President Donald Trump has been accused of many things recently. Being short of ideas—whether good or bad—is not one of them.

However, after touting 50-year mortgages, proposing to stop large institutional investors from buying single-family homes, and urging Freddie Mac and Fannie Mae to buy mortgage-backed securities to lower interest rates, it turns out that his latest housing affordability fix—allowing buyers to tap their 401(k) plans for a down payment on a personal home—wasn’t actually his idea. It was an advisor’s. And what’s more, the president decided he’s not on board.

“I’m not a huge fan. Other people like it…One of the reasons I don’t like it is their 401(k)s are doing so well,” he told reporters Thursday on Air Force One on his way back to Washington, D.C., from the World Economic Forum in Davos, Switzerland. “The housing market is good, but the 401(k)s are doing much better than the housing market.”

Clearly, someone spoke out of turn: Kevin Hassett, director of the National Economic Council, who said on Fox Business that Trump would announce at Davos a plan to allow Americans with 401(k) plans to access funds for a down payment on a house. The idea was short on details, and after input from other advisors, Trump was quick to throw Hassett under the bus.

The Argument for Stocks Alongside Real Estate Investments

The main reasons were likely the tax implications of withdrawing money from a 401(k), and the fact that a workaround already exists: 401(k) plans allow employees to borrow against their accounts, repay the loan, and avoid tax liabilities. Additionally, certain types of IRAs allow holders to take out $10,000 penalty-free for a first-time home purchase.  

While many real estate investors eschew traditional investing due to stock market volatility and the lack of control that comes with owning shares, there’s no doubt that certain tech stocks —Nvidia, Broadcom, and Taiwan Semiconductor Manufacturing come to mind—have blown real estate out of the water with their returns in recent years. Therefore, diversification is the safe play: building up a 401(k) from a W-2 job while investing in real estate.

That’s why Sergio Altomare, CEO of real estate private equity and development firm Hearthfire Holdings, told Nexstar’s NewsNation that the proposed 401(k) down payment idea came with a downside. “What are the ramifications of hitting your 401(k) early? Maybe adding some limits to it, so people don’t deplete it to buy their dream home too soon,” he added.

How Small Landlords Can Build Their Portfolios Without Gutting Retirement Savings

1031 exchanges

Assuming you want to invest in real estate without going into your 401(k), there are workarounds, particularly if you already own a home. Bloomberg notes that financial advisors suggest drawing on taxable brokerage accounts or using 401(k) loan provisions. 

However, if you already own properties, 1031 exchanges are the gift that keeps on giving, offering a tax deferral mechanism to roll one property into another. In the process, you increase your net worth and cash flow.

Low-cost capital

Down payment assistance has become a “growing tool” for first-time homebuyers during the affordability crisis, extending to one-to-four-family homes, thus allowing house hacking to offset mortgage payments and possibly turn a profit, the New York Times reports.

State Housing Finance Agency (HFA) First-Mortgage Programs

These programs, such as the State of New York Mortgage Agency (SONYMA)’s Achieving The Dream, are funded by governments, nonprofits, and private real estate firms, layering grants or forgivable loans on top of primary mortgages. They allow low interest rates and down payment assistance.

Such programs are offered through State Housing Finance Agency (HFA) first mortgage programs, available in 30 states and for owner-occupied one-to-four-unit homes.

State and local down-payment and closing-cost assistance programs

Here is a state-by-state guide to down payment assistance (DPA) programs, cataloging grants, forgivable loans, and low-interest second mortgages across the U.S., many of which can be used on a one-to-four-family home. The Mortgage Reports is an invaluable resource.

Additionally, Down Payment Resource’s Homeownership Program Index tracks more than 2,600 homebuyer assistance programs nationwide and provides a searchable, state-level list, including city and county offerings, for 30-year fixed-rate first mortgages.

HUD’s homebuyer program hub links to each state’s homeowner and assistance programs, many of which are designed for one-to four-family existing and new properties.

Bankrate and Rocket Mortgage also maintain updated guides to down payment assistance, cataloging grants, deferred payment second mortgages, and below-market first mortgage programs that can be layered on FHA, VA, USDA, and conventional loans for one-to-four-unit homes, where allowed.

Homebuyer.com is another good resource for programs that reduce upfront costs for one- to four-unit owner-occupied homes.

Creative refinancing

For current homeowners and investors, the modest decline in interest rates has created wiggle room for creative refinancing to reposition funds and take advantage of lower rates. 

Here are a few strategies you can employ to make the most of what you’ve got for investment purposes:

• Use savings from a refi to save for a down payment: Refinance a primary residence to lower the interest rate (ARMs are most favorable in the short term), and use the freed-up monthly savings to build up a down payment fund for an investment, as outlined in BiggerPockets. The refi break-even analysis from Neighbors Bank helps you see how best to utilize a small rate drop to save cash flow and reinvest.
• Take out a mortgage on a free-and-clear primary residence to buy an investment property for cash: This old-school technique is an evergreen move because a mortgage on a primary residence has a lower interest rate than an investment loan. Additionally, an all-cash offer on an investment allows you to be aggressive and negotiate for a deal that makes sense.
• Do a cash-out refi from existing rentals: This is a risky move in the best of times, because it can lead to overleveraging. However, when executed properly, making sure to keep mortgage payments affordable while increasing monthly cash flow, it’s another perennial winner.

Final Thoughts

Dealing with tenants, repairs, city inspectors, lenders, and more can wear down even the most experienced, deep-pocketed real estate investors. This is why it’s always good to have some “safe” money socked away in a stable investment.

While many people balk at 401(k)s and the stock market, Trump’s rationale for not using them for real estate is solid. These investment vehicles are performing well, and the last thing you want to do is deplete a well-performing asset for one that doesn’t perform at all, which is what a personal home is. 

However, there are a slew of down payment assistance programs for new homeowners who want to become investors as well. The downward interest rate movement means that for the first time in a while, you have options to plan your next move.

Hammers at the ready! After a stagnant few years, fix-and-flipping, along with its investment cousin, BRRRR-ing, might be poised for a comeback in 2026. The perfect storm of lower interest rates, increased inventory, and access to lender funding could once again see adventurous rehabbers transform tired real estate bones into inspired homes while turning a profit.  

Why 2026 Is Different

The big question hovering over the real estate industry concerns interest rates. Three Federal Reserve rate cuts and optimism about continued easing have many people hoping for the return of sub-5% interest rates. While that doesn’t seem to be in the cards for a 30-year mortgage, for shorter-term loans, it could be a possibility, putting house flipping into play.

“While labor and inflation data have gradually shown signs of softening, the pace so far is still supportive of lower mortgage rates, but not pronounced enough to drive them below the 5% threshold,” Jeff DerGurahian, chief investment officer and head economist at loanDepot, told CBS News. “If this trend continues, it’s unlikely we’ll see rates drop below 5%. Little to no action from the Fed will also prevent them from falling significantly.”

Adjustable-Rate Mortgages

However, an adjustable-rate mortgage (ARM) could provide the wiggle room buyers need to justify buying a recently renovated home. “ARMs can provide about a 50-to-75-basis-point advantage over 30-year fixed rates, which can significantly reduce your monthly payments in the near term,” DerGurahian said.

Sweetening the pot for buyers is income, which is expected to outstrip home price growth after the last several years, resulting in increased buyer demand and sustainable prices, Redfin predicts for 2026.

Short-Term Loans

Fix-and-flip loans, now referred to as Residential Transition Loans (RTLs), are increasingly more available to local investors, according to an op-ed in HousingWire by Justin Land, president and CEO of Merchants, a residential real estate investment lender. 

Increased access to cash means investors with existing rentals can reposition them as value-add propositions by adding units within the existing footprint, expediting the turnaround process. When applied to the BRRRR format, this could see investors add units without competing for deals.

Inventory Is Up

There is no flipping without an available source of housing, and while the inventory river of fixer-uppers is not bursting at the banks, it is up significantly over recent years. HousingWire reported in October that the existing supply of houses stood at 1.52 million units, representing a 4.4-month supply. That’s 11% higher than the previous year, according to CNBC.

CNBC also reported that home sales in December were the strongest in almost three years, reflecting both lower rates and greater inventory.

“2025 was another tough year for homebuyers, marked by record-high home prices and historically low home sales,” Lawrence Yun, chief economist for the National Association of Realtors, said in a press release. “However, in the fourth quarter, conditions began improving, with lower mortgage rates and slower home price growth.”

Predictable Exit Prices

Make no mistake: This will not be the frothy post-pandemic market of 2021/2, but rather a measured real estate arena with predictable prices and a larger pool of buyers, meaning that experienced flippers who buy right and renovate judiciously could turn a steady profit. 

Not every U.S. market will be ripe for flipping, either—only those where prices are rising. According to the recent BiggerPockets 2026 Home Price Growth forecast, expect home in select cities in the Northeast, Midwest and interior South to appreciate by more than 5%. When coupled with the affordability in many of these markets, this means that buying and selling at prices within the range of most buyers, even at current rates, allows flippers to mitigate risks by minimizing holding costs or buying for cash.

Price growth and affordability alone are not indicative of an ideal flipping market. Cross-referencing these two factors with available supply and an active job market narrows the list. 

Amongst the top job markets in the U.S., according to WalletHub, the top four out of five are in the South or Midwest and are relatively affordable:

• Pittsburgh, Pennsylvania
• Columbia, South Carolina
• St. Louis, Missouri
• Richmond, Virginia

Chip Lupo, a writer and analyst at WalletHub, emailed CBS News:

“Beyond sheer availability, these cities also offer strong employment protections, access to top-rated employers, and abundant work-share or internship opportunities that support employees at different stages of their careers. While starting salaries and industry variety aren’t always the highest, the combination of opportunity, stability, and quality of work makes these markets particularly appealing for anyone looking to make a career move.”

Cost-Efficient Flipping Moves for a Slow Market

The next factor in successfully flipping or BRRRR-ing in a slow market is to rehab shrewdly. That doesn’t mean cutting corners and doing shoddy work by being extremely selective on what you choose to spend money on. Often, it means renovating rather than replacing. 

