the vacations we’ve gone on together. I have a preexisting relationship with Ashley, so it’s okay for me to raise money from her under this 506B.
Now, if I just met someone today and then they gave me a million dollars, well, it’s a little bit harder to establish that preexisting relationship. So 506B is for people that you already know. These are warm contacts. These are friends, family, people that you have a relationship with. Under a 506B, you can’t go and advertise on social media or any platform. There’s no general solicitation is what it’s called. So I can’t go send out a mass email to 80,000 people. I can send one email to one person, but if I send it to a big list, that’s soliciting. If I post on my social media, that’s soliciting. If I buy a billboard, that’s soliciting. Any type of general marketing activities that’s one to many is considered soliciting. So that’s not approved through a 506B. A 506C allows for general solicitation. So I can go and get on a podcast.
I can get on YouTube short form. I could put it in a magazine ad if I wanted. I can do whatever I want, right? But there are limitations around who can invest in a 506C.
And you have to do what’s called an accredited investor, which takes me to my next point that you have to be what’s called an accredited investor to invest in a 506C. And that’s basically kind of like a fancy way of saying you have to have some level of income or net worth to be able to prove to the SEC that you’re what they call a seasoned investor. So the requirements for being an accredited investor are either $200,000 if you’re an individual of annual income over the last, I think it’s like two or three years, with reason to believe that that will persist going into next year. Or if you’re a married couple is $300,000 or a net worth of at least $1 million, not including your primary residence. So it can either be based on income or based on net worth. I’ve heard rumblings of them changing those figures because it’s been the same for a while now, but I believe as of today, that’s still what it is, but that’s the trade-off.
506C, I can go in mass markets. So if I’ve got a big brand or a lot of folks, I can go market it, but I can’t get the kind of everyday investors. 506B, I can’t market it, but I have maybe a wider demographic of folks that I can then go market it to.

Ashley:
So then the next question is, what do you actually own in a syndication? And you’re actually owning a percentage of the property or properties that are in the syndication deal. You’ll notice that your name isn’t specifically in the deed because there will be some kind of company set up that you will be a limited partner in. You are going to most likely put your money into the syndication, so give your money, and then they are going to go and buy the property. So you’ll mostly commit to the purchase of the property before they actually own it. Then you’ll buy the property, and then when they go and refinance or sell the property, that is oftentimes when you’re going to be repaid or even bought out of the property. So it will really depend on the term you sign on for when you’re doing the syndication.
Oftentimes you’ll see it’s a three-year commitment where they’re going to hold onto the property or they’re not going to refinance for three years and they’re going to stabilize the property. Tony, how do you have your hotel set up? Do you have a certain timeframe as to when investors will be paid back where you’re going to refinance or sell the property?

Tony:
Not explicitly stated. Our note is a 10-year note, so that’s kind of the timeframe that we’re up against more than anything, is just making sure that we either refinance or exit within the first 10 years of owning it. So we’ve got some flexibility there, but just going back to your point earlier, Ash, on the structure piece, just as an example, let’s say that I’m the general partner and I need to raise, just for basic numbers, let’s say that I need to raise $10. And of that $10, all of that’s coming from my limited partners. If I buy, say Ashley is a passive investor and Ashley buys two shares, so she spends $2, that means she owns 20% of that limited partner pie. But remember, the limited partner pie is not the entire pie because me as a general partner, I own, call it maybe 30%.
So Ashley, with her $2 investment, owns 20% of the 70%, 20% of the 70%. So on a property that’s maybe worth, again, for just round numbers sake, let’s say the property’s worth $100, 70% of 100 is $70, 20% of 70 is seven times 0.2, which is 1.4. So Ashley owns $14 out of that $100 pie based on her 20% ownership. So I know the math gets a little tricky, but just trying to break it down for you as best as we can that when you invest in a syndication, your ownership is based on the amount of money that you put into the deal for your investment. So unless you put up 100%, you’re typically not going to own 100% of that deal. It’s some smaller percentage.

Ashley:
And you have to look for what percentage is available to the limited partners. In your example, you would use 70%. So there is no way that you would be able to own 100% of the property because it is two separate pools there. Okay. So now that you’ve invested your money into the syndication, I put my $2 into Tony’s syndication, how do you actually make money in a syndication and when? So now, Tony, this is on the passive investor side, and we’ll go and we’ll talk about the general partner side later and how they make their money, but what is your first opportunity when you put money into a syndication to actually seize some money back to you? Yeah.

Tony:
Well, first I’ll say that most syndications, at least in the real estate space, probably aren’t returning anything for the first couple of years. They’ve spent in the first couple of years to really stabilize that property and stabilize that asset, improve income, decrease expenses to be able to eke out profit and improve that profit as time goes on. So 2025 was our first operating year, our first full year operating in the hotel, and we didn’t do any distributions. All of the cash stayed within that business, but we did a really, really good job, especially on the back half of 2025 of starting to reduce our labor expenses and increase our income. We’re recording this right now in February of 2025. January and February are the slowest months of the year for a hotel, incredibly, incredibly slow. But we doubled our January revenue year over year, but we also cut our labor expenses at half for January of 2025.
So those are the things we’re really working on in a syndication is trying to improve operational efficiency, increase revenue and all those things. So first, it takes some time to really get to that point. But usually the first opportunity you have to realize any sort of return from a syndication is through distribution. So it means that there’s cashflow being produced by the property, that pile of cashflow gets to a point that’s big enough to say, “Hey, we’ve got enough in this pile here to start sending money back to all of our limited partners.” And it’s usually a very small percentage as you start. And again, that number starts to ramp up as that deal matures and progresses. So cashflow would be the first. The second, and this is where a lot of those bigger chunks of cash start to come back, is if there’s a refinance.
So let’s say that someone buys a deal initially maybe on some sort of bridge debt or basically like hard money, and then they refinance at year two or year three. And during that refinance, because they’ve, again, increased the income, decreased the expenses, increased the profit that’s being produced, a bank looks at that and says, “Hey, you bought this for two million, but now I think it’s worth four. So I’ll give you a loan for three million.” So now there’s a million dollars that they just made that they can go send back to a lot of their folks who have invested into that deal. So that’s one way. And then the biggest thing that we typically see is that the biggest payday comes when that property sells. So they buy it for two, maybe 10 years later, five years later, it’s worth 10. And now they just made eight million bucks and that’s when those private money investors get a really big check at the end.

Ashley:
We are going to take a quick break, but when we come back, we’re going to cover what it is like to be a GP, a general partner of a syndication and running the deal. We’ll be right back. Okay. Welcome back. So what’s the big difference between being a passive investor in the LP side or being the sponsor and being part of the general partnership? So sponsors, Tony, what is the actual duty and responsibility of a sponsor of a deal?

Tony:
Basically everything. They’re the ones that are sourcing the market, deciding on the market. They’re the ones that within that market. They’re the ones that are sourcing the deal. Once the deal is found, they’re doing the underwriting. Once the underwriting is confirmed and they’re negotiating on the contract, once the contract is signed, they’re doing all of the due diligence. Once the due diligence is done, they’re the ones that are going through the managing the rehab, repositioning the property, whatever it may be, and then managing the property long-term oftentimes comes down to either the GP or they’re maybe managing a property manager as well. So every single part of the transaction falls under the responsibility of the general partner. Again, the limited partners are really there just to bring the capital, the GPs do literally everything else.

Ashley:
And when we say the sponsor, that’s not necessarily one person, that’s a group of people. Tony, how many people are actually in your general partnership?

Tony:
So for us, we actually set ours up slightly differently because there’s only four of us involved on that deal. We didn’t actually syndicate this deal. We did this as a joint venture. Now- Oh,

Ashley:
I didn’t know that. Oh, then we can cut this part out or we can

Tony:
Keep. So because there’s only four of us, we actually didn’t run this as a syndication. We did it as a small joint venture. Now, the difference here is that one, all of our partners have voting rights. So I’m the manager of our NC and I’m also the property manager, but I can be voted out at any time by my other three partners because they have the voting rights to say, “Tony, you’re actually doing a really poor job managing this. We want to hire someone else, so I can be voted out at any time.” So we meet quarterly to discuss performance and do all those things. So there’s a certain level of involvement that all of our partners have. I’m still responsible for the majority of the day-to-day, but all of the major decision-making. I can’t sell it on my own. I can’t refinance it on my own.
I can’t even replace myself on my own. I’d have to get buy-in from all of our other partners. So we structured ours as a joint venture, making sure that they were voting rights, making sure that everyone had an actual say on the different actions that go into it, and then keeping each other in the loop and leveraging each other’s expertise to make those decisions around what we do at scale for the property. Yeah.

