Have Florida’s days in the real estate investment sun come to an end?

That appears to be the takeaway from a new report from brokerage/listing site Redfin, which showed Florida as one of the few states where investment activity—both mom-and-pop and institutional—has declined, while nationally, purchases were up about 2% year over year in the fourth quarter of 2025.

The Sunshine State has experienced a steep decline in investment activity, with major cities down double digits. In Orlando, the 16% year-over-year drop was the largest among the 38 most populous U.S. metropolitan areas Redfin analyzed. Fort Lauderdale was just behind with a 15% drop-off, while further north, Jacksonville was down 7%.

Redfin’s head of economic research, Chen Zhao, said in the report: 

“Some investors are keeping their pocketbooks closed, which eliminates competition for everyday first-time buyers. The pandemic-era investor frenzy that crowded out so many first-time homebuyers has largely fizzled. There are still obstacles for buyers, like high costs, but investors are no longer one of them—at least in many parts of the country.”

The Math for Investors

The reasons for the pullback from Florida are not hard to figure out: rising expenses and stalling rents. While this is true for much of the country, in Florida, those expenses are even more pronounced due to a steep rise in insurance costs. 

Bankrate’s March 2026 homeowners survey put Florida’s average premium at about $5,838 per year for a standard policy with $300,000 in dwelling coverage, more than double the U.S. average of $2,424.

That analysis shows that Florida’s typical homeowner pays roughly $3,400 more per year than the national norm, which is a killer for the modest cash flow that mom-and-pop investors rely on in the current era of high interest rates and rising taxes.

A separate analysis won’t give investors banking on appreciation much solace. Data and analytics site Cotality highlighted several Florida metros, from Cape Coral-Fort Myers to Punta Gorda, as among the most at risk of price declines over the next 12 months.

A Meaningful Rate Change Could Be Monumental

“Lower mortgage rates and more inventory are starting to bring sidelined buyers back into the market—and Florida stands to benefit more than most,” Jessica Lautz, deputy chief economist and vice president of research for the National Association of Realtors, told Yahoo! Finance. “Even a small drop in mortgage rates can unlock thousands of new buyers in Florida. A drop from 7% to 6% could introduce over 6,000 additional buyers each month into the Orlando market alone.”

Higher inventory and lower rates could also bring cash flow back into the equation, especially if price drops coincide with meaningful rate cuts.

But even though some of Florida’s markets are stuttering, it doesn’t mean every market in the state is a bad investment. As expected, Florida Realtors’ January 2026 outlook is rosier, specifically for homebuyers, describing the state’s housing market as moving onto “firmer ground.” It noted that sales have been rising consistently for the first time since rates began climbing in 2022 and that listings are being absorbed.

Where Investors Can Still Cash Flow in Florida

However, for investors, the question is ROI, which is more likely to be found inland, in North and Central Florida, away from the overheated coastal markets.

Multifamily & Affordable Housing Business’s 2025 outlook identified Jacksonville as a strong investment market, driven by affordability, new jobs, and household growth (the increase in occupied housing units). A brokerage-based investing guide on emerging Florida submarkets notes that North Central Florida, specifically Ocala and Gainesville, has appealing rent-to-price ratios and relatively lower insurance and tax burdens than the coastal southern part of the state. It also mentioned stable employment and lower-priced properties that can potentially clear $600-$900 in monthly cash flow.

Other States Are Filling Florida’s Void

As major markets in Florida lose some of their shine, Redfin’s data shows investors gravitating to a diverse mix of markets, including parts of the West Coast, the Carolinas, and affordable “refuge” metros in the Northeast and Midwest. These include markets such as:

• Seattle (investor activity up 37% year over year in the fourth quarter of 2025)
• Portland, Oregon (up 27%)
• Milwaukee (up 24%)
• San Francisco (24%)
• Providence, Rhode Island (up 20%)

However, investments in many of these markets are there for very different reasons. Pricey West Coast markets are attracting deep-pocketed landlords betting on high rental demand driven by the artificial intelligence (AI) boom and tech companies’ return-to-office mandates. Many investors are institutional or wealthy individuals, the Redfin report notes, who can pay cash.

To this end, the report stated that most investor purchases of high-end homes in the luxury market increased 5% year over year as of the fourth quarter of 2025, making it more competitive than the non-luxury market.

Final Thoughts

If you are looking for investing options other than Florida’s coastal markets, it’s best to compare apples to apples. That excludes the high-priced West Coast tech markets. Instead, refuge markets mentioned in Realtor.com’s 2026 Economic and Housing Market Update, as well as other Sunbelt markets in North and South Carolina, will allow you to compare price points and cash flow stats, as well as economic data, jobs, and more with nonperforming Florida markets and find a market that suits your budget. Crucially, markets in economically robust metros where buyers can negotiate a deal are golden for cash flow.

If you are intent on investing in Florida but struggling to make home insurance numbers work, a recent New York Times article reveals that your credit score is often a big factor in predicting your homeowner’s insurance cost.

Zillow’s three biggest buyer-friendly markets for 2026 are Indianapolis, Atlanta, and Charlotte due to lower competition and cooling home values. Jacksonville, Memphis, and Detroit also get honorable mentions, as do other markets in the Sunbelt and the Midwest. 

Fittingly, some of these also coincide with BiggerPockets’ Top Five Cash Flow Markets for Investors in 2026.

This article is presented by Steadily.

Most real estate investors can tell you their ROI down to two decimal places. They can walk you through their expense ratio and their five-year appreciation projection without blinking.

But ask them about their landlord responsibilities? Silence. And that silence is expensive.

I’ve seen some version of this happen more times than I can count: A landlord spends weeks finding the right deal, negotiates a great price, gets their financing in order, and closes with confidence. Then, six months later, they are hit with a habitability complaint, a Fair Housing violation notice, or a liability claim they had no idea was coming. Not because they were reckless, but because nobody ever handed them a clear picture of what being a landlord actually requires.

This post is that picture. Think of it as a self-audit, a plain-English walkthrough of the four categories of landlord responsibility that determine whether your investment is truly protected or just looks that way on paper. 

Responsibility No. 1: Habitability

The moment a tenant signs a lease, you are legally bound by something called the Warranty of Habitability. You do not have to write it into the contract, it is implied by law in virtually every state. And it says one thing clearly: the property you are renting out must meet basic safety and living standards before and throughout the tenancy.

What does that actually mean in practice? Habitability covers more ground than most landlords assume. At a minimum, you are responsible for:

• Structural integrity. Foundation, walls, roof, windows, and doors must be sound and secure.
• Working systems. Electrical, plumbing, and HVAC must function. In states like Arizona, functional air conditioning is a legal requirement due to heat risk.
• Pest control. Infestations are your problem to solve, not the tenant’s.
• Mold remediation. If there is mold, you must address both the mold and the moisture source causing it.
• Smoke and carbon monoxide detectors. Each state sets specific requirements for quantity and placement.
• Common area safety. Stairwells, parking lots, laundry rooms, and shared spaces need proper lighting, secure handrails, and maintained conditions.

The self-audit question that guides you should be: when did someone last physically inspect each of those items at your property?

If the answer is “I am not sure,” that is a gap. And when a habitability complaint hits, “I am not sure” does not hold up in front of a judge. Tenants have legal remedies that range from withholding rent to terminating the lease to suing for damages. The cost of a single habitability lawsuit dwarfs the cost of a quarterly inspection.

Responsibility No. 2: Ongoing Property Maintenance

Habitability may be the legal floor, but maintenance is what keeps you from falling through it.

A lot of landlords treat maintenance as purely reactive. Something breaks; they fix it. That approach is not wrong exactly, it is just incomplete. And incomplete maintenance habits are one of the fastest ways to turn a small issue into an expensive insurance claim – or worse, an uninsured one.

The thing insurance companies know that most landlords do not is that a high percentage of claims are traceable to deferred maintenance. A roof leak that started as a missing shingle, a water damage claim that began with a clogged gutter three seasons ago, or a liability lawsuit from a cracked walkway that someone pointed out in a maintenance request eight months earlier. These are all common and costly maintenance errors.

Your ongoing maintenance obligations go beyond fixing things when tenants call. They include:

• Paying the mortgage on time. Obvious, but worth stating. At 90 days past due, foreclosure can begin.
• Managing utilities. Any utility in your name must be paid. Some municipalities can place liens on your property for unpaid utility bills.
• Scheduling preventive maintenance. HVAC servicing, roof inspections, gutter cleaning, dryer vent cleaning, and exterior walk-throughs should be on a calendar, not waiting for a problem.
• Documenting everything. Invoices, photos, and inspection reports. This documentation is your evidence that you operated the property responsibly. Without it, you have no defense.

The self-audit question here is direct: Do you have a scheduled maintenance calendar for each property, or are you operating on a “wait and see” basis?

Proactive maintenance does two things for you: it preserves the asset, and it builds a documented track record that protects you when something goes sideways despite your best efforts.

Responsibility No. 3: Legal Compliance

This is the category most landlords underestimate, and unfortunately, it is also the one with the steepest penalties.

Legal compliance in property management is not just about avoiding evictions. It covers how you advertise, how you screen, how you handle money, and how you communicate. Get any of it wrong, and you are looking at fines, lawsuits, or both.

The Fair Housing Act

The Fair Housing Act prohibits discrimination in the rental process based on race, color, national origin, religion, sex, familial status, and disability. Violations do not have to be intentional. An ad that says “great for young professionals” can be read as discriminating against families. A policy that bans all pets without a written exemption process for emotional support animals violates the FHA’s disability clause.

First-offense civil penalties can reach $16,000. Repeat violations climb fast. And HUD complaints are not rare.

The Fair Credit Reporting Act

Every time you run a background check, credit check, or pull rental history on an applicant, you are operating under FCRA rules. You must get written permission before running reports. You must protect that data. And if you deny an applicant based on what you found, you must provide a standardized adverse action notice explaining why.

Skipping that step is not just sloppy; it’s a federal violation.

Security deposits, lead paint, and right-to-entry

Security deposits are governed differently in every state. Some states cap the amount at one or two months’ rent. Many require the deposit to be held in a separate account. Most set a deadline for returning funds after move-out, typically 14 to 60 days. Miss that deadline or make improper deductions, and you may owe the tenant two or three times the original deposit.

If your property was built before 1978, you are required by federal law to provide every tenant with a lead paint disclosure before they sign – no exceptions.

Right-to-entry rules also vary by state. Some require 24 hours’ notice before you can enter for a non-emergency. Others require 48 or 72 hours. A few states allow landlords to enter without warning under certain circumstances. Entering without proper notice, even for legitimate maintenance, can give a tenant legal grounds to break the lease.

Self-audit question: When did you last review your lease language and screening process against current federal and state law?

Responsibility No. 4: State-Specific Rules That Change Everything

Here is something that catches out-of-state investors especially hard: what is perfectly legal landlord behavior in one state is a violation in the next one.

Arkansas allows landlords to enter a property without prior notice. California requires a minimum of 24 hours. Kentucky caps small claims court at $2,500. Delaware allows up to $25,000. Some states require security deposits to earn interest. Others have no such rule. Eviction timelines, late fee limits, rent increase notice periods, and move-out inspection requirements all differ by state, and sometimes by city within a state.

If you own property in more than one market, you cannot apply the same playbook across all of them. And if you have not checked whether your state updated its landlord-tenant statutes recently, you may already be out of compliance without knowing it.

The self-audit question: Do you have a current, state-specific understanding of your obligations for every market where you own property?

If the answer is no, that is not unusual. But it is a real gap. Start with your state’s landlord-tenant statutes and run them against your current lease and operating procedures. Bring in a local real estate attorney if anything is unclear.

You Can Do Everything Right and Still Take a Hit

So you ran the self-audit. You checked the habitability boxes. Your maintenance is scheduled and documented. Your lease is compliant with state and federal law. You know your right-to-entry rules and your security deposit deadlines.

That is genuinely solid. Most landlords are not operating at that level.

But here is the part nobody likes to say out loud: Compliance and maintenance reduce your risk, but they do not eliminate it.

A tenant gets injured despite your best efforts. A storm causes damage that your standard homeowners policy does not cover because the property is a rental. You lose three months of rent while a vacancy drags on after a covered loss. A vendor working on your property files a claim, and the liability boomerangs back to you.

These scenarios happen to landlords who did everything right. And when they do, the financial exposure lands directly on the property owner, not the tenant, not the property manager, not the city.

That is exactly where your insurance strategy has to close the gap that compliance alone cannot.

And if you are still carrying a standard homeowners policy on a rental property, I want to be direct with you: that policy was not written for landlords. It does not cover loss of rent. It may not cover tenant-caused damage. Perhaps most importantly in the context of this article, it does not cover liability claims that come from tenants. 

Homeowners insurance was built for owner-occupants, not investors. This is the gap that Steadily was built to fill.

Steadily is landlord insurance coverage designed specifically for real estate investors. Not adapted from a homeowner product, nor pieced together from commercial lines. The products are built from the ground up for people who own rental properties and need coverage that actually matches how they operate.

Here is what that means practically:

• Loss of rent coverage. If a covered event makes your property uninhabitable, Steadily helps replace the rental income you lose while repairs are underway.
• Liability protection. If a tenant or guest is injured on your property, your landlord policy covers legal costs and damages in ways a standard homeowners policy may not.
• Property damage coverage. Fire, storms, vandalism, and more, with coverage calibrated for rental properties, not owner-occupied homes.
• Coverage for all rental types. Single-family homes, multifamily, and short-term rentals like Airbnb. Steadily covers them all nationwide.
• Fast quotes with no paperwork nightmare. Investors can get a quote in minutes, not days. Whether you own one door or fifty, the process is built to move at the pace of your business.

Think about it this way. You just ran a checklist of your four core landlord responsibilities. You identified where your systems are solid and where the gaps are. That same mindset needs to apply to your insurance. When did you last audit your coverage the same way you just audited your compliance?

Most landlords have not. They got a policy when they bought the property and have not looked at it since. That is fine when nothing goes wrong. When something does, that is when the policy details matter.

Steadily makes that audit easy. Their team works specifically with real estate investors, which means they understand what you are protecting and can match your coverage to your actual risk profile, not a generic homeowner template.

Time to Close the Final Gap

You have done the work on compliance. Now do the same for your coverage. Get a fast, free landlord insurance quote from Steadily today at Steadily.com. It takes five minutes. And it might be the most important thing you do for your portfolio this quarter.

Investors with a sizable portfolio of single-family homes have been getting it from all sides recently. A new bill is adding yet more fuel to the fire.

Legislation targeting single-family investors comes from a coalition of Senate Democrats led by Massachusetts Senator Elizabeth Warren, including Oregon Senator Jeff Merkley, Delaware Senator Chris Coons, and 15 other Democratic senators. The group aims to end key deductions for corporate entities that buy up more than 50 single-family homes for rent through their bill, The American Homeownership Act.

In a different and bipartisan measure, the Homes for American Families Act, co-sponsored by Republican Senator Josh Hawley and Democratic Senator Jeff Merkley (who is also involved in the Democratic bill), follows a similar theme but aims the bar higher, amending the Sherman Antitrust Act to make it illegal for investment funds with more than $150 million in assets to buy single-family homes, condos, or townhouses, with enforcement handled by the Justice Department’s antitrust division.

“Families deserve to be able to buy their own homes and achieve the American dream without competing with big investment companies that irrevocably drive up housing prices,” Hawley, a Missouri Republican, said in a statement. “That’s why I am introducing legislation to ban Wall Street from buying single-family homes once and for all.”

Could Mom-and-Pop Investors Be Affected?

While the Homes for American Families Act firmly targets real estate heavy hitters through its $150 million in assets threshold, the American Homeownership Act’s target of companies that buy more than 50 single-family homes for rent could infringe upon mom-and-pop investors who have been accruing their portfolios over the years, often buying fixer-uppers in less expensive areas in clusters when deals became available, particularly after the financial crash.

Senate Democrats’ bill appeared to back away from language that seemed to affect mom-and-pop landlords, allowing investors who buy dilapidated homes to claim tax deductions for rehabbing those properties. However, it does not appear to apply retroactively. For landlords who have long held a portfolio of 50 units or more, whether they were once fixer-uppers or not, the 50-unit threshold still holds, according to Realtor.com and others.

CNBC’s description of the Warren-Merkley proposal says the legislation would prevent companies with more than 50 single-family rental properties from taking deductions for depreciation of housing value and mortgage interest payments. Corporations also would not be able to get federally backed mortgages. The bill would also bar Wall Street investors from buying foreclosed homes sold by a federal housing agency, the New York Times reported.

“Today, Democrats are introducing legislation to stop Wall Street from snapping up homes in bulk and jacking up rent for families,” Senator Warren said in a statement. “This bill will take on predatory landlords while making investments to increase housing supply and boost homeownership for Americans.”

The Trump Administration’s Take

The Trump administration first brought corporate single-family homeownership into the spotlight with its proposal banning investors who own more than 100 single-family homes from buying any new ones. Trump’s proposal includes exceptions for companies that increase the number of single-family homes.

This appears to have been amended more recently, according to the Washington Post, with new legislation unveiled on March 2 that includes incentives to build new housing and grants to renovate older housing. Also, the ban on large investors has been expanded to include those owning 350 single-family houses, at President Trump’s request.

The new legislation was spearheaded by Senate Banking Committee Chairman Tim Scott (R-South Carolina) and Senator Elizabeth Warren. The new legislation has been dubbed the 21st Century ROAD to Housing Act. It still needs enough House members to support the plan for it to pass.

Corporate Ownership Is Higher in Sunbelt States

The deluge of bills addressing single-family-home corporate ownership comes as high housing costs have made homeownership difficult for many Americans. Homebuyers need to earn 43% more than the median worker to be able to afford a typical home, according to Federal Reserve data.

Although nationally, large institutional investors only own 3.8% of all single-family rentals, the numbers vary across the U.S. In Sunbelt cities like Atlanta, for example, according to a 2023 Urban Institute analysis, large investors owned about 28.6% of such homes. That number was 20% in Charlotte and 9% in Houston.

“It would make a significant difference in these places, where it’s an outsized issue,” Colin Allen, executive director of the American Property Owners’ Alliance, a homeowners’ advocacy group, told CBS News. “But they own a small share of homes overall.”

The rhetoric from those proposing bills, from both sides of the aisle, barely differs. With midterm elections coming up, this is clearly an issue that all sides want to address.

“Now with bipartisan support, we have wind in our sails to finally crack down on billionaire corporations gobbling up American homes,” Merkley said in a joint statement. 

Supply Is the Root Issue

Pricing wouldn’t be so prohibitive if there were more houses. The supply-and-demand issue is complex and involves land and construction costs, zoning, and possibly immigration and tariffs.

