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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dave:
So that’s why you’re tired.

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

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

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

Dave:
That’s where you have to

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

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

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

Dave:
Florida’s coming back.

Kathy:
Florida’s coming back, right?

Dave:
Yeah, it is. Yeah, totally.

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

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

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

James:
Yesterday? Yes, please do.

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

James:
Yeah.

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

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

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

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

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

James:
He’s

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

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

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

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

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

Kathy:
Incredible.

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

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

Dave:
That’s right.

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

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

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

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

Kathy:
Outlet at this

Dave:
Point.

Kathy:
It doesn’t seem to be.

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

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

Dave:
For sure.

James:
No one else wants to buy this winter?

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

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

Dave:
Is that a syndication one?

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

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

James:
Again,

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

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

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

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

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

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

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

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

James:
Is there is

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

Kathy:
Sure.

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

Kathy:
Would you sell it for profit?

Dave:
Probably not.

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

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

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

Dave:
Oh, okay.

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

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

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

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

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

James:
Oh, I’m so jealous.

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

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

Dave:
Totally.

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

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

Dave:
How? Tell me.

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

Dave:
Hail

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

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

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

Dave:
Private. Yeah. Perfect.

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

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

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

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

Kathy:
Oh, absolutely. Sometimes you

Dave:
Got to take a

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

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

Kathy:
Yeah.

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

Kathy:
Thanks, I think.

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

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

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

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

Where the time actually went

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

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

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

The cost that doesn’t show up

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

The fix

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

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

What it actually saved

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

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

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

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

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

Your action items this week

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

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

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

Final thoughts

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

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

I want to tell you about a puppy.

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

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

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

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

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

You’re Not the Only One Who Got Surprised

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

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

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

The Bills Come Later

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

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

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

Disputes come down to paperwork

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

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

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

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

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

That neighbor email is Exhibit A

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

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

Three Houses, Three Rulebooks

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

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

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

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

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

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

One Pet Process for Every Door

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

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

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

Back to That Puppy

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

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

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

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

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

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

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

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

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

Henry:
Finance bros.

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

Henry:
I was

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

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

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

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

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

Henry:
So

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

Henry:
Oh yeah.

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

Henry:
I see no problem with that.

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

Henry:
Purchase price was 70?

Larry:
65.

Henry:
So you did a conventional mortgage?

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

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

Larry:
Yeah, exactly.

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

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

Henry:
And then you needed a tenant.

Larry:
Yeah.

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

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

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

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

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

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

Henry:
No, that’s pretty freaking

Larry:
Awesome. That’s

Henry:
Really

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

Henry:
Proof of concept.

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

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

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

Henry:
Get the proof of concept,

Larry:
Now you want to get

Henry:
Out of there.

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

Henry:
That’s wild.

Larry:
Yeah, it was a lot of – That

Henry:
Is a lot of class because

Larry:
What’s

Henry:
A full load? 12?

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

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

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

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

Larry:
Before

Henry:
Moving there?

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

Henry:
For work. Boosting Southern California folks.

Larry:
Yeah.

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

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

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

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

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

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

Henry:
Without doing any work.

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

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

Larry:
A

Henry:
Decent cash flowing deal without raising the rents.

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

Henry:
Nice.

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

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

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

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

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

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

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

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

Larry:
I was giving him 30%.

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

Larry:
Fifty fifty.

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

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

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

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

Henry:
Wow.

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

Henry:
All singles.

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

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

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

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

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

Henry:
Set every investor ever.

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

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

Larry:
Deal,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tony:
That’s a new intro.

Josh:
Absolutely fit him if you know him.

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

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

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

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

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

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

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

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

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

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

Josh:
Yes.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Ashley:
Today’s rookie reply is for the listener who has past the dreaming stage, but still wants to make sure they are moving in the right order. They have a goal, they’re talking to lenders, and they are studying deals, but the next step still feels intimidating.

Tony:
Today’s questions come from the BiggerPockets forums, and we have someone reverse engineering a first house hack, a rookie weighing 100% financing, and a young investor who wants a real step-by-step path before buying.

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

Tony:
And I’m Tony J. Robinson. With that, let’s get into our first question, which comes from Trey in the BiggerPockets Forums. And Trey says, “My goal is to purchase my first rental property by house hacking a two to four unit property using an FHA loan. I’ve identified when I want to buy, and I’m now focused on reverse engineering the steps needed to execute confidently and efficiently.” So what he’s done so far, save for a down payment and closing costs, actively building his cash reserves, has funds parked in a high yield savings account, got really clear buy box criteria, focused on educating himself, wrote a bunch of different books and podcasts and all those different things, became a BiggerPockets Pro member. Kudos, Trey, congrats to you. And planning to join the next local real estate meetup. So next steps are get pre-qualified with the local lender, use that to understand ballpark on buying power, complete the pre-approval process, and then build out his team.
So what he’d love advice from the community on is pre-qualification versus a pre-approval. For an FHA house hack, is getting pre-qualified early enough for meaningful planning or should certain steps wait until I’m within 90 days and pre-approved? Agent timing. From an agent’s perspective, would connecting after the pre-qualification but before the full pre-approval be appropriate or would doing so earlier be too soon and potentially a misuse of the agent’s time given my timeline? Number three, building the vendor bench. As a first time investor, what’s the best way to proactively build a reliable vendor bench or plumber or handyman electrician before owning a property? How early is too early to start those conversations and what’s the right way to approach those folks? And then number four, just blind spots. Looking back on your first FHA house hack or small multifamily purchase, what do you wish you’d done earlier in that process?
All right, so lots of context and lots of good questions here. I think first just one clarifying piece because the first part of this question was pre-qualification versus pre-approval. And they’re really the same thing. So you go to a lender, you get pre-approved. Ash, I’m not making that up right now. I’ve never heard of a difference between a pre-qual and a pre-approval.

Ashley:
I think it’s more of just a pre-approval. I think they do a little bit more like maybe a soft credit pull or something where a pre-qual is just very basic to basically get you a letter to submit with your offer. I think there are lenders that use it difference as in this is just like we’re looking at your stuff. Yeah, it looks good. And then there’s actually where they verify what you told them as the next step. Because actually there was a lot of controversy with that where you literally would fill out an online form for this one investor and one of his companies, you could print off a pre-approval letter to show for proof of funds or something like that. But I think it’s something like that, but I don’t know for sure, but I think there is a difference.

Tony:
Let me reframe that then. Well, I think the first piece is the whole idea of pre-qualification versus pre-approval. Ash and I, we’ve both done a lot of deals. We’re also not lenders, so maybe we can get a lender to come on here and clarify this for us. But I’ll tell you my experience. My experience has always been that the pre-approval or pre-qualification I’ve always kind of used interchangeably. There might be some differences technically behind the scenes on those, but for me, the pre-approval is me going to a lender, them taking a quick look at my background and saying, “Hey, we feel pretty good about what we see here and here’s a ballpark pre-approval that we can work with.” Now, once you actually have a property and you’re under contract, that’s when you go into full underwriting. And it’s during the full underwriting process, they come back with all these different questions and conditions and, “Hey, you got to do this to be able to qualify and do this and do this and do this.” It’s like when I bought my very, very first piece of real estate, which is my primary residence, I got a pre-approval.
I went out there, I was shopping for the deal. Now when I got into full underwriting, they’re like, “Hey Tony, you got to sell your BMW. I got my first big boy job and I bought this three series BMW and hey, we can approve you, but under the condition that you sell your BMW because it impacts your DTI too much.” So that’s always been my experience is you do the pre-approval, they give you a ballpark on what you’re pre-approved for from a price point. But then for the specific property, they run you through full underwriting to say, “Hey, here are all the nooks and crannies and things that we need to go dig into.” And then they get you the ability to actually close on the deal. So I would say start the pre-approval process now so you actually have an idea of what your purchasing power is and that will help you further refine your buy box to make sure that it actually aligns with what you’re pre-approved for.