Kitchens and bathrooms are where the majority of a renovation budget needs to be spent, but even here, being selective is essential. Here are some of the easiest ways to keep costs down:

• Invest in good-looking, less-expensive appliances: A $1,000 refrigerator and a $10,000 one look similar from the outside, and buyers won’t notice much of a difference.
• Choose expensive-looking, low-cost materials: Vinyl plank flooring and granite and quartz countertops are standard these days and relatively affordable, while still offering the luxury look of expensive homes.
• Mini-split ductless systems are great for older homes: There’s no need to open walls and install conventional HVAC systems. Mini-split ductless systems are ideal for older homes and are relatively affordable.
• Paint the basement: Painting a bare concrete basement not only stops it from looking dingy, but also adds a protective membrane. Light gray exterior paint on the floors and white waterproof paint on the walls, along with matte black on exposed ductwork, conduits, and exposed beams, will give your subterranean space a chic, sophisticated feel that looks great in photos for an affordable price.
• Reglaze and refinish your tub and tiles: Hire a pro to reglaze and refinish your avocado disco-era tub and tiles for under $2,000, turning retro into cool metro.
• Refinish kitchen cabinets or replace front panels: No need to remake it if you can fake it. Bring sturdy, old-school cabinetry back to life with a simple makeover.
• Fix the fixtures: You don’t have to spend a fortune to make fixtures pop in photos. Look for the most recent styles in high-end condos, and replicate them affordably.
• Make your front door stand out: Make a stylish statement to stand out from your neighbors with color.
• Power wash the exterior and brighten up the trim: Another affordable fix that takes dingy old concrete from drab to fab. Meanwhile, a paintbrush around the windows, gutters, and downspouts, and replacement exterior drainage, immediately add curb appeal.
• Landscaping: Mulch, plants, selective new sod, or artificial turf doesn’t have to break the bank while offering an instant upgrade.
• Repair rather than replace windows: If your windows are in decent condition, consider repainting and replacing glass panes instead of investing in a full window replacement.
• Put thought into your mailbox, house numbers, and exterior lighting: Don’t let a quality flip down with a cheap mailbox. Think stylish, sturdy, and standalone—something that can hold packages and deter doorstep thieves. Equally, bold, metallic house numbers that complement the exterior decor and well-placed exterior lights add to curb appeal.

Final Thoughts

To succeed as a flipper in 2026 means perfectly aligning all the disparate components that make a good flip. It’s a bit like threading a needle in a strong wind—it’s not that it can’t be done, but it needs to be executed with meticulous attention to detail and patience. 

Long gone are the days when you could buy a house, do almost nothing to it, and put it on the market a few months later and turn a profit—and that’s a good thing. It means the house-flipping market in 2026 will be less competitive than in days gone by. 

However, if you can buy and sell low, to circumvent the affordability crisis, there is no dearth of buyers waiting for you to show them the house of their dreams.

At age 47, Neil Whitney and his wife were living paycheck to paycheck—one bad day away from losing everything. Now, less than ten years later, he’s financially free with $8,000/month in passive income from rentals.

Neil started with almost no money, promising his wife he would keep their life savings untouched while investing. He picked up side gigs, drove for Uber for a year and a half, and saved anything he could to buy a rental. And once he got his first rent check, everything changed for Neil and his family.

Neil is now a millionaire in his 50s, thanks to “boring rentals,” all in affordable price ranges ($200K or under homes!). Once paid off, his rental portfolio will make him over $20,000 per month. In his own words, “If I can do this, anyone can do this.” Today, he shares the steps he took, how he finds the best tenants, and how to use rentals to fund the dream life you’ve always wanted (new cars, overseas trips, and more).

So if you’re in your 40s, 50s, or 60s and thinking it’s too late for you to turn your life around and get to financial freedom, Neil is ready to prove you wrong.

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Fear you’ll never be able to invest in real estate because of money, credit, or bad timing? This single mom lost her house and had a 200 credit score, yet she was still able to rebuild her life and buy rental properties. If she can find a way to build wealth, so can YOU!

Welcome back to the Real Estate Rookie podcast! Just months before the 2008 housing market crash, Sarah Weatherbee found herself unable to make her mortgage payments. So, she rented out her home, moved to Nicaragua, and lived off the rental income until the dust settled. Unfortunately, shortly after returning to the U.S., she lost her home. The silver lining? Although things hadn’t panned out, Sarah had been given a small taste of what it’s like to own a rental property—with someone paying down your mortgage for you—and was determined to own real estate again one day.

And that’s exactly what she did by buckling down, rebuilding her credit, and stashing away money for her next property. Fast forward to today, and Sarah has bought multiple properties with low money down. Stay tuned as she shares the investing strategy she uses to do it!