Ashley:
I honestly had no idea this whole time I thought you did a syndication, but honestly, a joint venture, I would way rather do that than just a syndication deal all day long. Let

Tony:
Me just hear that because we had attempted two syndications prior to that. And neither one of those were able to raise enough money to actually closing those deals. First deal, I think we raised four million out of six million that we needed. The second deal, we got halfway on a $3 million raise.

Ashley:
And I think clarify that when you mean raised. It’s not like you had people give you money and then you sat with it in your bank account. No,

Tony:
That’s exactly what happened. That’s exactly how it happened. So we raised everyone’s money, right? So we had all these different webinars and-

Ashley:
Oh, okay. I thought you would’ve just got commitment, but you actually got to the point of taking their money. Wow.

Tony:
We had money wired in the bank. We had four million bucks sitting in a bank account for this deal. And then as the funds kind of dried up, we had to go back and wire all those funds back and have people to say, “Hey, we didn’t get to the raise.” So it was a very, I think a lot of learning, obviously very frustrating, but we learned a lot through both of those processes, which is why for the third go around, we’re like, “Hey, let’s just go a little bit smaller. Let’s try and simplify this process.” And that was one that we were finally successful with, but that’s how we set up the hotel to make it easier on ourselves.

Ashley:
I was going to do a syndication too. I think probably it was around the time maybe when you were going to do the West Virginia one. Was that the one of them? Okay. Yeah. And mine was a campground and we got the campground under contract. I put a $100,000 earnest money deposit down, but gave myself 60 days due diligence period or something like that. But I met with attorneys, everything like, “Okay, what do I need to do for a syndication?” And then during my due diligence period, I just found so many more issues than I expected with this campground and we ended up getting out of the deal, getting our earnest money deposit back. And I am so thankful because I don’t think that I understood the responsibility of being a GP and how much you are responsible to other people. And I just don’t think that I have the … First of all, I don’t like to take a phone call.
So having to … First of all, pitch to investors, following up with them, what’s going on with the property. And I know there’s all systems and processes to set up like that, but I really like the fact that if I make a mistake or I decide against something or I don’t take action on something, and if I lose money because of it, it’s me losing money and I’m not losing it for anybody else. If I decide to go hang out with my kids for one day and it’s going to lose me a hundred dollars because I’m not doing something one day sooner, that’s okay. It hurts me. I’m taking the laws because I want to do that. But I learned a bunch of things about the syndication process, but not to the full extent that you definitely have going through the deals.

Tony:
Yeah. So I do think that 4A Ricky, doing a syndication on the GP side as your first deal would probably be a bigger undertaking because there’s a lot that goes into it. So if you are interested in syndication as a GP, as a general partner, the person putting the deal together, my strong recommendation would be to find someone who’s already done a few successful syndications and see what value you can bring to them. So if someone came to me with the hotel and said, “Hey, Tony, I’ve got a great hotel that it’s under contract. I just need your help with everything else. I need your help raising the capital. I need your help managing the rehab. I need your help managing it once we get it. I need your help with all these different pieces.” I would love to give someone a piece of the pie because they brought together the deal that maybe they can execute on themselves.
So if you are a Ricky that’s listening, one, send me a DME on Instagram @TonyjRobinson if you find something, but second, partner with someone who I think can fill those gaps for you to make it a little bit easier to get that first one done.

Ashley:
Yeah, it’s definitely a lot of things to figure out and a lot of legal implications. And also a big thing is having someone sign for the debt. If you’re doing a huge deal, they’re going to want, what’s the word for it, the person that’s going to sign on the debt that has the high net worth-

Tony:
A KP, a key principle.

Ashley:
A KP.

Tony:
Yeah. And what they’re looking for is someone who’s like, “Hey, if we’re going to write you a loan for millions of dollars, we need someone on your team who has the net worth to cover this debt that we’re giving it to. ” Because even if you find a great deal, even if the numbers look fantastic on paper, who knows what could happen in the future? So the banks want to make sure that they have some form of guarantee to say, “Hey, the buck has to stop somewhere. We got to get paid.” So the buck’s got to stop somewhere. But what I will say also is that depending on what size of property you go after, our buy box specifically asked for our hotel was we wanted seller financing. And while that limited us on some options, it also gave us incredible flexibility in that initial acquisition because we were able to negotiate terms that really played, really it was a win-win.
It worked out really great for the sellers, but also worked out really well for us. It wouldn’t have to jump through the hoops that a traditional bank might’ve made us jump through. So there are other levers there I think that might work as you’re looking to put the deals together also.

Ashley:
Okay. Then kind of another topic if you are thinking about being a sponsor of a deal is, do you need your own money in the deal? And technically, no, you could raise all the money, but I would say probably anybody that’s teaching or talking about investing in a syndication, when they talk about how to vet the sponsor, how to vet the deal is one, I would say this is probably in the top five of the first questions you should ask, is are they putting capital into the deal themselves? So are they having some skin in the game? And I think that just shows they believe in this deal too. They’re committed to this deal, that they’re investing their own capital. So I would say yes, you’re going to have an easier time finding people to invest in the deal if you’re showing that you’re committing your own money and putting it into the deal too.

Tony:
I will say, even if you are able to find a deal, raise all the capital without putting any money into the actual deal yourself, there’s still other costs that you as the general partner are responsible for. I mean, just putting together all of the paperwork for a syndication is tens of thousands of dollars. It’s not a small expense to put together this paperwork for the deal. I think on our last indication, we spent like 30 or $40,000 on paperwork just on the paperwork that people are going to sign was 30 or $40,000.

Ashley:
And just think that’s not even like it wasn’t guaranteed either. You ended up sending money back and it didn’t happen. Yeah.

Tony:
That’s a college tuition that we just spent on paperwork.

Ashley:
Sorry, Sean, you’re not going to college. Here’s some documents that we blew up.

Tony:
Here’s the TPMs that you can go through. So there’s that, right? There’s the legal cost. There’s the due diligence, just getting out to the property, paying for inspections. Even just like an appraisal on a commercial property is significantly more expensive than an appraisal on a single family home. An inspection on a commercial property is significantly more expensive than a single family home. Even your earnest money deposit. The first syndication that we attempted, we put in about 50 grand for our EMD. Our EMD alone was 50 grand, and then we spent, I believe, another maybe 50 or 60 grand between our legal docs and our initial due diligence. So we were all in for about a hundred grand on this deal that did not close. So you’ve got to make sure that someone’s got to foot that bill. So if it’s not you, that you have a partner who’s willing to commit that sort of capital, but it is definitely a more capital intensive game to get into.

Ashley:
Now let’s talk about why a lot of people want to be a sponsors and how they get paid. So here’s the important thing to know right here is that they make money on the purchase and the sale, but during the actual operation, it’s very minimal that they end up making, especially if the property isn’t performing well, if you’re not seeing distributions, they’re not getting distributions. They can be the operator or the property manager and charge fees for that, but it tends to be very minimal compared to the money that they make upfront. So there’s usually an acquisition fee, which is a huge chunk of money. And that is for paying them for their time to source the deal, to get it under contract, to cover some of those upfront expenses for their time to do the due diligence and the time to collect everybody’s money and get all the paper signed, everything like that.
There’s usually a huge sum that they’re making upfront from just the acquisition of the property.

Tony:
Yeah. So the acquisition fee is definitely one big piece. And then to your point, Ash, there’s the asset management fee that a lot of syndications will charge where that’s on a regular basis, could be monthly, could be quarterly. The general partnership is charging the syndication of fee for continuing to manage this asset on an ongoing basis. And that’s separate from the property management fee. There’s usually, again, a separate property management fee. The asset management fee is for being the person just overseeing the property to make sure that everything’s moving correctly. And then the third fee would be the property management fee. Some syndication or syndicators do this in- house, others farm this out, but for the ones that really want to make sure they’ve got cash flow coming in, they’ll do property management in- house. So they collect the property management fee, they collect the asset management fee, they get the acquisition fee upfront.
And then if there’s a big capital event, sale, refinance, et cetera, they’ll get some percentage of the proceeds from that as well.