Ashley:
Now agent timing, I would connect with an agent as soon as possible. You can get set up so that they are sending you automated emails that fit your buy box of properties. So you can go ahead and start getting alerts, seeing what information you’ll actually get from the agent on the property. A lot of times there’s more information when the agent sends you the direct listing than you would see on Zillow. So there’s a lot of times you’ll be able to see any attachments. I was looking at a Zillow listing earlier and it said in the listing description, see the attached letter from the seller for more information. And on Zillow, you can’t see that. But if you get on the agent’s list and you actually get sent directly from the MLS, you can a lot of times see that different information. Sometimes even the rents that they’re paying and they don’t put it on the Zillow listing, I don’t know why, but I would get with an agent as soon as possible to start understanding deals and maybe even connect with a couple different agents and see the different things that they’re sending you, who is sending you more information, who is more helpful.
I just love the story of Tony matching with an agent on Agent Finder on biggerpockets.com in Oklahoma City and her just sending him this overwhelming amount of information about the area that he wanted to invest in, which was like, Tony, you hit a pot of gold, more information than you even needed, but this was just the agent going above and beyond to give him this information before he even looked at his first property with her, right?

Tony:
Yeah, absolutely. And I contacted several different agents through the Agent Finder and some sent small emails, but she sent this massive repository of everything I need to know about investing in OKC. And that was part of what gave me the confidence to go into that market. So yeah, the sooner you can have that conversation with the agent, the better. Part of an agent’s job, I don’t think you need to feel like you’re wasting anyone’s time. Part of their job is talking to potential clients. So I think they’ll be happy to have that conversation, which actually kind of leads into the next question that you had here, which was the vendor bench and how do you build your roster of electricians and plumbers and handymen and so on. And I think going back to the agent piece, if you can find a really good agent in that market, oftentimes they have that bench for you and they can connect you with those folks.
Now, I think if you know that you’re going to buy a property that’s going to need some work, then yeah, maybe find a general contract where a handyman is your first step is probably going to be the place that I’d go, but I might not invest too much time going super deep into the sub-trades, like someone to do drywall repair and someone that can do woodworking, carpentry, those things, making cabinets, all those things. I maybe just focus top level GC handyman, someone that can knock out some of those things you’ll need to get the property ready. And then just naturally, as you’re owning and managing, you can start building out that roster of folks to do some of those other things that maybe weren’t present on day one. But if the plumbing checks out pretty clean for the property and nothing comes back as a concern, maybe I don’t spend a ton of time on day one going to search for a plumber.

Ashley:
Now the last question is around blind spots, like anything that they’re missing with the first FHA house hack or a small multifamily purchase. And one thing I will say is people talk about the FHA inspection as to some things might come up or whatever, and you have to be prepared how you’re going to handle if anything comes up in the inspection. Are you going to ask the homeowner to make those repairs? If the homeowner says, no, I’m not making those repairs, are you willing to go and make those repairs on the property without even owning the property yet just for it to pass inspection? So with the inspection, things that will come up like peeling paint, a handrail, some of the stuff won’t be a big deal, but to the seller, it could be an inconvenience to them. So as you’re getting ready to approach the inspection for the FHA, when you get the list of information back, is there anything that you are willing to either pay for or tackle or you definitely want the sellers, but just go into that kind of having a game plan of what you are comfortable with so that if things do come up during the inspection, you can go ahead and start moving forward to get through that as fast as possible because then it’ll delay closing until those issues are resolved.
And when you are viewing the property, just go online, ask Claude ChatGPT for a list of things that would make a property fail inspection from an FHA loan. And when you’re walking the property, see if there is anything that you notice. Is there no handrail going down into the basement? Okay, not a big deal. You can pick up a handrail at Lowe’s, you screw it into the wall. Peeling paint. I have a property right now where we completely renovated the whole inside. The exterior of the property is painted and there are a couple different spots where the chip is painting. $7,000 is the quote that I got. Anybody else can’t do it until spring, which is a long time from now. So that is actually a really big deal that we didn’t see coming up because we didn’t think it would be that expensive to paint this house, but the way it sits on the property with the neighbors and how they have to get to it and all this stuff or whatever.
So some issues that seem like they’re little actually could be very big and expensive issues, so you have to be prepared for them. Okay, coming up, a rookie has access to 100% financing, but someone close to him is warning him not to use it. We’ll talk about when leverage is helpful and when it becomes dangerous.
Okay. Our next question is from Jason Watts, who has found a lender willing to finance the whole purchase and rehab, but he is hearing some strong warnings from someone in his circle. I’m on my journey to buying my first investment property and I’ve spoken with a couple lenders and one gave me the name and number for a private money lender that would fund 100% of the right deal purchase and a rehab on a six to 12 month term at probably 10 to 11% interest only. Our family has a close family friend who is an aggressive agent that I pretty much have to use. I spoke with her today and she warmed me up one side and down the other not to try to get into real estate investing right now, especially with a 100% loan at 10 to 11%. Her concern being that I would use all of the loan for the purchase and have nothing left over for the rehab and that anything I find that’s been on the market for more than 90 days can’t be a good option because in the market, because there’s not going to be anything that a more experienced investor hasn’t looked at and decided was a bad investment.
All that to say, after my call with her, I’m feeling a little discouraged, but I still want to have my first property before the end of the year. The first thing you need to do is ask this agent how many people she works with that buy their primary residence, how many people she works with that are actually investors. And I’m going to bet that the pendulum swings the majority of people that are her clients are buying for their primary residence and are actually not buying in investment properties because there are deals out there and a good agent that works with investors is going to help you find these good deals, not tell you not to buy anything right now. Let’s just start with that. The second thing here is the financing piece, the 100% financing. So are you comfortable with estimating the rehab that you’re making sure you’re getting enough money on this loan to cover the rehab?
Do you have enough reserves in place so when the property is finished and you go to refinance or you go to sell it and it doesn’t appraise or it doesn’t sell for the full loan amount, maybe there’s $20,000 that you need to bring to the closing table because it didn’t sell for however much you borrowed from this person. Are you able to cover that? And what is a gap that you are comfortable with that you think there’s no way it could sell for less than this? Because the agent is right that the market is not great right now, but the market also could go down. So it could get even worse where you are stuck with this 100% financing and you have no equity in the deal for wiggle room and you have to sell it at that price to pay back that lender. So I used 100% financing for my first couple deals I took a partner on, but I gave him equity in the deal.
So if for some reason we missed a mortgage payment to him, it wouldn’t be as bad of a thing because he was also an owner missing paying half of that mortgage payment to himself. So I think you have to look at, are you able to buy this property under market? And that was something that I was doing was like one property I bought for 37,000 right after closing, I put an $800 refrigerant and five days after closing it appraised for like $52,000. So I was buying undervalued properties. Those are way harder to find now. So I do agree, be cautious with the 100% financing, but I strongly disagree that there aren’t deals out there and you shouldn’t be investing right now.

Tony:
Two things I’d say. Yes, great point on the agent, Ash. Go find a new agent. I get that she’s a family friend and you said that she’s quote aggressive, but if she’s not an investor focused agent, that she’s the wrong agent for you. So go to biggerpockets.com/agentfind or find the right agent. Number two, let’s just assume that what this agent is telling you is true. Let’s just assume that your market right now really is a terrible place to go by. That’s fine. Just go pick a different market. There’s 20,000 cities in the United States, and even if your market might be an absolutely horrible, terrible place to buy right now, which I don’t think it is, there’s always someone making money in some market. But even if that is true for your specific city, there are other cities out there and you just need to go find a different city.
So I wouldn’t get too caught up in one agent’s sentiment about one specific market when there are many, many more agents in many, many more markets to go tackle. So if your goal is to become an investor, find the right agent in the right market and go get the deal done. All right. After the break, we’ve got a 20-year-old investor with a young family who wants some rentals, but he’s worried about making the wrong move. So we’ll talk about how to turn fear into a concrete action plan right after the break. All right guys, our last question today comes from Ocasio. Ocasio is 20 years old. It’s a really great question, so we’ll get into it. Ocasio says, “I’m 20 years old with a wife and two kids, and I want to make my wife a stay-at-home mom. I’ve been studying rentals for a while, specifically multifamily homes, and I feel like I’ve found good multifamily homes to buy, but I don’t fully understand the loans and the paperwork behind everything and everything else that I’ll need.
I wish I had a true step-by-step guide in detail of what to do and how to do it and what I need from agents, the paperwork, to the money to understand loans. I’m trying so hard, but I’m scared that I’m going to get a rental and I’m going to mess it up and I’m going to mess it up for my family and wind up struggling. I wish I had someone who I could talk to to teach me face-to-face.” First, Ocasio, kudos to you for even being on the BiggerPockets forums at 20 years old and asking these questions because there are a lot of 20-year-olds who are being far less productive with their time. There’s a lot of 30 and 40-year-olds are being far less productive with their time, so kudos to you for that.
I think as someone who was a parent young, I was a teenage dad, I also wanted to get into real estate early as well. But what I found Ocasio as the best path forward for me, it was to really focus aggressively on growing my income at my day job. And once I got to a level of comfort there and we had an abundance of income, then diverting the excess toward real estate investing. And when I finally pulled the trigger on my first real estate deal, the stakes were so low that even if it didn’t work out, my family would still be fine. And I would hate for you to be in a position where even if you do find a really good deal, what happens if COVID happens again? What happens if the world goes to war and the economy crumbles? What happens if the AI bubble pops and then the economy crash?
There’s all these different things that could happen. Or what happens if you just didn’t do a good job on underwriting the deal and you take some hard lessons on your first one. I would hate for you to also be in a position where your family is struggling. So my actual advice, which is not advice that I give to most people, is get yourself financially in a position where you have the cushion and the balance in the breathing room so that even if you do miss on this first deal, it’s not a catastrophic thing. Go focus on building the income.