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Dave:
Better deal flow, huge regional differences, new variables in the mortgage market. 2026 is already off to a newsworthy start in the housing market and today on the BiggerPockets podcast, we’re giving you the updates and the insights you need to make smart investing decisions on your road to financial freedom. This is our January, 2026 housing market update. Hey everyone, it’s Dave Investor analyst, chief investment officer at BiggerPockets, and today on the show we have our first housing market update of 2026. We do this format every single month. It is almost always our most popular episode of the month, but I particularly love doing this at the beginning of the year. It’s maybe the most fun for me because we now know how everything ended up in 2025 and we’re just starting to get a picture of what’s in store for 2026 and even just a few weeks into it, we have a lot to talk about in today’s episode.
We’re going to cover housing prices in 2025 and where they’re heading, including some new winners and losers for the massive regional differences we’re seeing in performance. We’ll talk about inventory shifts that are changing the whole way to think about buying new deals. We’ll talk about some new variables impacting the volatile mortgage market we’re in and new investor data that helps us understand how investors like you and me are planning to take advantage of new opportunities this year. So let’s do it. Let’s get into our January, 2026 housing market update. Alright, first up, what’s going on in the housing market? I’m going to start in a different place than we usually do because when you talk about a market, whether it’s the housing market, stock market, used car market, whatever it is, there’s the supply side and the demand side. And a lot of people in this industry, myself included, we talk a lot about inventory in the supply side, but I think possibly the most misunderstood part of the housing market right now is the demand side of the equation.
A lot of people are out there saying there’s no buyers, there’s no one coming through houses. And while there is some truth to this because sales are sluggish and there’s certainly less demand than there was during COVID, which makes sense, right? Because prices are high now, renting is often cheaper than buying. Mortgage rates are stubborn. There’s a lot of uncertainty in the labor market and the global economy and it’s understandable that there is less demand. But despite that know what demand is up, demand is actually up from where it was a year ago. The way that we measure this in the housing market is looking at mortgage purchase applications. The amount of people who are just applying to go out and buy a new home, it does not include refinances. This just looks at purchases and it is up. When you look at the Mortgage Bankers Association, it shows that it is about 10% higher than it was last year.
So personally I find this a little bit encouraging because I think we’re all rooting for the housing market to recover. Now, I don’t know if it’s going to recover in terms of prices. I think some people would argue that prices need to drop more than they would, but when I say recover, I mean we need more activity. Even if prices go down, it would be better for the housing market, for investors, for agents, for loan officers, for the whole industry. Basically if we had a higher sales volume this past year we had 4.1 million home sales, that’s not a lot. Normally it’s 5.25, so we’re like 20, 25% below where we were normally about half of where we were during COVID. And so we need to see this pickup and the fact that demand has been ticking up for basically all of 2025. I think that’s a good thing and we’re going to talk a little bit more about why that is in just a little bit.
But I just wanted to start off with some good news about the housing market in 2026. Demand is higher than it was a year ago and it’s been on an upward trajectory and maybe that will continue. Next we’re going to look at the supply side, right? We talked about demand. What’s going on with supply? Now a lot has been made about inventory over the last few years. We’ve had very low inventory, we have the lock-in effect, but over the last one or two years we’ve started to see inventory go up and it depends who you are, how you interpret that. Some people think that’s good news, we need more inventory. I personally, I fall into that camp, I think we need more inventory in the housing market. Other people look at that and say, oh my God, the market is crashing. We’re going to have so much inventory, it’s 2008 all over again.
Well, that’s just not true. That is not what is going on. If you look at inventory, it is up, but it’s only up 4% year over year, not a lot. So all those people saying, oh my god, inventory is growing like crazy, not really. It’s actually going up less than I would personally like to see it. I’d like to see inventory go up even more, and that is not a level where we would have to be concerned about a crash. Now I’m not saying a crash can’t happen, but if you’re going to see a crash, you’re going to see inventory go up way more than 4% year over year, and that’s what we got in 2025 and that’s actually a lower growth rate than we’ve seen in years. So just to be clear, inventory is up, but it’s going up by less than it was a couple of months ago.
And the reason this is happening is because we’re seeing new listings drop. Now, these are two similar metrics, two important parts of the housing market. New listings and inventory, they sound similar, they’re a little bit different. New listings is actually how many people go out, put their home on the MLS and list it for sale inventory is how many properties are for sale at a given point in time. So inventory is impacted by new listings, but it’s also impacted by demand because you could have a lot of new listings and if demands really high, those get sold really quickly and inventory stays low. But the reason that inventory is moderating right now is not because demand is spiking, it’s gone up a little bit, but it’s not because it’s spiking and eating all those new listings. It’s actually because new listings as of December, 2025, the last month we have dated for, it’s at the lowest point in two years.
So fewer people are saying, Hey, it’s a good time to sell and this is perfect characteristic of a correction and not a crash. We have been in a market that is worse and worse for sellers and better and better for buyers. Actually there is a study that just came out from Redfin. It’s a pretty amazing chart. I’ll throw it up for people who are looking on YouTube that it is the strongest buyer’s market on record. Now take this with a grain of salt because Redfin doesn’t go back in time. Their data only goes back to 2013. So this is not during the great recession, but for the last 12 years, we’re in the best buyer’s market that we have seen. And when sellers see that and say, Hey, buyers have all of the power in this market, they’re like, I don’t want to sell right now.
I’m not going to get a good price. I’m not going to get good terms and therefore I’m not choosing to list my property for sale. And so when you take these things into account, when you look at both demand being up a little bit when you see inventory going up but not that much, you get a pretty balanced market. If you have a relative balance between supply and demand, you’re going to see a pretty flat market. And that’s exactly what we saw. I actually said in the beginning of last year, about one year ago, that we were probably going to have a pretty flat market back in 2025, and that’s exactly what happened. We have a pretty balanced market. We actually get the final numbers here from Redfin. They’re kind of the first people to issue this. We hear from other sources like K Shiller and Zillow a little bit later, but Redfin says that last year, year over year growth was just 0.5%.
That’s as darn close to flat as you can pretty much imagine. And so we had a flat year in the housing market in 2025. This is part of the thesis I’ve had about being in the great stall. Just to remind everyone, I think we are going to be in a flat market for several years barring some black swan event or some crazy geopolitical thing that happens or quantitative easing. If we stand the path we’re on, I think that we are going to have several flat years in the housing market last year that proved correct and so far in 2026 when we’re looking at this supply and demand data that I’ve been talking about, it looks like we’re staying on that trajectory. Now of course there are huge regional differences. We’ve seen this for the last couple of years, but during COVID, everyone got used to every market going up.
That’s not normally what happens in the market. We still have some markets that are growing like crazy. Detroit up 9% year over year, Newark, New Jersey, 8% war in Michigan, 8% New York City, 5% Cincinnati, Pittsburgh, places in Wisconsin, all up above the pace of inflation. We have several markets, a couple dozen markets basically that have real price growth. That’s inflation adjusted price growth, but the number of cities that are seeing corrections is growing. Dallas now takes the spot, Austin, its just a few hours away. We were just there on the Texas roadshow. Dallas now takes the spot for the biggest declines in pricing in the country at negative 8% year over year, followed by Oakland, California at 6%. Austin still up there, still top three worst performing markets at minus 4%, San Jose, Miami all there. Basically when you look at the top 10, top 20 worst performing markets, they’re all in California, Florida, and Texas.
Three of the biggest population and landmass states in the country. I don’t know what to make of that, but those are the worst performing markets right now. A couple other things to note just about housing market conditions that can help inform your decision making is that the typical home days on market actually spent 60 days on market. That is the longest it’s taken to sell a home in more than a decade. I’m sure anyone who’s flipping a house is feeling that right now and that hurts. But for anyone who’s looking to buy a house, that’s really good news. This is one of the things that we are seeing in the market that you as an investor should be taking advantage of, right? If you’re seeing homes sit on the market longer, that is an invitation for you to bid below asking price, right? We already seeing a flat market, we are seeing homes sit on the market longer.
These are conditions where sellers, if they want to move their home, they’re often going to have to sell below list price. And this isn’t just me saying that this is actually a measurable thing that you see in the data. The average home right now is selling for 2% below list price. So you as an investor, that means you should be offering at most 98% of what the list price is, and that’s average. That’s for home buyers. As an investor, you should be thinking, how do I get even more equity out of this deal? How do I buy this thing for five, seven, 10% below list price? And frankly, you should not just be thinking about list price. One of the main tips I’ve been giving people, and you should remember for buying in this kind of market is buy below comps. Don’t just take what the seller wants for their property and say, I’ll get 2% below that.
Figure out for yourself with your agent or doing your own comps. Figure out what the property is really worth in today’s market, not 2022, not 2023, what is it worth today? And get a discount on that. That is the best way to invest in a flat market, right? Because you’re still getting equity because you’re buying below current comps. You’re not waiting for the market to grow for you, you’re getting your equity through negotiation and the fact that properties are sitting on the market for 60 days means that you have leverage in that negotiation. Alright, so that’s the big picture stuff that’s going on in the housing market, but we obviously want to turn our attention to what’s going to happen in 2026 and if this trend is going to continue. And as we’ve talked about a lot in this show, I think because affordability is so low, the direction of the housing market is really going to be dictated by the direction of mortgage rates. We’re going to talk about which way mortgage rates going right after this break.
Welcome back to the BiggerPockets podcast. I’m Dave Meyer. This is our January 20, 26 housing market update. Before the break, we talked about basic housing market conditions that are going on, and now we’re going to turn our attention to what happens from here because mortgage rates are our big predictor of the market this year. Now, that’s not some hot take, I’m sure everyone is saying that, but if you haven’t listened to some of these shows before, I’ll just briefly give you my thesis about the housing market. All comes down to affordability is too unaffordable to buy homes in most of these markets, and so we need something to get better in terms of affordability if we are going to see the housing market increase in terms of volume and pricing. Now there are three parts of affordability. Home prices which we’ve set are flat wages which are going up, but that takes a really long time and mortgage rates.
So if we’re expecting something in affordability to change dramatically in the next year, it’s probably going to be mortgage rates. I’m not saying that’s what’s going to happen, it’s just has the biggest potential to change out of any of those three variables. So I really think we’re going to need to watch mortgage rates closely this year. We want to understand the housing market now, we started this year 2026 with mortgage rates around 6.25%, which doesn’t sound amazing to people, but just want to call out. That is a full percentage point below where we were a year ago. That’s worth celebrating. The reason why I said demand was up over the last year, it’s because affordability got better. Prices were flat, wages went up, mortgage rates went down modestly. That’s a combination for affordability, getting better, not a lot better. We got a long way to go, but it’s still better than where it was a year ago and that’s really good news.
Now we’ve had some interesting moves in terms of mortgage rates since the beginning of the year. Now, if you looked at the exact right second, you probably noticed that the 30 year fix, the average mortgage rate on the 30 year fix actually dropped under six for just a minute. If you blinked, you probably missed it because it was at 5.99 for just a single day. It was beautiful while it lasted, but it did not last. As of today, it is back up to 6.2%. Now the reason it dropped down was because the Trump administration announced 200 billion of mortgage backed security buying by Fannie Mae and Freddie Mac. And I talked about this in detail if you want to listen and understand this in detail. Back in December, I did a mortgage rate prediction for 2026 and I talked about mortgage-backed securities and how the government can actually move mortgage rates down without the Fed because the Fed, as you’ve seen when the fed lowers rates, it does not move mortgage rates right Now sometimes they are related, but they’re not directly correlated.
They’re not linked in lockstep. Mortgage backed security buying is different. When the government buys mortgage-backed securities, mortgage rates almost always go down and that’s what we’re seeing, 200 billion of that, not enough to move the market significantly. But experts say that that alone has taken 0.25 or 25 basis points off your mortgage rate. So that’s what brought us from 6.25 at the beginning of the year down to 6%. So although there has been some encouraging signs, I don’t think we have seen the magical piece of either policy or economic news or anything else that is really going to move mortgage rates beyond my predictions. I said last year, I think the range is going to be five and a half to six and a half. Sticking with that, I said the average for the year is going to be around 6.1%. We’re probably about that for the year Right now.
It’s going to be volatile, it’s going to go up and down, but that’s where my average is for the year. And unfortunately, I think that means we are only going to get modest improvements for affordability in the housing market this year. What we’ve seen is wages keep growing. I think they’re going to compress a little bit, but I’m optimistic that wages are going to keep growing this year. I think we’re going to have another flat year of housing prices maybe a little bit down. And so I do think affordability is going to improve this year, but it’s going to be very modest. It’s certainly not getting back to COVID levels. It’s not getting back to 2010 levels. I don’t even think it’s getting back to historical levels, but this is what I mean by the great stall. This is going to take time. I’ve literally been saying this since 2023.
These are the things that have to happen for 3, 4, 5 years before the housing market becomes healthy again. We’re three years into it and I think we have two or three years more unless something crazy happens Now, will something crazy happen? I don’t know. The world feels a little crazy to me right now. We might get quantitative easing this year. That’s literally the trillion dollar question for 2026. But as long as things stay in the realm of normal, I think we’re staying for a boring year in the housing market, slow sales flat to modestly declining prices, but modestly improving affordability. So before we move on from mortgage rates though, I do wanted to say one other quick thing. A lot is made in the media about delinquencies and for closures personally, I think it’s a lot of fear mongering at the current rate because if you actually look at it delinquencies across the board, the number of people not paying their mortgage, probably the number one indicator for a market crash delinquencies, they went down last month both for 30 days and 90 days.
So I know people say it takes a while for them to work their way through the courts. If you look at it at almost every level, delinquencies are actually down. Active foreclosures are actually up. They’re up 20% from last year because we did see the ending of certain programs, FHA and VA loans. There is a moratorium on foreclosures for a while that was up last year, so they nationally went up, but they’re already starting to level out according to the data that we’re seeing. And I just want to call out, even though foreclosures are up 20% year over year, you’re going to see that on social media. I promise you, someone who’s trying to sell you something or to scare you is going to tell you that foreclosure rates are up 20% year over year. But remember this, they are still 40% below pre pandemic levels.
No one was freaking out about foreclosures in 2019. Maybe you weren’t investing then, but no one was talking about foreclosures because it wasn’t a problem. And we are still 40% below that. So just keep that in mind if you hear this news. I just want everyone to know there is no forced selling. We’re seeing new listings at the lowest point. It’s been in two years and we’re seeing delinquencies down. Those are two signs that the market is not going to crash right now. There is no evidence of a market crash, the slow recovery of affordability, the slow recovery of the housing market, it’s not the sexiest thing. That’s why not a lot of people talk about it, but it is the most likely scenario and it’s exactly what’s playing out right now. So for the immediate future, just to summarize things, look on track for forecast, we’re going to take a quick break, but after that break, I’m going to share some insights into how the BiggerPockets community, all of you listening to this podcast, our community here is planning to take advantage of the many opportunities that are seen in the market this year.
We’ll get to that right after this quick break. Stay with us.
Welcome back to the BiggerPockets podcast. I’m Dave Meyer. This is our January, 2026 housing market update. Before the break, we talked about mortgage rates. We also talked about basic housing market conditions that show that we are in the great stall and a lot of the principles, the ideas, the tactics that work that I’ve talked about in the great stall are still working. So that’s good news, right? If you want to listen to some episodes about more tactical stuff, you can go back. We’ve done a lot of episodes about the Great stall or the upside era. Those are still things that work in this market. So great news for us and in this community, but it’s not just my ideas that matter, right? We actually at BiggerPockets wanted to go out and learn are people optimistic? What do people think about the great style? Is it a good time to invest?
And we’ve collected that data and I want to share with you some insights here because I think that it has real practical applications here for our community. It might give you some confidence and some ideas about how to grow your own portfolio here in 2026. The big headline from the data is investors are optimistic. I don’t care what your uncle says or what everyone else says about the housing market right now. Frankly, for homeowners, it’s a tough time to buy a primary residence right now and a lot of places if you’re not going to do value add. But for investors, people are feeling rightfully so in my opinion, that conditions are improving and are feeling that they’re going to get even here in 2026. We found this out because we basically asked two different questions. The first one is like, how do invest in conditions compare to a year ago and how are they going to change?
And if you look at the answers people didn’t feel like last year was very good, and I like that because I think it lends us a little bit of credibility. If people were like, last year was great, next year is going to be even greater. There was some bias in that data, right? Well, maybe it’s because we were polling real estate investors, but people were pretty honest that 2025 stunk. I talked to Henry, we were on the roadshow and he was just talking like 2025 kicked a lot of people’s asses. Let’s just be honest about it. But 20, 26 people are feeling better about because it’s a little bit more predictable. 25 was the time we went from a market where prices were going up every year. We still, despite high rates in 23 and 24 prices, were going up 5, 6, 7, 8% for a flipper, for any sort of buy and hold investor for a burr investor.
Those are good conditions. Now, when you’re buying in 2025, assuming those things are going to continue, but we get a flat year, that makes for a tough year for a lot of investors. Now, I did some good deals. I think a lot of people did good deals, but that’s a tough year to navigate. But since we’re in 2026, people are feeling optimistic because the housing market is more predictable. I think we know that we’re in a great stall and we are seeing housing prices start to come down. Negotiating positions are better. We actually asked, we were like, why are you so optimistic? Right? Because maybe people are just optimist. But the reasons that people cited for their optimism in the housing market is number one, they think lower mortgage rates. That’s not by a lot. I do think rates will come down a little bit.
Like I said, I think last year was averaging in the mid sixes I think will be low sixes this year, so that’s true. But the two other ones which are almost equal in terms of popularity for the biggest opportunity in residential real estate this year was better ability to negotiate. I love that. That’s exactly what we were talking about early in the episode. I think this is the number one tactical thing that people should be doing right now, being super patient and negotiating. And number two, better deal flow, better inventory. I’ve said this recently, but there are just better deals on the market. There are three things in combination, better deal flow, better ability to negotiate and potentially better mortgage rates. Those are great conditions for anyone who wants to be a buy and hold investor. You’re seeing better assets, things that you really want to hold onto.
You have a better ability to earn equity through negotiation. You don’t even have to do anything other than negotiate, but you can do that. And number three, if you get affordability improvements, that’s going to increase your cashflow. All those things combined are good reasons to be optimistic. I understand why optimism is increasing, and I want everyone in the audience to think of these three things as tactical things that you can be doing. Now, you don’t control mortgage rates, so that’s not one, but the better ability to negotiate increasing inventory, these are things that you should be taking with you from this episode right now, you have more opportunity to look at deals. So go look at all of them. Look at more stuff. If you were analyzing three deals a week last year, do eight right now because I promise you there’s more stuff for you to look at and you should look at as many of them as you can because you don’t know which seller is going to be the most willing to negotiate with you.
Now, like I said, your ability to negotiate is absolutely going up, don’t get me wrong, but not every seller is willing to accept a lower price. Not every seller has had their property sit on the market long enough for them to accept, Hey, what I’m asking for is not really reasonable and I’m going to have to accept a lower offer. Those are not in your control, but patience in your negotiation, that is in your control, and that’s what the BiggerPockets community is planning to do this year. And what I encourage all of you listening here today to do in your own investing as well. Now among our audience, not super surprising here, but by far the most popular strategy for next year is long-term rentals. That includes birth, that includes rent by the room, it includes house hacking, stuff like that. Flipping is the second most popular, and I was kind of surprised to see, we’ve seen midterm and short-term rentals fall below both of those pretty far over the last couple of years.
I think what people are seeing now with this flat housing market is maybe it’s time to just go back to buying great assets that you want to hold onto for the next 10 years. That’s personally what I’ve recommended. When we talk about the upside era and the great stall that we’re in, it’s time to buy great assets that you want to hold onto forever, and that’s the plan of the BiggerPockets community right now. I don’t want to pretend that everything is rosy. There are real challenges in the housing market, and I just want to call out the number one challenge because I think this is something we all need to keep an eye on. It’s rising expenses. I actually thought it was going to be bad deal flow or I don’t have enough money or I don’t know what to do next. But rising expenses, especially among experienced investors are by far the biggest challenge that people are seeing.
So this is something I encourage everyone to keep a really close eye on as they manage their portfolio. I am guilty of this. I think everyone who’s a real estate investor is guilty of this at some point in your investing, but you’re like, I analyze that deal. It gets a 9% cash on cash return. I’m fine. But did you reanalyze that deal in year two, in year three in year four? Because if you have seen your taxes go up, like everyone, if you have seen your insurance go up, like everyone, your maintenance costs go up. Maybe that’s not getting 9%. Maybe it’s getting 4%, maybe it’s getting 2%, and maybe that’s just something you have to deal with right now during this kind of market until rents start going up, which I do think will happen in the latter half of this year, maybe into next year.
But I digress. What I’m saying is maybe that’s something you deal with, but the other thing is maybe you could be doing something to better optimize that portfolio. That might mean adding value. Maybe you can renovate and get more rents. Maybe you can add an A DU and get more rents. Maybe instead of renovating you sell that property and turn it into something else. But I highly recommend it’s the beginning of the year. It’s a great time to do this. If you have not done this yet, take some time and reanalyze your deals. Go look at what your expenses have. How have they changed over the last year? Are they growing faster than your rent? Is your return on equity increasing or decreasing? If you don’t know how to do these things, you can check out BiggerPockets. We have tons of resources. Both of my books cover these things.
You can check those out there, but go do that. Go analyze your deals right now because I agree that this is a big challenge for real estate investors, but it’s really only a big challenge if you don’t know what’s happening. Well, it’s actually just a bigger challenge. If you don’t know what’s happening. If you’re just sitting there like, oh, expenses are fine, they might not be. So go and make sure that your deals are still performing. This is one great insight from the BiggerPockets community, I think you should all take away here today. Last thing I wanted to mention that despite those challenges, and they are real by far, most BiggerPockets community members are planning to grow. Nearly 60% of them are planning to increase their portfolio size. This next year, 25% are saying that they’re going to optimize their existing portfolio and only 4% are planning to sell.
So I just wanted to share that because I know there’s a lot of noise and media attention to the housing market. A lot of people are saying, this industry is dead or It doesn’t work. I completely disagree. It’s just a change of tactics, and if you follow some of the plans that we’ve talked about on the show that we talk about every week on this show, there are absolutely still great ways to increase your portfolio, and generally speaking, that’s what the BiggerPockets community is planning to do in 2026. I hope that’s the plan for you all as well. And even if you don’t plan to buy, think about ways to optimize your portfolio. Think about ways to put yourself in a position to buy next year, improve your financial situation. All of that is still investing. You don’t have to go and transact. It’s all about the mindset of putting yourself in a position to grow your portfolio. That might not mean you’re buying today or next month, or maybe even not this year, but keep listening, keep learning, and keep putting yourself in a position so that you can strike when the time is right for you. That’s the game plan for me for 2026, and it’s what I recommend for all of you. Thanks so much for listening for our January, 2026 housing market update. I’m Dave Meyer with BiggerPockets, and we’ll see you all next time.