“We have to build more homes and look at policies that allow us to expand supply,” Allen told CBS News.

Edward Pinto, co-director of the AEI Housing Center at the American Enterprise Institute, a nonpartisan think tank, is unconvinced about how much impact curbing large investors’ purchases of single-family homes will have on the ground, making homeownership more affordable for American families.

It “is not going to have much of an impact—if any—on making homes more affordable,” Pinto told CBS News. “It just gives the impression of doing something positive, and so it may have some attractiveness on both sides of the aisle, but it’s not going to solve any problems.”

Final Thoughts

With so many competing bills in the race, it’s unclear which one will cross the finish line. One bill might pass that combines proposals. Given Trump’s position, it seems likely that his bill with a 350-single-family-home threshold stands a good chance of passing.

However, should the other Warren-led bill be approved, and you are an investor with around 50 units, the workaround is quite simple—1031 exchange some of those for two-to-four-unit homes, as small multifamily properties are not under discussion in any of these bills. 

Equally, if you are an investor looking to aggressively scale your portfolio, sticking to small multifamilies will keep you out of the spotlight while you enjoy all the tax breaks that come with real estate investing.

Foreclosure markets tend to speak in stages. Early filings hint at pressure. Auction notices confirm momentum. And when Notices of Sale accelerate, it signals that distress is no longer theoretical—it’s moving rapidly toward resolution.

According to ATTOM Data Solutions, December 2025 marked a major inflection point in the foreclosure pipeline. After a strong but uneven fall, foreclosure auction activity surged sharply nationwide, pointing to a growing wave of properties advancing toward the courthouse steps.

For real estate investors, the Notice of Sale stage is one of the most actionable moments in the foreclosure process. It provides defined timelines, clearer visibility, and a direct window into which markets are likely to produce both auction opportunities and future REO inventory.

December’s data shows that auctions are not only increasing—they are doing so aggressively across several key states and counties as we head into 2026.

National Notice of Sale Activity Jumps Sharply

According to ATTOM Data Solutions, 23,235 Notices of Sale were recorded nationwide in December 2025, representing:

• +25.10% month over month
• +67.99% year over year

This is one of the strongest year-over-year increases in auction-stage filings seen in recent years. While Foreclosure Starts surged earlier in the month, the Notice of Sale data confirms that distress is now maturing rapidly.

In simple terms, this means more properties are advancing past early filings and entering the final countdown to auction.

State-Level Auction Trends: Five Key Markets in Focus

Florida

Florida’s auction pipeline reaccelerated sharply after November’s pullback. Nearly 50% year-over-year growth confirms that foreclosure activity remains deeply embedded in the state’s housing market.

• 1,056 Notices of Sale
• +24.24% MoM
• +49.58% YoY

California

California’s auction activity rose meaningfully in December, particularly after several quieter months. This suggests that earlier filings are now pushing into the sale stage.

• 1,315 Notices of Sale
• +14.07% MoM
• +25.60% YoY

Ohio

Ohio delivered one of the strongest auction surges in the country. Nearly 76% year-over-year growth signals a pronounced acceleration into late-stage foreclosure activity.

• 688 Notices of Sale
• +28.78% MoM
• +75.51% YoY

North Carolina

North Carolina continues to stand out. Auction filings more than doubled year over year, reinforcing its reputation as one of the fastest-moving foreclosure states.

• 610 Notices of Sale
• +12.46% MoM
• +131.94% YoY

Texas

Texas recorded the highest volume among all states. With a non-judicial foreclosure process, auction notices often follow closely behind Starts—making Texas one of the most dynamic foreclosure markets in the country.

• 4,104 Notices of Sale
• +36.35% MoM
• +58.09% YoY

Why the Notice of Sale Stage Matters to Investors

For investors, the Notice of Sale phase represents a critical transition point.

1. Timelines become defined

Once a Notice of Sale is recorded, an auction date is typically set within weeks. This clarity allows investors to:

• Perform focused due diligence.
• Line up capital or financing.
• Evaluate repair scope and exit strategy.
• Decide whether to pursue pre-auction negotiations.

2. Distress becomes actionable

Properties at this stage are far less likely to cure. While some homeowners still resolve their situation, the probability of sale—or eventual REO—rises sharply.

3. Auctions forecast REO inventory

When Notices of Sale increase, REOs usually follow 60–120 days later, particularly in states with faster foreclosure timelines.

For investors who prefer bank-owned properties, auction data acts as an early warning system for future supply.

County-Level Insights: Where Auction Pressure Is Intensifying

Looking beyond state totals, county-level data reveals where the most meaningful auction-stage changes are occurring.

Florida: Central Florida, and urban cores reignite

Florida’s December surge was driven by:

• Orange County (Orlando), which posted a notable jump in auction filings.
• Lee County, continuing its steady progression from Starts into sales.
• Miami-Dade County, which rebounded after a softer November.

Investor insight

Florida’s auction activity is broad-based, with both urban and investor-heavy markets contributing to rising volume.

California: Inland Empire pushes forward

California’s December increase was led by:

• Riverside County, where auction notices rose sharply.
• San Bernardino County, continuing its role as a foreclosure bellwether.
• Los Angeles County, which showed a moderate but meaningful increase.

Investor insight

The Inland Empire remains one of California’s most consistent sources of auction inventory.

Ohio: Auctions accelerate in Central Ohio

Ohio’s spike was concentrated in:

• Franklin County (Columbus), which recorded one of the largest MoM increases statewide.
• Cuyahoga County (Cleveland), rebounding after earlier softness.
• Montgomery County (Dayton), contributing to the statewide surge.

Investor insight

Central Ohio continues to transition quickly from early-stage filings into auctions.

North Carolina: Rapid conversion continues

North Carolina’s extraordinary YoY growth was driven by:

• Mecklenburg County (Charlotte), with a clear increase in scheduled sales.
• Wake County (Raleigh) continues to show elevated foreclosure velocity.
• Guilford County, adding to statewide totals.

Investor insight

North Carolina’s foreclosure pipeline is moving faster than most states, compressing timelines for investor action.

Texas: Volume and velocity

Texas’ December auction surge was widespread:

• Harris County (Houston) led the increase.
• Dallas and Tarrant counties posted strong gains.
• Bexar County (San Antonio) continued its upward trend.

Investor insight

Texas remains the fastest foreclosure market in the country—Starts often translate into auctions in weeks, not months.

How Investors May Use Notice of Sale Data

Notice of Sale data may help investors:

1. Target auction-heavy counties where inventory is increasing.
2. Prepare capital earlier, especially for retirement account strategies.
3. Forecast REO opportunities before they hit the MLS.
4. Align acquisition strategies with clearly defined auction calendars.

For investors using a Self-Directed IRA or Solo 401(k), the Notice of Sale stage offers a balance between urgency and preparation—more defined than preforeclosure but less rushed than the auction itself.

Disclaimer

Equity Trust Company is a directed custodian and does not provide tax, legal, or investment advice. Any information communicated by Equity Trust is for educational purposes only and should not be construed as tax, legal, or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional.

BiggerPockets/PassivePockets is not affiliated in any way with Equity Trust Company or any of Equity’s family of companies. Opinions or ideas expressed by BiggerPockets/PassivePockets are not necessarily those of Equity Trust Company, nor do they reflect their views or endorsement. The information provided by Equity Trust Company is for educational purposes only. Equity Trust Company, and their affiliates, representatives, and officers, do not provide legal or tax advice. Investing involves risk, including possible loss of principal. Please consult your tax and legal advisors before making investment decisions. Equity Trust and Bigger Pockets/Passive Pockets may receive referral fees for any services performed as a result of being referred opportunities.

This article is presented by Proper Insurance.

Waterfront short-term rental properties rarely struggle with demand. Whether it is a lakefront cabin, beach house, or riverfront retreat, these homes command premium nightly rates because they offer the kind of experience travelers actively seek out.

But the same features that make waterfront short-term rentals attractive to guests also increase their risk profile.

Between docks, hot tubs, boats, and outdoor recreation, guests tend to spend more time outside and around the water. That introduces liability exposures that many standard landlord insurance policies were never designed to handle.

If you operate a waterfront short-term rental, here are several coverage areas worth reviewing closely.

1. Off-Premises Liability

Many investors assume their policy protects them as long as an incident happens on their property. In many cases, standard landlord policies stop coverage at the property line.

That becomes a problem for waterfront rentals where the guest experience naturally extends beyond it. Guests may swim off the dock, paddle into open water, or spend time along nearby shoreline areas connected to the property.

If an accident occurs in those areas, the property owner can still be named in a lawsuit, and without coverage that responds, they are left to face legal fees and any settlement or judgment on their own, even if the policy does not respond.

Policies designed for short-term rentals address this more directly. The Commercial Homeowners policy from Proper Insurance includes off-premises liability as a standard feature, helping extend protection beyond the physical property when guests are using nearby recreational areas tied to the stay.

2. Amenity Liability

Amenities are often what justify the premium nightly rate of a waterfront short-term rental.

Pools, hot tubs, docks, paddleboards, bikes, golf carts, and small watercraft all enhance the guest experience. They also increase liability exposure.

Many standard landlord policies exclude these features or require separate endorsements. In some cases, owners do not realize the limitation until a claim occurs.

Short-term rental policies are structured with these amenities in mind. Coverage from Proper Insurance extends liability protection to common guest amenities such as pools, hot tubs, bikes, golf carts, and small watercraft without requiring multiple add-ons.

For high amenity waterfront rentals, confirming these features are actually covered is essential.

3. Business Activity Exclusions

Short-term rentals are legally considered a business activity. That can create problems with standard landlord or homeowner policies.

Many include what is known as a business pursuit exclusion. This can void coverage for liability claims that occur during a guest’s stay.

Incidents such as guest injuries, slips and falls, or accidents involving amenities may not be covered under traditional policies.

There is also another exposure many owners overlook: liquor liability. Alcohol is common during vacation stays, but standard landlord policies typically exclude incidents involving alcohol entirely. This includes furnished alcohol — a bottle of wine left as a welcome gift or alcohol remaining from a previous stay. If furnished alcohol is present at the property and is involved in a liability incident, standard policies typically will not cover it.

Insurance designed specifically for short-term rental operations removes many of these exclusions and aligns coverage with how the property is actually used.

4. Business Income Protection

If a covered loss forces your property offline, the financial impact can be significant. This is especially true for high-demand waterfront rentals.

Traditional landlord policies calculate loss of rents based on average long-term rental rates in the area. For short-term rentals, this often underestimates the actual income a property generates during peak booking seasons.

Short-term rental policies approach this differently by structuring business income coverage around short-term rental revenue models instead of long-term leases.

For waterfront properties that depend heavily on seasonal demand, that difference can have a major financial impact after a loss.

5. Additional Environmental Risks

Flood exposure and environmental factors are realities for many waterfront properties, but they vary widely by location.

Risk levels depend on elevation, proximity to tidal water, regional weather patterns, and local floodplain designations. FEMA flood maps can be a helpful starting point, though interpreting what they mean for coverage is not always straightforward.