Ashley:
My advice would be to utilize some of the free programs and classes that are available to first time home buyers. So the information that you will learn there will be applicable if it’s your first time purchasing a home or your first time purchasing an investment property. So I just Googled first time home buyer programs at Buffalo, New York, and a bunch of them come up. All of the Section eight vouchers for the area are giving out by Belmont. I’ve taken landlord classes from them. They also have classes in different programs you can enroll in if you’re a first time home buyer or if you just want to learn the process of purchasing a house. They have free counselors that can assist you and walk you through the home buying process. Another one is Home NY in the Buffalo area, the homes and community renewal. So there’s a lot of free education and you had said specifically you wanted the face-to-face that offered these, either they do have the Zoom ones, but there’s also a lot that are in person that you can attend and go to and they’ll walk you through that process to be comfortable with it.
And even if you take Tony’s advice and you don’t start investing or purchase a property today, at least you can take your time learning and researching and attending some of these free programs that they have out there. I remember when I first attended their landlord class, it was so informative. They even give you a little book and everything to take home with you and it was completely free. Some of the classes are maybe like $10 to attend, but I would do that. I would look in your area for the different classes that are offered by some of these housing programs that you can attend to learn this stuff. And also too, I think a huge benefit of attending one of these and not just talking with an agent about the process or talking about a lender about the process because they’re trying to sell themselves to be your agent or your lender, where this way you’re getting a third party that’s not trying to solicit their services from you.

Tony:
I think the last thing I’d add too, Ash, is just for someone who’s looking for that face-to-face, like Ocasio, at 20 years old with the desire that you have, there’s probably a lot of other seasoned investors who would love to let you come work with them for free in exchange for helping them out in their business. So you go approach someone and it’s like, “Hey, can I do this one thing for you just to learn from you? I’ll give you value in this way. Hey, I’ll do all the cold calling or I’ll field the phone calls for all of the direct mail that you send out and I’ll be that person for you. I’ll go knock the doors or hey, I’ll be the person that goes and takes the pictures for you on your rehabs to make sure that they’re moving along the right way or there’s property that you’re thinking about looking at and you want some photos of it, I’ll go do that.” Or, “Hey, you need someone to unlock the door to let a vendor in.” Any of those little things, just offer to be that person for someone in your area in your neighborhood, and that could be the way that you end up building that network of folks.

Ashley:
Today’s episode was about getting ready without getting stuck. So whether you’re reverse engineering a house hack, looking at 100% financing or trying to understand the first deal step by step, the answer is to make the next move smaller and clearer.

Tony:
You don’t need to know everything before you start, but you do need to know your own numbers, understand your own risk, and build enough of a team that you’re not making the biggest decisions long.

Ashley:
Thank you guys so much for joining us today on this episode of Real Estate Ricky. If you have questions, you can submit them in the BiggerPockets forums and we may pull it to be played on the show. I’m Ashley, he’s Tony, and we’ll see you guys next time.