Source First (Teacher Rule!): Everything you’re about to learn comes from one textbook: Annual Report to Congress Regarding the Financial Status of the Federal Housing Administration Mutual Mortgage Insurance Fund (FY 2025), published by HUD and available here.

Today’s lesson turns that very serious report into something easier—and more interesting — to understand.

Lesson 1: FHA’s Big Piggy Bank Is Very Full

Imagine the Federal Housing Administration (FHA) has a giant piggy bank called the Mutual Mortgage Insurance (MMI) Fund. This piggy bank:

• Collects mortgage insurance premiums.
• Pays claims when borrowers can’t keep their homes.
• Is backed by taxpayer dollars, so it must be managed carefully.

In FY 2025:

• FHA’s piggy bank had $140 billion inside.
• Over $100 billion of that was cash or cash-like.
• The piggy bank was filled to 11.47%, when the law only requires 2%.

Translation for investors

FHA is not broke or fragile. It has plenty of cushion to handle borrower problems without panicking or dumping homes onto the market.

Lesson 2: Too Many “Second Chances” Was a Problem

During COVID, FHA tried to be nice—maybe too nice. Borrowers who fell behind were allowed to:

• Modify loans
• Pause payments
• Get partial claims
• Try again…and again…and again

But the report shows something important: Almost 60% of borrowers who got help fell behind again within one year. That’s like letting a student retake the same test six times—and they still keep failing.

Lesson 3: New Rules to Help People Succeed (or Move On)

So in 2025, FHA changed the rules. In April 2025, FHA rewrote its “help plan” (called the loss mitigation waterfall). New rules:

• COVID programs ended
• FHA-HAMP ended
• Borrowers now get one home-retention option every 24 months.
• Borrowers must prove they can actually make payments before getting permanent help.

FHA estimates this saves $2 billion.

Translation for investors

This doesn’t mean “more foreclosures tomorrow.” It means faster decisions and less endless limbo, which historically leads to clearer timelines when homes eventually change hands.