Ashley:
Okay. Then kind of the last piece here for, if you’re going to be a sponsor is you need a team along with any other partners you have on the deal. You need an attorney, a CPA, you need a lender, property managers. You need somebody who’s going to be able to support you in different elements. You cannot do all of this yourself. And if you’re buying a multimillion dollar property, sorry to say it. I really, really love Tony’s short-term rental calculator. I really, really love the BiggerPockets calculator That’s not going to cut it to underwrite a $100 million multifamily property. You’re going to need something more complex. And then also just asset management support. My one really good friend is the sponsor for a syndication and there was this one time we went on a family vacation and literally half the time she was on the phone trying to get insurance quotes for these properties and negotiating the insurance and figuring all this out.
So there definitely is a lot of work that goes into the deal upfront when you’re acquiring it and like throughout. So if there are things that you don’t want to manually do or take care of, you’re going to need to hire somebody on your team to take care of those things. All

Tony:
Right. So we’re going to take a quick break, but while we’re going, if you’re not yet subscribed to the Real Estate Rookie YouTube channel, you can find us there at realestaterookie that way you can not only hear money nationally’s voices, but see our faces every Monday, Wednesday, and Friday, and we’ll be back with more of it after this. All right, we’re back. So we talked about the syndication from the side of the limited partnership, the people putting money into the deal. We talked about it from the side of the general partnership, the folks who are actually managing and putting everything together. Well, let’s kind of finish off by talking about how do we know if a syndication is a good deal or just total garbage. So what are some of the red flags look out for, why sometimes projected returns can be a little misleading, and just the importance of focusing on the operator’s track record.
So red flags and pitch deck, I think first and foremost, it’s maybe the underwriting piece that Ash talked about before we took our last break. We want to make sure that there’s a level of realism, I guess, inside of the projections that we see. It’s almost like when you see any deal and you see a pro forma from the person that’s selling it, those are always the rosiest, most optimistic, sometimes unrealistic projections that you could see. And if some Someone’s pitching a deal to you based on the proformas that were given to them by the seller, by the broker who’s on the deal, that will be a big red flag for me. I want to see a lot of research that went into how this deal was actually put together.
For example, when we pitched our hotel to our potential partners, one of the things that we did to put all of our data together, we did not use my Airbnb calculator, like Ashley alluded to before, because to her point, that doesn’t work on a big deal. What we used was a custom underwriting tool that we paid someone a few thousand dollars to build out for us for all of our hotels, because that was the strength that we needed in our underwriting. We went through and we looked at every single calendar for all of the comparable hotels in that same town, and we manually clicked through their calendar for 12 months out to get a sense of how their pricing was. We got data from the brokers on what is the average ADRs in the market and what is the average occupancy in the market. We looked through all of the one bed and single room Airbnb listings to see what they were charging both historically and looking for to give us a better understanding of what the property could do.
So you just want to see a level of rigor in their underwriting to make sure that they’re presenting the right data. The second thing is you also want to see that they’ve stress tested this deal.What happens if the assumptions are off by 5% or 10%? What happens if they’re off by 20%? Did they just assume best case scenario or did they give some variance in how that property might perform? The last piece that you want to see is what is the actual business plan? What are we trying to execute on here? Is the goal that, hey, this is actually a really good property, but it’s just maybe being mismanaged. Do we need to improve the marketing? If I’m buying a hotel, are they only on their own direct booking website and they’re not on booking.com or Expedia or all these other travel platforms? Is there an opportunity there just to exact same property and maybe get more distribution?
Is it a heavy rehab? Are we going through and are we rehabbing every single property? Is it maybe an expansion? Is there room to add more units? What is the business plan and what are the underlying economics that make that business plans down? And then the final piece I think would be the team. Who’s on the team? What’s their track record? How much of this have they actually done before? What was the level of success on those deals? Or if there were failures, what did they learn? And how were they incorporating that into this deal? So those are the things I’m probably looking for, Ash.

Ashley:
I think one thing too that we’ve seen more and more often is, oh, they have a social media following that they’re probably good to invest with. And I think that’s for all things, not just syndications as, oh, this person has a following. They must be trustworthy. Other people must believe in them or they must be good at what they do if they have a huge following. So I think make sure that you’re not basing, doing a syndication off of popularity, I guess, and really doing your due diligence on the person and the deal and the team members. So the last thing here before we wrap up is, what is the worst case scenario in a syndication? If you are investing in a syndication deal, the worst case scenario is you lose it all and you get nothing back. So if you’re looking at $100,000 minimum and you put in $100,000, that can mean over a two, three year span that you are getting nothing.
You don’t get any payouts, no dividends, nothing disbursements over that period of time. And then the property fails and it could be foreclosed on by the bank, taken by the bank, and you are left with nothing. There could be sold at a loss where maybe you get part of it returned. So there are different outcomes, but when you are doing a syndication, you have to understand that you are not in control. So if the property does fail, there’s nothing you can do about it to turn it around and you have to rely on the people that are the operators that are part of the GP. So make sure you are doing your due diligence because in the end, you can blame the people who brought you the deal. You can blame the sponsors as much as you want, but this is a risk you have to know can happen when you are investing in a syndication that you could not get any of your money back.
And I think that’s one thing that I really like about being a smaller investor is that I have control over the deal and that if the property is poorly performing, that I feel like I could do some things to at least get a partial return on my investment. And I think that’s a lot harder to do when you’re talking huge multimillion dollar properties to be able to turn them around quickly or to exit quickly. I think we’ve seen a lot in the last several years. In 2021, it was everybody became a syndicator. I mean, I almost became a syndicator. Tony almost became a syndicator. It was like the next, you got to do it. Once you’re investing in real estate, the next step up is doing a syndication. And that’s the next big thing. And it was deals were just flowing and there was so much opportunity, there was low interest rates, and we could do a whole nother episode on what happened during the last several years.
And if that’s something you would be interested in, go ahead and put in the comments here on YouTube. We can kind of go over how so many syndication deals have struggled the last several years of what they went through. And a lot of it obviously has to do with the change in the market, the change in rates. And don’t worry, we’ll bring an expert on for you guys to talk about that and dive deep into the numbers on that if you guys are interested. Well, thank you so much for listening. I’m Ashley. He’s Tony and rookies. Remember, syndication, not the best way to start out in real estate investing as a rookie, get some experience under your belt or partner with someone like Tony. Find him a hotel and D him at TonyJRobinson, or you can DM me if you find a lake house at Wealth Room Rentals.
Okay. We’ll see you guys next time. Thanks so much for listening.

Gen Zers are the new millennials—Americans in their late teens, 20s, and early 30s—who traditionally comprise the largest renter demographic in the country. However, stubbornly high housing costs and supply issues have made the once-seamless transition from renter to owner more complicated, pushing more young Americans to rent longer and making rents harder to afford. This has had a dramatic influence on where Gen Zs live and work.

According to a new report from RentCafe.com, Gen Z has dramatically increased its footprint in the U.S. rental population, from 700,000 five years ago to 4.4 million today. The Wall Street Journal quotes Zillow as saying that 25% of all U.S. renters and 47% of recent renters were Gen Zers, as of May 2025. 

However, they have stepped into a perilous housing market. A recent Redfin survey found that 67% of Gen Z respondents reported struggling to afford their rent or mortgage, compared with just over half of millennials and about 36% of baby boomers. Selling belongings, working side hustles, and moving in with their parents have been Gen Zers’ financial coping mechanisms.

Asad Khan, a senior economist at Redfin, said in a statement:

“The reality is that with housing costs still historically high, many young Americans are making compromises on location, size, or timing to get their foot in the homeownership door and start building equity. Gen Zers and millennials are making small gains in homeownership because they’re eager to buy, they’re making sacrifices, and because affordability has improved a bit at the margins—not because homes suddenly became affordable. We expect the slow progress to continue this year, with housing costs dipping slightly while wages rise.”

Where Gen Z Rents and What They Look For

Gen Z renters are located anywhere they can find good jobs and rising wages, according to the RentCafe.com report. Gen Zers are not monolithic, nor are the locations they choose to settle, from pricey coastal cities and tech hubs to less expensive, burgeoning, smaller Southern cities.

For those who can afford it, high-design, amenity-rich apartment buildings functioning as self-contained communities are high on the list, reported the Wall Street Journal. For those who can’t afford it, lower monthly rents and short commutes are high on the list of Gen Z priorities, according to the RentCafe.com report, which states that wage growth makes renting a more viable financial option for many Gen Zers, especially those with good jobs in California’s Silicon Valley, where 95% of Gen Zers who live there rent.