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Final Thoughts

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Dave:
AI is coming for the labor market, or so every expert seems to be saying from Elon Musk to Jack Dorsey, to Sam Altman, a major disruption in the labor market, one that disproportionately impacts white collar workers could be heading our way. And if it does, it will ripple through the entire real estate market, impacting everything from regional housing demand to rent prices, and yes, even to mortgage rates. So today and on the market, we’re diving into a recent report detailing which jobs are the most likely to be impacted, how this could play out in housing, and what real estate investors should do about it.
Hey everyone, it’s Dave Meyer, Chief Investment Officer at BiggerPockets. Welcome to On the Market. Today on the show, we’re going to dig into what is being labeled the white collar recession. Basically, most of the studies and information that we have are showing that AI is coming for our jobs. Well, not actually all of our jobs, at least not yet, but some industries do seem particularly vulnerable and that really matters for real estate investors and for the broader economy. What recent evidence shows is that we may be at a sort of turning point for the jobs market. And this may not be the type of normal labor cycle that we’ve seen in the past where layoffs are sort of temporary and then they recover when the economic cycle shifts. Instead, we might actually be looking at sort of a generational shift in what industries are hiring, which industries are shrinking payrolls and which are going to pay the most in the future.
And if all of this does indeed happen, the implications are far reaching for the economy and the housing market. So in this episode, what we’re going to do is we’re going to cover first a new report from Anthropic, which is an AI company. They make a tool called Claude, if you’ve ever heard of that. They use their own data to show what industries are being impacted so far and which might be impacted in the near future. We’re going to talk about the current state of the labor market, and then we’ll shift into talking about what this means for housing, what regions and asset classes could be impacted, and what you should do about this with your own investing and portfolio. So let’s get into this. First up, let’s talk about the state of labor market as it stands today. We just got the jobs report actually last week for February, and it wasn’t good.
There’s really no way to mask it. It was a bad report. Non-farm payrolls fell by 92,000 jobs in February alone, and unemployment ticked up to 4.4%. Now, it’s important to remember, 4.4%, still very low historically speaking. A lot of people might point out unemployment rates, not a great metric. It’s not, but it is important that it is going up. I mean, it signals that things are not heading in the right direction. We also saw some downward revisions for jobs from previous months, just making the whole general labor situation a lot less stable. Now, of course, not all industries are impacted the same. Just like in real estate, not every market is impacted by macro trends the same. Same thing happens in the labor market. And we are not seeing uniform weakness. What we’re seeing is particular weaknesses in what are known as white collar jobs.
Never heard of this term. Basically, these are things like finance or insurance or tech or just general business. They tend to be higher paying jobs and they are a big part of the economy. According to some studies, these kind of jobs account for 40% of US GDP, that’s super high, and 20% of all employment. Now, normally, for decades, honestly, these industries added jobs very steadily. Of course, recessions are sort of the exception there, but during normal times, these industries in general were growing. However, over the last three years, they have on net cut jobs despite the fact that the economy has been growing and GDP has been growing. So the idea that white collar jobs are going to be impacted isn’t new. It’s actually a trend that has been developing for years. From 2010 to 2019, these industries were adding a lot of jobs, like 570 jobs per year on average.
But in the last three years, they’re losing an average of 190,000. So that’s a really big shift. You’re talking about a net shift of 750,000 jobs per year. In just the last couple of years, we’ve just seen postings for these kinds of jobs go down from the beginning of 23 to beginning of 2025. White collar job posting fell 36%. We’ve seen software developer jobs being absolutely crushed. They’ve dropped more than twice the overall rate. And it’s not just software developers, business analysts, market research, data entry people all getting impacted. Now, you might be thinking this happens, right? Layoffs happen, and that is absolutely true. They are an unfortunate part of the economic cycle. But there is some reason to believe, both from evidence and just logic that this economic cycle or this cycle in the labor market might be a little bit different. If you look at the types of layoffs that are happening, you see that we’re moving from times where companies would make big announcements, huge layoffs that would happen kind of infrequently.
Every couple of years, they’d announce they’re cutting a couple thousand jobs for a big public company. Now what is happening is that you’re seeing more frequent, smaller kinds of layoffs. People where they’re laying off 50 or 100 people at the time. Now, not all companies are doing this. We’ve seen massive layoff announcement from Amazon to UPS to Starbucks. Those are still happening. But if you just look across some of the trends, you’re seeing more frequent, smaller layoffs in economy-wide. And these are being called quote forever layoffs because they kind of just are cycling. People are constantly worried about their jobs because they don’t know when the next layoffs are coming. And these forever layoffs now account for the majority of layoffs. And that’s why you may not have noticed that this is happening over the last three years. I know a lot of attention is getting called to it now because of AI, but this has been happening for three years.
We should know ChatGPT has been around for about three years, three and a half years, so maybe there is a correlation there. But the reason it hasn’t been so noticeable is that it’s more of a slow bleed. This isn’t an event. It’s kind of something that’s just been happening, and that makes it a little bit harder to track. So why is this happening? Now, I mentioned AI, and obviously we’re going to get into that in just a minute. We’re going to go deep on the AI thing in a minute. But I actually think there are three different things converging here all at once. First and foremost, in 2021 and 2022, companies overhired. Remember how tight the labor market was back then? People were jumping from job to job. People were getting massive raises. There was just not enough labor for the demand during that booming economy.
And frankly, I just think companies overhired. So starting in 2023, about three years ago when we started seeing these things happen, they were just cutting back. Corporate speak, people like to use the word right sizing when they’re laying off because they’re saying they overhired and they’re just getting it back to the right size. I hate that term, but I do think it’s kind of true right now that we are seeing companies sort of revert back to what their payroll should look like instead of what they were hiring for in 2021 and 2022. Then this sort of continued, right? In 23 and 24, we got a lot of automation, a lot of AI, new software, and they found that most companies found that they could just basically keep cutting jobs, even if it’s slowly 20 here, 50 here, a hundred here, they could keep doing that.
And now the third thing is in 2025 and 2026, we’re getting more AI advances that allow them to hire even less or layoff even more, or they’re just anticipating that more AI disruption is coming or AI capabilities, I should say, and so they don’t need to hire as much. And that brings us back to the big news from last week when Anthropic, the AI LL company that makes the product Claude, released a new report using their own data, detailing where they think the labor market is going to be disrupted most. And it’s kind of scary. I got to be honest with you, I looked at this report and I was like, wow, this is really going to change the entire face of our economy if it comes true. Let’s just remember here before I dive into this, this is one company and they’re finding there’s not really evidence that this is happening at scale just yet, but I do think the data is good enough that we should be talking about it.
So I’m going to dive into it. And you actually may have seen this chart. It’s been circulating on social media a lot. I actually put on my own Instagram. You can check that out at the data deli. We’ll also put it in the show notes. But basically it’s this big radial chart that shows two different things. There’s one thing, it’s the blue on the chart if you’re actually looking at it. That shows the potential for AI to disrupt the industry. And then there’s a much smaller sort of red area on the chart, and that shows where AI is actually being disruptive here today. And when you look at this chart, you see that the potential for disruption is just massive, at least according to anthropic in certain industries. When you look at business and finance, tech, legal work, arts and media, office admin, architecture, engineering, sales, life and social science, all of these are showing that the majority of their work can be done by AI.
That is a little bit scary, right? We are seeing huge numbers of industries that potentially could be completely disrupted. Now, I think it’s important to call out that that red section where we are seeing, is it actually disrupting? Not really. Most the biggest ones are sort of in tech, business and finance. They’re saying about 30 to 40% maybe disruption at this point, but they’re pointing out that that could get much bigger. But again, really important to call out that the disruption is not happening yet. What I take away mostly from this report is that they’re saying they think that these industries may be entirely disrupted by LLMs. Now, they’re not saying 100% replacement of humans, but they’re just saying there’s going to be a lot of overlap between what an LLM can do. That’s a large language model that’s something like ChatGPT or Claude where you talk to it, that a large language model can do and what a human can do.
Now, the reason this is sort of perpetuating the fears of a white collar recession is because the industries that I just named are basically the highest paying industries out there. The most at-risk workers earn 47% more on average than workers with no AI exposure and tend to have graduate degrees or advanced degrees as well. Now, if you look at the other end, the income spectrum, it’s totally different. It is not really hitting industries like construction, agriculture, healthcare, manufacturing, transportation. All of those, at least Anthropic is saying their tool clot based on what they’re seeing, how people are using it, what is required in those fields, at least as of now, they’re not likely to be impacted. Remember here, we’re talking about large language models. These are like the question and answer talking format things that you see in ChatGPT or Claude or Gemini or whatever.
We’re not yet talking about robotics. That might be in a year or five years or 10 years. I don’t know, but we’re not talking about robotics. So just keep that in mind. So big picture here, white collar industries likely to be impacted according to Anthropic, other industries, lower paying industries, more of the trades, those kinds of things not going to be impacted by LLMs anytime in the near future. Now, of course, not all of this has played out yet, but we are starting to see some declines in hiring, but as of right now, it is mostly hitting younger workers, not due to layoffs, but due to declines in hiring. They’re actually seeing, I saw some data that there’s a 16% fall in employment among workers age 22 to 25 in exposed occupations. And that’s basically what Jerome Powell has been saying. If you listen to the Fed chair, he’s been saying that we’re in a quote, no hire, no fire economy, because layoffs haven’t been huge.
Like I said, we’re getting this slow grip of layoffs, but not these huge events or cliffs where there’s massive layoffs all at once. Sure. Individual companies are doing that, but if you zoom out and look at the whole economy, we’re not seeing mass waves of layoffs across tons of different companies at the same time. So that’s why it’s been described as this no hire, no fire economy, which is where we are today. But if you believe this data and you look at some of the trends, they’re suggesting that things could get worse and unemployment might go up. Now, I want to remind you all too of something that I’ve been saying for a while, why I’ve been fearful about the labor market and been making episodes about this because one, it has a lot to do with housing markets, which we’re going to talk about in a minute.
But I also believe that the nature of this economic cycle of what’s going on in the labor market is not really something that the Fed can fix. We talk about this all the time. “Oh, the Fed, they should lower rates so that the labor market does better.” I don’t know. I don’t really think companies are all of a sudden, if you lower the federal funds rate by 50 basis points, are they all of a sudden going to be like, “You know what? I’m not going to use Claude, not going to use ChatGPT. I’m going to go hire someone again.” I don’t think so. I just don’t see that happening. Normally, the Fed lowers rates to encourage companies to expand and hire, but is that really going to matter if jobs are being replaced with AI? Hiring is not slowing because interest rates are high, in my opinion.
There are in some and maybe in manufacturing, maybe in some areas, but personally in tech, I don’t really see that as the reason why hiring’s slowing. And I just think it’s more because either AI is disrupting things or companies are banking on AI disrupting things. So I find this report fairly compelling, and it’s not this alone. I’m looking at this just logically. I have a lot of friends who work in tech or in white collar jobs. If you combine this with the trends that we’re seeing in employment, the revised down jobs numbers over the last couple of years, this report and just logic. If you just use an LLM, you can see that this is going to replace some level of work, right? I believe that this is something that we should prepare for. Is it going to happen exactly like this? We don’t know.
Probably not exactly like this either, but it is something I think we should at least be talking about and preparing for. So after this quick break, we’re going to talk about how this could spill over into the housing market and what you should do about it. We’ll be right back.
Welcome back to On The Market. I’m Dave Meyer today talking about the potential for a white collar recession. We talked before the break about jobs data that we’ve gotten in the beginning of this year and a report from Anthropic about what industries could be impacted the most. So in this next section of the show, we’re going to presume that Anthropic is right, and we’re going to see rising unemployment in white collar industries. Now again, we do not know if that’s going to happen. The unemployment rate overall remains pretty low, but I believe that there is risk. I’m not freaking out, but I do think there is risk here and it’s something we need to watch and it’s something we need to talk about the potential consequences of. So let’s get into it. In a scenario where job losses mount in these white collar industries, the way I see this could possibly spill into the housing market, sort of like the order of operations, the mechanism for how it could move into housing is first and foremost, sales volume is probably going to drop because buyers step back.
If all of a sudden we see a lot of layoffs, this is what happens anytime there’s large increases in unemployment, we see sales volume drops. Then we’ll probably see lenders start to tighten their credit, right? They won’t be as willing to give mortgages to people who might be losing their jobs that can negatively impact the market. Sellers could start selling, but I think they’re probably more likely to cling to their low rate mortgages unless they are forced to move because as a reminder, just the way things have gone in the last couple of years, for a lot of people, paying your mortgage is cheaper than renting. So it doesn’t really make sense to panic, sell your house and then move into a rental if you’re just going to be paying more. So I do think that’s an important thing to remember here that sellers, unless they are forced to sell, are likely to hold onto their homes.
We’ll definitely see days on markets start to rise as demand drops and credit tightens, and we’ll probably see prices decline. Not everywhere, of course, but in areas with high concentrations of white collar workers, I do think we will see price declines in those market if this all plays out. And I think it’s important to remember that what I just said, those things happening would be happening in addition to a market that is already slow. We saw pending home sales fall 6% year over year through February 2026, and it was already slow in 2025. That was the largest decline we have seen in a while, the typical home now taking 67 days to go under contract, which isn’t crazy, but it’s a week longer than it was last year, and it’s the slowest it’s been since 2019. We also, before unemployment goes up, our seed people worried, right?
Two thirds of people in a recent survey said that they’re either somewhat or very worried about possible jobs cuts in their workplace in the next year, and over 60% were worried about losing their own job or having their hours reduced. And so if you just look at these things, I think there is a chance unemployment goes up, but the fact that people are fearful alone is already suppressing transaction volume even before those actual job losses could potentially accelerate. So just remember that we’re starting from a very slow point and it could get even slower. So my main thing is that it will probably suppress overall demand in the housing market, but I also think it could really impact one of the more active parts of the housing market right now. We’ve talked about on the show, I’ve done whole episodes on the quote unquote K-shaped economy that basically wealthy people are spending a lot of money, people on the lower end of the income spectrum are not spending a lot of money, and that is reflected in real estate too.
We see luxury homes selling pretty well right now, high income people still buying houses. And if the professional class for these white collar workers that sort of anchor the, let’s call it the top half of the K, it’s not half, but let’s call it like the upper leg of the K, it’s usually about 20% in most analyses, 20%, if that starts to erode, the upper tier of housing market could start to lose its floor and start to drop down a little bit. And again, transaction volume will be impacted as well. So just keep a lookout for those things if demand starts to decline. But don’t freak out just yet because demand going down, this is what people on social media and YouTube often get wrong, is that demand going down does not mean a crash. And there are important things to remember here on top of just demand.
First is supply, right? You got to think about which way supply is going to go. Now, a lot of people might say people are going to panic sell their homes and there is a chance that could happen, but I actually, where I’m sitting right now, I think supply could go either way. I think it’s possible that inventory actually goes down. If people are scared, they don’t want to move, they don’t want to rent a house that’s more expensive than their current mortgage, that could actually lower total new listings and that could offset lower demand. That would lower transaction volume, right? When demand and supply shrink at the same time, that can lower transaction volume. It does lower transaction volume, but it means that pricing could actually stay stable. It might fall a little bit, but it’s not going to go into any sort of free fall.
So I think that is a very likely scenario that we see even if demand declines. Now, of course, it could go the other way. I think if things get really ugly, if we see a huge spike of employment, as I’ve been talking about for a while, I remember at the beginning of the year I said I thought there was about a 15, 20% chance of a crash, and that would happen if we saw a huge spike in unemployment. So if we see a spike in unemployment, we could supply go up. People start to panic, they can’t make their mortgage payments. That’s when we see the potential for bigger price declines. Not going to say a crash because I think it’s far too early to predict anything like that. We don’t really have any evidence of force selling right now, but I do admit that the risk of bigger price declines happens to be going up.
I said last week on the show, I think it’s gone from about a 15% chance of a crash to about a 20, 25% chance of a crash. And I’m saying 10% price drops or bigger, but I think the risk that we see two to 5% declines is pretty high, but that’s what I predicted back in November before any of this data came out. So I think that correction, probably still the most likely outcome. But just want to remind you all, keep an eye on the supply side because that tells us where prices are going. You can’t just look at demand in a vacuum and say what’s going to happen. You have to look at both. And I think what will happen with supply depends on how severe. If we see unemployment hit eight, nine, 10%, probably going to see big declines in the housing market, but we’re a long way away from that.
We’re at 4.4%, and although eight doesn’t sound that different, it’s very different in a historical context. 8% unemployment rates are very rare, and although it can happen, it doesn’t look like we’re imminently approaching that. So that’s number one thing to look at in addition to demand is the supply side. The second thing to remember, super important here, is mortgage rates. If there is a huge increase in employment, and we see a traditional recession, or even if they don’t call it a recession, because I think that’s stupid, but whatever they decide to do, if we see a big increase in unemployment, it is probably going to bring down mortgage rates. That is the one thing other than quantitative easing that could really bring down mortgage rates in the foreseeable future. Because fear of recession caused by higher unemployment will probably send bond yields down as investors seek safety, and that takes mortgage rates down with them.
How low? I don’t know. I really don’t know. It depends on if the Fed does quantitative easing. If things get really bad and they do quantitative easing, we could see mortgage rates in the fours, maybe in the threes, but I do not think that is the most likely scenario. I think instead we could see bond yields fall into the low threes. Maybe we get mortgage rates towards five or potentially into the high fours. Depends how bad the recession gets. I’m not telling you this though to make predictions about mortgage rates. I’m sticking with my mortgage rate prediction for the year right now, but I am just saying some of the potential downside in the housing market of big job losses could be offset by higher general affordability due to lower mortgage rates. This is one of the reasons why I think a crash is not the most likely scenario still and why I still think a correction is more likely because even with lower demand, things like lower supply and lower mortgage rates could offset some of the impact of that unemployment.
So just keep those in mind. Those are the three variables we’re going to watch, supply, demand, and mortgage rates. And even if demand goes down because of high rising employment, we got to keep those other two factors in mind. But as we all know, even if all of this happens, not all markets are going to be impacted the same. And when we get back from this short break, we’re going to talk about which markets are at risk, which ones are the most resilient and what you should do about it.
Welcome back to On The Market. I’m Dave Meyer talking about a potential white collar recession and what it means for the housing market. And before we get into some of the regional differences that we are forecasting and get into those geographies, I think I’m just going to state the obvious. I kind of mentioned it before, but if we’re talking about where the risks are, where the opportunities are, I just want to say that the higher end of the market could be impacted, right? If white collar workers are getting laid off disproportionately, more expensive homes are the ones that are going to get hit the hardest, right? So just keep that in mind, more sort of workforce, starter home kind of homes probably going to be relatively more resilient, but personally, I think the regional differences are the real things to pay attention to. The housing impact, I think, is going to be felt first and foremost in cities that have really high concentrations of tech employment or white collar employment, where the proportion of people who work in these white collar jobs is high.
In these markets, home prices could fall. Now, I am not going to make predictions generally about all of them, but I do think that we could see single digit declines in the mid single digit declines in a lot of these markets. These are markets like Washington DC and Chicago, Dallas, Boston. We actually, if you look at the data, you could see that in these kinds of markets between the beginning of 2023 and the beginning of 2025, they had some of the highest proportion of declines in job postings for white collar jobs. And there are jobs where the overall labor pool is disproportionately built on, unfortunately, the jobs that are at risk. In addition to that data, I’m just going to call out two markets in particular, Seattle and San Francisco. These are two of the biggest, if not the biggest tech hubs in the country.
You actually don’t see them on the list. Maybe because they are sort of home to the biggest AI companies like both of these cities, home to Amazon and OpenAI and Meta and Google and Microsoft, and maybe there’s less anticipated impact because they also are the core of the AI boom. But personally, I live in Seattle. I think there is still risk in these markets. You’re seeing Amazon lay off 30,000 workers, that’s going to impact Seattle where Amazon is based. So I think all of those kinds of markets, I think you would be remiss not to mention places like New York as well, big tech finance concentrations as well. So a lot of those big major markets, but also the Sunbelt too. I think the Sunbelt continues to see compounding problems, right? They have been struggling for a while due to rising prices, to increased insurance costs, all this rising taxes, all this stuff is going on.
But also partly because all of these pandemic era remote workers that moved to Florida or to Texas or to Arizona, a lot of them have had to return to office, which has reduced overall demand. And now that the remote work migration is sort of reversing, that could accelerate it, right? If you’re seeing white collar workers, even the ones who can still work remote, if those people start to lose their jobs, this would probably accelerate the correction in a lot of Sunbelt markets that are also oversupplied right now. So I do think those markets are at risk as well. Now, the markets that I think are most insulated, I think are markets that are mostly focused on the trades or healthcare heavy metro areas. These are small mid-size cities that are sort of affordable rents that I talk about all the time. Affordability is going to drive the housing market.
And I think that this is true because we see a lot of markets like Columbus or Indianapolis or Cleveland or Kansas City, they have employment bases that are concentrated in healthcare or manufacturing or logistics or the trade and have lower overall exposure to AI displacement and they happen to be more affordable. So I think that those are going to be the most resilient markets. These are a lot of the markets in the Midwest and some in the Northeast. I’ll call out a couple of sectors here. I think personally, healthcare is a really good thing to look for if you’re trying to find markets that are going to be resilient. Healthcare, pretty key defensive sector. If you look at the jobs numbers over the last couple of years, it’s the largest growing area. I think there’s a lot of tailwinds there. If you look at baby boomers aging, there’s probably going to be a lot more hiring in healthcare as well.
And those are pretty high paying jobs that aren’t likely to be disrupted by AI in the short term. So that’s sort of how I break down regional differences. I also want to just mention that I said at the beginning of the year, I know a lot of people are forecasting rents going up, but partly because of weakness in the labor market, I said,” I don’t think rents are going to go up. “You might remember, I was debating my old boss and friend, Scott Trench about this where he said he thought we were going to see massive rent growth in the back half of this year. I just don’t think so. I really don’t think so. If we’re going to see job losses, even if people are fearful they’re not going to stretch for a more expensive apartment, I think we are going to see very soft rents across the country, and that’s something I think every investor should be paying attention to, which brings us to our last section here for the day, which is what this means for real estate investors and what you should do.
Because I obviously just talked about regional differences, but as I’ve talked about, you can invest in any market. So here’s what I would recommend you do given all this information. First and foremost, you must watch your own market carefully. We talk about it all the time from the beginning of the show for four straight years, we have been talking about this, but you need to do your own research. We talk about regional trends on the show, but we can’t talk about every single market. So what you need to do here, I’ll give you some specific data sets you should be looking at. Number one, delinquency rates in your own market. If those start to go up, if you start to see forced selling in your market, that is a red flag, a major red flag that prices are going to go down and that you could see significant price drops.
The second thing to look at are layoffs. You can look at something called unemployment claims, initial and continuing unemployment claims. You can Google all this or ask ChatGPT to pull this up, ask Claude to pull this up, even though it’s going to steal your job after it does it, but you could go ask them. Look at them in your area and then look at rising inventory. If you see rising inventory, rising delinquency rates, rising layoffs, that’s a recipe for price declines. I think most markets, what you’ll see is that inventory is going up in a lot of Sunbelt Western areas. Delinquency rates are low though. That’s good. So you’re probably going to see more muted declines, more muted corrections. I’ve been saying this for a while, but I stand by that. But do the research and look at this for yourself. Markets that have low AI exposure and good affordability, carry on.
If you’re in a market like Kansas City or Cleveland or Columbus, AI exposure is low, inventory is manageable. Jobs keep coming to those areas. Do what you’re doing. You don’t need to change much because even though the headlines might be scary, your area might not be impacted. Now, of course, the opposite is also true. Markets with high exposure, low affordability. I’d be very careful in acquisitions, right? Because in those markets, I would underwrite falling prices. I would underwrite slow or no rent growth, and I would be very careful. Now, of course, that means there’s going to be better deal flow though.This could also turn into really interesting opportunities because remember, there’s a flip side to every risk, which is opportunity. And some of these major markets that may have not be permanently impacted, think of a market like Chicago. They might see a little blip here, but Chicago is a big dynamic economy that will probably start growing again.
Or a market like Boston, right? Huge concentrations of medical and big pharma and those kinds of jobs. So could it go down in the next couple of years? Yeah. Could there be opportunities to buy at a discount? Also, yes. So in those markets that are going to be impacted, you need to be very careful in acquisitions. But I would keep a close eye for opportunity because I do think there’s going to be good assets for sale if all this comes through fruition. The last thing I’ll remind people of is be careful on the higher end of the market. I think this is going to be true most places, but every market has some level of white collar workers. And if this stuff that Anthropic is saying comes true, if we see this white collar recession, I’d be careful at the higher end of the market regardless of what market you’re in.
So be careful there. But also remember that the other segments of the market might have a lot of opportunity. B and C class assets are probably still going to do pretty well in terms of prices and probably will still see really good rent demand. You actually might see more rental demand in these kinds of markets where people don’t want to get into the housing market. So I think that these are areas to focus your attention. This is, again, not in every market, but just generally speaking, if you look at the national trends, B and C class assets for rental properties are probably going to do pretty well. Flipping, not my area of expertise, but I would generally believe that flipping is going to do better in that entry level starter home category than in the higher ends of the market. And so I always say this, but you can invest in any market.
Just be smart about what you do. And I think being in these markets that are resilient against AI disruption and staying in that B2C class area of the market instead of the high tiers in the market are the best things that you can do for your portfolio if these trends continue. Again, we don’t know, but the trends are there. And if they continue, these are some things that you can do to keep growing, keep profiting as a real estate investor, even if they do happen. So that’s what we got for you guys today. Just some closing thoughts. To sum this up, I’ll just say the white collar softening in the labor market, it’s real. I think it’s structural. I think it’s probably here for a while. I don’t know what it means. I don’t know if that means it’s permanent or we’re going to start to see different kinds of high paying white collar jobs emerge in the next couple of years.
We just don’t know. But the data shows that the white collar labor softening started before or around the time of AI and it’s actually just accelerating. The second thing to remember is that I don’t think the housing market has priced this in yet because it’s a lagging indicator, right? People are fearful, but they haven’t really lost their jobs. And I don’t think housing has been really impacted by that yet, but it could come in the coming years. This is one of the reasons why at the beginning of the year, I said that prices could, will probably … I forecasted price declines in the national housing market this year, and this is one of the major reasons for that, not just affordability, but softness in the labor market. Third thing to remember, geography is going to be really big. The forces that are going to impact Seattle or Austin or San Francisco, not going to matter that much in Kansas City or in Cleveland or in some of these different markets.
So remember that where you’re investing is going to dictate your strategy. And the last thing I’ll say is, remember, this isn’t 2008. Could prices go down? Yes. Could a crash happen? Also, yes, but it still remains less likely. I think the correction that I’ve been talking about for years remains the most likely scenario because equity is high. People have a lot of equity in their homes. Lending has been very tight. Forced selling, there is no evidence of it. And even if it comes, it probably won’t come in the wave. Demand erosion that could happen is probably going to be in that upper middle tier of impacted markets. And that could bring down prices in general, but it’s not going to strike everywhere. The chance that this prices go down 10 or 20%, it’s there. I’m not going to pretend that it’s not, but I do not believe that it’s the most likely scenario.
I think a single digit correction is still the most likely scenario, but we’re just going to have to wait and see. We are in such crazy uncertain times. I know I’ve been saying that for four years of hosting this show. We started during COVID. Now we have AI disruptions. We have a war in Iran. There is so much uncertainty. And so the key thing here is I’m telling you where I see things as I sit here at my desk today, but I am not going to hold any of these predictions precious. If I think that I was wrong, I will change my opinion and I will let you know. I look at data literally every single day for hours, every day. And my goal here is not to be right retroactively, it’s to be right going forward and to give you all the information that I can as soon as I have it.
As of right now, I do think there’s risk to the labor market. I don’t think that means there’s going to be a massive crash in the housing market. I think certain markets will be impacted, but overall, the correction, the single digit correction is still the most likely scenario. If that changes, I will be sure to let you know. Thank you all so much for listening or watching this episode of On The Market. I’m Dave Meyer and I’ll see you next time.