Lesson 4: Borrowers Are Struggling—but Not All at Once

Now let’s talk about late homework (aka delinquency).

• Serious delinquencies (90+ days late) rose to 4.54%.
• That sounds scary—but it’s still normal by historical standards.

Here’s the twist:

• Even when loans fail, losses are much smaller.
• Loss severity dropped from 50% years ago to 22% today.

Why?

• Home prices went up.
• FHA sells homes faster.
• Fewer homes sit empty and deteriorate.

Translation for investors

Stress is rising, but damage is limited. Timing matters more than panic.

Lesson 5: “Risk Layers”—When Too Many Weak Spots Stack Up

FHA doesn’t just look at one thing. It looks for stacked risks, called risk layers. Think of it like a Jenga tower. If all three are there, the tower wobbles:

• Low credit
• High debt
• Very small down payment

In 2025, FHA updated how it measures risk layers:

• Credit score below 640
• Debt-to-income ratio above 40%
• Loan-to-value ratio above 95%

Using this better ruler:

• About 8% of FHA loans have risk layers.
• Old rules only caught about 1%.

Translation for investors

This doesn’t predict a crash. It helps identify where stress might appear if conditions worsen.

Lesson 6: Students Are Smarter…but Carry Bigger Backpacks

Good news: FHA borrower credit scores are higher than they’ve been in years.

Not-so-good news:

• Borrowers are carrying more debt.
• Average DTI today is 45%.
• Twenty years ago, it was closer to 37%.

Why?

• Homes cost more.
• Rates are higher.
• Insurance costs more.

Translation for investors

Borrowers are more responsible—but have less wiggle room. Small disruptions matter more than they used to.

Lesson 7: FHA Ran the Worst Tests Imaginable (on Purpose)

FHA asked a scary question: “What if the worst economy ever happened again?” They replayed:

• The Great Recession
• Massive home price drops
• High unemployment
• No price recovery afterward

Even then:

• FHA’s piggy bank stayed more than twice the legal minimum.
• The system still worked.

Translation for investors

This strength is why FHA could lower up-front mortgage insurance costs—it wasn’t reckless, it was math-backed.

Final Thoughts: What Can Investors Do With This?

This report is not a crystal ball. It is a map. Investors can use it to:

• Understand where stress forms.
• Track policy-driven timing.
• Watch cohort-level risk.
• Avoid assuming “defaults = chaos.”

FHA isn’t ignoring problems. It’s managing them slowly, deliberately, and with money in the bank.

Important Disclosures

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A stairway to heaven? Maybe. Higher cash flow for California landlords might be as simple as changing the number of enclosed staircases required in small multifamily buildings. 

That’s the debate surrounding Assembly Bill 835. California’s fire marshal is finalizing a report to comply with the bill and potentially reshape real estate investment across the state.

Why Staircase Rules Matter to Small Landlords

Under today’s International Building Code, which is followed in some capacity by most U.S. jurisdictions, buildings above three units must include at least two enclosed staircases, which shape the core of any apartment building. Assembly Bill 835 seeks to allow single-stair multifamily buildings with more than three units.

The proposed ruling is by no means unique in America. Many jurisdictions, including Seattle and New York, allow single-family staircase buildings (up to six units). It is, however, a financial game-changer for small landlords, as California YIMBY’s website explains, reducing construction costs, creating more livable square footage, and allowing apartment buildings to be constructed on smaller, narrower, and oddly shaped lots. More apartments equal more cash flow.

AB 835’s author, Assemblymember Alex Lee, sees the bill as opening more sites rather than a dramatic rewrite of the code. Lee told Mitpitasbeat:

“I see AB 835 as a first step to revising California’s building code on apartment staircases. If California were to permit single?staircase apartments above three stories, we could unlock previously undevelopable properties and create more high-density housing. Single?stair apartments also allow for more efficient use of building spaces, along with a greater variety of housing units.” 

In practical terms, eliminating an extra staircase could create more usable exterior space, provide sorely needed extra parking, and facilitate higher rents and lower tenant turnover.

The Opposition

The Pew Charitable Trusts estimates that single-stair four-to-six-unit buildings with relatively small floor plans cost roughly 6% to 13% less to build than comparable dual-stair designs, partly because they sit on narrower lots and use simpler cores. In addition, Pew states that safety is not compromised by eliminating the second staircase.

National Fire Protection Association president Jim Pauley stated, however, that safety records could not be viewed uniformly, saying, “While the report celebrates the outcome of modern safety codes, it could also be used to open the door wider to bypassing the very process that developed them,” pointing out that well-funded fire departments in New York and Seattle, which both allow a single exit staircase in buildings up to four stories under their respective codes, allow for much faster response times than elsewhere in the country.

Fire unions have taken a harder line. The International Association of Fire Fighters (IAFF) has launched campaigns in various U.S. states and cities, including Los Angeles and Connecticut, arguing that single exit designs “jeopardize escape routes and complicate firefighter response.” In short, they claim affordability should not come before safety.

“We all want to see more affordable housing built, but not at the expense of people’s lives,” General President Edward Kelly said on the IAFF website. “One stairwell means one way in and one way out. When firefighters are going up and families are trying to get down, that’s a recipe for disaster.”

His sentiments were echoed by IAFF General Secretary-Treasurer Frank Líma, who stated: 

“The removal of a second stairway as an emergency exit—a critical life safety feature—is not an acceptable trade-off for additional housing. That’s the bottom line. The proponents of this ‘only one way out’ design have an overreliance on fire alarms and sprinklers to perform without fail. And that’s a big gamble on public safety.”  

More Tech, Building Codes, and Safer Units

Advocates of single-staircase multifamily buildings point to increased safety standards and building codes, which have resulted in fewer fires. “New fire safety standards in our building code have made it so new buildings are much safer overall,” Los Angeles council member Nithya Raman said in support of considering the change.

As with many issues, the case for building code reform has ultimately become political: Advocates of an outright gas stove ban—often the cause of fires in apartment buildings—in favor of electrification have come up against the oil and gas industry, supported by the Trump administration.

Other States Are Following Suit

The single-staircase argument is being adopted elsewhere. Colorado, Pennsylvania, Rhode Island, Minnesota, Oregon, Virginia, and Washington state have already adopted some form of single-staircase allowance for buildings over three stories, with some limitations tied to building size, according to Pew.

The Push for Greater Housing Supply

The 2027 edition of the International Building Code is expected to ratify the single staircase for apartments up to four stories, under certain defined limits, according to Boston Indicators and other sources. The pressure to increase housing supply and staunch the affordability crisis by expanding the number of permissible units in small multifamily buildings has been a central argument for zoning reform advocates, keen to end single-family-zoned neighborhoods.

As Single-Family Stalls, Multifamily Housing Takes on More Importance

Single-family housing starts hit an 11-month low in mid-2025 amid higher borrowing and construction costs, underscoring the importance of maximizing multifamily housing. Conversely, multifamily starts soared 30.6% in June compared with the previous year, with all regions except the Midwest reporting stronger multifamily gains, according to KPMG Economics, which summarized National Association of Home Builders data.

Final Thoughts: Practical Strategies for Landlords to Increase Cash Flow in Small Multifamily Buildings

Even if building code reform is successful in advocating for single staircases in small multifamily buildings, retrofitting apartment buildings accordingly is usually far more expensive than it’s worth. 

However, there are more practical ways to increase cash flow with your existing multifamily units. These include:

• Adding ADUs: If zoning and space allow it, adding an ADU on your existing lot is a relatively easy way to generate more cash flow without getting involved in major construction.
• Take advantage of “missing middle” housing reforms: Zoning changes in some U.S. cities have legalized duplexes, triplexes, and fourplexes in heavily residential districts, often removing parking minimums to allow more units.
• Implement a classic value-add strategy: Upgrading kitchens and bathrooms is a proven way to increase rents, especially for landlords with under-rented buildings in rapidly appreciating neighborhoods.
• Upgrades and separating utilities: If practical, adding in unit laundry rooms, upgrading parking facilities, implementing a ratio utility billing system (RUBS), and sub-metering systems where it’s allowed are all practical, relatively easy ways to increase cash flow.

Ashley:
What if the cashflow number you’re chasing is actually holding you back from getting your first deal? Today we’re breaking down the real math behind minimum cashflow, why it matters and when it doesn’t.

Tony:
We’ve also got a question that stops a lot of rookies in their tracks, should you buy an investment property before you buy your primary home? Plus, we’ll tackle how to build a rock solid out-of-state investing team when you’re totally brand new.

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

Tony:
And I’m Tony j Robinson. And with that, let’s get into today’s first question. Alright, today’s first question comes from John in the BiggerPockets form and John says, as the market is changing and I’m seeing in my market that more houses are producing lower cashflow, what would be your minimum cashflow that you’d like to see from an investment? I know that there is a lot to consider, but if cashflow really is king, would you be okay with a $150 a month cashflow in a growing metropolitan area? We’re seeing different versions of this question I think pop up a lot recently around can we still get cashflow? How much cashflow should I take? What’s good cashflow versus what isn’t? I think that there’s a lot that goes into this and I’m curious for you, Ash, what’s your take on it as well? But I think the good cashflow can vary a lot depending on the person, depending on how much capital you put into that deal, depending on so many different factors.
So to boil it down to say, is it good or is it bad a thing? Is it a little difficult? Funny enough you say one 50 because that was the actual cashflow. My very first deal that I ever did, that first long-term rental that I bought in Shreveport, Louisiana, my cashflow after everything, property management vacancy CapEx, was 150 bucks per month. To me, that was an amazing deal because I had $0 in that property. I literally had $0 into that deal, so I had an infinite return. So for me, 150 bucks, I had a pm, maybe it took me a couple hours a month to deal with the pm, but it was 150 bucks and basically free money that I was getting. I had a tenant paying down the mortgage. It wasn’t a super strong appreciating market, but still there was some level of appreciation. So for me, one 50 was great. So that’s how I would approach it like, well, what am I putting into it? How much time is it involving? Am I getting any other ancillary benefits? But what’s your take ash?