Dave:
There are more homes for sale in the US right now than at any point since 2020, and mortgage rates are near 7% with no relief in sight. Are these signs of an impending crash or is it an opportunity to stock up on properties at a discount? On this BiggerPockets September housing market update, we’re digging into the big changes we’ve seen to the housing market in recent weeks, and things have definitely changed. So I’m going to explain where the risks lie and how savvy investors can use these new market dynamics to build a bulletproof portfolio for the years to come.
Hey everyone. Welcome to BiggerPockets. I’m Dave Meyer, chief investment officer, housing market analyst, and real estate investor for more than 16 years. Today, we have our monthly housing market update. And I do this every month, go through the numbers, the recent data to keep you up to date. But this one, September, feels a little bit different to be honest, because for most of 2026, the story has been kind of that nothing has happened. We’re in the great stall. Things have varied a little bit, but we’ve had the same big picture story. Rates have sort of stayed in this band, inventory is sort of grinding away, it’s not really moving that much, prices are creeping up slowly and it’s been boring. But August broke that pattern in a couple of places that we need to talk about, and the market is actually starting to change a little bit faster.
And I think we’re getting a very clear signal for the first time in a while on where the market is going for at least the rest of the year for 2026 and maybe even for the next couple of years. So we’re going to hit on a few big stories. First, we definitely need to talk about mortgage rates. They’ve shot up as you know, and this matters a lot, but we got to talk about why they’re going up and where they’re going to go. Secondly, we’re talking inventory and a surge in supply and how that can be either a very good or very bad thing for investors depending on your individual approach. And I’m going to share some regional housing data because of course there’s only so much we can learn from national data and we’ll talk about different regional events and how inventory and pricing are trending around the country.
Lastly, if we’re talking about rising mortgage rates and increasing supply, we got to talk about risk because those are two of the things that can bring prices down in the housing market. And so we’re going to end the show with the risk report. It’s something we do every month here on the housing market updates. So that’s the plan for the show. One quick thing before we start, if you get value out of these monthly updates, don’t forget to hit subscribe. I am terrible at remembering to ask, but today I remembered, so do me a favor and subscribe. With that, let’s get to our housing market update. First up, we’re talking about mortgage rates. Big picture here, rates have gone up a lot over the course of the year. They’re now hovering above 7% as of this recording, recording right in the middle of September. They are about 7.2%, the highest they have been in over a year.
Now you’ll remember about two years ago we were getting mortgage rates briefly in the eights, but starting at the beginning of this year, we were closer to six. We’re at about 6.1%. So we’ve seen a significant increase in mortgage rates over this year. And the reason they’re going up so quickly is really important because it tells us whether they’re going to go back down or if this is something we just need to get used to. So what is driving up mortgage rates? The short answer is yields, treasury yields. You might have seen that the yield on a 10-year US treasury is now above 5%. This is the highest it has been in quite a while. 30-year treasuries, highest point they’ve been in 30 years. And the reason this matters is that mortgage rates are directly tied to the yield on a 10-year US treasury, not what the Fed does.
If you’re not familiar with what a treasury is, it’s just a bond. It is a bond issued by the US government where investors lend their money to the US government and the yield is how much interest or the interest rate the government pays to those investors. So right now, if you wanted to lend the government money for 10 years, you would get a 5% annual return. That’s what a five-year yield means. And this is notable because it’s gone up a lot and what has driven these yields up and therefore taken mortgage rates up with them is basically just inflation. Now, inflation is caused by a lot of things, but the primary thing that’s happened this year is the warranty ran. There’s no end in sight. It’s causing energy shocks, it’s causing increasing fertilizer prices, which is increasing food costs. Diesel is at the highest it’s been on record, which increases the cost of everything that goes on a ship, which is everything.
So that’s driving up inflation. We also have tariffs, which are inflationary contributing to inflation. That’s not what’s causing this acute spike in mortgage rates, but it plays a role. And the last thing just is the national deficit, right? We have this massive national deficit and bond investors are worried that to pay off that deficit, the government’s just going to print a lot of money which will cause more inflation. And so I know this is sort of big macro stuff. It’s not as directly related to real estate, but the reason I am telling you this is because if you want to know, are mortgage rates going to go down, you have to ask yourself this question, is inflation going down? I hope yes, but there is no end in sight to the war in Iran. Tariffs have been up and down and I think they’re just going to remain volatile for a while.
The national deficit, there’s no chance we’re getting that under control anytime soon. And so if you ask me, I don’t think mortgage rates are coming down anytime soon because I don’t see inflation getting any better. Now, the Fed is probably going to raise rates over the next couple of months a couple of times. That could help a little bit, but I do think until the energy shock that we’re going through gets better, we’re not going to see inflation come down in a meaningful way. So my outlook for mortgage rates going into the end of 2026 is that they’re going to stay near 7%. Hopefully they’ll come back down to the high sixes. I actually think that’s probably the most likely, but are they getting below 6.75? Probably not. So this is, I know frustrating. Everyone wants mortgage rates to come down, but it is not unexpected.
I’ve been saying this for years. I’ve done tons of episodes on this podcast, on the On the Market podcast saying mortgage rates are unlikely to come down because if you study this, it’s kind of obvious that this was going to happen. I think it’s just that a lot of people in our industry have been wanting mortgage rates to come down and saying that they’re going to come down because they feel like it’s an inevitability because they went up so quickly that of course they have to come back down. That’s not really how it works. The bond market rules the world and the bond market is telling us that borrowing costs are going to be higher across the entire economy and mortgages and real estate are not exempt from that. So for investors, you got to plan on higher rates. I’ve been saying it and screaming it and I’m going to scream it some more.
Rates aren’t coming down. We’re not going to see a number with a five in front of it for a long time. I don’t see that coming anywhere in the future. Certainly not in 2026, probably not even 2027. And who knows what happens after that because this stuff is sticky. There is structural stuff going on outside of real estate that is impacting borrowing costs. And the net effect of all of this is lower affordability, which pulls demand out of the market. It also lowers supply too, so that doesn’t mean there’s going to be a crash. We’ll talk about that in a little bit, but it does mean deals are going to be harder to pencil in the short run. That is only in the short run because if you think about over the long run, what’s going to happen is that prices are going to come down.
I feel pretty strongly about that. One year ago, I made a prediction that prices were going to come down in 2026. We’re actually probably closer to flat right now, but I do think they’ll be negative for the year when we get to December and see what actually happened. But I think they’re going to have to come down even more in the coming years because affordability is just too strained. Now, I know that sounds like a reason to panic, but I don’t think it is. I actually think prices should come down. I know if you own a bunch of real estate, you don’t want to see the value of your properties come down on paper, but for the market to restore some semblance of health and balance where deals are affordable and easy to get again, prices are going to need to come down a little bit.
And that’s a good thing. That actually means that cash flow is easier to find because rents, even in these kinds of scenarios, don’t really fall as much as home prices do. Historically speaking, of course something could be different in the future, but that’s usually how it works and rent to price ratios typically get better. And I’m going to dig into all of that data, but we do have to take a quick break. We’ll be right back.
Welcome back to the BiggerPockets Podcast. I’m Dave Meyer. Today we are doing our September housing market update. Before the break, we talked about mortgage rates and why they’re high. And I said that I think the rubber’s going to start to hit the road. We’re going to see prices come down. Better deals are going to start to come this winter. And there are a couple reasons for that. First and foremost is just seasonality. Prices always go down in the winter. Even during the strongest markets, you see these ebbs and flows throughout the seasons and the winter’s just not a popular time to buy a home. And with that lower demand, you usually see lower prices. But I think a couple of other things are starting to converge here that show that prices are going to start coming down in a more meaningful way. And I’m not saying there’s going to be a crash.
We’re going to talk about whether a crash is likely or not in just a minute, but just hear me out on the inventory stuff because this will make a little bit more sense. As of right now, at least according to Redfin, the total amount of homes for sale as of August, last month’s data, was 1.53 million. And this is a step up. It’s up 4% from July. And 4% might not sound like a lot, but 4% month to month is unusual. That is an unusually large change in the amount of supply. And the reason we care about supply is because prices are dictated by supply and demand. And we already know that when mortgage rates go up, there’s less demand, right? Less people can afford to buy homes. So what you really need to track in these scenarios is what’s going on with supply because if supply also falls, then prices stay in equilibrium.
That’s what’s happened the last four years. Everyone’s been calling for a crash since 2022, but I’ve been repeatedly saying prices were not going to crash because if you looked at the data, even though demand went down, supply also went down. But right now when demand is going down, supply is starting to go up. Now it went up 4%. That is not an emergency, but we’re starting to see this divergence where people, instead of saying, “Hey, I’m just going to wait this out,” they’re choosing to sell, and this is going to create a much stronger buyer’s market. When there is a big difference between the amount of people selling, if there are more people selling than more people buying, and there are a lot more people selling than buying right now, that’s when buyers have their best opportunity. And when buyers have good opportunity and their choice of properties that they can buy from, that is when prices go down, right?
Because just think about this logistically. If you’re a seller, how do you compete for the buyer pool? I’m just going to use simple numbers. If there are a thousand sellers, but only 600 buyers, how do you get the 600 buyers to buy your property? You lower your prices. You give them a better deal. You give better value. When that happens in aggregate, prices come down, right? When all the buyers are out there flexing, showing that they don’t have to buy your particular property, what kind of deal can you give me? That’s when you get better pricing. And so the reason I think the rubber’s going to hit the road and we’re going to start seeing this happen in the winter is this divergence between supply and demand. Now, I don’t personally think this is an emergency just yet. I don’t think a crash is on the horizon, but I think the correction is going to go from just being a modest flat pricing to probably modestly negative pricing.
I have not made my predictions for 2027 yet. I will do that in a couple of months, but I would not be surprised if by the end of the year we saw national housing prices down 1%, down 2%. So nothing crazy, but we’ve been sort of waiting for this to happen. Four years of low affordability and the market has held up really, really well. But I think with these higher mortgage rates, everything going on with AI, the concerns in the labor market, we’re going to start to see home prices come down. Now, of course, what I’m talking about is national data and there’s a lot of regional variants. There are places that are seeing big declines right now. Where I live in Washington State, the Seattle metro area, we are seeing a lot of declines. If you look at places like Houston, Texas, another massive market, big declines there, Austin, Texas, a lot of Florida, even some areas of the Midwest that have been resilient, like Detroit are starting to see declines and increases in supply.
Of course, a lot of places are still doing well, primarily the Midwest and the Northeast. Places like San Francisco are seeing exceptionally strong housing markets right now. This is why you have to look at local data. I like giving you the big picture national headlines here because it helps you understand what’s going on in a macro sense. Because when I say prices are coming down nationally, that means that for the most part, not everywhere, most markets are going to experience a slowdown. So even if you’re in a market in the Midwest that is growing right now 5% year over year, maybe it comes down to 3% or 2%. Or if you’re in a market that’s flat right now, maybe it turns negative, but you do need to go out and look at this data for yourself. Luckily, there’s tons of places you could do this entirely for free.