Ashley:
Today’s episode is a first for real estate rookie. We’re diving into government contracts, what they are, how they work, and how rookie investors can actually use them to create predictable long-term income without owning hundreds of units.

Tony:
Yeah. If you’ve ever felt nervous about maybe Airbnb rules changing or you don’t like the idea of flipping or large multifamily and you want something that’s maybe a little bit more predictable, today’s guest is going to show you a completely different way to think about rental demand, where the government becomes your tenant.

Ashley:
This is The Real Estate Roofie Podcast. I’m Ashley Kehr.

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

Noble:
Hey, thanks for having me. I appreciate it. Appreciate it.

Tony:
Noble, first thing I want to ask before we get into the actual interview, do you ever feel like this pressure with the name Noble that you’ve got to live up to a certain standard? Because if my name was honesty or my name was humor, I feel like I’d have to be funny everywhere that I went. With the name like Noble, do you feel that pressure?

Noble:
It’s funny. Not so much anymore. That’s a family name. So I’m actually the third. My oldest son is the fourth, so it’s getting out of control now. But that’s funny.

Ashley:
Now tell us who … Spill the means. Who actually lives up to the name and who doesn’t in the family?

Noble:
It definitely would’ve been my dad. My dad was upstanding. Yeah.

Ashley:
Well, Noble, take us back to when short-term rentals were working and what was going right and what started to feel unstable underneath the service though.

Noble:
Yeah. So I’ll give you the quick little bit of context of how I got into it, so that’ll help break some things down. So I used to work in the hotel space and then I got into technology space and I worked in that space. And when I was in that space, I got into sales. I was doing commission sales for technology. I had to manage a couple of different verticals. So this will be important later. So the verticals that I was over was corporate, was higher education, was healthcare, was military and federal government. Those were the primary verticals that I worked as a commission sales rep. And so long story short, my wife, she gets sick. She gets sick and she’s having these seizures and whatnot. And so we had to take her to the doctor and they were like, “Oh, you have this massive tumor in your brain, you have a brain tumor.
We need to get it out like ASAP.” So we scheduled the surgery, got her in what should have taken six to eight hours and the surgery took 14 hours, but they were able to get the tumor removed. She’s out, she’s in the ICU. The second day in the ICU, she flat lines twice. Long story short, turns out she was allergic to morphine and they had her on a morphine drip post-surgery and it was killing her organs from the inside out. And so fortunately they were able to resuscitate her both times. She’s still here with us today. But on the heels of that surgery, she had to go through a long recovery period because the brain surgery is pretty major. And so it took like six weeks almost for her to learn how to do basic things all over again, including walking straight. And so during that timeframe, I had a decision to make.
If I was going to stay home and care for my wife or I was going to be at the job grinding them because I was on commission sales. So I elected to stay home with my wife at that time. And so at the end of that timeframe, I got called into a company-wide sales meeting. And the CEO of the company, he just rips me in front of the entire company for having dismal sales numbers for the previous four weeks, even though everybody in the company knew what I was dealing with. And so I had made a decision in that moment, I’m not going to be beholden to someone else’s time, making money for someone else. I’m going to put my head down and grind and work myself up out of this W2. And so eventually I hit a couple of large contract deals and I was out of there.
I cashed out. So on the heels of that, exiting, I started a marketing agency. I always wanted to run a marketing agency. That was the thing. I was one of the first HubSpot related agencies in that space. And so I fell in love with this concept of MRR, monthly recurring revenue. So as I stack clients in my marketing agency, my monthly revenue started stacking. And so I was like, oh, I can get used to this. But as Ms. Fortune would have it, I was working exponentially longer hours than I was in my W2. So it kind of defeated the purpose. And so my dad came across this YouTube video and he sent it to me and he said, “You familiar with this short-term rentals?” I was like, short-term rentals like, “What is that? This is 2016, late 2016.” And so I checked out the video.
The guy was putting it on. He was holding a mastermind out in California at the time of a group of people that were already in the space doing some big things. And so me and my wife flew out there and we said, “Hey, we can do this back home in Texas.” And we came back and put our heads down and went to work. What we were taught initially in the short-term rental space was lease arbitrage. That’s how we were taught when we went to that mastermind. So that’s what we executed on. So we’re cruising right along. We’re starting to build our portfolio of inventory and stuff. We get up to like a dozen and plus and we started having some things about the Airbnb’s platform specifically that we didn’t enjoy. And then so we started engaging in B2B type business way back in 2018, 2017, 2018.
And so that was our first foray into the short-term rental space and how we got started. So that was a long answer. I don’t even know if I answered your question.

Tony:
No, you did. And nobody … Well, first, let me say, I’m incredibly happy to hear that things turned out well for your wife. And I can’t imagine what an experience that might’ve been for you just going through that from a health perspective. But I always think it’s so interesting how, for a lot of folks in this podcast, myself included, there are these moments in life where you feel like, man, could things get any worse? And a lot of times that becomes that turning moment where it’s like, I’m actually going to decide to make sure that things get better. And I just love that. I love that part about your story. But you jump in full force into arbitrage, you’re building up your portfolio. And you’re early. I mean, 2016, Airbnb is still almost a baby at that point. So you’re really one of the earlier folks in this space, but you go the arbitrage route, you start building your portfolio.
Why not just keep scaling that up? I mean, you had first movers advantage or wasn’t a lot of folks doing arbitrage at that point. Why not be one of the guys that’s got thousands of arbitrage units?

Noble:
Yeah, yeah, good question. So we ultimately, over time, we scaled up to like 44 doors, and then we had a few of those that were owned assets, but the majority of them were leased inventory. And so it was going well. I couldn’t complain, the revenue was good and all that sort of thing, but I just didn’t enjoy some of the issues that came with having to deal with changes in the platform and things like that and just guest issues. Even though I started my career in the hotel space in hospitality back in the day, it’s just not something I enjoyed in my own business. And so for that reason, we decided early on that we wanted to … Because remember, my background was already selling into these different verticals. And so my thought process was, why don’t I see if I can get direct business for lodging and accommodations in these same verticals?
And this was pre-direct booking. This is before anyone was talking about it. And so we turned that switch on and it started to take off. And then on the heels of that, that’s when I had a light bulb moment about engaging with the federal government, and we’ll talk about that.

Ashley:
Yeah. So what was that thing that kind of put government contracts on your radar as a real estate strategy?

Noble:
Yeah, absolutely. So essentially, so a couple of things happened. So number one, like I said, the first thing was I was going about just my regular week of business. And I had this light bulb moment like, why am I not selling to the federal government? I already understand the process because in my W2, I had to sell into the federal government. So that’s how I cut my teeth on government contracting, was for my W2 job. So I already knew the basic process of it. And so I said, “Well, why am I not doing that with this business? It’s just a different service really, different product and service.” And so we started to go down that path of going after our first contract opportunity. And so prior to that, we were already providing inventory in the healthcare space and it wasn’t with traveling nurses, but we were providing inventory in the healthcare space.
We were already providing inventory in the corporate space because I had already started engaging with corporate clientele and we had already started providing inventory in the higher education space and it wasn’t student housing. So we had already turned on some of these things very early and then government contract stuff was just a kind of a natural progression. No,

Tony:
I’m curious, we’re going to get into the how-to of how to actually put these government contracts in place. But just to set the table for our listeners, what is the biggest, in terms of dollar value, what is the biggest government contract that you’ve ever secured for your real estate business?

Noble:
So the most recent one, which is a large contract out in San Diego, it’s a Navy contract, it’s 400 doors. Me and the couple of business partners, that one’s about 44 million.

Tony:
44 million?

Noble:
Yeah.

Tony:
Oh my goodness. I was not expecting 44 million.This episode just got-

Ashley:
We have to go into the numbers of this real quick. So 400 doors. And so what’s the bottom line end up being on this?

Noble:
So I’ll break it down for you. So I’ll give you a little bit of context. So in the government space, and here’s the beautiful thing, and it’s probably the best way for me to describe it. I’ll just give you the first case study. So we’ll back up a little bit. I’ll tell you about my first deal and that’ll set the table for this large one. Oh, making us

Ashley:
Wait. Okay,

Noble:
Go ahead. Okay. All right. So the very first one I did after I made the decision, I’m going to pursue this space because there’s something there. So my first deal was I found an opportunity that was already in my backyard. So I’m here in the Dallas-Fort Worth area. I found an opportunity with a company that was a defense contractor. And so they were holding at the time a DOD contractor, a Department of Defense contract, and it was to provide training and recertification for helicopter pilots and mechanics. And so these pilots and mechanics would fly into the Dallas-Fort Worth area and they would go through their training and recertification and they would just rotate them through, rotate them through. And so the pilots, their training recertification was 30 days. So they were flying instead for 30 days. The mechanics, their training and recertification was two weeks.
And so once I found out about the opportunity, I approached the company that was holding the DOD contract, the big umbrella company, and I said, “Hey, we would like to provide our inventory of properties for your trainees to stay at.” Because I knew one of the things I found out during my research was I knew that they were staying in hotels. So at the time, I knew I had a superior product that could compete in price. Now, here’s the beautiful thing. With the government, the government pays for lodging under what is called a GSA rate, government services administration lodging rate. That is a nightly rate. So they pay for lodging and accommodations by the night. Well, as it would turn out, we were sitting on nine doors, mixed of one and two bedrooms. There were arbitrage apartment units in the area, and we were leasing those by the month, obviously.
And so when the government pays you by the night, according to this GSA rate, that nightly rate can differ from market to market. But in Dallas-Fort Worth, it was 167 at the time, 167 a night. So if you do the math, 167 a night times 30 nights is $5,010 a month. Now, mind you, we’re putting the pilots in one bedroom because they’re there longer. So one bedroom for us was costing us 14.85 in rent, couple hundred dollars in expenses, large profit margin. And so we said, well, the mechanics are only there for two weeks. So we’re going to put them in a two bed, two bath with a shared living, shared kitchen, common area. And so however, because we had a second bath and we were to split them up like that, we were able to charge that 167 a night, not once, but twice.
So the two bedroom units were generating $10,000, $20 a month, and the rent was only a couple thousand dollars plus expenses. High profit margins, that deal, five-year contract, nine doors grossing 65K a month.

Ashley:
At what point did you say, “I need to use some tax planning.”

Tony:
Wild.

Noble:
So that was the first one that we did. And so after that, we were like, “Oh, we love this. We’re about to do it again. We’re about to run it up.” And so we found another opportunity up in far North Dallas. Raytheon’s up there. We found an opportunity with them, similar situation, not as many doors, but a similar situation. And so after that, it was full on. It was like game on. And so fast forward to last year is when we landed the big Navy one and that one. So we’re still inside of the first year of that one. And it’s a five-year deal.

Tony:
No, well, I’m super excited to get into the kind of nitty-gritty part of putting this together, but what did that first deal prove to you? Again, you said five-year contract. What did that first deal prove to you that most investors misunderstand about government contracts?

Noble:
I think most investors think that it’s just difficult to pursue them. There’s just too much red tape. You’re talking about Uncle Sam. And so they immediately think IRS level red tape and it’s too difficult to pursue. And it’s too big of a goal. Maybe they think it’s like doing business at the federal level is just way over the top. And it’s really not. It’s really just a matter of understanding the federal procurement process and how to bring your product or service to the market and make it available to them as a registered vendor. And so it’s not easy, but the process is simple. I’ll say that.

Ashley:
So really that first deal really opened the door for you because once you understand how that contract worked, the next question becomes how many different types of government contracts are actually out there and which ones should rookies even be paying attention to? We’ll be right back with more from Noble. Okay. So now that we understand why government contracts made sense for you, let’s slow this down and walk through how they actually work, especially for someone who’s never even heard of this strategy before, like me. So for someone-

Noble:
Good question. So there are multiple types of government contracts. Now, since we’re on the Real Estate Rookie podcast, we’re going to focus on just the real estate related ones, which the majority of those involve some type of lodging, accommodations, housing, something like that. The way to think about it is what type of inventory is a specific federal agency looking for? Now there are over 400 federal agencies, so there’s a lot and they move people all around the country all the time. So there’s always a need for someone to lay their head somewhere. And so, but what types of inventory are they looking for? Well, it could be single family, it could be multifamily, it could be hotel, it could be emergency shelters. So this is an idea. And it could even be, in some instances, manufactured homes and tiny homes. Now, the core areas that I focus on are single family, multifamily hotels.
We sell all of that back to the federal government. And so part of it is just understanding what specific type of housing or type of lodging is the agency looking for. And then what we do basically is we find, after we found the opportunity and we understand what they’re looking for, then we go out and source that inventory. So then we go out and we find the property that matches that inventory. And there could be a number of different variables. Sometimes it could be a scenario whereby it needs to be within a certain radius of this address or of this zip code. It needs to have certain amenities. It needs to have free parking. It needs to have this, that, or the other. 95% of the time, the inventory needs to be furnished. And so very similar to an STR, MTR play. It needs to be furnished inventory.
But once we determine what type of inventory is required-

Tony:
No, but one clarifying question on that. I just want to make sure I’m tracking. So you’re securing the contracts before you actually get the property. So is your model predominantly then still arbitrage to where you have some flexibility to lock these units up after you’ve gotten the contract?

Noble:
Good question. Good question. So in some instances, yes. Some instances we’ll win the contract and we’ll leverage the contract to support getting the inventory, right? Because it’s a totally different conversation when you’re coming to the table with a federal contract and you’re not asking a multifamily community, “Can I do a short-term rental at your property?” It’s a totally different conversation. The occupant is totally different. These are vetted personnel of federal agencies or contractors or service members. Some of them have security clearances, so they are the ideal occupant that most of these properties would love to have on site. And so sometimes, yes, we’ll get the contract and we’ll leverage the contract to then go get the doors. But more often, we are actually having a preliminary conversation with the property about the opportunity that we’re working on and we’re trying to negotiate what is a win-win solution to partner with them on this opportunity.

Tony:
Got it. No, but let me ask one follow-up question on that piece because you mentioned the government contract in hand and it almost reminds me of Section eight where there are a lot of investors in the Section eight space who tout that Section eight is guaranteed. And for the most part it is because the government is paying all or portion of those rents, but then there are those situations like the government shut down. So when those things happen, are your contracts impacted? If the government shuts down for 60, 90 days, are you not getting payments or are they still paying for their lodging requirements?

Noble:
Good question. So the short answer is, I’m going to give you two answers. The short answers is your payment, their payment obligation is guaranteed. It’s a legally binding contract. So once you go into contract with an agency to provide lodging, it’s legally binding. So this most recent government shutdown, because we’ve gone through government shutdowns before. Now, this most recent one was the longest. They’ve never gone that long before. They were the longest, and that was the first time ever that we got paid late. However, they also are required to pay interest on late payments. So what we normally got paid on X date, we got paid like 48 hours later, but they paid with interest. And that was the first time it ever happened. And quite frankly, I think it was more of an anomaly because at the time Trump had made a decision to pause payments.
Well, that was actually illegal and the big contractors went into uproar and he backed down. But yeah, it’s a legally binding contract and thus it’s a guaranteed payment from the federal government.

Tony:
My mind is like blown right now on this strategy and I can’t believe that we’ve waited almost 700 episodes to get you onto the podcast. So I guess the next question about the contracts is, how long do they typically last? Like you mentioned five years, that’s a long time to have some quote unquote guaranteed income. Is that normal or is it typically a shorter timeframe?

Noble:
So it can be anywhere from … They run the gamut, to be honest with you. I’ve seen some as short as like two nights, but maybe they need to put 500 people in a hotel room for two nights and we’ll broker that deal. We’ll put those rooms under contract and then mark them up and sell it back to the agency basically.

Ashley:
So that’s even you going to the hotel?

Noble:
Oh yeah.

Ashley:
Oh, so like getting a room block.

Noble:
Yeah, we’ll do hotel brokering. Yeah, that’s a strategy that we use. And so it could be as few as just a couple of nights and as long as it’s five years and everything in between. So they vary.

Ashley:
So now let’s talk about that operational piece, the hospitality piece. You think of Airbnb arbitrage, you’re renting the unit from somebody, then you’re doing these contracts. Who’s the actual property manager? If the toilet starts leaking, who is the person? Are they contacting the apartment agency or apartment complex and you’re out of it? Who is taking care of them and what role do you actually have once the people are in the apartments?

Noble:
Yeah, good question. So essentially, we are the point of contact for the agency. So there’s actually two contracts that exist, the contract between your company and the agency and the other contract between your company and the property owner. And so we’re the main point of contact for the agency if an issue comes up with an occupant, our team is alerted first. Now on the front end, we’ve already come to an agreement of how maintenance and things like that and emergencies will be handled with the communities or with a single family property owner, whatever the case is. And so if anything happens, then that whole process kind of kicks into place.

Ashley:
Do you have an example or a story of there was a problem where you actually had to step in and take up some of your time? What’s the worst case scenario of something that could happen?