“Gen Z prefers renting in pricey markets like New York City and Los Angeles for the flexibility it offers, and many don’t mind smaller apartments if it means living close to everything,” Adina Dragos, RentCafe.com writer and research analyst, wrote in the report. “Social media adds to the appeal as the ‘fear of missing out’ (FOMO) makes living there feel like an important and shareable life experience.”

Mostly, however, Gen Zers want affordability, good schools, and outdoor activities, which is leading many to the South. Birmingham, Alabama, is ranked as the metro area with the fastest-growing population of younger American renters, increasing by 13 times in just five years. Affordability means that a third of the Gen Z population is able to own here.

According to RentCafe.com data, Huntsville attracts young professionals for similar reasons. Ranking second, however, is a Southern city that has been on most people’s radars for a while: Raleigh, North Carolina, a college town where nine out of 10 Gen Zers rent and which offers a vibrant, well-paying job market.

Remote work, coupled with affordability, appears to be a big draw for snowy Buffalo, New York’s high ranking on the list, while a lack of income tax and cultural attractions puts Nashville in the fourth slot.

The Play for Landlords

For landlords who don’t intend to buy pricy rental properties in San Jose, New York, or Los Angeles, less expensive markets with growing economies in the South and Midwest remain good places to invest, given their long-term renter demographics. A September survey by multifamily-focused property management company Entrata found that three-quarters of Gen Zers plan to continue renting long into the future, unwilling to be shackled to a mortgage.

“What the survey told us about Gen Z is that renting is a great way of life for them,” Entrata’s industry expert, Virginia Love, told Newsweek. “While homeownership is something they want at some point in life, they are sort of rewriting their timeline. They don’t feel like they need to follow the whole ‘college, marriage, baby, house, bigger house’ timeline; they can create whatever life they want.”

Employment challenges also keep younger Americans away from homeownership. 

“We are seeing less people in that 20-to-24 age group categorized as fully employed,” Jimmie Lenz, a financial economics professor at Duke University, told Newsweek. “There’s a lot more people that are employed by gig work and things like that, and those are jobs that tend to make it a little more difficult to afford mortgages, and in particular, the kind of traditional 30-year fixed-rate mortgage.”

Playing It Safe: Investing in Areas Where Gen Z Renters May Want to Buy

It’s unreasonable to expect Gen Z renters to want to rent forever, even if that’s what they might say now. Parenthood, increased earnings, and a desire to step away from the risk of escalating rents mean that, at some point, homeownership might be on their wish list. Thus, investing in markets with both a high percentage of Gen Z renters and affordable housing is a sensible move.

According to Cotality, unsurprisingly, Gen Z mortgage loan applications (the data was collected in 2024) were heaviest in less expensive Midwest markets such as: 

• Des Moines, Iowa (21%)
• Omaha, Nebraska (21%)
• Youngstown, Ohio (20%)
• Dayton, Ohio (20%)
• Grand Rapids, Michigan (20%)

Other Southern markets that made the top 10 rental markets for Gen Z also made the top mortgage application list, such as Birmingham, Alabama (19%), and Jackson, Mississippi (19%).

Cross-referencing both sets of data will give prospective landlords a good indication of stable future rental markets.

Final Thoughts

In Apartment List’s 2026 State of Renting Report, one thing becomes evident: Gen Z is chronically challenged financially, and that is affecting every major life decision, including where they live. However, 87% of those surveyed said buying a home remained a major life goal.

For investors, this means renting to Gen Z tenants who work and may one day want to live in a particular location makes sense, as does offering different options, such as holding the note on a property for a more passive rental experience. Offering the option to rent along with the option to buy, or simply tying the tenant to a long-term lease with predictable, affordable rental increases, provides both the landlord and tenant with peace of mind through a long-term solution.

Does the idea of a never-ending stream of potential renters, many of them with guaranteed payments, lining up to apply for your vacant apartments sound appealing? Then you might want to consider renting to lower-income tenants.

Before you rush to judgment, it’s worth taking a broad look at the current rental market. America’s affordable rental crunch means that the biggest segment of the population that needs housing is the one that can least afford it. For landlords willing to serve this growing demographic, a golden opportunity awaits—as long as it is approached correctly.

A National Shortage That Isn’t Going Away

If real estate is about supply and demand, there is an almost bottomless demand at the lower financial end of the market. The United States is short about 7.2 million affordable rental homes for extremely low renters, defined as those at or below the poverty line or 30% of the area median income, according to the National Low Income Housing Coalition’s (NLIHC) “The Gap” report. That translates to only 35 affordable and available units for every 100 extremely low-income renter households nationwide.

The report shows that roughly 11 million households fall into this category, with some states having more than others. However, as Renee Willis, president and CEO of the NLIHC, said in the report, “The findings from ‘The Gap’ show that no state or major metropolitan area has an adequate supply of affordable and available homes for extremely low-income renters.” She added that only about one in four households that need assistance actually receive it.

Western and Sunbelt States Are the Most Affordable Housing-Challenged

According to a Newsweek map based on NLIHC data, Western and Sunbelt states such as Nevada, Arizona, Florida, and Texas rank among the most challenged. The report shows that seniors, those with low-wage jobs, and people with disabilities are often forced to compete with higher-income tenants for modest-priced rentals.

Focusing on Texas, a recent report from the Texas Tribune finds that Dallas—often celebrated for its burgeoning jobs and middle-class population—was short about 46,000 rental homes for families making 50% of the area’s median income as of 2023.

“We have a serious shortage of affordable rental units for very low-income households,” said Ashley Flores, the Dallas-based housing chief for nonprofit Child Poverty Action Lab, who coauthored its new report.

The Problems With Section 8

Although there is a deep need for affordable housing, there is a chronic shortage of tenants approved for Housing Choice Vouchers (Section 8). A New York Times article found that these vouchers are too scarce in major American cities where they are most needed. In Orlando, for example, there are roughly 200,000 rent-burdened households (those paying over 30% of their household income in housing costs) but only 7,401 available Section 8 vouchers.

More recently, the Trump administration proposed imposing a two-year time limit on rental assistance, which could affect as many as 1.4 million households, exempting the elderly and those with disabilities.

Many landlords choose to avoid Section 8 housing altogether because they feel it is too much of an administrative nightmare, requires excessive inspections, involves chasing tenants for their share of the rent, and soaring rents make it easier to get top dollar from regular tenants without the hassle of dealing with the government.

Each county has its own rules for affordable housing, and many have programs beyond Section 8 that can also offer qualified tenants steady, market-rate rents.

How Landlords Can Turn The Affordable Housing Shortage Into Cash Flow

A recent Business Insider story detailed the story of Ted and Jamie Gerber, who own 28 rental units across 15 commercial and residential properties in Florida. “We always rent at or below market rates,” said Ted Gerber. “Our tenants value the fact that they’re renting slightly below market rate, so they’re going to want to take care of the place. They’re getting a deal, and we’re still making money from it all.”

Another investor, Washington-based Dion McNeeley, interviewed for the same article, uses a similar strategy.

“Happy tenants don’t trash the place, and they don’t move, and tenant turnover is one of the most expensive things a landlord has to deal with,” McNeeley said. “I’m making tens of thousands of dollars more in the last few years than I would have if I raised the rent to the area average and then dealt with a bunch of turnover.”

A BiggerPockets article outlined some of the essentials for renting to low-income tenants:

• Accept it for what it is: Homes in lower-income neighborhoods generally won’t appreciate at the same rates as other areas unless they are hit by a wave of gentrification.
• Anticipate high potential cash flow, but be realistic: On paper, your cash flow can be extremely high, especially if you are not heavily leveraged, but management-wise, these types of properties can be quite labor-intensive.
• Work with a responsive management company experienced in this type of rental: Unless you want your passive income plan to turn into a full-time job and have to deal with tenant calls, outsource management to a responsive management company well-versed in this type of rental.
• Patience is key: Many landlords steer clear of low-income rentals because of the labor-intensive management and the types of tenants they attract. Clearly, beyond meticulous screening, having a thick skin and playing the long game are key. Some years, you might not generate much cash flow due to repairs and turnover, but eventually equity and rents will increase.

Final Thoughts

Stable tenants with stable jobs in stable neighborhoods are an ideal scenario for most landlords. However, due to the U.S. housing crisis, a much larger pool of rentals and tenants lies within the less-glamorous affordable rental segment. 

Having owned multiple low-income units in the past, I can attest that they can be challenging—which is putting it mildly. However, experience has been a great teacher, and these are some of the lessons I’ve learned.