Go on Redfin’s data center. It’s awesome. It’s completely free. No sponsorship here. I just use it all the time. Yo should check this out. Great place to look at inventory and price trends in your area. So go check out your local data because that’s going to be really important. Where I’m in Seattle, it’s definitely down. You can feel it and good deals are coming. You see crazy deals right now compared. You can buy stuff easily 10% lower than it was a couple of years ago, and I think this winter it’s going to be 15%. To me, that’s what gets me excited is that there’s good buying opportunities. Of course, you got to be careful. You can’t just go out there and buy anything, but I do think there is going to be good buying opportunities out there, definitely worth keeping your eyes open for because as a buyer, as a real estate investor, motivated sellers is the best person to buy from.
Someone who says, “I just want to get rid of this. I’m willing to lower my price. I’m willing to give concessions in order to move this inventory.” And there’s just going to be more and more of those people. And so the key here is to really just buy at a discount. You really need to find the best possible deal and buy great value. Find those great properties that you can buy five, 10, 15% under current market comps. Because then if prices go down 3% next year, you don’t care. You still have equity because you bought at such a good price when you went out there. And of course, not every seller is going to be selling to you for five or 10%, but that’s the job of the investor. Go find the ones who will. Be patient and identify properties that are great locations that you’re going to be really happy to own 10 years from now and go negotiate a great price on it.
And if you can’t walk away, you don’t need to rush right now. Not saying you should wait forever and try and time the market, but don’t rush into any particular deal because there’s going to be more. There’s going to be plenty in the next couple of years. There might not be a lot of inventory on the market, but the percentage of motivated sellers who are cutting prices in a declining market is going to go up and that’s your opportunity. So make sure to keep your eyes out. Now, I am saying this all under the presumption that there is not a full-blown crash, but we need to address that because when prices are going down, it is very reasonable and it is wise. It is prudent to ask if the market is going to experience a crash. And for that, we need to look beyond inventory.
We just can’t look at active listings or new listings. We have to look at the health of the credit market and mortgage markets, and we’re going to do that in our risk report right after this quick break. Stick with us. We’ll be right back.
Welcome back to the BiggerPockets Podcast. I’m Dave Meyer. Today on our September housing market update, we’ve talked about mortgage rates, we’ve talked about price and inventory trends. Let’s go through our risk report. And again, for anyone who hasn’t listened to our monthly updates, this is basically when we assess the risk of a crash in the housing market each and every month. And for this, there are different ways you can look at it. One is looking at inventory, and as we talked about, it is going up a little bit. It went 4% up in one month, not an emergency, but if it grows 4% every month for a couple months, that might be a problem. That’s something we’re going to have to keep an eye on, but that has not happened. One month of data is not reason to freak out about pretty much anything, and I think inventory falls into that category as well.
But we got to look at mortgage quality. Are people paying their mortgages on time? Because the most likely cause of a crash is through the credit markets. Basically, people can no longer pay their mortgage on time and they are forced to sell. They might be forced to sell even if they have equity, they might be forced to sell by a bank to avoid foreclosure, or in some cases, people will get foreclosed on. The reason this can create a crash is because it floods the market with inventory, right? If all of a sudden a lot of people are forced to sell, then instead of having, using our simple example, a thousand sellers to 600 buyers, maybe you have 1,200 sellers to 600 buyers and that puts more downward pressure on pricing, then people freak out, they put their property on the market, and it creates kind of this negative feedback loop that can lead to a crash.
I’m oversimplifying it right now, but that can happen. So when we look at the mortgage market, what we see is strength. It’s actually doing quite well. So there’s a couple of different ways to measure this, but one of them is mortgage holder equity, how much equity they have in their properties. And right now it is literally at an all-time high. In Q2 2026, I know people say all-time high and they’re just saying recent high. This is literally an all-time high, $18 trillion in equity for mortgage holders. That is a ton. And out of that 18 trillion, almost 12 trillion is considered tappable, which is just a weird word, but it’s basically just saying if you wanted to do a cash out refi or do a HELOC, you could, meaning that on average, the average borrower can take out $212,000 from their existing home to use for everyday expenses.
And so this tells us first and foremost that people are doing pretty well, and if they need cash to cover an emergency, they have equity in their home they can tap. They are not going to necessarily be forced to sell to realize that money. And so that prevents that for selling and that uptick in supply that can lead to a crash. So this is sort of like a shock absorber for the industry. Equity rich owners, they don’t do distressed sales. That’s what happened in 2008 that’s not happening right now. In 2008, prices went down so quickly and there’s so many things going on. There was a lot of people underwater on their mortgage, and right now there are some people underwater on their mortgage, but it’s very few, and it’s basically only people who have bought from 2022 until now. So there is this sort of cohort of people, and it’s not a lot even in that cohort, but there is some underwater mortgages that has gone up.
But if you compare that to the total size of the mortgage market and the housing market, it is very, very small. So that is one piece of good news and relative strength for the housing market. Just to put this whole underwater mortgaging in perspective, the number of borrowers underwater as of August 2026 is up a lot, 44% year over year. So that sounds scary. You’re probably going to see that headline on social media, people trying to sell you some nonsense. They’re going to say, look, it’s up 44%. And that is technically true, but there’s something called the base effect that goes on here where it’s like going up 44% from a very low number. So it sounds like it’s going crazy, but it’s really not because even though the total number is about 800,000 mortgages are underwater, that is out of 50 million mortgages, right?
So we’re talking about less than 2%. It’s really not that much, and there’s always mortgages underwater. The second thing to remember about underwater mortgages is that does not mean you get foreclosed on. People get confused about it and they get this wrong all the time. Your mortgage underwater does not mean you’re foreclosed on. Only way you get foreclosed on is if you’re not making your mortgage payments. And for that, we need to look for active distress. We can look at mortgage delinquencies, and as of the last month we have data for the national delinquency rate rose five basis points, that’s 0.05%, so not a lot, to 3.55%. Now, again, that is up a little bit, but that is still significantly below where it was pre-pandemic. In 2019, the amount of distress we had was 4.16, and so we’re still below that. So all these people saying people are being forced to sell, that is just not true.
Are foreclosures going up? Yes. They’re going up because they were artificially low due to moratoriums during the pandemic. Right now, foreclosure data, distress data is lower than it was in 2019 when zero people in the economy were concerned about a foreclosure crisis happening. So it’s really important to keep these things in mind, and these are the reasons why I still don’t believe a crash is the most likely scenario. Has the risk of a crash increased in the last year? I would say yes, it probably has gone up a little bit, but I still don’t think that’s even close to the most likely scenario. I think what we are in for is more of a traditional correction where prices come down a little bit over time. It might take a couple of years too. So I don’t think it’s going to be this big steep crash thing.
I think we’re going to see prices grind down a little bit, couple percentage points in the next year, maybe a couple more percentage points the year after that. And so that sort of brings us to the last segment of the show today is like, what do you do about this? Inventory’s up, demand is kind of flat, it’s going down a little bit. Prices are up right now, but it’s softening. It’s probably going to go down. Fed’s hiking rates. What do you actually do? I’m going to come back to that perspective because if you’re a flipper right now or you’re trying to do some short-term deals, it is really risky right now. I’ve done some flips. I’m in the middle of some flips and I actually think they’ll do fine, but I don’t know if I’m going to do a lot more flipping right now in Seattle unless I can get a screaming deal on the buy.
I need to get it for 60 cents on the dollar. Then maybe I can do it because you’re just getting for such a good deal and you underwrite it for hold onto it for longer. That would be fine, but it’s risky. I think everyone should acknowledge that. On the other side of the spectrum though, if you are a buyer, this is a good time and I think it will be for the next year or two. I think we’re in for at least a year or two where buyers are going to have all the power and you need to flex that. So the number one thing I recommend for people is establishing a really clear buy box. At what price point do you feel you can buy an asset in your market where even if prices went down five or 10% over the next few years, pick a number, right?
I don’t think they’re going to go down 10%. I would be surprised by that, but just say 10%. If that’s what makes you feel comfortable, pick 10%, pick 15% and say, “I will only buy a deal if I can get it for 15% below current market value and then stick to that.” That’s the way to do it. If you have an aggressive target like 15%, you’re going to have to talk to way more sellers, but you can probably do it depending on your market. If you’re in a strong market, if you’re in Hartford, Connecticut, if you’re in Madison, Wisconsin, if you’re in Indianapolis, you’re probably not getting that. But in those markets, the prices aren’t going to decline that much. So maybe you set your target at 5%. If you’re in a market like Seattle or Denver or Austin, pick 20% or 15%, whatever. Pick a number and go out and find a great asset that you can buy at a huge discount and then grind.
That’s what it takes. Go out and find the seller who’s willing to meet that price because they’re going to be there, but be patient at the same time. If it takes a month, fine. If it takes three months, fine. It takes six months, fine. Go find a good asset that you’re going to want to hold onto for 20 years. That’s the job of the investor right now. Go find a deal you can buy well under market comps. Your negotiating leverage is real. It is what differentiates this market. It is the thing the market is giving us right now. Take this fact, 60% of US homes sold in August sold for below their original asking price. No one’s paying asking price right now, right? Miami, 83% sold below asking. Austin, 82%. Dallas, 80%. Go out and don’t just get a discount. Go out and get a big discount.
Use what the market is giving you. And when you underwrite these deals and you stick to this buy box, make sure you are not counting on a refi. I have been railing against this date the rate, marry the house. You can just refi in a couple of years nonsense for years. It is such bad investing advice. Underwrite with the rate you have at 7%, seven and a quarter, whatever it is. That’s how you got to do it. When you set your buy box, you got to say, “I’m paying seven and a quarter. I’m going to be paying seven and a quarter, and I’m only buying deals that cash flow that I can buy under market comps with these realities.” That’s how you do it. Just be patient and diligent. You can absolutely do this. So those are my first two pieces of advice. Stick to your buy box under market comps, underwrite with the rate you have.
And lastly, use local market data. Hopefully this national story that I’m telling you helps you understand the broad trends and the pressure that sellers are going to be feeling, because I think that’s going to be somewhat universal. Maybe not San Francisco, but the rest of the country, sellers are going to start getting a little nervous. But use local market data, whether that’s from your agent, go find a great agent on BiggerPockets and talk to them about it, or you like doing research yourself, go on the Redfin Data Center and check this out, but go find market data. That’s how you’re going to inform that buy box and be able to identify those diamonds in the rough because there’s going to be a lot of junk, but a lot of good deals. So that’s where you need to focus your time. This is what I’m doing.
It’s what I’d see all experienced investors doing, and it’s what I recommend you do as well. That’s our show for today. Thank you all so much for watching this episode of the BiggerPockets Podcast and checking out our September housing market update. If this was helpful to you, don’t forget to subscribe to our YouTube channel for more information just like this. I’m Dave Meyer for BiggerPockets. Thank you so much. We’ll see you next time.