Noble:
Okay. So at the end of the day, we’re all in kind of a real estate quote unquote space. So yes, I’ll give you one. The worst one’s probably happened to one of my students. So one of my students, it was a contract out in Alabama. It’s for the alcohol, tobacco and firearms, ATF. It’s a five-year deal. It’s 150 doors, something like that. So it’s a combination of multifamily and hotel space. Now, the multifamily that he got under contract was new development. So it was super clutch, new development, brand new facility, class A, beautiful, everything. So he’s into the second year of the contract and just a random event happens. Now, all of the occupants are there gone doing their job during the day, so they’re not in the units during the day, nine to five type deal. During the day, one of the units gets shot up by a drive-by.
Now here’s the thing, this is in a nice area of town. It’s in a nice area of town. It’s brand new Class A development, and it’s this freak thing. So whomever shot up the unit, drove by first floor type of scenario. Luckily, nobody was there, but multiple rounds going through the windows and everything. So after that happens, of course, he’s freaking out because he’s getting all of these messages and stuff from the agency. His agency contacts. Long story short, it was a very freak thing. Even the police got involved, obviously they said nothing has ever happened like that in this side of town and certainly with these level of properties. And the agency didn’t hold him responsible or anything. We moved them. They had to move to another unit, the higher floor. It was good. It worked out. So anything can happen. Anything’s possible. We’re dealing with real estate at the end of the day, and you just have to go with the flow and adjust accordingly.
And so that’s what happened.

Tony:
Now, before we talk about pitching Noble and putting yourself in position to start securing some of these contracts, and again, I’m sure everyone’s mouth is probably watering at a $44 million real estate contract. I didn’t even think that that was possible in this space. But before we talk about that though, what’s the minimum foundation that a rookie investor needs to even be taken seriously by a government agency?

Noble:
The very first thing that you have to do is you need to register your entity to be a vendor with the federal government. So you have to register your entity. You can do that by going through a website, Sam, S-A-M.gov like uncle Sam, sam.gov, and you have to go through the registration process. So for someone that hasn’t gone through that process before, it can be a little cumbersome, but that is a necessary first step. You just have to do it. Once you’re registered with the federal government, you receive two different identifier numbers. One of them is called a UEI, unique entity identifier. It’s a 13 character alphanumeric number. The other one is called a CAGE code, C-A-G-E. The CAGE code is an identifier for your entity that is issued by the Department of Defense. Every company gets one. And so once you have your UEI and your cage code assigned, you’re officially in the system, in their database as a federal vendor, and it’s off to the races.
Then at that point, you can start the process of going after some of these opportunities.

Tony:
And how long does that process take noble ballpark? Is that a two-year process or is it a two-week process?

Noble:
It’s definitely not that long. It can vary though, depending on the person’s aptitude going through the process. So I’ve seen it, quite honestly, I’ve seen it where it’s taken some people a couple of months to get through it because they just didn’t know how to navigate it and the questions are a little bit confusing. It’s like filling out IRS paperwork. It’s just not fun and confusing. When I work with my students and mentees, my goal is to get them in and out in two weeks. And that’s historically what I’ve been able to do. And so it just depends on that person’s aptitude for getting through the questions because there’s a lot of questions and documentation you have to deal

Tony:
With. But it can be quick, which is super cool. I have family members who run homes for disabled adults, and you have to go through a government vetting process as well, but that’s a two-year timeframe for you have to get all these certifications, do all these different things. So I was just curious if it was similar here. One last question though, Noble, just going back to the contracts really quickly. I know we mentioned the length can vary, but do you see renewals happen often?That first one that you signed that was five years, do they renew for another five or is it kind of like a one and done thing in most scenarios?

Noble:
Yes. So a lot of the contracts, to be honest with you, are old contracts that just get repeated every five years. And so that is pretty common because the agencies want to give other companies the opportunity to win the business. And so a lot of times when opportunities come out, they’re not first time opportunities. On occasion, there are, but a lot of times they can be decades old opportunities that just get resolicited every five years and give you opportunity to compete for that business with that agency.

Tony:
Once you understand the contracts themselves, a real advantage shows up in how you approach them because after the break, Noble’s going to break down how to actually find these opportunities and how to pitch the government. So like you said, they choose you. So we’ll be right back after we’re from today’s show sponsors. All right. So we’ve covered what government contracts are, how they work. Now let’s talk about the part that everyone’s really excited about. Where do you find these opportunities and how do you actually get the government to say yes? So Noble, a lot of rookies probably assume, and you kind of hit on this earlier, that you need some super secret access to be able to do this, but obviously that’s not really the case. So where can I go to find these government contracts once I’ve been approved? Is there like a Zillow for government contracts or where am I going to search for these?

Noble:
So essentially the same place that you go to register, sam.gov, that’s the best starting spot because those same opportunities, once you’re registered, you can log in and you can see a list of a lot of those opportunities right there in that portal. I would say that Sam.gov probably would be considered like the parking lot, if you will, of government contracts. They park a lot of opportunities there. Now there’s some other portals as well, but that is the primary portal, sam.good.

Tony:
And Noble, do you ever find yourself like … We both know Jesse Vasquez, and when we interviewed him on the podcast, he was almost doing gorilla type marketing for his midterm rentals where if he saw a business truck at the Extended Stay America, he would search for their phone number and call them up directly to try and get them to come save his midterm rental. Are there any kind of gorilla strategies like that, or is it really just It’s like, hey, once you get approved, you can really get all the business opportunities you need through that onesam.gov website.

Noble:
So there’s not really gorilla strategies per se. That being said though, there are a couple of marketing assets or tools that we use, if you will, in this space. So one of them is called a capability statement. A capability statement is simply like a one-page business resume. So we use that document all the time. We send it in emails to different contracting teams. You’ll put it on your website, you can put in your LinkedIn profile, whatever the case is. So the capability statement is probably the number one marketing tool that we use. And again, it’s like a one-page business resume. The next thing that I would say is probably the best way to kind of get out there and get in front of people because the part of the problem is a lot of these agencies, they don’t know you exist. You’re in the database, but that doesn’t mean they’re going specifically and looking for you.
And so getting in front of these agencies is a huge, advantageous thing to do. And so you can request what is called a capabilities briefing. And that’s simply kind of like a get to know you meeting over Zoom typically or a conference call or something like that where they’re actually looking at your capability statement and you’re going over it with them, kind of explaining to them like, what is your background in this space? And your background does not need to be on the federal side. It can be on the private sector side. It could be that you’ve ran short-term rentals or midterm rentals or what have you. But it’s effectively a get to know you meeting. So between capability statement as a marketing tool and also having capabilities briefings, that’s as good as it gets in terms of like any type of gorilla marketing effort.

Ashley:
So is that kind of like your pitch almost before the numbers even happen is that meeting or is there something else that happens before you’re actually working through the numbers on the deal?

Noble:
So there’s a couple of things that happen, which I’ll break down for you. So there’s really kind of like two sides of the coin if you kind of look at it. So on the one side of the coin, you have active bid opportunities that are posted on Sam.gov. The other side of the coin is there are opportunities that you don’t have to compete for. It’s who you know and it’s driven by the need that the agency has. And so it can be advantageous to build a rapport, get to know some of these contracting teams, the decision makers, what their needs are, what they’re looking for, what their forecast is for inventory and lodging inventory. So one side is active bidding. The other side is networking, quite frankly. And so those are the two sides. Now, as far as the active bidding side, I’ll break down the anatomy of providing a proposal to an agency that’s put out a solicitation.
I’ll break it down. Okay. So the first step is to find the opportunity. Again, you can do that on sam.gov. That’s one location where you can look. The next step is once you find the opportunity, there’s going to be a due date, which that due date represents, when do you need to submit your proposed solution for this opportunity to the agency? There’s a cutoff date. There’s a date and a time. You can never be late, not even like 30 seconds because that could automatically disqualify you. And so you need to pay attention to the due date. Once you find the opportunity and you notice what your due date is, then you want to read all of the information that the agency has provided about what they need. That is called a scope of work or a performance work statement. It can be a five-page document.
It can be an 85-page document. But at the end of the day, it states everything in great detail about specifically what the agency is looking for. The type of housing, the quantity, the dates, the move-in or check-in, the length of the contract term, all of the things, all the amenities that they’re looking for. Everything is in that performance work statement or scope of work. So you need to read that document. Then after you determine, okay, this is something I want to go after I want to pursue, you can do some quick math to run the numbers to see how much potential profit is on the deal. So you would start by finding the GSA rate for that region or market or zip code. And you can Google that. You can put GSA lodging per diem into Google and then put in the city and state or the zip code.
It’ll bring up a chart and it’ll tell you what the government pays per night in that market. And so once you’ve determined that, let’s just say the opportunity is for a one-year deal. So 365 days, you can multiply it times that GSA rate, that gives you your gross revenue ceiling of what you could potentially from a gross revenue perspective make. Now, the next question is you want to know how much potential profits in the deal. And so if you know, let’s just say it’s a hotel deal, you could quickly go just to get a quick idea, you could quickly go to hotels.com. Drop in the city, put in the number of doors that you’re looking for or whatever, put in some rough dates and get an idea, kind of a foundational baseline of what hotel inventory is going for in that market. Now, keep in mind, what you find on a hotels.com is not what you’re going to end up paying.
Reason being is because when the government has a need, they have a need in bulk. They need a lot of something. That’s typically the case for lodging as well. So when you contract a hotel deal, you’re not going to pay market rate. You’re not going to pay rack rate, any of that. You’re going to be paying a group discount rate where you’re blocking a group block of rooms. And so you’re going to get a discount for that. But it at least gives you a foundational baseline of what you could expect in the market. And so you can quickly assess it and say, okay, this is my gross revenue. This is what I anticipate from a market perspective, what is the spread there? Because that’s where you make your money. And so you can run some quick math to make a quick decision of, am I going to pursue this opportunity or not?
If you say, okay, I’m going to pursue this, then you need to start doing your market research. That’s finding the actual property that’s going to fit all of the criteria that they spelled out in the scope of work. So they want free parking included. Maybe they want Continental Breakfast, maybe different things. So you’re going to find properties that fit that criteria. Once you find the property, then you’re going to start your outbound communication where you reach out to the property to get rate quotes from them for all of the things that were detailed. Because you need to then start to determine what are my expenses going to look like so I can figure out what my true spread is. So you’re going to get some rate quotes back from the hotel after they’ve determined it’s available. That’s first and foremost. You want to find it.
Is it available if it is?

Ashley:
Noble, real quick on that point of availability, how far in advance are you getting these contracts? Is it you have a year to kind of book out these? Is it weeks? Or what is that kind of timeframe that you’re getting before they actually need the check-in?

Noble:
So it could vary. It could vary. Sometimes the true window is when does my proposed solution, my proposal need to be submitted? I see it’s on SAM. I see they’re readily ready to award it. When do I need to have that turned in? That window could be, it could be a week, it could be three weeks for you to go out and put a solution together to present, to propose. Now, once you’ve secured the contract, maybe you secure it in April and it doesn’t start until mid-May. Well, maybe you secure it April 1st and it starts 10 days later. There’s a lot of variables that determine is based on the agency’s need. Does that make sense?

Ashley:
But it could be like two months from when you find the bid online and from when they actually need it to start. It could be that quick. Okay. Because I feel like that makes it even more difficult to find availability when it’s that short of a window.

Noble:
One might think, but there’s certain strategies that you could use to get that information quickly and to lock up that inventory. But at the end of the day, you still want to get your numbers back from the property, the hotel in this case, because you’ve got to put your markup on it and determine what you’re going to propose to the agency. And so then once you’ve done that, usually you’ll want to ask for what is called a letter of intent or a letter of authorization from your partner hotel in this case. That is not a legally binding document. It’s just a letter on their letterhead from their decision makers simply saying that should X, Y, Z company end up closing this opportunity with this agency for X number of doors over this timeframe, we’ll support it based on availability. And so it doesn’t lock them into anything hard.
So then there’s that. Then after that, it can be in some situations, very much a hurry up and wait game. Hurry up and get us your information, your proposed solution in, and then you got to wait on the government to respond. And so sometimes you might wait a few weeks, sometimes you might wait a couple of months. I think the longest one of my students that had to wait was like five months, but he landed a $7.5 million contract. But that’s the process from beginning to end, if you will.

Tony:
I’m just curious, because it seems like it’s a little bit of a black box once you submit everything. What can someone do to make their proposal stand out amongst … You can’t even see what everyone else is submitting. So how do you make sure that you give yourself the best shot at actually getting chosen?

Noble:
The key is, at the end of the day, you want to be in a position where you’re providing the best value for the agency. Now, value can mean different things to the agency, but they’ll typically spell that out. So there’s three common things that they look for. Obviously, price is one, right? Sometimes that’s the most important factor, sometimes it’s not. And they’ll rank the factor of what’s order of importance. So price is one determination factor. Another one is what they call technical capability. Technical capability just simply means, are you able to check all the boxes of all the things that we’re asking for in the scope of work? If you can, you get graded 100% on the technical part because you met all of the requirements. The third part is past performance. That’s where people get hung up the most because the first inclination is, “Oh my gosh, I don’t have any government contract past performance.
How can I win?” You don’t need government contract past performance. For those that play in the space that we do, that’s all the past performance you need. So all of my students that have won contracts, it was all the first for them, but they’ve had past performance by doing short term, even long term and midterm stuff, or maybe they came from a flipping or wholesaling space. But they have some level of past performance under the larger real estate umbrella, we can leverage that. And so did I answer your question?

Tony:
No, absolutely. And that’s what I’m trying to understand is just like how as we go through this process of submitting ourselves, can we potentially stand out? But I think the next question that comes to mind for me, Noble, is that let’s say that we do get chosen and you talked about reaching out to the hotels if it’s a big order or something to that effect, but how can rookies maybe negotiate on the property owner side or the landlord side to get the best possible rates to make sure that that margin is actually there?

Noble:
Got it. Got it. So let me back up a little bit and I’ll make one point and then I’ll answer that question. So what you asked previously, most people think, “Hey, this is going to be a highly competitive deal. I’m going to be going up against multiple other vendors.” Here’s what happens in reality, and I was just walking a student through this the other day. You may be in a scenario that you feel is highly competitive because you call a hotel and your sales contact at the hotel is like, “You’re the fourth call I’ve had today,” or whatever. And so that plants this seed in your head of, “Oh my gosh, there’s a lot of people calling. This is going to be a competitive opportunity.” More often than people realize a number of the people that are initially looking at an opportunity fall off, they don’t go to the finish line and they end up no bidding.
And so I’ve seen multi-seven figure opportunities where there was one vendor that bid and won by default, or there was two or three, and it was one that somebody won 20 million and there was only three bidders. And so it’s not as competitive going to the finish line as people think it is. Part of that is just up here. And so hopefully that makes sense. Now, and then what was the previous question you asked

Tony:
Me? Just like on the other side of going toward the landlord, how do you leverage these government contracts to negotiate better rates there?

Noble:
So it depends on the type of asset. So let’s just say it’s a single family asset. Obviously you’re dealing with a property owner at that point or maybe even a property management company. So if it’s a single family asset, let’s just say it’s a contract with a Veterans Administration because it’s very common. So the Veterans Administration, they’ll look for single family assets where they can place a veteran in a room in a house or sometimes two in a room in a house. And maybe that veteran house is located near a VA medical center and they need to stay nearby because they just had a post, they had surgery and they go back to post-op appointments. So they need to stay nearby. So the VA will pay for veterans to stay in your unit sometimes by the bed, but definitely by the room on a monthly basis.
Now here’s the thing. If you’re speaking with a single family property owner, one of the advantages for them making their inventory available for you for this specific use case is one, that individual is already vetted by the federal government. Secondly, the payments are guaranteed by the federal government. Third, it’s a long-term deal. These are normally five-year deals when you find these VA type opportunities. So you can actually lock up a property for five years with a homeowner, with guaranteed payments backed by the federal agency. Those are all positives for the homeowner. And you’re simply, you become the manager for the occupants that the federal government provides. And so because of that, you’re able to negotiate usually a discounted rate because you’re taking it for such a long term and you’re just helping them pay down the mortgage on the house. If it is a multifamily scenario, then there’s a lot of leverage that you can pull.
It’s very much similar to an arbitrage play. Because you’re taking so much inventory, you’re helping them increase their occupancy rate. Sometimes we have helped property management companies go from 93% to full-on 100% occupancy just off of one contract. Our San Diego contract, we’re spread out across 27 different communities to get to that 400 doors because inventory is so tight. But in some of those areas, we’re able to get those property manager companies to 100% occupancy. That’s excellent for them.That’s a win all day long because the standard is you need to be at 96%. That’s kind of the standard for where property owners want to see property management’s occupancy rate. And so we’re able to push that up. Typically, we’re able to negotiate because we’re getting so much inventory. So we’re able to negotiate a very favorable rate for us. And then also, again, because of the type of occupant that we’re putting into the property, they’re vetted at the highest level of the federal government.
So the background checks and the clearance checks is at the highest level, much stronger than property management vets I guess and background screens a guest. So the type of occupant that we’re putting in the property are the type of people that they very much want to have staying on site. And so we leverage all of that stuff to, at the end of the day, come up with a win, win, win solution, a win for you as the vendor, a win for the property owner, a property management company, and a win for the agency. And when you can construct that deal, that’s the recipe for a winning contract.

Ashley:
Now, Noble, what are some of the negotiation tactics you can put into your contract or negotiate with agency where maybe you don’t have as many upfront costs? If you’re getting even a hundred units furnishing those units can be quite extensive of a cost. So what are some of the things you should negotiate to really minimize those upfront costs?

Noble:
I like that. I like this. I get that question a lot. So one of the things that I recommend, especially out of the gate, because these contracts can be a year, three years, five years, they’re longer term. And if it’s 50 doors, a hundred doors, that can get costly furnishing that. We don’t pay for the furniture. We typically will lease it. We’ll lease the furniture. We’ll go through a court. We’ll go through an AFR. We’ll go through a regional furniture company. We’ll lease that inventory for a number of different reasons. One, we’re padding that lease cost back into our proposal. So we’re taking that expense, we’re marketing it up a little bit, and we’re putting it right back into the proposal. So it’s being offset by the revenue that we’re generating. That’s number one.

Ashley:
So Nobel, is that a high-end rental center or something kind of where you’re leasing?

Noble:
Yes, it’s corporate furniture leasing. And so Court, CORT is probably one of the largest in the nation. AFR is very large, but they rent full on fully furnished apartments and you can do it by the month, I mean, all the way down to the silverware stuff. And so it’s a fully furnished, but we’re not paying for it. We’re leasing it. And then because we’re going to a quarter AFR with volume, we’re expecting a discount. Again, because it’s over a longer period of time and it’s multiple doors. So we’re not going to pay even market rate. But it also helps on the back end because when a contract ends, it comes time for disposition, you’re not sitting on a hundred units worth of furniture, you don’t know what to do with.