Ashley:
Yeah, the last thing I would add is what else could you do with any money invested into the property or with your time that you’re going to be putting into managing this property and really seeing if there’s a better opportunity for you? But I think that can also get you stuck in analysis paralysis where you becoming too concerned about getting the best and the greatest return on your first deal. That first deal is going to bring you so much value by propelling yourself into your real estate investing journey.

Tony:
I think it’s also important to understand what kind of market you’re buying in. Are you buying in a market that’s meant for high cashflow or are you buying in a market that’s meant for maybe more appreciation? And if your main focus is just maximizing cashflow, then yeah, maybe 150 bucks a month isn’t enough for you and you need to go into a market where you can maybe extract more on a monthly basis. But if you’re buying in a market like where I live in southern California where appreciation historically has been really, really high, then 150 bucks a month is probably pretty good if you know you’re going to gain eight, 10% a year in appreciation or something to that effect. So I think the market types in managing those expectations is important. But the other thing Ashley, I think is, and John didn’t really specify here, but when he says 150 bucks per month in cashflow, is that true net cashflow or are you just taking gross rent minus your mortgage and calling that cashflow?
Because in addition to just your mortgage and whatever other kind of ancillary property expenses you, you still have to account for things like potential vacancies, repairs and maintenance CapEx, and if your one 50 doesn’t include those, that I would assume that once you start adding those things in, you might be barely breaking even or potentially negative. So at that point, I think generally speaking, probably not going to recommend that anyone does that deal If you’re actively losing money every single month on a property, there are probably some unique situations where it does make sense, but in a general sense, usually we don’t want to be negative on a deal. So I think also looking at are you actually calculating the true net net cashflow? And guys, this is why the BiggerPockets calculators I think are so helpful because it forces you to make sure you’re accounting for all of those things that a lot of Ricky Investors might miss. Ashley, I guess one last question for you on this one, how important do you think cash reserves are when determining the type of cashflow that you’re willing to accept?

Ashley:
Are you saying how much you should have saved before

Tony:
Not quite

Ashley:
Deal? What do you mean?

Tony:
Yeah, so I guess when I think about 150 bucks per month, if your water heater goes out and say it’s only been running for six months at 150 bucks per month, you don’t even have enough to replace your water heater.

Ashley:
Well, I think that goes back to the true cashflow is one 50 after you’ve already accounted to saving 8% for repairs and maintenance going forward too, and cap CapEx saving for that. So I think that’s a big factor in how that compares. If you are already counting that you’re going to spend X amount every year anyways and repairs maintenance and capital improvements as to whether, but if you’re not in that one 50, that one 50 is going to be in up when you need that roof or that hvac and you’re going to end up, if you’re not accounting for those variable expenses, you’re going to realize a couple of years from now you actually have negative cashflow on that property.

Tony:
And I guess that’s where I was taken is if you’re jumping into this deal and maybe you use all of your extra cash on actually acquiring the property and you don’t have enough set aside for some of these surprise expenses, even if you’re setting money aside on a monthly basis for CapEx and reserves, if something big happens in month number three, you probably haven’t set aside a whole heck of a lot. And if you don’t have any excess funds, then yeah, 150 bucks per month is definitely not enough. So I think there’s also a discussion around, or at least you should take into account how much reserves you have going into the deal to weather some of these storms because I think it does make a difference

Ashley:
Up next, should your first move to be buying an investment property instead of your own home. A lot of rookies think this shortcut gets them ahead. We’ll break it down right after this. We just talked about minimum cashflow and now we’re moving into a decision a ton of rookies wrestle with. So this question is from the BiggerPockets forums and it says, Hey everyone, I am weighing the options between buying an investment property before a primary. I am still staying at home. My girlfriend has one more year of law school, and then we’ll stay with my parents for one year before looking to buy our primary home with joint income so she can have a year’s income at least to show I have a real estate mentor who is helping walk me through the whole process. Nothing crazy on top of all this, I will still be working and saving.
Should I look to dive into a rental property or just wait to buy one after we get our primary? I feel it’s better to start building the foundation early. I totally agree with that. It’s better to start now than to wait, and it doesn’t necessarily mean starting with a rental before, starting with your primary. One thing that I noticed that I want to call out is saying that he wants to wait for his girlfriend to have one full year of income before going and purchasing their primary. My sister literally graduated college, had an offer letter to work part-time, not even full-time, and she got approved for an FHA loan to purchase a property on her own. So I don’t necessarily think you need to wait.

Tony:
Yeah, my very first investment deal, I talked to that lender earlier in the year. I did not get approved for anything. I got a new job offer in the middle of that year with a totally different company. It wasn’t in the same company, a completely different job. And same with that offer letter. They said, okay, cool, we can approve you based on this offer letter. I hadn’t even started the job yet and I was able to get approved. So yeah, I mean, I agree with you that you don’t have to wait the full year.

Ashley:
So I guess his question comes up too is should he buy the rental property or wait till after the primary? And I think this really comes down to what you can do. So if you’re able, you have the capital, you have the time to buy a rental property now and still have enough capital to buy your primary, yes, go ahead. I actually think that the best thing to do is to buy a small multifamily, a duplex and live in one side and rent out the other side. And then you are accomplishing both of these things. You’re going to get better financing than you would for an investment property because you’re going to be living there and you’re already used to living with people because you’re living with your parents. So at least you’d get your own side of the duplex possibly. Or you could do rent by the room in a property too. So I know everyone’s sick of talking about house hacking, but I think this would be a great scenario to combine getting your primary and to have your first investment property.

Tony:
Yeah, couldn’t agree more. Ash, you hit the exact point that I was going to make is that it doesn’t have to be either or just make it an and go do both and then maybe you buy one today and then when your wife does finish law school and she’s got this new attorney degree or career, then you go out and buy another one that’s a primary residence. And even if you guys just stay on that same cycle of buying one new property every year for the next 10 years as your primary in a decade, you’ve got 10 properties with really good long-term fixed debt that are hopefully cashflowing pretty well. We keep referencing back to this episode, but Matt Krueger, I can’t recall the exact episode number, but if you just search YouTube for Matt Krueger and Real Estate Rick, you’ll find his episode. But that was his exact strategy every year he just bought a new primary residence and then rented out the old one, and that stacks up over time.
It seems like you guys are young, didn’t mention anything about kids. So you’ve probably got a certain level of flexibility that might get harder as you kind of start to mature in life and responsibility. So I love the idea of doing both. I think, and to your point, Ashley, you said this earlier, if you do want to separate them, just making sure you have enough capital. But I think the other piece too is keeping close tabs on your DTI, just to make sure that if you guys do buy the rental today, will you have enough in terms of debt to income ratio? Will you have enough room there to still get qualified for that primary down the road or where there may be some challenges there? And again, I think working with a good lender, they’ll be able to answer that question for you. But I agree, Ash, I think waiting the best time to buy a real estate deal is yesterday, and then the second best time to buy a real estate deal is today.
So if you guys have the right deal, if you guys have the right resources right now, pull the trigger and then take the next steps to figure out how you guys get the primary from there. Alright, so coming up, if you’re going out of state for your first deal, who do you hire first and how do you know you’re not being taken advantage of? So stick around and we’ll answer those questions right after we’re from today’s show sponsors. Alright guys, let’s jump back in. We’ve talked about cashflow. We’ve talked about whether you should buy a primary or a rental first, and now we’re diving into one of the biggest sticking points for rookie investors and that’s building teams out of state. So this next question comes from Kevin in the BiggerPockets forum and Kevin says, I’m looking to buy my first rental property. I live in California.
I feel like we’ve been getting a lot of these. I live in California types, I live in California and want to buy out of state. I’m a buy and hold investor looking to buy a small single family home that at most needs major cosmetic work done. My questions to all of you is how do you go about building a team and in what order do you recommend doing those things? For example, should you find a real estate agent before or after finding a house you want to put an offer on? Do you hire a property management company before or after you purchase a property? Will an agent and property management company help you find good deals? Any other suggestions you can offer as a beginner would be appreciated? Alright, I bought my first rental property exactly fitting this story. It was a single family home, mostly cosmetic renovations, and it was, I dunno, 2000 miles away from where I lived.
I’ll tell you my experience and what sequence of events I followed, and then we can go from there. But for me, I actually found my lender first, which is not I think the most standard way, but that was the approach that I took. I found a lender in that market first who offered a really, really unique and just really compelling loan product for real estate investors. The lender then introduced me to an agent and then I did my own research, but between the agent and my lender, I also found a general contractor. They both have their list of recommendations and one person was on both of those lists that ended up being my general contractor. And then I just did my own research and met with a bunch of different property managers in that market. But my sequence was lender. The lender kind of gave me the buy box of what I needed to purchase in that market to fit the requirements of their loan.
I then went to the agent and said, Hey, here’s the buy box that the lender just gave me. Help me find something. Once I found the deal, I then had the general contractor who came in to kind of vet and make sure the scope of work was lined in and they handled the rehab and the PM came in. Actually before I closed, I had been chatting with them, but I didn’t actually hire them until we got close to the end of the rehab. And then they were the ones that were kind going through near the end of the rehab to make sure the blue tape and putting everything like, Hey, fix this, fix this, because they were going to take over the management. So they actually helped me finish off the rehab to make sure it was rent ready. And then when the rehab was done, the GC literally took the keys, drove them over to the property manager’s office and said, Hey, here you go. And the PM took it from there. So that was my sequence of events. Lender, agent, contractor, and then pm.