Ashley Kehr:
Should you buy a multifamily or a single family rental property? It’s an age old debate in real estate, and it’s also one of the first decisions you’ll need to make before building your own real estate portfolio.

Tony Robinson:
And one of these properties tends to be more affordable and is arguably easier to manage. The other is more scalable and may even give you more cash flow, but which one is the better long-term investment and which one will actually help you reach financial freedom faster?

Ashley Kehr:
Today, we’re putting them head to head. We’ll break down the biggest differences between the two, weigh the pros and cons and put a couple of real properties under the microscope. We’ll even let you know which one we would buy if we were starting over today. Okay, Tony, single family versus multifamily. What was your first actually? Was it a single family or was it a duplex?

Tony Robinson:
My first was a single family. I’ve actually never owned traditional multifamily property. Every investment that I purchased has been a single family and then we got a mortel. So I’ve never done small multifamily before. And as we all know, yours was like a $17 duplex somewhere that you bought.

Ashley Kehr:
17,000, Tony, not $17.

Tony Robinson:
Okay. All right. I was close. I was close.

Ashley Kehr:
Yeah, my first was a duplex. So the difference between a single family and multifamily is first single family, one household typically. Sometimes a single family can be considered. It may have an ADU or something like that, but it’s zoned as a single family. So sometimes it could be considered a single family, but technically have two units in it depending on how it’s permitted and things like that. And then small multifamily or multifamily property is when there are multiple units so that multiple families, how it has its name, can occupy the property. So you’re looking at a duplex, which is two units, a triplex three, a quadplex four. And then after that it just goes to a five unit, six unit, seven unit, eight all the way up. I would say one of the biggest differences between single family and multifamily is the common areas and just the fact that you’re having multiple families or individuals of separate households living together on the property.
And then the second thing is actually the market value and how the value of these two properties compare in different markets.

Tony Robinson:
Let’s talk about that a little bit and maybe let’s just break down the pros and cons of both sides. I think both serve a purpose in different ways. And maybe we can talk about single family homes first. I think the biggest pro to a single family home is the simplicity and abundance of deals. Simplicity in the sense that almost every single market across the country has a single family home for sale. Not every single market has small multifamily for sale at any point in time. In my neighborhood where I live in Southern California, there just isn’t a lot of multifamily. It just doesn’t happen. There aren’t a lot of duplexes or triplexes. Most of my neighborhood is very suburban sprawl where it’s all single family homes. So we just don’t have a lot of inventory. So for me, I can open up Zillow on any day and find a deal to go underwrite if it’s a traditional single family property.
And then just again, simplicity wise, I think rookie investors can just wrap their heads around the idea of one house, one family inside, one door as a stepping stone for their first deals.

Ashley Kehr:
And as I mentioned, the fact of looking at the market value of each of those properties in different markets, that plays a big role into it as to single families are easier to sell because you have a larger buyer pool. So in my market that I invest in, a single family home has shown more appreciation over the years than a duplex has. Very similar property, but if it’s broken into two units compared to single family home, the single family home has had more appreciation over the years than the duplex in my market.

Tony Robinson:
Let’s talk about that just for a little bit too, Ash, because in small multifamily, maybe not as much, but definitely when you get into larger multifamily, the value of the property is a little less based on comparable sales and more so based on the net operating income. But for the smaller multifamily properties, are you seeing that they’re also using that approach of NOI, net operating income to appraise a property? Or are they actually doing just the comparable sales approach where they’re looking for other duplexes, triplexes, and fourplexes in the area?

Ashley Kehr:
Kind of depend on the loan product. So if you’re buying it as an investor and you’re getting a commercial loan, they may look at that. But in all of mine that I’ve purchased, they’ve never ever looked at that for a duplex. I have a six unit property and a five unit property, and they did look at that for those when they did the appraisal. But as far as getting appraised to find the value of a property, it is the same as a single family home for the duplex. They’re just using other duplexes as comparison for when they’re doing the appraisal.

Tony Robinson:
Yeah. So I guess that maybe sometimes is another benefit to the traditional single family home is that even just the appraisal part is going to be a little bit easier because there just tends to be a lot more inventory of single family homes they can appraise against.

Ashley Kehr:
And cheaper. Sometimes they charge more because it’s two units there.

Tony Robinson:
That’s true. Even the appraisal itself is a little bit cheaper. Have you been in a situation though, Ash, where they just couldn’t find another small multifamily to really appraise against yours and because of that you felt like your appraisal was impacted negatively?

Ashley Kehr:
No, I wouldn’t say that for the small multifamily. I would say more for my short-term rental actually. It’s two single family homes on one parcel. That’s where I had trouble, but not for duplexes. But if you are in a market where there’s not a lot of small multifamily, then yeah, they’ll probably have to stretch out farther and look at a bigger area. And then you could get yourself into trouble because you could know that where your property is, the neighborhood is really good. But if you’re going out a couple more miles, you know that area is not as nice. But since it’s in close proximity, they could still use that as a comp because when they’re pulling comps, they’re not looking at where the crime is and things like that. They’re just using a radius around that house that you’re purchasing or appraising as to which ones to use for comps.
And I think a lot of us know, Tony, that when you’re looking at a city, and if you don’t know this, you’re going to learn it today, is you’re looking at a city that you could literally turn a corner and it can now be an area where nobody wants to live and nobody wants to be in, it’s in high crime, but around the other side of the street, it’s the best neighborhood that you want to be in. So it can just change so quickly and rapidly street to street.

Tony Robinson:
And I think that’s another benefit too though of the single family home is because there are so many different neighborhoods and there are so many different options, selling the property in the back end can be a lot easier as well because a lot of times when you’re selling single family, you could be selling to another investor, but a lot of times you might just be selling to someone who wants to move in there for themselves. So your pool of potential buyers just tend to be a lot bigger on the backend exit as well.

Ashley Kehr:
One more pro that I really want to highlight too is the management of the single family because when you’re putting together their lease agreements, since they’re the only person living in it, you can ultimately put in there whatever you want them to take care of. If you want them to be in charge of the snow removal, if you want them to do the landscaping, where if you have a small multifamily that has shared areas, if all of your tenants are sharing the driveway, it’s hard to say, okay, you guys are all responsible for making sure the snow is removed. It’s just going to cause fights and cause problems because someone’s not pulling their weight to shovel their little portion of the driveway or whatever. Then you also have to deal with parking. They’re all getting along and parking well if you only have so many parking spots in the parking lot or they have to, in a lot of cities where the driveway is so narrow, you only can park in front and behind each other and then it’s coordinating cars to get in and out when someone has to go to work, the other one has to get up, move their car around.
And I’m speaking of all these examples from experience. So I really like single family that it eliminates a lot of the issues that can come up with having multiple households living on one property and sharing common areas too.