Ashley:
Having a garage sale at the apartment complex.

Noble:
Right, right. So that’s how it works. And that helps keep our upfront expenses low, very manageable because then we’re just dealing with things like utilities, turning those on, this, that, and the other, and we don’t have huge upfront expenses. And to that point you made earlier, we do negotiate off of security deposits and first month’s rent a lot of times where we’re not paying first and sometimes not even second month’s rent upfront. And so there are some different levers you can pull to make your upfront costs very minimal.

Ashley:
So Noble, you left me in suspense here. So with that $44 million contract, I don’t know if you want to give us yearly or monthly, but what are you going to end up netting on that contract each month or every year? I

Noble:
Can tell you what we deposit in the bank and then what we end up paying out every month. So here’s how it works. And it’s a little tricky because when you get a contract like that, the agency will issue what are called task orders. And so a task order is where they say, okay, we’ve got our next wave of people coming in is going to be 120 of them and they’re going to be there for eight months and that’s a task order. Well, while that task order’s going on, another task order could be issued on top of that that overlaps. Okay, we’re sending in our next 200, they’re going to be there for four and a half months, and that’s a task order. And then there’s another layer of task order. So task orders are issued throughout the course of the five years, right? But the value of what we sold to the agency and what we wanted on was 44 million.
Now, our profit margins, profit margins in this space can vary. They could get … I’ve seen as small as 20% and I’ve seen as large as like 55, even 60%. And so we’re probably hovering around for this particular deal, the 40 to 45% profit margin range. So it’s nice.
But it’s difficult for me to say monthly because of the task orders and the way they stack on top of each other.

Ashley:
Right. Yeah. No, that makes total sense. And that’s also interesting to learn. Yeah. But wow, okay. So 40 to 50%.

Tony:
Yeah. I mean, over the life of this deal, I’m 44 million, 40% is what, just over $16 million over the life of that deal. I mean, that’s like an NBA player’s salary.That’s like an NBA contract right there.

Noble:
It’s not just me because I have business partners in on it.

Ashley:
Wait, are you calling in from your yacht right now?

Noble:
I’m at the house. That’s funny.

Ashley:
Well, Noble, thank you so much for enlightening us on government contracts and really the upside potential. And I’m sure as great as it sounds, there is a lot of work that goes on behind the scenes, the negotiation that I can’t even imagine finding the properties that fit exactly what the government wants. So thank you so much for taking the time to share with us the first basic steps of how to actually start this real estate strategy. Noble, where can people reach out to you and find out more information?

Noble:
Absolutely. Well, first of all, my pleasure. Thanks so much for having me. I appreciate you having me on. If anybody wants to connect with me, the easiest place, quite frankly, is Instagram. I’m always on the Gram. My handle is noble.crawford.3. So noble.crawford.3. And I still answer my own DMs. I’m not any type of influencer anything, but Instagram’s a way to reach me.

Ashley:
Until this $44 million contract

Tony:
To go to new. They won’t be able to find them anywhere.

Ashley:
Well, thank you guys so much for listening to this episode of Real Estate Rookie. I’m Ashley. He’s Tony. I’ll see you guys on the next one.

Dave:
Here’s a simple rule for building wealth through real estate. Get your own financial house in order before you go buy someone else’s. Today’s guest has bought dozens of properties and he reached financial freedom in his 30s, and his secret isn’t finding better deals. It’s actually having a rock solid financial foundation underneath his investing, saving money, using leverage, managing risk. And he’s created a system around these ideas that help him build millions of dollars in equity. And today he’s sharing all 11 steps so you can do the same. What’s up friends? Dave Meyer here, Chief Investment Officer at BiggerPockets. My guest today on the show is Andrew Giancola. He’s the host of the Personal Finance Podcast. Andrew has successfully bought, operated, and sold many different businesses, and that includes several years as a full-time real estate investor. And through those experiences, he’s seen one skillset that separates the investors who succeed from those who fail.
It’s a strong understanding of personal finance. So Andrew actually built a system around it. He calls it the Financial Freedom Stack, and it combines real estate investing strategies with financial best practices like emergency funds and market exposure into one simple and repeatable package. Today on the show, he’s breaking down this 11-step framework to show you exactly when you should be saving, when you should be investing, when you should be paying down debt, and when it’s time to scale your portfolio. If you want to build wealth in real estate without feeling financially stretched, this episode will show you exactly how. Let’s bring on Andrew. Andrew, welcome to the BiggerPockets Podcast. Great to have

Andrew:
You. Dave, thank you so much for having me. I am so excited to be here.

Dave:
For people who don’t know Andrew or his podcast yet, maybe you could just give us a brief introduction of who you are and how you’re involved in the real estate and investing space.

Andrew:
Sure. So my name is Andrew Gincola. I am the host of the Personal Finance Podcast, and my entire goal with that show is to actually create a million millionaires. That’s the initial goals that I had when I set out to create the Personal Finance Podcast. And our entire goal is to kind of empower you with your money. And that is the big thing that we do over there. And so I started investing in real estate back in the day where I was a sweat equity partner. So I was a sweat equity partner with two cash partners and got into real estate in 2015 and then exited and kind of sold my portfolio with those partners in 2018. We’ve done a lot of cool stuff just within those last couple of years. And it is something that is one of my favorite ways to invest overall and something we talk about all the time in the show and is a huge, huge deal for the things that we talk about every day.

Dave:
Let’s talk about your wealth building journey a little bit though. So it sounds like you’ve done a lot of stuff, not just real estate. So how has real estate sort of fit into your personal wealth building journey over the years?

Andrew:
So this is really fun because I started out in corporate finance. And when I started in corporate finance, I was not making much money at all whatsoever. And so what I did is I was sitting in my cubicle, which then eventually as I got promoted, became an office. But when I was sitting in my cubicle, I would listen to podcasts. And there was a bunch of different ones that I would listen to, but one of the big ones I listened to was BiggerPockets. And so at that timeframe, I was kind of listening to the show and then all of a sudden I got hooked listening to a ton of different episodes. And it was one of those things that all of a sudden I got the bug. I just wanted to invest in real estate so bad. And the biggest thing for me was I had analysis paralysis.
I spent so much time trying to understand and learn deals. I read every single real estate book out there. And so this was one of those things where I really, really just needed to get started. And I probably took two to three years too long before I actually got started. But eventually, when I was working at that corporate job, got a couple of promotions and realized I don’t really want to do this for the rest of my life. And so I worked with two different folks who were worth hundreds of millions of dollars who said, Hey, I want to get into investing in real estate as well. I don’t want to do all the work. You become the sweat equity partner. We’ll become the cash partners and we can start this company together. And so I took a leap of faith and I jumped into the water, literally quit my job.
I don’t recommend anybody do this, quit my job and decided to go start investing in real estate. And I remember that first day sitting down at my computer, I’m like, okay, I got to make this happen. I was only married at that time. I didn’t have kids yet. And so I could take on this risk. And I set up my finances ahead of time to make sure that I actually could take this risk. But once we took the leap of faith, then we started to invest. And honestly, these guys were willing to invest as much as we possibly could. And it was one of those things where I was sticking to my numbers and my metrics going forward. And I wish I bought everything in sight. I didn’t. I was very strict to my numbers, but it was one of those things that was one of the best experiences because once we started that journey, then I got to test out pretty much all the different types of real estate investing and it was a very, very powerful lesson.

Dave:
I would imagine from your experience, you can identify some other things that separate successful investors, whether it’s real estate or not, from the people who want to get into this stuff, but don’t actually wind up pulling it off. So what are some of those things that you’ve seen?

Andrew:
So early on, I think one of the biggest things that most people need to do is kind of reverse engineer what they want to do when it comes to building wealth. And I think this is the big key that overall most people don’t do when they get started. I think a lot of people get the real estate bug like I did and they just want to jump in, they want to get started, and they’re trying to figure out what to do. But what I like to do is begin with the end in mind. And so I like to reverse engineer exactly where I want to go. And so there’s a number of different ways that you can do this. You can look at this and say, “Hey, here’s how much I spend every single month.” And overall, this is going to be something where I reverse engineer and figure out how much cashflow I need, how much can I cashflow on each property and get to that point in time.
We all know that. Dave and I spoke on my podcast recently and Dave was talking about the equity model where he kind of has a focus on the overall equity in his portfolio. And that’s how he figures out how he gets to financial freedom. And I think this is the biggest part that most people need to start with, is they need to start with understanding what that financial freedom number is. And once you get to that point in time, this is going to be your north star. This is going to be your guiding light on where you need to go next. And you can shift the way that you’re going to invest. You can shift the way that you think about this, but this is really how you set your plan in place, how you set up your goals and how you get to where you need to go.

Dave:
I could not agree more. I literally wrote a book called Start with Strategy. The number one thing is set up that vision and then build your entire portfolio backwards. I love this, Andrew, but I’m curious, there’s kind of this debate, I feel like in the personal finance investing community about a financial freedom number. What’s your take on whether or not it should ever change? Is this something you set and forget or do you adapt it time to time?

Andrew:
I have a very, very big thing that we always do. And the biggest thing overall is I think this adapts over time. My biggest problem is in my 20s, I was very frugal. And I had this goalpost in place where I had this number where it was basically, we call it financial independence or the fire movement. We have this number in place where we were looking at this and saying, “Hey, I’m going to be lean fire. This is the minimum amount that I need in order to be able to be financially independent.” The funny thing is, then I got married and all of a sudden that goalpost moved a little bit.

Dave:
Exactly.

Andrew:
And then I had my first kid and then all of a sudden the goalpost moved again and then again and again. And so I realized very quickly, I can’t get this goalpost to stop moving. And so instead, what we do is we tell people, you need to evaluate your freedom number every single year. What most people do is they do it every five, 10, 15 years, if ever. And when you wait too long, all of a sudden the gap between what you actually need and what you thought you needed is way too big and now you have to play catch up again. And so every single year, just like you would on your net worth or just like you would on your finances and taxes, we tell people to evaluate your freedom number, look at your expenses and how much you’re spending, look at how much your burn rate is and go back and make sure that you were on track to accomplish that.
Now, there are going to be things that change when you retire and when you stop working and all those different things where you may not have as much expenses later on in life, but we want you to evaluate it on a yearly basis so that you can stay on point and stay on target. Whether you’re investing in stocks, real estate, businesses, all of these are going to matter to make sure that you evaluate it on a yearly basis.

Dave:
I love this because it kind of drives me crazy when people say set it and forget it kind of thing. If you’re in this community, if you read fire blogs or Reddit or whatever, you see people who do LeanFire go back to work all the time. Your life

Andrew:
Is going

Dave:
To change. I’m not super old, I’m 38, but what I spend my money on now is totally different what I thought that I would need to spend my money on when I was 25. It’s just totally different. And I’m sure when I’m 50, it’s going to be very different from what it is today. So really recommend it, but that does not take away from the necessity of actually creating this number because flying blind is worse. Adjusting is fine, but flying blind is like a thing that I just think you’re bound to go astray, introduce risk and lacks efficiency. So I completely agree with this. We started with step one, which was defining your financial freedom. Andrew, what’s step two?

Andrew:
So step two is to build up that starter emergency fund. So if you’re just getting started with your finances and you’re just getting the ball rolling, it’s getting that starter emergency fund, which is one month of expenses. So we have this thing called the 136 method where we do it by a percentage of your expenses because everyone’s needs is going to be very different. And so when we look at a percentage of your expenses, we want you to save at least one month of expenses ahead of time. What is this for? Because when we look for these future goals and some of the things that we’re going to be doing, this one month of expenses is not there for anything other than to protect you and not derail your financial progress as you move on to some of these stages. So if your car breaks down, you have some cash on hand to take care of that.
If your water heater breaks, you have some cash on hand to take care of it. If your kids get sick, you have the cash on hand to take care of that as well. So all this is for is just some early financial protection to allow you to continue working on your financial goals as you move forward.

Dave:
Okay. So this is step two, just fund one month before you do anything else. It’s lower than I’ve heard other emergency funds though. I’ll usually hear like three to six months, maybe even longer. So why just one month?

Andrew:
So one month is just the first stage till we get to the next steps. Ultimately, I think the minimum you should have in your emergency fund is six months. And so when we look at six months, we want you to build to three and then six, but ultimately I think at a minimum, you need six. So there’s a lot of people out there that will say three. There’s a lot of people out there that will say a little less. I think you at least need six because of job loss is the big key.

Dave:
I feel like most people are like, “We have no idea what’s going to happen a year from now with AI, the broader economy.” It’s big question mark. So I like the idea of protecting. But so it sounds like this first emergency fund one month is sort of like you sock away a little bit of money so you can make other progress in your financial journey. Is that step three?

Andrew:
Exactly. So the next step would be to eliminate any high interest debt. So what I classify as high interest debt is things like personal loans, credit cards, those types of things that are anything above a 6% interest rate outside of your mortgages or anything that has asset classification on it, any of that consumer debt. We want to get rid of that as fast as possible because this is something that is a pants on fire emergency, in my opinion, where it’s one of those things, you got to get rid of this, otherwise it is just going to drag you down going forward. And really, if you have credit card debt and you are thousands of dollars in credit card debt, you have no business investing in real estate yet, in my opinion. I agree. Instead, you need to make sure that you get this stuff paid off so that you have the financial foundation in place so that you can go out and take the risks that you want to, the calculated risks and have those in place to move forward.

Dave:
A hundred percent could not agree more. You absolutely … Real estate is not something to get you out of crazy debt. You need to be first in a good financial position to take on the financial responsibility. It is not capital light. I mean, this is a capital intensive business. And if you have not gotten yourself to a position where you can manage your own budget, managing your own personal budget and managing a business’s budget is probably going to be really hard. So show yourself that you can do it with your own personal situation, and that’s a great way to learn. And then you can apply those skills to managing a budget, managing a P&L for a business. It’s kind of similar. And so this is an opportunity for you to learn. And I also see sort of where you’re going now with the emergency fund of one month.
You don’t want to fund it to six months because it sounds like in your opinion, paying off that high interest debt is actually more important and more urgent than fully funding an emergency fund up to six months.

Andrew:
Exactly. And if you don’t have that one month in place, then what happens to a lot of people is that something will pop up and it will derail their progress from paying down that high interest debt. So instead, having that one month in place first allows you to at least have somewhat of a protection where if anything were to pop up, you would at least have some cash on hand to take care of it. And then from there, you are focused on paying off that high interest debt.

Dave:
So it sounds like there’s a presumption in this framework here that the folks who are going on this journey are at least able to earn more than they spend, right? Is that a fair place that you think people need to start from?

Andrew:
That is a fair place to start from. So the difference between your income and expenses, we call the gap. And I believe the gap is where wealth is built. This is the place where if you are struggling or you’re living paycheck to paycheck, you either have two options you can cut back or you can increase your income. And for me specifically, my biggest goal is to pull that big lever of increasing your income. You can only cut back so far and your income is infinite. And as real estate investors, we’ve seen this. We’ve seen this happen time and time again because the more houses that you add or the more properties that you add in your portfolio, the more you can grow your income over time. And so this is a very, very powerful thing that once you have the difference between your income expenses and you have a gap there, then you can deploy this cash into income producing assets that are really going to help you over time.
But you got to get rid of that high interest debt first, this debt that’s dragging you down, this huge weight. And so that is what is so important upfront to make sure you have that foundation.

Dave:
Welcome back to the BiggerPockets Podcast. I’m here with Andrew Jimcola talking about his 11-step financial freedom stack, specifically for real estate investors. Hopefully you get that consumer debt under control. It’s a really important part in anyone’s financial journey. And if you pull it off, congratulations, it’s hard to do. What comes after that?

Andrew:
So after that, we get to the six months of emergency funds expenses in place. So the reason for this, and a lot of real estate investors are going to say, “Well, I want to get that capital working,” but let me talk to you about just why this is so important for a lot of folks out there, is six months is going to do a number of different things. One, if you lose your job, your nine to five, you have the cash on hand to take care of this. And a lot of people will say, “Well, why don’t I just have three months?” Well, if you lose your job, let’s go through this sequence for a second. First, you’re going to have to get your resume back together, start sending people your resume from LinkedIn. You’re going to go through a couple of rounds of interviews.
Maybe if you don’t get those first rounds of jobs, you got to go through more interviews and you don’t just take the first job that comes up front. Instead, you are trying to find a job and find the job that fits perfectly for you. And so if you’re doing this during that timeframe, that takes about six months, sometimes five, sometimes four. But if you are someone who is in an industry that may take a little longer to find a job, that is going to take six months. Number two is you can also take advantage of opportunity. So a lot of times, big opportunities happen where people who don’t take advantage of opportunity, meaning moving across the country for a job that pays more or being able to take advantage of opportunities that pop up, maybe a property pops up. You cannot take advantage of that opportunity without cash on hand.
And so you have to have this cash on hand in order to help protect you moving forward. Now, this isn’t really the money that you’re going to be investing. This is going to be helping you stay protected, but it also just allows you to use your emergency fund if opportunities pop up that are once in a lifetime situations.

Dave:
I like that a lot. Yeah. I think this number really varies. I personally would never recommend under six months. I just think that makes sense in an uncertain economy. For some people, if you’re single, you’re living cheap like three months, I’m not going to argue with you. But if you have kids, if you have responsibilities outside of just taking care of yourself like most of us do, six months makes sense. I think everything you said is true, Andrew, taking advantage of opportunity, finding a job. The other thing I’ll say is I think the one thing that hurts real estate investors, the one situation you never want to get yourself in is a place where you’re forced to sell, where you have to sell a property at an inopportune time. If you can hold on and you get to pick one to sell, you almost always make money in real estate.
That’s just how it works. And if you don’t have a big enough emergency fund, you are putting yourself at risk to have to sell a property. Maybe even you have a great deal that’s doing well, something comes up in your life and the only equity, the only capital you have is tied up in this property. Now you got to go sell a good deal to cover your expenses. I’d rather you wait and get those emergency expenses covered so that when you go out and find that great deal and do all that hard work, you know that you get to hold onto it.

Andrew:
I could not agree more. And that is the biggest reason, is to protect you against life. It protects your family, it protects your investments, it protects everything. And so this is basically just de- risking your situation. For example, in my story, I would not have been able to take that leap of faith without having that emergency fund in place. The opportunity came up very quickly, and I would not have been able to take that advantage of that opportunity if I didn’t have this in place. So it’s very, very important to have this upfront. And we call it the SWAN number. So six months is always our minimum, but if you want more, what is your sleep well at night number? That is going to be the number that you come up with. And it’s just the amount of cash that you have on hand that maybe makes you slightly uncomfortable, but it is what you really, really need.
That is the big number there.