Ashley:
Yeah, I guess for me it was a little bit different because I was working as a property manager, so I knew going into it that I was going to self-manage the property, but I just think BiggerPockets just has so many resources to find these team members that before you even find the deal, if you know what market you’re looking in, you can connect with an agent, a lender, an insurance agent, all of these people to help you get the deal. I do think it is important to know that there are least options. So this can go for long-term rentals or short-term rentals. I think, Tony, you’ve mentioned that in one of the markets you invest in and it was harder to find cleaners because it wasn’t as populated or it was very much just short-term rentals. So there wasn’t a lot of people. I think maybe even your hotel even that it’s more of a tourist destination that it’s hard to find people to work.
So I think there is some element where you need to at least do some research to make sure you can find team members and that there is a wide variety of selection. So that maybe if the first property manager doesn’t work out, you know that there’s another one in the area that you can go to. So biggerpockets.com/teams is where you can find all of your market specific team members and you can talk with them them. We always recommend asking questions to ’em, not in the form of do you work with investors, but how many? So not asking yes or no questions, but actually having questions where they have to give you some information as to verify what they’re doing instead of them just being able to say yes and maybe only one investor they actually work with. So

Tony:
I guess on that note, actually, let’s maybe talk about red flags that you might see from an agent or even a potential contractor. On the agent side, I think one red flag is if you ask that agent questions that anyone who works with investors should probably be able to, I guess even before that, the first question that you should ask, and we talked about this before, is ask that agent what percentage of their transactions last year involved real estate investors as their clients? And if it was like 1%, maybe that’s not the right agent for you to work with, but if it was like 50 plus percent or 90% or Hey, I only work with investors, that’s someone who’s going to understand what it’s really like and what you are focused on as an investor. When we buy our primary residence, it’s very much an emotional transaction.
We’re raising our family here, we’re making memories here. We want to see ourselves having Christmas morning and Thanksgiving dinner and whatever it may be, and celebrating birthdays. When we’re buying an investment property, we are more so focused on the numbers. Is this going to work? Is it going to cashflow? Is it going to give me whatever it’s that I’m looking for on this deal? And an agent who really understands investing will be able to tell you, Hey, this is a really nice neighborhood, but I very rarely see things cashflow over here. And hey, this is an up and coming neighborhood where maybe it’s not an A class, but it’s a solid B class, but you can get much better returns in this market. Or, Hey, we actually don’t want to buy homes over here because there’s issues with flood insurance and none of my investor clients like buying here because it’s always hard to do that. So you want them to be able to give you those kind of insights that as an investor will allow you to make a more informed decision about what to buy. So those are maybe potential red flags to look out for. On the Asian side, Ashley, with any of the other team members, can you think of any other maybe red flags that you’re like, I don’t know if I want to work with that kind of person?

Ashley:
I’ll give you one recently for a lender as in a lender just giving you a disclosure. So this is where you fill out the loan application, you have your property under contract, you know what you’re going to buy, and the lender sends you a disclosure without discussing your options for the interest rate or telling you their fees upfront and they’re just sending it to you thinking you don’t know what you’re doing. So this was literally a disclosure I read the other day where they’re like, oh, great news. I locked you in at this percentage rate. I was like, oh, cool, that’s an awesome rate. And then I get the disclosure and it’s saying that I’m paying $3,000 in points for this interest rate. And I know when I’ve worked with other lenders, there is a table that tells you it’s like a scale, a sliding scale.
If you pay 5,000 in points, you can knock down 1% of interest. If you pay $500, you’re knocking off 0.01 of your interest rate. And that’s where I go and I say, okay, how long am I going to hold this loan for? Where’s the breakeven point where it makes sense for me to pay X amount? I’m going to hold the property for X amount of years, whatever this lender just put in what they thought was best. And they also included an underwriting fee that wasn’t discussed or negotiated ahead of time. And so I think make sure you are reading your disclosure and asking questions if you don’t know what those fees or those things are. There’s also, if you just Google loan disclosure estimate, if you just Google it, there’s a government website that literally goes line item by line item telling you what every single thing means on the loan estimate disclosure that you’re getting and what the fees are for. And you can find out this is a fee that is charged by the lender. This is something that is standard that you’re going to be charged no matter what. So I think when you’re working with a lender, how much are they trying to get by you? And it can lead with you asking the right questions upfront, what are your underwriting fees? Things like that. What are my options for points for interest rates, things like that too. So just on the lending side, those are some things to be cautious of.

Tony:
Yeah, those are all great points, Ashley. And just shopping. Just make sure you’re shopping any lender that you work with to see if not only just the interest rate, but the overall cost and the product that you’re getting. I think just last piece on just the red flags, I would say from a contractor, a general contractor’s perspective, we can probably do an entire episode on bad general contractors, but I think a few things to look out for. Number one, very similar to the agent, make sure that they’ve got experience actually working on investment properties because the contractor who is maybe just like a small time handyman that goes to people’s houses and fix their blinds when they fall down or kind of ran a little knickknacks, is different from someone who’s going to be able to do a four rehab. So I think understand the scope of their experience first.
You maybe don’t want to be their first Guinea pig of a full renovation project. And then also just do they actually work with investors? Because sometimes if you’ve got someone who just says, really high-end kitchen renovations for primary residences, they’re not going to be enough for you as a real estate investor to work with. And that was, I think part of my challenge is when we first started as well, is that I would just open up Zillow or not Zillow, open up Yelp and some of the businesses in there, they have great reviews, but they’re all focused on residential, like me as the homeowner and their pricing and their just entire business model is different than the contractors who work with investors. The ones who work with investors know they’re probably going to make a little bit less on a per job basis, but they’ll make that up because they’re doing it in a more volume, right?
I’m going to be a repeat client. You’re not going to do my kitchen once every 10 or 15 years. We’re going to do like 10 a year. So they know that they’ll make it up in volume. So understanding, I think just again, the breakdown of their client pool and how much of that is investor focused. And then just big one, if you are an outstate investor working with the general contractor one, try and get as many referrals as you can, and ideally, referrals that didn’t come or not referrals, references is what I really mean to say here. Try and get as many references as you can. And of course, any references they’re willing to provide the better. But if you can find maybe, I don’t know, from talking to other folks in the community agents, lenders, property management companies like, Hey, what have you heard about this general contractor?
And try and gets some references that way as well. If the PM’s like, oh man, you definitely don’t want to go with John Smith down there because I’ve heard nothing terrible things about him. And you talk to the local lender, they’re like, oh yeah, John Smith, he talks a good game, but he’s not worth his weight. But talk to other folks inside that community and see what their take is on that person as well, because it is easier, I think, as someone who’s not there in that market, and you don’t really have that finger on the pulse to maybe talk to someone who’s a smooth talker and you’re like, man, they’re saying all the right things, but then the project starts and it’s a completely different story. So just trying to do a little bit of homework, trying to do a little bit of research before you get into bed with these guys, I think will be really important.

Ashley:
Thank you guys so much for joining us today. I’m Ashley. He’s Tony, and if you guys have a question, leave it in the BiggerPockets forums or you can DM us on Instagram at Wilford Rentals or at Tony j Robinson. Thanks so much for joining us. We’ll see you guys next time.

Every few years, travel quietly changes its personality. Not in a dramatic, sky-is-falling kind of way. More like when you show up at your favorite restaurant and realize they raised prices, changed the menu, and now you’re supposed to order from a QR code while squinting at your phone like a confused raccoon.

That’s where we are with travel and hospitality heading into 2026. And if you run a short-term rental, these shifts are already showing up in your bookings, pricing, and those increasingly specific guest messages you get at 11 p.m. asking if the coffee maker uses pods or grounds.

Here’s what’s actually happening, and why it matters if you’re trying to fill a calendar this year.

Guests Are Waiting Longer to Book

Travelers are still traveling. They’re just thinking way harder before they hit that Book button.

People are booking closer to their arrival dates, comparing more options, and obsessing over what they’re getting for their money. It’s not that demand disappeared. It’s that guests are shopping like it’s 2009 again, and they just got laid off from Lehman Brothers.

This is why some hosts feel like interest is there, but bookings feel slower or weirdly unpredictable. Your property isn’t suddenly bad. Guests are just doing more homework before committing.

If your pricing strategy only works when people book three months out or when they don’t bother comparing you to the listing next door, 2026 is going to feel pretty uncomfortable.

Taxes and Fees Are Killing Everyone’s Vibe

Between lodging taxes, tourism fees, cleaning fees, service fees, and whatever random charges your city just invented, travel is getting more expensive—and nobody’s happy about it.

Most guests don’t blame you directly. But they do become way more sensitive to whether they’re getting ripped off. They don’t mind paying more. They mind feeling stupid for paying more.

This is why listings that look overpriced relative to what they actually offer are getting destroyed in the booking game. Clear expectations and strong photos matter more than ever. If your listing looks like a 2018 iPhone photo shoot and you’re charging 2026 prices, good luck.

The Flood of New Airbnbs Is Finally Slowing Down

After years of everyone and their cousin launching an Airbnb (seriously, your cousin Todd bought a cabin in the woods and thinks he’s a hospitality mogul now), supply growth is finally cooling in a lot of markets.

That’s not because STRs stopped working. It’s because regulation, financing requirements, and basic reality finally showed up to the party.

This is genuinely good news for operators who know what they’re doing. Fewer new listings means less noise and more room for quality properties to actually stand out instead of drowning in a sea of beige couches and “Live Laugh Love” signs.

The downside? Mediocre listings no longer get carried by market momentum. You either earn your bookings now, or you sit empty, wondering why nobody wants to stay in your generic three-bedroom with the same Wayfair furniture as everyone else.

Guests Actually Care About the Place Now (Wild, I Know)

There was a time when guests just wanted a clean bed, Wi-Fi that worked, and maybe some coffee in the morning. That time is over.

In 2026, the property itself is part of the experience. Comfort, layout, design, cleanliness, and all those small details you thought nobody noticed? Yeah, they’re noticing. Hard.

This doesn’t mean you need to spend $50K on a full renovation with gold-plated faucets. It does mean you need to be intentional about everything. Does the space actually make sense for how people travel? Is the couch comfortable or just decorative? Can someone figure out how to turn on the shower without a YouTube tutorial?

The listings crushing it right now feel thoughtful. The ones struggling feel like someone bought furniture in bulk and called it a day.