You cannot be too leveraged. 

BRRRRing your way to success with low-income rentals is fraught with risk. Other investors I have known who have succeeded in low-income areas have bought rentals in auctions for cash, used their credit cards to fix them up, paid off the debt, and used the cash flow to service the repairs while keeping a full-time job. Eventually, rents increased, and the areas turned around. It was a conservative long-term strategy.

Screen meticulously.

Landlords are often so desperate to fill units that they will let anyone in, especially if they have a Section 8 voucher. Vouchers or not, comprehensive tenant screening is a must, which is why an experienced outside management company is important.

Older tenants or those with disabilities tend to be more stable. 

I once had a three-unit rental where, unbeknownst to me, all the tenants were drug dealers—even the single mom with a baby. One day, I found out that my building was completely vacant due to a DEA drug bust. Older folks usually know better than that.

Have a slush fund ready for repairs. 

Even with good screening, you will still encounter your fair share of repairs. This is why buying with cash or minimal leverage and having a slush fund and a reliable, affordable contractor are essential. 

One of the biggest dangers with low-income rentals is actually expecting to get the same cash flow in reality as you worked out on paper. Things often go wrong, and making your rental work means having enough cash to cover repairs and absorb vacancies.

Ashley:
If you’re sitting there thinking you can’t get started in real estate because life’s too hard or you have this going on or you can’t do it, today’s story is with Beth and she’s going to provide you the motivation and inspiration to know that you can do it. At one point in time, Beth was going through divorce, had a struggling failing business, had $70,000 in IRS debt and on the verge of bankruptcy, but she made it out and she ended up getting her first real estate deal.

Tony:
And in today’s episode, Beth is giving us not only how she got out of that very precarious and difficult situation, but how she built a cashflowing real estate portfolio that includes flipping, long-term rentals, mid-term rentals and short-term rentals all in the span of a few years. So if you want the tactical guide along with the motivation, then this episode.

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

Tony:
And I’m Tony J. Robinson. And with that, let’s give me a big, warm welcome to Beth Smart. Beth, thank you so much for joining us on the podcast today.

Beth:
Thank you. Glad to be here.

Ashley:
Beth, you were a new single mom. A business had just ended up in your name and you were dealing with a federal tax lien. So the margin for mistakes was basically zero. What was the first domino that fell? What happened that turned your life from manageable to I’m in survival mode and how quickly did things spiral for you?

Beth:
Well, so first I’m going to start by saying it’s so hard to talk about my past because it was such a painful time. And that was about 20 years ago. So that’s the timeline. So I’ve come a long way in that 20 years, so I’m happy about that. But at that time I had a new business. I had a nine-month-old and I had a two-year-old, and I was realizing that I had a horrible marriage. So it was just one thing after another. I had also had a bankruptcy, and that was kind of the first flag that told me, “This is not a good marriage,” because it just was all part of that bad marriage thing. So I had a bankruptcy that I kind of went through by myself. And then I was getting letters from the IRS saying, “You need to be audited.” And my husband at the time had said, “Just ignore that.
” Well, when you ignore the IRS, they do not like that. And so I did get a tax lien.

Tony:
That’s like one of the people that you can’t ignore is the federal government, I think when they asked for-

Beth:
Yeah. Well, I know that now, so thanks. Yeah. Well, and I don’t know.

Ashley:
But you trust someone and you trust them to know what to do.

Beth:
That’s right. And I was trusting him that he was going to give a good advice because when people talk with authority and I don’t know, for me it was like I’ve learned now not to just trust anybody because they act like they know what they’re doing because that’s not always the case. That’s actually probably rarely the case. So I’m not sure if I’m answering your question, Ashley, but there was a lot of dominoes that just kind of fell over all at once. So I had a new business that I really didn’t know anything about. I had started a med spa with my husband at the time and he was working for a laser company. So that’s how we got into that industry. And then with this new little baby and a two-year-old and this new business, and then I’m like, “Oh my God, I have a terrible marriage.
I need to get out of it. ” And oh, I have a bankruptcy and oh, I have a tax lane and everything has to start over. So it was like a clean slate and that’s what happened.

Ashley:
What was the moment like when you realized that you couldn’t live like that anymore, that you had to figure something out once you found out about all this stuff going on, what were kind of the first steps that you took to make some changes?

Beth:
So the last straw was, and I’m laughing because it was like, what a stupid last straw. So we had bought a house during that whole subprime lending thing. So I knew that that was going to be a horrible thing when that seven-year note came due or whatever. And I was cleaning our three-car garage because it was just a mess. And I’m a person of order and everything has a little place. And I had spent the whole day after working at the business and raising these two little kids by myself because he was traveling. I organized the garage because I thought this is going to be nice when he comes home from traveling. And he came home and trashed the garage. And I was up that night and I saw the garage and I burst into tears and I’m like, “I can’t do this anymore.” It was just everything else.
I mean, we were in debt, we just had nothing to our names. And my husband, he wasn’t home a lot because he was traveling for this business. And that was my last straw, was the dirty garage.

Tony:
Beth, I applaud you for having the courage to recognize that you weren’t happy in the situation and kind of stepping out of it, but then that also kind of puts you, like you said, in a very unique situation where now you’re newly single, two young kids. And I guess walk us through what happens with the business. You said you started this business together, but it seems like you became the person really running it after the fact. How did that come to be? How did the business fall into your lap?

Beth:
Well, we had signed a lease in a mall and we had to be open seven days a week, which was working when he had quit his job and we were supposed to be working together, but he was not working. And so when the divorce was processed and he moved out, I had to be at the office every day, even though we didn’t have any clients, even though there was no money coming in, but we had about $15,000 in monthly expenses that I’m like, “Somehow this has to … I have to pay these bills.” And somehow people would come in and spend money and buy my laser services when I needed them too. And it was the first time that I really realized I’m going to be okay that there, even though I don’t have support and I don’t have the people around me and I don’t have a rich uncle to help me, somehow miraculously people would just come in and buy things and I’m like, I’m going to … I started to notice that I got all the junk out of my life and I was cleaning up my messes and I don’t know, the universe just started to help me.
And so it was during that, it was 2007 and 2008, which was another weird period. And people were just, they would come in and spend, they’d give me their credit card and they would charge $7,000. And I needed, how much did I need that day? I needed $7,000. And they would just come in and charge. And I’m like, “This is weird.” And then I would sometimes never see them again. So I had to handle everything from the finding a tax accountant and paying bills because I knew that paying taxes was really important. I’d learned that and I just had to pay the bills. Then I asked the leasing company with the mall if I could just be open six days a week. And they said, “It’s actually, we never do this, but it’s in your lease that you don’t have to be open seven days a week.” So that helped a lot.
Yeah,

Tony:
That’s of course. And I mean, again, I think a lot to put on one person’s shoulders, but when everything was kind of chaotic, you mentioned the federal tax lien, you mentioned bankruptcy, a lot of the options were off the table for you to try and get stable. So what did you kind of tackle first, second, third to start putting the pieces back together and rebuild your own personal financial foundation?

Beth:
I went through all our expenses for the business and I had an employee who was a … Just she advocated for me. I don’t even remember who she was, but she came in and she was helping me run the business and she called up the Yellow Pages because we had a monthly charge of like, I don’t know, $5,000 or something for Yellow Pages. And this is when back in the day people actually advertised in the Yellow Pages, but that was going out because this was all pre-Google and all that. And so she got rid of that Google or that Yellow Page ad for me. So that helped a lot. So things like that. So it was just minimizing my expenses and then just praying every day, “Okay, I need to make $3,000 today. Okay, I need to make $100 a day. I need to find a cheaper place to live that’s just as safe, that is more convenient and closer to work.” So I’m juggling a million things and it was just like, “Oh, I’ll do that one today.
I’ll do that one today.” So that was my modus apperandi, is just deal with it.

Tony:
How long after the divorce and you becoming the sole owner of the business do you feel like it took for you to get to a point where you could kind of breathe again?

Beth:
Well, I think it probably took about two years of just one day at a time, one hour at a time and making it. And okay, I have a little cushion of money in the account. I have this bill paid off, this bill’s about to be paid off. So I think it took about two years. And I remember when I felt like I was safe and I was secure and I was going to make it, and I had a friend come into the store and she’s like, “I’m going away to Estes Park. I’m in Colorado.” She said, “I’m going to go away for the weekend. Do you want to get a cabin and bring the kids and go with us?” And I thought, I looked at the numbers and I’m like, “I can afford to do that. I can afford to pay someone to be in my store.
I can afford to go rent this little cabin and enjoy myself.” But it was two years after the drama. So what would that have been, 2010? Yeah.