Tony Robinson:
That’s a great point, Ash. And I think maybe we can transition now into the pros of multifamily because it almost acts as like a counter to the pro that you just mentioned because while all those things you said are very, very true, I think that the benefit of multifamily is that if I have four single family homes or 10 single family homes and I’ve got one 10 unit multifamily building, and you can check me if I’m wrong here, but we’ve felt this experience with our single family Airbnbs in our motel, the 13 room motel, much, much easier to manage than 13 separate individual Airbnb properties. And for multifamily, I would assume it’s the same way. Have you seen that experience yourself that the fourplex is easier to manage than four separate individual single family homes just because of everything’s under one roof, you get one handyman who knows the whole building and they can tackle all those things.
Are you seeing the same thing in your portfolio?That’s

Ashley Kehr:
Actually a great question. And I used to manage a 40 unit apartment complex and then I have 40 rentals. I would take my 40 separate rentals over that 40 unit apartment complex. And I never ever thought that I would think that way. I never ever thought that because I always though you have one roof, you have less overhead. It just makes sense mathematically that you have this. Everything under there, like you said, that there’s only one place the handyman needs to go. You have one building. I will say as far as managing the properties, so take the tenant side of the equation, managing the properties, it is 100% easier to have those 40 units under one roof. You have all the information for the building, you only have to remember or write down or have the information for one building. You only have one roof to worry about.
You only have one parking lot to worry about that the property management. On the other side, with me having 40 units, when there’s a question about one of the houses, I have to pull up that information with that house and they’re in different towns that have different laws that has different rules, like garbage pickup days, five different days across all the properties. There’s so much more information that you need to have and keep track of with having the 40 different units separated across. But here’s what I’ll tell you is easier. Managing these 40 separate units compared to the 40 unit building, managing the tenants, it is way worse with the 40 unit apartment building, way worse. And I don’t know if it’s because everybody’s living in one place, but all the disputes and disagreements of managing 40 different households, all trying to share the same hallways, the same dumpster, the same mail room, the same parking lot, that side of it was way worse than what it is for my 40 unit apartments.
40 unit apartment, every single day there was communication of some kind. I probably have in my 40 units probably maybe interaction with my tenants at maximum five times a month, as in that would include a maintenance request. That would include just a message asking about something or talking with them about late rent or an issue or problem that has come up, probably five max. Where at the other, the 40 unit was every single day there was something that needed to be communicated or taken care of with a tenant

Tony Robinson:
Specifically. Ash, does it have anything to do with the class of property? Are your single families in A and B class neighborhoods and your multifamily’s in C class?

Ashley Kehr:
No, they’re all pretty much in the same market or very close. And mine aren’t 40 single family. They’re still small multifamily. So it’s a mix of both single family and small multifamily, but just using a bigger one, a larger multifamily as comparison. But also too, when you’re getting into that scenario of having a 40 unit, it makes sense to hire property management or to hire someone to run it because you have the, well, hopefully you have the cash flow from that property to support having a property manager to take care of those issues. But in my experience personally, I would rather take the 40 individual if I had to pick the tenant management of it is what I would rather do is the individual properties than the complex altogether.

Tony Robinson:
Okay. Well, that’s good to know. That’s why we got you on here as a resident, multifamily, large and small expert. Ash, you can give those insights.

Ashley Kehr:
Oh, and one more thing on that too, is that I feel like you have more financial opportunity with having the separate units than the one building. Because if you need cash, you can go and refinance, you can get a line of credit on your apartment complex, you can do all of that. But with the small multifamily, you could list one property for sale. You could put a line of credit on one of them, on two of them, you could pay off one of them. So with the large apartment complex, you’re going to pay off that property, that’s probably going to be a lot of money you need to pay off that. Where at the single family, you could have some that are completely paid off and then other ones with mortgages on it. So I kind of like that side of it too, is that with having the different units, you have flexibility and financial opportunity where you can kind of move things around if necessary.
That’s

Tony Robinson:
A great point. You have more levers to pull, which you don’t get with the multifamily. I think maybe on the inverse side of that though, one of the other benefits of multifamily is that there’s maybe less risk in the sense that on a single family home, if someone moves out, you’re at 0% or 100% vacancy or 0% occupancy, if I’m using my short termmental words. But on the other side with multifamily, if I have a fourplex and I’ve got three out of the four units rented, well, at least I still got some income even though someone’s out. So there’s a benefit in the other direction of having multiple people under the same roof.

Ashley Kehr:
And it’s more scalable for small multifamily or even large multifamily, just multifamily in general is you are purchasing, you’re doing one acquisition. So you’re making one offer, you’re doing due diligence on one building, you’re closing, you’re doing one mortgage, you’re done. But if you say that that was a five unit you just bought, that was one process. But if you’re going to buy five single family, you have to do that five times over. You have to go and find five different properties. You have to offer on them, you have to get them accepted, you have to do due diligence on those properties, you have to get through the closing. So acquisition I think is much easier to get more under one roof than it is to do them all separately too.

Tony Robinson:
In general, I feel like there’s pros and cons to each, right? Both can be successful, but each one has its own pros and cons. I think maybe the last thing I’d highlight, Ash, on the multifamily side is that in addition to your point of just being able to scale faster, you can typically also get more cash flow. If I have one single family residence that’s $300,000 versus same price, 300K, but I’ve now got five units or four units, in theory, the rent across the four would be more than the rent for that one property. So more cash flow, potentially better returns as well.

Ashley Kehr:
Okay. So we covered the benefits and some of the cons of each of these different asset classes, but when we come back, we’re going to highlight a few more cons you should be aware of for each strategy. We’ll be right back. Okay. Welcome back from our short break, and thank you so much for taking the time to check out our show sponsors. Let’s go over some of the cons, the additional cons that we haven’t discussed yet for single family properties. And Tony, I think one of these is house hacking, completely capable of doing house hacking by renting by the room with single family. But a lot of times that may not be something that you actually want to do is rent by the room with other people living in your property and you’re more comfortable having your own unit. So it does limit the amount of people who would use house hacking as a strategy if they only had the option of a single family because you do have to live with others where if you get your own unit, to me, that at least sounds a lot nicer idea of house hacking than single family.

Tony Robinson:
And then on the multifamily side is that as you get bigger, the financing requirements start to change as well. Obviously, if you go super, super big, say you’re syndicating an apartment complex that’s multiple seven figures and it gets really, really complex where you’ve got to have a guarantor on loan and someone who’s got the net worth to be able to sign for it and it gets a little bit more complex. A lot of times you’ll eat more money down. We talk about buying a single family home. To your point, Ash, house hacking a single family home, 3.5% down, FHA, there are some loan options that are 0% down, but as you get into some of the larger multifamily things, they want 20, 25%, sometimes 30% down in order for those deals to make sense. So I think even on the financing side, it can become a little bit more complex as you get into the multifamily space as well.

Ashley Kehr:
There’s also requirements with commercial loans, and not even just for large multifamily, but even for my five unit, my six unit is when you’re doing a commercial loan, a lot of times they will have requirements of you need to keep as long as you have the life of the loan. For example, you need to have sometimes so much money in reserves, and then sometimes you need to stick within a specific DSER kind of range in order to keep the loan in good faith or that it’s in compliance. So there are other things with commercial loans when you’re getting into small multifamily or large multifamily that you do need to consider to make sure that your property is performing well. So if you do have a single family and your property sits vacant for a while and you don’t have any income coming in, but you just have a conventional loan as the financing, no one’s going to be checking and caring that there’s no income as long as you’re going in and paying your rent.
But when you have one of these commercial loans, they’re going to ask you for financials every single year and they’re going to make sure that your property is performing and that it’s not all of a sudden going downhill. When I worked for another investor, every year we would submit the financials and if there was anything that was out of the ordinary, they would question and I would have to show like, “Oh, we replaced the roof. That’s why the capital improvements was so much higher this year or we did a whole re-landscaping,” different things like that. Or we just had a ton of repairs and I would have to show what those repairs were to the bank too. So that’s also something to be cautious of when considering going with a commercial loan for a small multifamily too.

Tony Robinson:
Wash, what do you think? Should we look at maybe some real examples of what this might look like in practice? So the team at BiggerPockets here gave us two deals that are actually on the market right now. One is a single family home in Memphis, Tennessee. We’ll call that Maple Tree Drive. The other is a duplex also in Memphis and it’s on Waynoca Avenue. So we got the Maple Tree single family home. We have the duplex on Waynoca.

Ashley Kehr:
Why can’t we just call them single family and then the multifamily?