Dave:
Yeah. I keep more cash than most people say. I keep a year of expenses personally. I just, I don’t know if I’m paranoid, but I just think it’s just, it makes me sleep at night. I’m okay keeping that in a money market fund and earning 4% instead of what I earn on a real estate property. It’s fine for me.

Andrew:
Same here. And that’s the big thing for me as I keep more cash than most people and they pick up crazy, but it’s just what I feel comfortable with.

Dave:
100%. So much of economics is just psychology. It’s just what you’re comfortable with. And that’s more important in the long run than getting a maximized return in this next year. I promise you, that is more important. Making it sustainable for yourself and being in the game a long time and figuring out what you got to do to stay in the game for 20 or 30 years, that’s the most important thing. So what comes next, Andrew? What’s step five after you’ve really built out that emergency fund? Is it time to start putting some money to work?

Andrew:
Exactly. It is. So this is the next step, especially if your number one goal is to invest in real estate. It’s to build your, we call it the investor war chest, but all this is, is just the cash that you are building up to start investing into real estate. So there’s a number of different things that you can do here. One is as you start to build up enough cash maybe for a down payment, or you can look at strategies out there that are going to help you get into real estate with low to no money down. You could do things like house hacking. You could do things like what I did like find sweat equity partners while you’re starting to build up this cash. You can do a bunch of different strategies that are going to help you get started investing even while you’re building up cash to buy some of your additional deals.
And so this is a timeframe that I think is very, very powerful for a lot of people because you know that now this money is going to get to work for you. And so you can start to build generational wealth for you and your family.

Dave:
This part is so variable, right?This could take you a year, this could take you five years. Do you have any advice for people who might feel that this is going to take a really long time?

Andrew:
I think this is the big piece for most people overall is I think over time your strategy can change. And Dave and I just recently talked about this where your tragedy can shift based on what market conditions are, but also what situation you are in. So folks who don’t have a lot of cash on hand yet, but you have your emergency fund in place and you have your financial foundation in place, you’re in a prime position to start to look for deals with low to no money down strategies. And this is going to be one of those areas that I think for most people out there, if you can get into a house hack with an FHA loan at 3.5% down, that’s a really powerful strategy if you could find that deal. If you can find this sweat equity partner during that timeframe where they give you the cash and you do all the work, even if you only get 10% in the deal, your experience that you are going to get investing in real estate is better than anything else out there that you can do.
If you sit on the sidelines and just continue to read books and not do anything, your education is not only going to get you so far, you have to get out there and do something. I remember my first deal was the easiest deal ever. So I bought it actually from a hedge fund. I developed this relationship with the hedge fund that already had a tenant inside of this property. And I was like, man, this real estate stuff is so incredibly easy. This is the best thing ever. My second property, I bought the property. I had a duplex in there. I had to first evict both tenants. One side of the property had exploding toilets where like all the pipes were bursting. The other side had, when I evicted the tenants, they left 15 different animals inside the property. And so it’s just one of those things-

Dave:
Is that real? 15 animals? 15

Andrew:
Animals. I had to call the SBCA to come. They had fish tanks, they had illegal turtles, they had legal fish, they had dogs and catch. I felt terrible for all the animals. Oh my God. Yeah, that’s terrible. And it was the craziest experience I’ve ever had. So I had the easiest first experience. My second property was probably the worst possible experience that you could have. And between those two things, you don’t know how this is going to work and you don’t know how to handle these situations unless you do. And so I highly encourage every investor out there who has not bought their first property yet, to while you’re building up this cash reserve, find a way that can help you get this education right now to get this education out there. Maybe you only do one or two deals with these folks, but at the same time, when you do those deals, you’re going to learn so much more than you ever would just sitting on the sidelines.

Dave:
If you were sitting at home, you’re willing to house hack, you’re doing low money down strategy, what’s a number that you think a threshold people need to get to and saved up money in order to pull off a deal that they are at least a part owner in?

Andrew:
Well, if you’re looking at the strategy, for example, if you’re looking at a house hack and you’re doing 3.5% down, all you really need to do is get to that 3.5% number. As long as you run the numbers and you can get to close to breakeven or cash flow, that is going to be a really, really powerful way for you to kind of get started. And so first, which is kind of partially what the next step is also talking about, step six, which is matching your capital to your real estate strategy where this is looking at and making sure that whatever strategy you’re going to do first, you’re also matching how much capital you are saving with that. And so these kind of go hand in hand. And so if you’re looking at this, I mean, house hacking is the number one thing I want to do.
I was already married when I started to invest in real estate and my wife wouldn’t go for it. I was looking for duplexes and she just would not go for it at that timeframe. But if you can househack, I think it is the number one strategy to kind of get started. And I think that is the big thing for most beginner investors out there is if you can find ways to just get deals, even when you don’t have a lot of cash on hand and BiggerPockets has great books on low and no money down in terms of how to find deals that way, I think that is just one of the best things that you could do. But you could also get into some active income things as well. If you want a wholesale, if you want to do other deals that are just ways for you to get involved in real estate, I think it is one of the most powerful things upfront.
But make sure you set your goals first and understand what you’re going to do. And then from there, you can start to really allocate as many dollars as possible towards that specific real estate strategy.

Dave:
We talk a lot on the show about systematizing things in scale, which is important, but it can also be daunting at first if you’re coming from a position with low capital to say, “I want to buy 10 rental properties. I have this long-term goal. I don’t even know where I’m going to get the money for my first deal.” So how do you mentally or psychologically recommend people navigate those sort of competing interests?

Andrew:
So what I would do is I would kind of reverse engineer how long it would take you to get there. So let’s say, for example, you have 500 bucks extra every single month. Well, you have to figure out, okay, well, let’s do easy math for Andrew here. If we had a $100,000 property and we’re just using a nice round easy number, if you wanted to house hack that property and you wanted to find that $100,000 property, well, you need 3,500 bucks to go out and buy that property. Obviously there’s not many deals like that out there anymore, but that is like a situation where you could figure out, okay, this is my common goal. Now I need to reverse engineer how long it’s going to take me to get there. And when you do the math, then you can see, okay, it’s going to take me one year, two year, three years, four years to get there.
Well, during this timeframe, then that is the timeframe where I can figure out how can I get into another property with no money down because you have time available. And so you know my second property or my third property is going to come this way and some other opportunities might open up if you start to kind of do the work. So I recommend A, during that timeframe also networking, just kind of how we have talked about a number of different times here, but I think that is going to be one of the best things that you can do because then you can find deals. And maybe another big thing is finding deals seller financed. You could find things like assuming mortgages. There’s a lot of cool things that you can do there that are going to help you, but I would reverse engineer it. I would do the math backwards and that way you know exactly how long it is going to take based on your savings rate.
Now, if you get to a point in time where you realize this is going to take way longer than I think to accomplish my goal, again, you have those two levers to pull. You can either decrease your expenses or increase your income. Those are the two levers that you have available to you. And if you focus your time and energy on increasing your income, and if you are really focused on real estate investing, then maybe it is some of those active income things where you’re the sweat equity partner in a flip or you’re a sweat equity partner in something else that can help you get through this process and understand how this works. Maybe you take a part-time job with a property management company so you can understand how to manage properties, but there’s a lot of different things that you can do to really get yourself in the game so you have an understanding and you are that much better off when you get started.

Dave:
Totally. And I just want to reiterate that if you want to try and increase your income, it doesn’t need to be through real estate. That is an option. If you think you’re good at that and it will be something that you enjoy and you like and you can make money, go for it. Absolutely. But if you could make more money, drive an Uber or doing something else that’s just another way to increase income. I personally sort of had a crossroads in my investing career in 2015. I was like, “Should I go into real estate full-time, be an agent, whatever.” And I was like, “Actually, I think I can increase my income more if I went back to grad school.” So I went to grad school, increased my salary, and then used the excess income from that to invest in real estate. Not everyone can do that, but I just wanted to point out that I was fully committed to real estate, but chose to do something outside of real estate because I thought it would build my portfolio long term at a faster rate.

Andrew:
Exactly. And that is the biggest key is finding those biggest levers that you can pull. I highly recommend if you have a nine to five learning how to negotiate your salary, putting together a system that helps you negotiate your salary, that is going to be one of the fastest ways that you can increase your income. Or we do this series called side businesses that can turn into a full-time income. There are different things that you can do that really are going to make you a lot more money. And again, it does not have to be in real estate. It could be something else. And especially if you know that you can make a lot more based on your current skillset, doing something else and then you take that extra cash and put it into real estate, that is just going to compound so much more than you can ever imagine.

Dave:
We’ve gone through the first six steps. As a reminder, step six was to match your capital to your real estate strategy. Where do you recommend people go from there?

Andrew:
So step seven, and this is something that I believe in, especially if you work a nine to five or something else. And Dave, you may have a differing opinion on this because I’d love to hear this, but it is to build market exposure next to real estate. So if you’re a real estate investor and you are someone who is investing over time, there’s a couple of different things that I like when it comes to investing in the market. So I am a guy who does both. I invest in market and I invest in real estate, and these are ways that I just diversify the way I’m investing. But I like to just look at things like getting your 401k match. Why? Because that’s 100% rate of return and that is free money. And if you work a nine to five, that is a fantastic option for people out there because you can’t get a rate of return like that.
Another one is looking at something like a Roth IRA where you put money in, it grows tax free and you can pull the money out tax free. But for real estate investors, if you decide, “Hey, I am really crushing it in real estate,” you can do a self-directed IRA through your Roth IRA and be able to invest in real estate with a Roth IRA. You could do things like if you invested in your 401k, you have your 401k available and building wealth over time, that is one of the most powerful accounts I believe in building wealth over time. And if you look at some of the studies of millionaires, for example, Ramsey Solutions did a study of millionaires and found that 80% of them built their first million inside of their 401. It’s just an automatic way to kind of invest your dollars. And so it is one of those areas that you could do some really, really cool stuff, I think that can help you with real estate.
But even if your money’s in your 401k, a lot of people are like, “Well, it’s locked in there.” Well, you could do things even creative, like if you wanted to invest in real estate, in reality, you wanted to do that. You could do things like a 401k loan. Now that’s not something I would do, but you could do a 401k loan and the interest actually goes back into your 401k when you do this. So market exposure, I think just helps diversify your investment strategy, especially when it comes to finances. And so that is the next step if it is something that you’re interested in. I love liquidity. I love having the ability to have that, and so it just gives you some cool stuff there.

Dave:
I’m so glad you brought this up. It’s something I feel on an island over sometimes with other real estate investors. I mean, no offense, like Henry, co-host of the show, invest only in real estate, nothing else. We have other people come on, James Daynard, Kathy Fecke, they’re all in real estate. They don’t invest in the stock market. For me, I’m not comfortable with that. I mean, I believe in real estate. I have two thirds of my wealth roughly in real estate. So I clearly believe in it, but I also, the stock market offers different cycles, it offers different opportunities, and I just think it makes a lot of sense for people to have some balance. The question though, Andrew, I get all the time. Top 10 question I get is how do you decide how much to put in real estate, how much to put in the stock market?
What do you do or do you have any rules of thumb that could be useful?

Andrew:
The way that I think about this is for a lot of folks who are new to this, and if you know you want to do both, if you know you want to invest in real estate and you know you want to invest in the market, then I would look at a, first, making sure you get that match. That match is always the number one thing that you should go out and get. In fact, we’ve done studies in the past where we’ve looked at getting your match over the course of 30 to 40 years. And over the course of 40 years, you’d have over a million dollars in your portfolio just It’s by getting a 4% match. So please, if you have that match available, it is very, very powerful what you can do there. But secondarily is then you can decide, okay, well, first, if I split this off fifty fifty, I always tell people when it comes to their money, split it off fifty fifty and kind of see how you feel.
So if you start investing dollars into the market, for example, let’s say you start with the Roth IRA because you could do a self-directed IRA later on. For real estate investors, I always want them to think of the backup if they want to take some of this money and put it towards real estate. So if you put it in a Roth IRA, for example, and take the other 50% and put it aside for real estate investing, see how you feel, see how that money’s growing, see over time when you have that financial plan in place, is this something you want to continue to do? Because then as you start to build up that portfolio, then all of a sudden maybe you buy your first property. And when you buy your first property, you’re looking at this and saying, “Man, this first property is absolutely killing it.
I love this stuff. I am so passionate about this stuff.” Well, maybe then you’re going to shift it over to 20% in the market and 80% in real estate. And that is a situation where you kind of have to make that shift. But I always tell people to start with fifty fifty and then start to shift it over based on how their plan looks, which is why I want you to review your financial freedom number every single year because as these strategies shift over time, you may have to review that number and shift the strategy based on that number.

Dave:
That makes a lot of sense to me. I think there’s no science to it. You kind of just have to feel it out for yourself and what you like. You had mentioned something before though that is one of the top things I think beginner investors of all type overlook, especially in real estate is liquidity. Liquidity, if you’re not familiar with this term, it’s just basically a measurement of how easily you can convert an asset to cash. So cash is the highest liquidity thing out there because it’s already cash. Things like bonds and stocks in terms of the spectrum of liquidity, pretty high up there. There’s a very sophisticated, high volume market where you can go sell that. If you want to sell your stocks, your bonds and get cash, takes a couple days, right? Maybe. Real estate, even in the best times, takes weeks or months.
In a market like we’re in today, probably takes multiple months or half a year. I know it’s a little bit more advanced, but something to think about as you progress in your investing careers. Do you want access to your money? How quickly do you need access to your money? Not just for emergencies, but for opportunities. Sometimes you see an amazing deal. Can you sell your one property in time to get to that other one? Probably not. Can you sell some stock to get to it? Maybe. So it’s just something to think about. There’s no right answer, but I would really recommend, one, diversification lowers overall risk, and two, liquidity allows you to get more opportunity and mitigate risk. So two things to think about there.

Andrew:
100%. And for real estate investors out there who don’t have any liquidity now, if you have all of your money tied up into properties and you have that in place, here’s just an example of this is like recently a really good deal to buy a business came up for me a couple of years ago. And when that deal came up, I had to close within less than a month. And the only way I had the cash on hand was because I had it in a taxable brokerage account. I had the cash there and I was able to liquidate that money super quickly and go and take advantage of that opportunity. If I had to liquidate a property, I wouldn’t have been able to take advantage of that opportunity and I would’ve completely missed out.

Dave:
Exactly. Perfect example. Welcome back to the BiggerPockets Podcast. I’m here with Andrew Gincola talking about 11 steps that real estate investors should follow to build their financial freedom stack. All right, so once you’ve done this, you recommend getting this exposure to the market. What’s step eight?

Andrew:
So the next thing is basically what we’re going to do is we are going to allocate based on our progress. So what we want to do is basically take a second, take a breather and decide, we’re looking at our freedom number. We’re going to decide, do we want to really push and accelerate? Meaning that do we want to start to buy more properties? Two, are we okay where we are and we want to continue to, if we’re investing for cashflow, do we want to stay here? Or three, do we want to divest or figure out if we want to allocate some of the stock money to real estate and/or vice versa? And why I say this is because I think a lot of people get to this point in time where they push, push, push, push, push, and never stop to think about the overall grand plan of, “Hey, am I okay where I am now?
Is this the point in time where I can then decide to make some other moves and/or how do I need to think about my portfolio?” Because at a certain point in time, we reach our goals and if we continue pushing on and on and on, if that’s not our goal, then we need to decide, well, what is the life that we want to live? How do we design this? How do we have a lifestyle design that makes a lot of sense? And so this is kind of reallocating capital based on what our overall goals are. So maybe you got your first five, 10, 15 property set up. Now we need to decide, do we want to continue doing this and just kind of letting this compound over time, or are we okay slowing down and reallocating capital somewhere

Dave:
Else?This is so important. I feel like it’s one of the things that people really miss and is kind of lost in the broader social media conversation about real estate where people talk about door count, which I hate. I talk about that a lot or this idea that you need to get to a certain number of properties or that you always need to be pushing. I just personally believe what I said earlier that the goal is to stay in the game, right? And sometimes you have capacity. Sometimes you have capital, sometimes you have time and you could go and you could get out there and acquire a bunch of assets and turn them around and do some rentals, and sometimes you don’t. Sometimes life happens, sometimes you need capital for something else, and that’s totally okay. I don’t know how you feel, Andrew, but for me, designing a portfolio that is sustainable is the most important.
If that means you don’t buy a deal one year, that’s okay. It’s like, yes, you want to keep that goal in mind, but there are inevitably times where your progress is going to ebb and flow and you just need to know that that’s normal. And reallocating and rethinking these things is just part of the journey. It is not expected that you’re just going to be a regimented robot that’s going to be able to buy properties at the exact time that you want to and grow on the exact scale. It just doesn’t happen that way.

Andrew:
Exactly. And the person that opened my eyes to this was Chad Carson where he kind of talked about his portfolio and how he had this small and mighty portfolio in place where he would just kind of stop and reallocate and make sure he knew exactly what his plan was. And is he okay with the amount of doors that he currently has? And I think that’s just a powerful, powerful way to look at this.

Dave:
All right. So once you’ve done this, Andrew, what’s step number nine?

Andrew:
So step number nine is to save for any known future expenses. So we’re getting back into the personal finance realm here. What do I mean by this? Well, let’s say you start to have kids. Let’s say you get married or let’s say you have some big future expenses that you want to save for. Well, after you get some of your real estate investing done and you start having this working for you and you have a certain amount of allocation and capital that you have there, maybe your income starts to increase. Well, as that income increases and you have more of a gap to play with, that’s when you start to save for future expenses. So things like maybe your kid’s college or your kids’ future brokerage accounts or whatever else you want to save for. Maybe it’s a wedding fund, whatever else, this is the timeframe where I look at this, where I want to get as many dollars as possible, working as early as possible, and then I will start to save for some of that other stuff.
One of the big things that we talk about with this, especially for folks out there who do have kids, is a lot of people want to save for their kids first. They want to do it upfront. But we talk about this thing called the oxygen mask method where if a plane is going down-

Dave:
I already like this analogy. Yeah.

Andrew:
If a plate is going down, what do you do? Well, first, you take care of your own oxygen first, then you help others. And we want you to do the same exact thing, but guess what? There are no student loans for retirement. So there’s no loans out there for retirement. You got to take care of yourself first, then you can take care of your kids. Otherwise, if you do not take care of yourself and make sure your investments are going to be funding your retirement and your financial freedom, then your kids are going to have to fund that and it’s going to be more of a burden on them. And so overall, future expenses are just a big piece of the pie. I know a lot of people want to save for their kids’ college. They want to help their kids in their future, but we got to make sure that we have this in place first.