Ashley:
Beth, during this time, did you create any rules for yourself that maybe you’re not going to base your decisions on fear anymore or that you’re not going to worry that your kids can’t depend on you? Was there anything that kind of went through your mind that you realized from this point and this experience that you weren’t going to let that control you anymore?

Beth:
I know during that period, my rule was I wasn’t going to fail. I wasn’t going to end up homeless. I wasn’t going to end up living in my car. I wasn’t going to lose my kids. I had a fear I was going to go to jail because of this tax lien. And my biggest, biggest fear was that I knew my ex- husband wouldn’t bring my kids to visit me. So when you’re operating in that level of fear, it’s like nothing is scarier. So the rules I created where I was never going to be in that situation again, but that also I needed to learn to trust my gut that if somebody comes in and tries to sell me something and I think it’s a stupid idea, then I’m going to learn how to say no, because I didn’t really know how to say no. I didn’t know how to advocate for myself.
And so I mean, it was like basic core rules that I was creating of don’t give away your soul.

Ashley:
Beth, how much was the tax lien for?

Beth:
Well, I think I owed $10,000, but because I had ignored him the interest, I think it was $70,000, which when you’re not making any money, it could be $70 million. It was just a lot of money.

Ashley:
I mean, that could be with someone’s whole year’s salary, $70,000. Yeah. And especially when it was only 10,000 knowing that it could have been taken care of, but yet all the penalties and interest. Wow.

Beth:
Yep.

Ashley:
Next, Beth is going to walk us through the exact pivot that made real estate feel possible and the boring insurance call that later protected a $60,000 outcome. That’s coming up right after a quick word from today’s show sponsors. Okay. Welcome back. So Beth had rules, but real estate investing starts when reality tests them. So Beth, walk us through the exact moment you’ve stopped insisting on a cool market and chose a market that actually worked for you. Okay.

Beth:
So we’re going to flash forward about seven years and my medical spa is doing really well. My divorce is completely over and I have met a great man named Patrick. I’m going to refer to Patrick a lot.

Tony:
I love that this story has a happy, not even the ending, but a happy middle part. Yeah,

Ashley:
Happy transition.

Beth:
There’s a good transition and that’s what changed everything. So I’ve gotten out of the mall, they let me out of my lease, which also never happens. And then I rented office space in an office building and I could be open whenever I felt like it. And I met this man online, whatever those things are called, online program. And we were destined for each other. It was just a great fit. And he was an executive chef. So I had manifested a cook into the family. Thank you because my … I don’t know. Anyway, that was a good thing. That was a good big sign. And he ended up after a couple of years quitting his job as a chef and he came to work for me. So we were working together and we were working and that’s when, and he had a little kid and I had little kids and they were … Well, now they were seven, eight and nine by then.
And we were just having fun. And I had a family and I’ve never really had a happy family. So we enjoyed a few years of having a happy family. One of the things that Patrick had was a little cabin in the mountains, and it was a little like a double wide mobile home that the previous owners had built a deck on. And it was just in a beautiful spot with Aspen Trees. And you could see all the Rocky Mountains and all the mountains, I mean, all around. And it was just such a peaceful retreat. We spent a lot of time there. We had a blast up there. And yeah, Ashley, I forgot your question. What was your question?

Ashley:
So go into how you had started in real estate.

Beth:
Oh, thank you. That’s a great question. Oh, yeah. How interesting that we’re on that this podcast and we’re going to talk about real estate. So we didn’t realize we were in real estate at that time, but we loved this. We loved the cabin and we thought other people should enjoy it. And this is when Airbnb was just starting. And I’m like, “You know what? We probably could make some money.” I think somebody would come to this … I mean, it was very rural. It was very rustic. It had running water, a bathroom and a shower and even a laundry room. And so we put it on Airbnb and we got somebody who spent a week up there and they loved it. And I realized we just owned this free and clear, but we didn’t even have insurance on it. And I thought if we’re going to keep renting on our Airbnb, we better get basic insurance on it in case something happens.
So we got a policy, we paid one premium, and I think it was like $30 a month. There was nothing. And we paid monthly. And like I said, we went there all the time. We were there at least every other weekend. And I always wanted to … I’m sorry I have to use my hands, but I always wanted to … It was just a mobile home, but I always wanted to pop the top so that you would have an even better view of all the mountains. And we went up one weekend. It was Halloween weekend and there had been an explosion and the top had popped. So I guess our introduction into true real estate began with the bang because insurance came up three times to inspect our claim and found that we hadn’t committed any crime to fraud. And we ended up getting … I think our claim was for $60,000.
So we got the full amount.

Ashley:
I want to make sure there’s no one in this, right? It happened to be vacant.

Beth:
Yeah. Yeah. Nobody was hurt, but one of the bedrooms, the bed had melted. So something horrible had happened, but I’d made one insurance premium or payment. And I mean, I was crying. We both were just in shock that it’s like somebody popped the top and melted the windows and broke everything. And anyway, yeah, it was so sad. It was awful.

Tony:
Beth, I know that the insurance situation was obviously terrible because obviously we never want that to happen to our properties, but it also becomes this kind of moment where you really do launch into real estate investing. And I want to talk about that, but before we do, you said, “Hey, we’re going to fast forward about seven years or so. ” And you go from this very difficult situation, post-divorce, newly single, businesses struggling, to happily married, family’s there, business is doing well. How does someone separate the difficulties of a moment from their identity? Because at times someone who’s going through something difficult can start to internalize that situation as part of who they are. And the reason that I asked this is because I was just talking to an investor last week and we were having a conversation. She was almost in tears because she had this property that wasn’t performing well.
And she was like, “I just feel like I’m a failure.” And I know that there are other people out there who have gone through similar situations, whether in their personal life, their business, whatever it may be, who start to internalize these difficult situations as part of who they are and they start to question their ability to be successful at anything. How did you not fall victim to that?

Beth:
Well, I don’t know that I didn’t fall victim for that. When you’re a self-made woman or a self-made human being, I mean, when you try something, whether you do it intentionally like, “I’m going to go try doing this, ” or you just have to fall into it and make it work. When it’s not working, you do have to take a look at yourself and say, “This is not working.” And there’s something that I’m not good at. And so some people don’t do that self-analysis and go, “Okay, what can I learn? I need to learn. I need to ask somebody. I need to read a book. I need to now, today. We didn’t do this back then. Listen to a podcast or whatever.” So I think people who fall victim to, “Oh, I’m a failure,” it’s because they’re not looking to learn and they’re not looking for what else?
There’s something I don’t know. I better figure it out. So at least that’s what I did. It’s like, this is not who I want to be. I want to be a different kind of person. I want to be a success. I want to be somebody who has achieved things. And I didn’t know how to do that. I didn’t have anybody showing me how to do that when I was growing up. So it’s like, all right, I’m going to listen to the people that, the science of getting rich, the science of personal achievement, the secret. I mean, there’s what you think about, you bring about, that’s something that I learned during my whole divorce is that book movie came out the secret. It’s all about the law of attraction. I didn’t know anything about that, but it’s true. What you think about, you do

Tony:
Bring about. Yeah. Well, Beth, I appreciate that because again, I know there are a lot of folks who are listening that just don’t have the confidence to move forward. And I feel like that’s what stops a lot of people more than the technical know- how, more than the … They’ve read all the books, listened to the podcast, watched YouTube videos, but they’re just missing the confidence piece. So I think it’s always important when we can talk to someone who’s gone through the kind of peaks and valleys of life and business and can show that Sick and With it has a positive impact. But going back to the insurance story, so you guys, obviously the terrible thing happens, but then you get this big check from your insurance company. What do you guys do with that? Do you rebuild the cabin? Do you turn it into another short-term rental?
What happens next?