Travel Demand Is Spreading Out

Peak season used to mean one or two obvious months when you printed money, and then spent the rest of the year wondering if anyone still knew your property existed.

Now? Demand is showing up in weird places and at weird times.

Fall trips are getting bigger. Shoulder seasons actually matter? Smaller cities and drivable destinations are getting attention because people realized they don’t need to fly to Europe to have a good time. Guests are choosing experiences over Instagram-famous bucket list spots.

This is why markets people used to ignore are quietly outperforming. If you’re still only planning around summer weekends and holidays, you’re missing half the picture—and probably half your potential revenue.

AI Is Already Deciding Where People Go

Guests are using ChatGPT and other AI tools to plan trips, compare options, and narrow down choices faster than you can say “algorithm.” That means listings that communicate clearly and convert quickly are eating everyone else’s lunch. 

You don’t need to sound like a robot wrote your description. You just need to be obvious, helpful, and easy to understand.

Confused guests bounce to the next listing. Clear listings book. It’s really that simple.

Nobody Books in a Straight Line Anymore

The booking process is an absolute mess now. Someone sees your listing on Instagram, checks it on Airbnb, Googles it to see if you’re secretly a scam, sends it to their partner, forgets about it for three days, remembers it at 2 a.m., and then finally books while standing in line at Starbucks.

If you’re only showing up on one platform and hoping for the best, you’re making this harder on yourself. Hosts who appear in multiple places feel more legit and convert better, even if they have no idea why.

It’s not about being everywhere. It’s about not being invisible.

Personalization Is the Advantage Nobody Talks About

Guests notice when a place feels like it was actually designed for them. Not in a creepy surveillance way; in a “wow, someone actually thought about this” way. Some examples:

• Flexible check-in times
• Clear local recommendations that aren’t just Yelp’s top 10
• Spaces designed for how people actually use them instead of how they look in photos
• Kitchen stocked with more than one sad coffee mug

These things don’t cost a fortune, but they completely change how guests feel about their stay and what they write in reviews.

Generic stays get generic results. Thoughtful stays get repeat bookings.

Tech Is Finally Making This Job Less Annoying

The best tech in 2026 isn’t flashy. It’s not some app that promises to automate your entire life while you sip cocktails on a beach. It’s quiet, reduces mistakes, catches maintenance issues before they become disasters, and keeps your cleaners and guests on the same page so you’re not playing telephone at 9 p.m. on a Friday.

Hosts who rely on memory and good vibes are stressed out all the time. But hosts who built actual systems feel calm and maybe even take a day off once in a while.

You don’t need every tool. You just need the right ones.

Hotels and STRs Are Basically Dating Now

Hotels want the flexibility and personality of short-term rentals. STRs want the consistency and operational systems of hotels. The lines are blurring.

Honestly? That’s good for hosts willing to steal the best ideas from both sides. You don’t need room service or a concierge desk. But you do need reliability, clear communication, and a property that doesn’t fall apart the second someone uses the shower.

Borrow what works. Skip what doesn’t.

What This Actually Means for You

Short-term rentals still work in 2026. They just don’t work accidentally anymore.

Guests are more intentional about where they book. Competition is quieter, but way sharper. The hosts winning right now aren’t louder or flashier. They’re clearer, better prepared, and way easier to book.

If your STR strategy still assumes the market will do the heavy lifting for you, this year is going to feel hard. Like really hard.

But if you’re willing to treat hosting like an actual hospitality business instead of a side hustle you check on twice a month, it’s going to feel like an opportunity.

Travel didn’t slow down. It just grew up. And the hosts who grow up with it are going to be fine.

Extreme weather is increasingly raining down on real estate transactions, with insurers and lenders kicking up storms and killing deals if a new metric—a climate disaster score—doesn’t offer a sunny outlook.

As extreme weather events increase in frequency and ferocity nationwide, homebuyers and investors have had to recalibrate their pricing based on a climate risk score, The Wall Street Journal reports. This follows 27 $1 billion extreme weather events in 2024 in the U.S. that caused an estimated $182 billion in damage, according to NOAA data.

The Worse the Score, the More the Insurance Costs

A U.S. Treasury Department report shows that insurance is becoming more expensive and harder to obtain in areas with higher climate risk scores. The danger is clear to small landlords who do not have deep pockets to mitigate a high disaster score: High insurance is a cash flow killer.

This is a contentious issue, with many property owners disputing the scores assigned to their properties. They are not the only ones.

“Accurately estimating future flood risk at every property in a single city or watershed—let alone the entire United States—is fundamentally not possible, given current knowledge,” James Doss-Gollin, an assistant professor of engineering and a climate-risks specialist at Rice University in Houston, told the Journal.

For sellers, including flippers and investors looking to trade up or liquidate, a bad score can derail a deal by scaring away potential buyers and prompting discounts, as acknowledged in a Zillow analysis last year.

How Climate Scores Infiltrated Real Estate Deals

The increase in climate-related insurance losses presented an opportunity for climate analytics firms such as First Street, which has raised vast amounts of Wall Street money when it switched from its nonprofit status to a for-profit company, forming alliances with real estate websites such as Zillow, to offer climate stats to potential buyers and sellers.

Increased data has enabled in-depth climate modeling, offering insights into the likelihood of potential disasters, not just for neighborhoods, but also for individual parcels, including flood, wildfire, wind, heat, and air quality risks, on existing pages with interactive maps and links to First Street’s reports. Zillow described the company as “the standard for climate risk financial modeling” in a 2024 press release, saying the partnership would put the same risk data to use as banks, insurers, and large investors.

The Data Problem

But what if the data were flawed? 

In late 2025, The New York Times reported that the data was turning off buyers from transacting on properties that had not experienced any disaster events in decades. Art Carter, CEO of the California Regional MLS, told the Times that “displaying the probability of a specific home flooding this year or within the next five years can have a significant impact on the perceived desirability of that property.” After a backlash from the real estate industry, Zillow quietly removed prominently displayed climate risk scores from more than 1 million listings in late 2025.

“When we saw entire neighborhoods with a 50% probability of the home flooding this year and a 99% probability of the home flooding in the next five years, especially in areas that haven’t flooded in the last 40 to 50 years, we grew very suspicious,” Carter told the Times.

Despite Zillow’s retreat, other listings sites such as Redfin and Homes.com still display climate risk scores.

“Our models are built on transparent, peer-reviewed science, and the full methodologies are publicly available for anyone to review on our website,” Matthew Eby, First Street’s chief executive, said in a statement to the Times. He added that the company’s models have been validated by major banks, federal agencies, insurers, and engineering firms. 

Eby told TechCrunch: “When buyers lack access to clear climate-risk information, they make the biggest financial decision of their lives while flying blind.”

The Cash Flow Killer: Rising Insurance Costs

For investors, surging insurance costs have become a cash flow nightmare. Reuters analyzed the Treasury’s findings and discovered homeowners in the highest-risk areas paid $2,321—82% more than those in low-risk zones.

Even worse for investors: Those in high-risk areas were also more likely to be dropped by their insurers, according to the Treasury study of over 246 million insurance policies conducted between 2018 and 2022.

Mandated Upgrades and Higher Deductibles

A January 2025 study by commercial real estate brokerage JLL revealed the scale of the challenge for larger multifamily properties. Insurers are demanding higher deductibles while imposing coverage conditions: flood barriers, impact-resistant windows, upgraded roofing, improved drainage, and fire-resistant building materials.

The upside? Owners who complete these upgrades gain access to lower premiums and more favorable terms.  

How Investors Can Lower Their Climate Risk Score and Insurance Costs

Small landlords aren’t powerless against climate risk scores. There are concrete steps you can take to offset the risks, such as strategic site selection, targeted property upgrades, and smart insurance shopping. The key is proving to insurers that you’ve lowered risk and increased resilience. 

As mentioned, data shows that location is still the biggest driver of premiums and nonrenewal risk. According to the U.S. Treasury, owners in the top 20% of climate-risk ZIP codes not only paid about 82% more in premiums than those in lower-risk areas, but faced the highest nonrenewal rates.

A report by global investment group GIC warned that the real estate market could lose up to $559 billion, affecting 28% of real estate asset value in the S&P Global REIT Index, from physical climate risks by 2050. 

According to Climate X, here are specific steps smaller landlords can take to offset their climate-related insurance costs:

1. Buy in low-risk locations: Use First Street’s property-level climate assessments to avoid high-risk areas.
2. Target safer micro-locations: Even if you are in a generally flood-prone area, target properties on slightly higher ground, neighborhoods protected by upgraded/new levees and drainage systems, or fire-susceptible areas. Ensure the property is set back from woodland and constructed from fire-resistant materials.
3. Invest in resilience upgrades: In flood-risk areas, this includes elevating electrical panels, HVAC systems, and water heaters above projected flood levels. Add a sump pump and backflow preventers, and improve site grading and drainage to move water away from the property. For wildfire prevention, create defensible space, and use fire-resistant, resilient materials.
4. Create a paper trail of improvements for insurance companies: Keep detailed records of all mitigation work, including photos, invoices, permits, engineering reports, and code-compliance certificates, to provide clear proof to underwriters that risk has been reduced.
5. Use experienced insurance brokers: It’s worth paying an insurance broker for their expertise in placing coverage in climate-exposed markets.
6. Consider higher deductibles once resilience upgrades have been completed: Industry insurance guides say this move can lower annual premiums while mitigating the risk of high out-of-pocket expenses.
7. Bundle multiple properties with a single carrier: Bundling multiple properties under one insurance roof can increase negotiating power and save around 10%-25% in costs. Also consider special programs that reward “green” buildings and owners with a low claims history.

Final Thoughts

Extreme weather events and climate-related insurance costs have been touted as accelerants of the next real estate crash. Banks and insurers take this seriously, so there’s no getting around it if your business is property investing.

However, now more than ever, people need a place to live, so take steps to ensure your properties can withstand the insurance storm that will rear its head if you invest in a risk-prone area. Take a short-term financial haircut for a long-term gain.