Dave:
This is a hard one. I struggled with this personally on two fronts. One, I don’t have kids yet, but hope to and think about this. But secondly, I think the other part is like, once you get to this stage, accepting that you can use some of your capital for personal things, I think was a really hard thing for me where you get into this mindset where you’re like, okay, I know the law of 72, right? I know that if I can invest this capital at 10% in 7.2 years, it’s going to double. And I’m like, oh, I don’t want to buy a new car. I don’t want to plan for having an expensive wedding. So I just think it’s difficult to get out of that investor mindset. Was this hard for you too?

Andrew:
It was very hard for me. And so I kind of developed a plan and a system to make this work well for me where I just automated all of it. So now, for example, I have a 529 open for my kids. I have a taxable brokerage open for my kids and I just literally set that up and automate the funds to those different accounts so I don’t have to think about it. They automatically invest and that helps me tremendously. And we’re a big proponent of automating your entire financial system so you don’t have to think about it. The reason why that Ramsey study shows all those millionaires in a 401k is because really all they did was automate their money into that 401k so they didn’t have to really think about it anymore. They didn’t see those dollars in their checking account so they could go out and spend it.
And instead they automated their funds there. And I’m a huge proponent of automation. So that’s how I kind of got past this, was just automating my finances as much as possible because it is very hard psychologically to get over that.

Dave:
Yeah, because then you’re not thinking, okay, I have this 10 grand, I could put it towards 529 or I can invest it in the stock market or real estate. You’re like, okay, I have eight grand, right? Because you already took the whatever. I’m just making up the numbers, but you took some number out and allocated it elsewhere. So it’s not even going into your equation as an investor that this is investable capital.

Andrew:
Exactly. That is the big key. And I think that helps overall for most people. It removes willpower out of the equation. And our willpower is the worst thing of anything. And so it removes that from the equation. Then we can just send the money over and it is a very, very easy way to build wealth. I have had people do this and they’re like, “I don’t know what to do with my hands when I automate my money, but my accounts just keep growing and it’s the best thing ever and I literally don’t have to do anything.” So it’s very cool to watch people do this.

Dave:
Okay. Step 10, what do you got?

Andrew:
So step 10, this is going to be one that not everyone’s going to want to do. And you don’t have to do it in this order, but I want to give people the option of this because it’s strategically to pay down any other debt that you have, any consumer debt that you have on hand. If you want true financial freedom, let’s say, for example, you have car loans and they’re at a 5% interest rate or anything else like that. If you want to become completely debt free at some point in time, you’ve got your investing rolling, you’ve got everything going in place, then now you have some extra cash on hand and as you’re starting to build wealth, you can start to pay down some of that debt. Whereas for most retirees out there, for folks who are getting their 50s or closer to their 60s and they want to be retired, or if you’re retiring in your 40s, I love the idea of having debt freedom, meaning you don’t have to worry about any other debt out there outside of maybe properties and things like that, but you really just want to get this paid down.
And so over time, strategically getting this paid down is very, very powerful.

Dave:
Yeah, I totally agree. I’m sort of at this point in my career where I’m thinking like I have a mortgage, but I’m still thinking about paying it off. I know it’s not the best financial decision, but it’s that I love your swan analysis. It’s like, how do I sleep well at night? I’m at a point in my career and I think that’s why this is step 10, not step five where you’re like, okay, just reduce risk, reduce complexity, make your life easier. And it’s a blessing to be at this point of your career, but it is also another big change in mentality. But I totally agree with this. I’m like, I don’t know when I’m going to do it. I’m not going to do it this year. But one of my short term goals, two, three, four, five years, something like that, is to pay off my mortgage and just be completely debt free on a personal level.
I’ll still have debt on my rental properties, but be personally completely debt free.

Andrew:
And that’s kind of the goal I think is a lot of times I’ll look at the same thing. I bought my house in 2020 and my mortgage is like 2.7%, so I’ll probably never pay it down. But sometimes I look at it like, “Well, what if I did? What if I did do that? How would I feel about this? ” And it’s one of those things where I feel like I would feel a lot of just relief and no worries and those types of things. And I know a lot of people who have done this with really low interest rates and they’re like, “It’s the best thing I ever did, not because it was a good financial decision.” In fact, it was probably a bad financial decision overall, but it was just one of those things that I de- risked my life. I don’t have to think about it.
I don’t have to worry. And it’s a really, really powerful way to just take control and de- risk everything.

Dave:
This framework is great. It’s just tracking my own personal life for the last 15 years. Okay. Well, I think 11 is the last one, right? So what is it?

Andrew:
So 11 is going to be investing in advanced strategies. So this is going to be a number of different things. We call them wealth accelerators, but what they are is basically A, you could do real estate syndications, you could do advanced note lending, you could do a lot of different things here, but also if you’re interested in things like buying businesses or if you want to try different strategies, this is a great place to do that where you have this extra capital on hand that you can then put in riskier things or things that are riskier in quotations here that are just one of those areas where I love wealth accelerators. Why? Because a lot of people, once they start to invest in wealth accelerators, then they really see their money start to grow. But it is one of those things that if you do this too early before you kind of have your foundation and your rentals in place and your investments in place, if you do it too early, you could be taking on way too much risk.
And so I like to have it later on down the line because it’s very, very powerful.

Dave:
This is, I think, the fun part of investing now. It’s like being a capital allocator to me is a good time. You’re like, all right, I got X money to work with. I could put some of it in passive, I could put some of it inactive, I could put some of it in the stock market. And just as an analyst, I think it’s really fun. And it also, I like the steps that you’ve done it. I didn’t do it in this order, but I can imagine you pay down your mortgage, right? You’re probably more willing to take a couple big swings on a syndication or something that has big upside but has lower liquidity because your living expenses are just so much lower. On a personal risk level, you don’t have that much. And so yeah, go take some swings.

Andrew:
Exactly. And I think for most people out there, if they’re saying to themselves, “Listen, I’m not going to pay down my low interest debt. It’s at 4% across the board and I have this car loan and I have this mortgage, but I’m not going to pay that down.” You can flip the two. I think that’s the point in time where you can kind of flip and do this before that low interest debt. If you just want to pay off that low interest debt last if ever, that is completely fine in my book. And in terms of for most people out there, it’s just getting this capital to work and kind of like you said, doing some of the fun stuff and being able to kind of get that point in time. Because once you establish the foundation, you have enough cash flow coming in or you have enough equity in your properties, being able to get towards financial freedom and you know you’re on track and you’re investing your money in the market and doing all these other things, you are in such a powerful position that you can really take advantage of some of this stuff and take on a little more risk.

Dave:
What kinds of advanced strategies do you like or do you invest in?

Andrew:
So my favorite strategies right now, and I think one of the biggest opportunities right now is small business acquisition. And so this is one where I see people have talked about it at nauseum, but the baby boomer generation is retiring and a lot of them don’t even know that they could sell their businesses. And they have systems and operations that are completely outdated. And with the age of AI now, there are a lot of just AI implementation things that you can do in some of these businesses to dramatically increase profit. And so this is my favorite opportunity overall for most people. That’s one of my favorite wealth accelerators. But another one is finding real estate syndications with really good operators, like having really good operators in place where it is completely passive. Sure, you’re going to be tying your money up for a long time.
I don’t like that part, but at the same time, as long as the cashflow is there and you see that rate of return, that I think could be very, very powerful.

Dave:
Totally. Doing nothing is great.

Andrew:
I

Dave:
Love it. Yeah. I mean, I agree. I do syndications. I love private lending, by the way, great way to get 10, 12% cash on cash returns every single year, great way later in your career to build wealth. And then yeah, I’m just starting my buying a small business journey, but the numbers are compelling. But Andrew, this is awesome. Thank you so much for joining us today. I love the framework. I think this is so powerful for real estate investors to just see that you don’t need to do it all at once. I think people think, oh, how do I get into syndications or how do I get into the market? How do I balance it? Think about it systematically. Everyone has to do it slowly. No one does this all at once. And I think this is an awesome framework. For all of our listeners to apply to their own investing career, hopefully it will help you see that if you do this for eight, 10, 12 years, you can get to step 11, it just takes discipline and knowing yourself.

Andrew:
Exactly. I think that is the most important thing is if you go through these steps, I did these steps myself personally and it helped me set myself up where I was protected, but then in addition, helped me accelerate my path to wealth, which was my ultimate goal. I just wanted to buy more freedom every single year. I love

Dave:
It. So thank you again, Andrew. If people want to connect with you, where should they find you?

Andrew:
Thank you so much for having me. So they can find me on the Personal Finance Podcast where anywhere you listen to podcasts, you can find us there or on YouTube. In addition, we have a PDF guide of this exact framework if anybody is interested. If you go to mastermoney.co/resources, we have that there available for you. And then we have Master Money Academy. If you ever want help with your personal finances, that’s what we help you there is in Master Money Academy.

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

This article is presented by Steadily.

You analyzed the deal on the new rental property, ran the numbers, negotiated hard, got it under contract, and closed. You took a long sigh of relief.

Then the actual insurance quote came in.

And just like that, the cash flow you underwrote? Gone. Or at least significantly thinner than your pro forma suggested.

This happens more than most investors want to admit. And the frustrating part is that it’s almost entirely avoidable. 

The problem isn’t that investors don’t do due diligence. Most serious investors do. They order inspections, pull title, review the rent roll, and stress-test their numbers six ways from Sunday.

But there’s one category of due diligence that consistently gets treated as an afterthought until it’s too late to do anything about it: Insurance.

Not the concept of insurance. Everyone knows they need it. The issue is when investors think about it, and how little they actually dig into what it’s going to cost before they close.

In this article, we’ll discuss why insurance is one of the most unpredictable line items in any rental property acquisition, what specifically drives costs that investors miss during due diligence, and how to build a smarter process so you’re never caught off guard after the keys change hands.

What Investors Actually Check vs. What They Should

Let’s be honest about what a typical due diligence process looks like. You get under contract, the clock starts ticking, and you’re juggling an inspection, a title search, a review of the financials, and probably a lender breathing down your neck about documentation. It’s a lot.

So what gets the most attention? The stuff that feels urgent and tangible, such as the:

• Inspection report.
• Title commitment.
• Rent roll.
• ROI math.

These are all important. No argument there.

But here’s what usually happens with insurance: An investor plugs a number into the pro forma based on what they’ve paid on other properties, what someone told them at a meetup, or a rough estimate from an online calculator. They put “$1,200/year” or “$150/month” into the spreadsheet, and they move on.

That estimate becomes a load-bearing assumption in the entire deal analysis. And it never gets verified.

The problem is that insurance isn’t a flat commodity. It’s not like estimating property taxes, where you can pull the current bill and assume it stays roughly the same. Insurance premiums are underwritten. They’re priced based on dozens of property-specific variables, and they can swing wildly from one property to the next, even in the same ZIP code.

Getting an actual quote before you close isn’t a nice-to-have; it’s essential due diligence. In the same way you wouldn’t accept a seller’s verbal claim about rental income without seeing bank statements, you shouldn’t accept a ballpark insurance estimate without seeing a real number from a real carrier.

And yet most investors don’t do it.

Why Insurance Costs Are Impossible to Predict Without Digging In

So why is insurance so hard to estimate without actually going through the process? The main reason is that underwriters are looking at a long list of variables that most investors never think about during the acquisition phase.

The age of the roof is a big one. Most carriers want to see a roof that’s been replaced within the last 15 to 20 years. If it’s older than that, you’re either looking at higher premiums, a requirement to replace it before coverage is bound, or both. A roof that looks fine on a walkthrough can still be a problem from an insurance standpoint if it’s aging out of acceptable underwriting windows.

The type of electrical panel in the property matters more than most people realize, too. Certain panels, Federal Pacific and Zinsco being the most notorious, are flagged by carriers as fire hazards. If a property still has one of these panels, some insurers won’t cover it at all. Others will cover it, but at a significantly higher premium. If you didn’t know to ask about this during due diligence, you’re finding out after closing.

Plumbing material is another one. Galvanized steel pipes corrode from the inside out. Cast iron has a finite lifespan. Polybutylene, a gray plastic pipe used heavily in the 1980s and early 1990s, has a history of failures and is considered high-risk by many carriers. These aren’t always visible on a standard inspection walkthrough, and if they show up during underwriting, they can change your insurance picture fast.

Then there’s location. And this is where things get really market-specific.

Carriers are getting increasingly granular about geographic risk. Properties in coastal areas face hurricane and windstorm exposure. Properties in Texas deal with hail. Parts of the Southwest are seeing wildfire risk priced into premiums for the first time. Flood zones carry mandatory federal flood insurance requirements that can add thousands per year to your carrying costs.

And here’s the part that really stings: Some of these risks aren’t fully visible in a standard property inspection. The physical condition of the building might be fine. The deal might pencil perfectly on paper. But if the property sits in a geographic risk corridor that carriers are pulling back from, your options narrow and your costs go up.

Here’s what this looks like in practice. An investor in a Gulf Coast market underwrites a deal at $1,800 per year for insurance based on what they paid on a property two states over. They close. 

The first actual quote they receive after closing comes in at $4,200 per year, with a wind and hail deductible that represents 2% of the insured value. That’s thousands of dollars in additional annual costs, plus significant out-of-pocket exposure in the event of a claim, that never made it into the original analysis.

The deal still might work, but it’s a very different deal from the one they bought.

The Specific Things Underwriters See That Investors Miss

Let’s go a layer deeper. The roof and electrical panel are the obvious ones. There’s a longer list of property characteristics that quietly drive insurance costs, and most of them don’t come up in the standard acquisition conversation.

Claims history

Every property has a Comprehensive Loss Underwriting Exchange (CLUE) report. This is a record of insurance claims filed on the property over the past seven years. 

If the previous owner filed multiple water damage claims, a liability claim, or a fire claim, that history follows the property. Carriers use it to price risk. Multiple claims, especially water-related ones, can make a property significantly more expensive to insure and, in some cases, harder to insure at all.

Most investors never pull this report during due diligence.

Vacancy provisions

Many standard landlord policies change or restrict coverage when a property sits vacant for 30 to 60 consecutive days. If you’re buying a property that needs work before it can be rented or if you’re in a market where turnover is slow, you may find yourself in a coverage gap you didn’t anticipate. 

Some carriers require a separate vacant property endorsement. Others simply won’t pay a claim if the property was unoccupied beyond the policy threshold.

Property type and unit count

A single-family rental, a small multifamily, and a short-term rental are all priced differently. If you’re planning to run a furnished, short-term rental strategy on a property that was underwritten as a standard long-term rental, you may find that your policy doesn’t actually cover your intended use. Short-term rentals require specific coverage language that not all standard landlord policies include.

Your own investor profile

This one surprises people. Carriers don’t just look at the property. They look at you. 

How many properties do you own? What’s your claims history across your entire portfolio? 

Investors who file claims frequently, even legitimate ones, can face higher premiums or limited carrier options across their whole book of business. As your portfolio grows, your insurance strategy needs to grow with it.

The bottom line is that insurance underwriting is a detailed process that considers far more than the purchase price or square footage of the building. And because most investors don’t engage with it until after closing, they’re discovering these variables at the worst possible time.

How to Build Insurance Into Due Diligence the Right Way

The fix here isn’t complicated. It just requires changing when you start the insurance conversation.

Get an actual quote before you close…long before you close.

This is the single most important shift you can make. Immediately after going under contract, contact an insurer who works with real estate investors and submit the property for a quote. You don’t need to bind the coverage yet. You just need a real number from a real underwriter.

If the quote comes in dramatically different from your pro forma assumption, you have two options: renegotiate the deal or walk away with your earnest money still intact. That leverage disappears the moment your due diligence period ends.

Pull the CLUE report.

You can request a CLUE report as part of your due diligence process. Review it carefully. Multiple water claims are the biggest red flag. They can signal an ongoing issue with the property, which will affect your insurance costs for as long as that claims history is active.

Ask about specific systems.

When you’re reviewing the inspection report, look specifically for the roof age, electrical panel type, and plumbing material. If any of these fall into high-risk categories, submit them to your insurance carrier before closing. Ask directly: Will this affect coverage availability or pricing?

Document what you find.

Insurers respond well to documentation. If you’ve done a renovation, have photos, permits, and receipts. If you’ve replaced a roof or upgraded a panel, have documentation of the work. This doesn’t just protect you; it can meaningfully improve your pricing and underwriting experience.

Account for geography explicitly.

Don’t assume your premiums will look like what you’ve paid in other markets. If you’re investing in a new state or region, research the local risk environment. Is it in a flood zone? A wind corridor? A wildfire-prone area? These factors need to be quoted specifically, not estimated generically.

Getting a real insurance quote during due diligence is the same discipline as getting an actual repair estimate from a contractor rather than eyeballing it. It takes maybe 15 minutes of extra effort. And it can be the difference between closing on a deal that works and closing on one that slowly bleeds cash flow you never budgeted for.

How Steadily Takes the Guesswork Out of This

Most investors avoid getting insurance quotes during due diligence because the process feels slow, complicated, and full of paperwork.

That’s exactly the problem Steadily was built to solve. Steadily is landlord insurance designed specifically for real estate investors. Not homeowners who happen to rent a unit or general commercial property owners – investors, with all the complexity that comes with it.

And the reason it matters here is speed. Steadily delivers real quotes in minutes, not days. That means you can get an actual, underwritten number during your due diligence window without burning a week waiting for a traditional carrier to process your submission. You get the information you need to make a real decision while you still have the ability to act on it.

Steadily, it also understands the investor context in a way that most carriers don’t. They cover all rental property types nationwide, including short-term rentals, multifamily, and properties mid-renovation. 

If you’re buying a value-add property that will sit vacant during rehab, they have coverage options for that. If you’re scaling a portfolio across multiple states, they can handle that too. Everything is managed through one streamlined investor dashboard, so you’re not juggling policies across a dozen email threads.

On the underwriting side, Steadily looks at the full picture. They consider your experience as an operator, not just the physical condition of one property. That investor-friendly logic means you’re more likely to get coverage that makes sense, at a price that reflects your actual risk profile, rather than a one-size-fits-all premium designed for the most conservative underwriting scenario.

And when you’re deep in due diligence, trying to make a decision fast, that responsiveness matters. The last thing you need is an insurance process that moves slower than your closing timeline.

The smartest investors treat insurance as a due diligence item, not a closing task. Steadily makes it easy to do exactly that.

Don’t Wait Until It’s Too Late

Due diligence exists to protect you from making decisions based on incomplete information. Insurance costs are a material part of your operating expenses. There’s no good reason to leave them as an estimate when you can have a real number.

Get a free quote from Steadily today before your next closing. It takes minutes, costs nothing, and it might be the most valuable 15 minutes you spend on your next deal.

Get your free Steadily quote here.