Beth:
Well, we did love that location, but it was really far from anything. And our kids were getting older and we thought, “This is just too far from anything, so let’s find something else. Let’s take this money.” I think we paid off a car, but we still had a bunch of money. Plus we sold the land for, I think, another 40,000. So that was like 100,000. Today, I would do it so different, but back then we’re like, let’s go find another kind of retreat center. That’s how we looked at it was a retreat. And so we found a realtor and we’re just driving around, looking on the MLS and found this house in Cripple Creek, Colorado, which is this old gambling town and found this house one block from the casinos that it was in the middle of this little town. So of course in hindsight, it’s not at all what we were looking for, but it’s exactly what we needed.
It’s this 1895 Victorian. It was painted purple and blue and it’s just so cute. It just was so cute. And so it was in December and when we went to inspect it, the water wasn’t even on and we’re like, “It doesn’t matter. We’re going to buy it. ” We just knew in our hearts that this was our house. So we took that money from our explosion, our bang, and we bought this house and we went out and furnished it with period pieces. We’d walk into a thrift store and it’s like, that’s the perfect couch, which I don’t really recommend buying account furniture from thrift stores, but it was like, that’s the perfect furniture. So I think we got it furnished within a week and we spent New Year’s Eve there.

Ashley:
Did you have to do any repairs at all?

Beth:
No, no. Well, once the water got turned on, there was a leak and we had that fixed, but that was it. Otherwise, it was perfect. It had a detected garage with a studio above and we’re like, “We can rent that out. This’ll be fun. It’ll be so much … It’ll be lovely.” And so we were there New Year’s Eve, I remember, and we were staying there and I’m like, “Wait a minute, we have a mortgage on this now. Wait, this isn’t relaxing. We have a mortgage on it, so we’re going to have to do something about this. ” And so that’s what we did with that money. We bought really, truly, our first investment property.

Ashley:
And how much did you purchase it for?

Beth:
Oh gosh, I think it was maybe 200,000. It wasn’t very much, but this was probably eight years ago. So now it’s worth more, thank goodness. But we still have it actually.

Ashley:
Oh, really? That’s awesome.

Beth:
We rented that summer. We put it on short-term rental because I was such an Airbnb expert by then with our cabin and that one tenant that we had, but we put on … And it is a block from the casinos. So that was people would come up for the weekend and they loved it and it was convenient and it was adorable and all the things that we loved about it, other people loved about it. Well, then fall came and nobody really goes to Cripple Creek for the weekend because it’s cold and snowy and it’s not that much fun. So then, okay, we got to get a tenant in here. So we found a property manager and she got it rented. It probably took a couple of months, but so we had long-term rentals in there, long-term tenants there for, I don’t know, two years. And that’s when we started really learning about real estate.
And we’re like, if we converted the garage to another unit, then we could have a duplex. So we actually now have a duplex. We converted that to a duplex. So that’s a nice cash flowing property. Yeah.

Tony:
$200,000 for three units is pretty solid. So you guys take that money, you use that to launch into your first true real estate investment, but you don’t stop there, Beth. I know you go on to start experimenting in all different types of real estate investing. So what was the next deal after this? And my mind is blown when you said 18.95. I don’t even think I’ve been inside a house that was built before.

Ashley:
Come visit me, Tony, and a lot of them.

Beth:
Right? Yeah.

Tony:
Said 1895. What came next?

Beth:
Well, we didn’t really realize we were investors. We were just getting the mortgage paid. And then COVID hit and our business, we still had our medical spa and it got shut down. And my husband had always wanted to be a real estate agent because he loves looking at real estate. He doesn’t like helping people buy real estate or sell real estate. He just likes to look at real estate. And so during COVID, he got his real estate license and I’m like, all right, I’m going to be a part of his life and help him with that. And so I found this Facebook page and this woman was teaching how to be a real estate investor. And so every night, it was a fine night program. We listened to that and we learned all of the real estate techniques, the Burr method and flipping and house hacking and wholesaling.
And our minds were blown. We’re like, “We could totally do this. ” So that’s like giving a little kid a dollar back in the day and go into the candy store. So that’s how my husband was. He’s like, “Now we’re going to go buy real estate.” So we knew Denver, which is where we’re at, the Denver metro area was too expensive. And so Pat was looking in Pueblo, Colorado, which is two hours south of Denver. And I grew up in Colorado Springs, Colorado, which Pueblo, it was like the armpit of the world. It’s just the nastiest place in the world. And so when he’s like, “Look at all these properties without Pueblo.” I’m like, “We’re not buying En Pueblo. It’s disgusting there.” And he’s like, “No, no, really, really. Look at how cheap the properties were.” And they were. I mean, at that time Denver, the average price was $600,000 just off the MLS.
And in Pueblo, it was $150,000 for the same kind of cute little house. And I’m like, “Yeah, but it’s Pueblo. So no, gross.” Well, at that time also there was this TV show on Netflix called Undercover Billionaire and Grant Cordon got sent to Pueblo of all the places in the world and he’s like, “This is the greatest town in the world.” And I’m like, “I don’t even know who Grant Cordon is, but okay, if that guy says that it’s a good place, we should go check it out. ” So again, on a New Year’s Eve, we went, that was when we do everything apparently. So we went down to Pueblo and state New Year’s Eve and we looked around this town and Pueblo, Colorado is the cutest little town in the world. It has a city park and a zoo and old little Victorian homes.
And I mean, there’s some yucky places, but there’s a lot of history. There’s a big reservoir. So I’m like, all right, let’s go buy, let’s look down here. So we ended up finding … So we found out about how to get on wholesalers lists. And so we, I’ll make this very short, we found a property and we went and walked through it. And during that time, it was so chaotic. It was like you could walk into a house, and this is what one of the realtors said that we met at the flipping house or at the house that we were looking at. He’s like, “You could have dog poop on the walls and you’re going to get three offers above asking.” And I’m like, “What?” That doesn’t even make any sense, but it was true. So we toured a house, we put a bid in and we got it.
We got this house that we were going to flip. It was below market. I didn’t understand why they were using a wholesaler because it was a great house. They should have just put it on the MLS. But I know that’s one of those mysteries in real estate, right? It’s like, why did they do it that way? I don’t know. But anyway, it was to our advantage. So yeah.

Tony:
I just want to ask because obviously you’re still in Colorado, but it is a new market for you. And you mentioned it briefly, but you said we got it on the list of a wholesaler. There are a lot of rookie investors who don’t understand how to start building those connections with wholesalers who have the keys to unlock all of the deals that tend to make a little bit more sense. So what did you actually do to get in contact with these wholesalers in a market that you didn’t actually live in?

Beth:
I think probably at that time, my husband went on Craigslist and said, “I want to buy wholesale properties.” And there were just people there where they’re like, “Hey, want to buy this below cost.” Now you can Google buy wholesale properties and they’ll find all these companies and that’s what they do. And they go out and they door knock and they get these properties under contract for below cost. That’s a whole world that I’m not interested in. I would never want to be a wholesaler. It sounds on paper like it would be fun. You just go help somebody get out of their house they’re going to lose and you help them pay off their whatever, but I just didn’t want to do that. Yeah. Right. And so anyway, so we just bought another flip just recently and I’m like, why is this property being sold to a wholesaler?
They could just sell it anyway. I’m sorry, I’m rambling. I ramble.

Ashley:
Tony, didn’t you wholesale deal for a little while?

Tony:
Yeah, we did back in 2021, I think it was. And yeah, I mean, a lot of it was us getting cussed out by home sellers saying that we were the 18th person to call them today and how did you beep this and you should beep this and all these other kind of crazy things, but we dig it if you do, which is I guess the price you have to pay.

Ashley:
Now, when you saw your $65,000 profit, what did you do next and why did you choose to roll it into two more properties instead of just taking the win and pocketing it?

Beth:
So that was how much we made from our very first flip. It took us about, I think a month, maybe six weeks, and we fixed everything, which now we don’t do that. But even then we turned around and we sold it in two days. We actually only got one offer.

Ashley:
Two days. Wow.

Beth:
Yeah. And we made a profit of, if I did the numbers right, which who knows if I did, but we made about $65,000. So what we found is that it was so much fun. And real estate in general is just fun. And it was fun taking this kind of house that just needed some love and making it, improving it and giving more life to it and then turning around and finding somebody who’s like, “This is my forever house. I love it. I want to buy Buy it. And then we made money at it. I mean, it was fun. So we took that $65,000 and instead of spending it on something that we didn’t want, we’re like, let’s keep going and let’s stay in Pueblo. And so my husband, who loves looking at real estate, found a house that was, it had it for sale sign in the front, but it was not on the MLS.
And he called up the agent and he’s like, “Yeah, that’s for sale.” Well, it’s not on the MLS. Oh, well, I don’t know. So we looked at that and the price was right. It was like $160, $70,000. It didn’t need any work. And it needed a little cleaning and some paint, but it had hardwood floors. The bathroom was fine. It had clawfoot tub in it. And we had a contractor who had helped us on our flip. And he’s like, “You should do this as a short-term rental and we’ll manage it for you. ” And so we’re like, “Okay, because it’s two hours away and we can’t do a short-term rental, but we know how much money those can make. So let’s turn this into a short-term rental.” So we bought that house in June, middle of June, and I immediately got it set up on Airbnb and we had it booked for the 4th of July.
So it took us two weeks to turn that around. And we had it booked for, I think, four straight months and made, I mean, so much money. It just was fun. It was fun because people loved it. And then I love helping people, but I also love making money. And I learned from my med spa, those two things are not mutually exclusive. You can have fun, you can help people, and you can do what you’re supposed to do. So that’s what we were doing. The other thing that we did with that $65,000 profit is actually, we bought two properties down in Pueblo. One, we turned into a short-term rental. We actually closed on both those properties on the same day, and we were going to just flip that other property, but we ended up losing our contractor because he got really burned out because we were moving at the speed of light, and he was managing these properties and having to turn them over every couple of days.
And then the one kind of challenge about Pueblo, Colorado is August is super hot. And so that’s by now we’re into August and he got burned out and he quit managing the short-term rental and he quit finishing our flip.

Tony:
I just want to say that’s the biggest fear for every real estate investor is that you build a relationship with someone and then for whatever reason, they don’t follow through. They kind of stop mid-job because now you as the investor are left to pick up the pieces. And I want to talk about that, but before we finish off the serve at the contractor, we’re going to take a quick break to your road from today’s show sponsors and we’ll come back and finish that story. All right, welcome back. We are here with Beth and she just broke the news that her contractor kind of burned out in the middle of not one, but multiple jobs. So I guess Beth, maybe describe the moment that the relationship kind of broke, I guess, what went wrong, what did it put at risk and what did you do in those first 24 to 48 hours to try and keep things moving along?

Beth:
I remember where Pat and I were both standing, we were supposed to go to dinner with our contractor and his wife, and we had made plans to go to this little Mexican restaurant and they called and said, “Oh, we can’t go. We have to go do something else.” And we knew what that meant. We knew that they were quitting because of other things that had happened. And we both just looked at each other and said, “What just happened and what does this mean? Because they’re doing this and they’re doing this and they’re doing this. And oh my God, what are we going to do? ” And so sure enough, they’re like, “We’re not doing this anymore and give us our money that you owe us and here’s the keys and good luck.” So we went on Craigslist, my husband’s really good at that and he found another person to finish this house, finish the house that we were flipping.
And we shut down, I think we probably had a couple more short-term rental appointments or bookings that we finished. And I found a cleaning lady who would go in and she moved those around for a couple months, but it was just too much work. So I’m like, let’s turn that house into a medium-term rental. And to answer your question, Tony, sorry, you have to deal with it and it’s like all hands on deck and what are we going to do? And you have to focus on solving the problems. So okay, we got to finish the house. All right, find somebody to finish the house. We got to find somebody to clean the house because we can’t do it and turn it over because we have bookings. You just have to find somebody. And when you have that laser focus on finding what it is you need, because it’s not like it’s life and death, but it kind of is because it’s your business.
It’s like the universe really does conspire to help you and you find those people show up. And so the contractor that we found to finish the flip, he did a really good job, but he moved at the speed of a sloth. He was so slow. So it should have taken about a month. It took him like three months. And so it was done in November. Well, then it’s too late to try to sell it. It’s in Colorado at least. You just can’t sell anything in that fourth quarter. So we ended up turning that property. We put that on the market to … No, what did we do? We turned that into a long-term rental, which wasn’t the goal. That wasn’t what we were going to do with that money. I wanted that cash so we could buy another flip, but we turned it into a long-term rental.
We actually still have that property and we’re on just our second tenant in, what is it, four years. So that turned out, it turned out okay. The house that we had is a short-term rental, we turned that into a midterm rental, and that went really well for a couple of years also. And that was nice money and pretty easy money. And that cleaning lady that I had found, she would go in after the month or however long that contract was, she would go in and turn that over. And then we just had a couple of bad experiences and I’m like, “Let’s just turn this into a long-term rental.” So we still have that property also, and that’s been a very nice investment for us. It’s still booked. So yeah.

Ashley:
Beth, after having to learn how to pivot and change strategies, what are maybe some things you implement now when you’re managing a project or a rental that you wish you would’ve done before?

Beth:
So the way we funded a lot of these projects was through my medical spa. So we don’t have that medical spa anymore. I sold that and now my husband and I both have W2 jobs. Why? I don’t know, but we do. And so what I wish I could- for lending, but you get loans. Yeah, exactly. And it is, it’s nice to have insurance and whatever. But I wish that I had been wiser with the budget and the money and really everything I’ve learned on BiggerPockets about how to analyze a deal. We would analyze a deal by going in and going, “What a cute house. Oh, we could paint it this way. And then if we do this. ” And we didn’t really run numbers like we’ve learned how to do now. And we’ve had to learn how to run the numbers because we just don’t have that.
I mean, my med spa was a cash cow. So if I needed money, we’d make some. That’s one thing I learned is like, “Oh, we need some money? Well, let’s make some. ” And that’s what I’m loving about real estate and why we decided to get back into flipping because I like making some money and flipping is a really fun way to make some money and I get to help people, I get to be creative. My husband gets to find things. He loves to find things and then we have a nice little payoff. So what I would do different is look at the budget and be a little bit smarter, which now that’s what I’m learning how to do.

Tony:
Beth, one follow-up question on the transition back to W2, because I think for a lot of folks that are listening, the goal is to get to, “Hey, I’ve got my own thing going and that’s kind of sustaining me, ” but you’ve ventured back into the stability that comes along with that. What was the decision-making process that you followed to say, “Hey, we’re going to put the MedSpa up for sale versus continuing to run that alongside the flipping and the other rentals that you own.”

Beth:
When we were shut down for COVID and we got to have a life and try other things, when then we had to go back to work for a couple of years, we realized how burned out we were. And it was one of those decisions that we kind of just made within a couple of days. It’s like, let’s put the business up for sale. And so we found a business broker and they had said, “Well, we’re going to take about nine months to sell your business.” And we’re like, “All right, that’s perfect because then we can make some more money and save some money and maybe even pay off one of these properties.” It sold in an hour. So we closed within a month. So it went from nine months of, I have a lot to do and nine months to, I have a lot to do in four weeks.
And so it was a miracle and we got out of there and yeah. So then we realized, okay, we still don’t have quite enough money and now we’re kind of bored. And that really was. We were kind of bored because we couldn’t do too much because we didn’t have that money that we were making. So we’re like, let’s go get jobs. So I started working for the post office. I thought that would be a fun job. I can get paid to exercise by walking. I can be outside and I could be by myself. I just needed my own, I needed to be away from having to wheel and deal and make sales like I had to do with the med spa. And then six months later, my husband started with the post office too. So we’re both mail carriers. If you work for the post office for five years when you started our age, we’re both in our 60s.
If we work five years, we get a pension. It’s not a big pension, but it’s cashflow for the rest of my life is how I look at it. And we also get to keep all our insurance. So I think that’s a win-win-win. So yeah, we have a job that’s going to give us cashflow.

Ashley:
I mean, that feels like a good retirement strategy.

Tony:
I love the concept of how you described it. If I am by myself, I don’t have to talk to anybody throughout there.

Beth:
Well, honestly, Tony, I’d never listened to podcasts. I’d never, nothing until I got this job because now I am by myself all day. I’ve got my headset on and that’s when I really discovered was BiggerPockets. I’ve been with the post office three years now, so I get paid to learn and I get paid to exercise. So yeah.

Ashley:
Well, Beth, thank you so much for joining us today. I really enjoyed this conversation. I still think it’s incredible that you made the $65,000 off one flip in a short period of time, and that was almost the same amount as that IRS debt you had. And I can imagine that took way longer than the flip did to actually pay that off. But congratulations on all your success. And thank you so much for sharing your journey and also the lessons you learned and what you would do differently too. So Beth, where can people reach out to you and find out more information?

Beth:
I’m not on social media, so my email is [email protected]. Who am I? [email protected].

Ashley:
Well, Bob, thank you so much. We really enjoyed having you on today.

Beth:
Thank you very much.

Ashley:
I’m Ashley, it’s Tony, and we’ll see you guys on the next episode of Real Estate to Ricky.