Tony Robinson:
Because I just want to hear you stumble over the words. That’s the whole reason why. I saw that. I was like, I’ve got to get Ash to try and say that live on air. So we got the single family, we’ve got the duplex. So the single family here is 210,000 bucks. And let’s just assume that for both of these, we’re going to do 20% down, call it a 7% mortgage rate, 8% for vacancy and 1% of purchase price for maintenance and CapEx. So if we just use those as ballpark figures for both. On the single family home, 210,000 bucks, 20% down, 7% rate. Your principal and interest will be about $1,100. Property taxes, about 230, insurance 120, maintenance 175, vacancy 128. And based on what we’re seeing, rents in this area are about 1,600. So guys, if we take that 1,600 and we subtract out all of those expenses we just listed, we end up with a cash flow of negative $172 per month.
So here’s a single family home with brand new construction, beautifully done, but we will be losing negative 172. Now I just want to highlight too, because we’re also including maintenance and vacancy which hasn’t happened. We don’t know if that’s going to happen, but we still want to make sure that we account for those things as well in our initial underwriting. So it’s tough on a single family home, at least in this market for this specific deal. But let’s look at maybe how the duplex compares to that one.

Ashley Kehr:
So the duplex, we are going to purchase it at 269,900 with 20% down, also 7% mortgage rate. So for P&I, we’re looking at about 1,400 bucks a month. The property tax, 315 a month, insurance 160, maintenance about 225. Vacancy at 8% is around $200. And we think we can get for rent about 1250 per unit, so $2,500 in total per month. This would put us for our monthly cash flow at $164 per month. So sometimes this is easier to get a multifamily property cash flow because you have the higher combined rents, but you also have similar expenses. So for example, let’s look at the property taxes. The single family home, the property tax is $231 per month, and the property tax of the duplex is 315. So even though you’re getting double the rent, you are only paying $100 more in property taxes, basically actually less than that each month.
And then the insurance for the single family, 120, the insurance for the duplex, 160. So a lot of those expenses are not that much more if you have more units in the property, which can make a big difference.

Tony Robinson:
And even though the per unit rent on the duplex is cheaper than the overall rent for the single family home, because there’s two, we’re generally going to make more. Guys, in this example, the duplex gives you more cash, but which one of these properties actually get you to financial freedom faster? And let’s assume obviously that we’re only buying single family homes that produce cash flow, right? But don’t go anywhere because we’ll cover that and more right after the break. All right. So what is the best path to financial freedom and which property would Ash and I actually choose? I think this largely depends on what your goals are. Why exactly is it that you chose to invest in real estate? Do you want to quit your job as soon as humanly possible? Tony asked, if I could quit yesterday, I would’ve done it. Do you want to build maybe a bigger portfolio that gives you at least maybe some job optionality where maybe it’s not quitting and not working at all, but can I go maybe take a lesser paying job that I enjoy more because I have the real estate?
Or maybe you’re like, Tony, I love what I do. I’m a teacher. I love teaching. I’m a doctor. I love being a doctor. I’m going to do this if I can’t do it anymore. And real estate investing is just another way for me to diversify and build wealth for retirement. All those strategies or all those goals are fine. I think it’s just first clearly defining which one is the one that you’re actually working toward because different goals could lead to different solutions. If your goal is, hey, 30 years from now I want this, well then maybe you’re fine if the duplex or the single family home is barely breaking even because in 30 years it’ll be paid off and it’s in a very high appreciating market, so you’ll be set. But if you want to quit today, the barely breaking even is going to help a whole heck of a lot.

Ashley Kehr:
It also depends on your time and what you are capable of doing or maybe what you even want to do. So if you’re going to go after multifamily and you want to take down a 10 to 20 unit, do you have the time to manage a property like that? Sometimes there’s this little gray area where it consumes a lot of your time for the management, but it’s also there’s not enough room in the cash flow to actually hire someone to be the property manager on these units or it really cuts down into the cash flow of these properties and you don’t have the huge unit count to actually cover the price of hiring your own property manager in-house too. So that’s one thing you got to look at, or maybe you do really want to be a full-time property manager for your rentals. I feel like that’s basically what I am is I self-manage.
I use a lot of tools and resources, but is that something you actually want to do? Do you want to not pay a property manager and then you keep that money in house and that helps you leave your nine to five job because you’re keeping that money instead of giving it out to property manager? Then maybe going after multifamily is better because you’re going to get more units than you would buying a single family one at a time throughout the time period. The next thing that you want to look at is your market. You need to understand what will work and what won’t work in your market too. So like I said in the beginning, single families in the market that I invest in appreciate better over time than multifamily does, but that could be the complete opposite in your market. So you need to do your own research and verify the market that you’re looking in.
Look at all of the things we talk about, the pros and the cons. Look at rents. Do people pay more for a single family home for rent, even though it’s the same bedroom count, the same bath count, because they’re getting that privacy of their own home instead of living in a duplex or a triplex where they’re still sharing that area with others? Or maybe it’s opposite. Maybe people prefer to live in an apartment than living in a single family home. So these are all things that can vary market to market. So you do need to do your own research in the market that you’re looking at. Just take all of the points that we talked about and then use that to analyze your market.

Tony Robinson:
Guys, I think the bottom line is that both property types can work. And the beauty of real estate investing is that you can layer different strategies together. So if you want to go out and buy a single family home, maybe it doesn’t work as a traditional long-term rental, but could you rent by the room? Could you add an ADU on the back and turn it into a multifamily? Can you turn it into an assisted living facility? Can you turn it into a midterm rental or a short-term rental? There are so many different strategies that we can layer together. And Ash and I, we’ve both done a little bit of everything. I built most of my portfolio with single family homes in more expensive markets. Ash built her portfolio with the mix, single family, small multifamily and more affordable cities. Both of us have found success.
So I think the question guys is less about which strategy is best And it’s more so about which one can you execute the best on? And if you can answer that question, then everything’s going to work in your favor at that point.

Ashley Kehr:
Okay. Now Tony, if you were starting over in 2026 going into 2027, would you pick the single family? Would you pick multifamily?

Tony Robinson:
I would pick single family.

Ashley Kehr:
Yeah, I feel like your answer is so obvious.

Tony Robinson:
I would pick single family. Obviously my first instinct is that I do a short-term rental because that’s what I know so well. But let’s say that I’m starting over as a rookie and I didn’t have the experience that I have and I was just like Tony who was still working at Tesla, I would probably still do that same thing because not only would short-term rentals give me the cash flow, the increased cashflow above the long-term rentals, but it would also give me the tax benefit, which would then allow me to hopefully get a big tax refund and then just repeat that same process over again. And traditionally speaking, single family properties can produce more revenue than an equivalent small multi or duplex because folks want that space and those experiences. So that’s what I would do. Ash, what about you? If you’re starting over.

Ashley Kehr:
Yeah. I mean, I actually have a really hard decision on this, because I think my start went out great doing duplexes. That’s all I bought at first was just duplexes and I think it worked out really well. But if I go back to that and the cash flow was decent and it definitely would’ve been harder to cash flow at first. So I don’t think that I would’ve been as successful in the early years if I was doing single family homes because the cash flow was so much smaller on those than the small multifamily, the duplexes. But if I look back over the last 10 years and I compare the appreciation from a single family, if I would’ve bought it at that time and what it’s worth now compared to my first ever duplex and what that’s worth now, I would have a lot more wealth, I would say.
So I think the duplex was the right choice because at the time I was chasing cashflow and I wanted cash flow. I didn’t want to work anymore and that was the right strategy for that. And I think a good mix was to start with that and then add in the single family properties. And I still don’t have a lot of single family homes. I just have a small handful, but they definitely see way more appreciation than the small multifamily for sure. But also at the time too, when I first started, I thought I would never ever sell a property. So I didn’t think that I would ever do that. I just though maybe I would pay them off or I would maybe refinance them or something like that. But I learned along the way that your goals change, your buy changes, and I didn’t want my dumpy little duplexes that Tony’s jealous of that I bought for $20,000 anymore.
Well, thank you guys so much for listening to this episode. We want to know if you’re watching on YouTube, but what strategy are you going after or are you currently investing in? Is it single family or multifamily properties? Let us know in the comments. I’m Ashley. He’s Tony and we’ll see you guys on another episode of Real Estate Ricky.

Dave:
Is this the best rental property opportunity of 2027? Today, I’m sitting down with another real estate investing veteran, Zach LeMaster. Zach has been purchasing real estate since 2013 and has bought rentals every single year since then. When interest rates were high, he bought. When prices were low, he bought. And everything in between, he bought. Through pure consistency, picking the right markets and learning from many failed management experiences, he replaced the income of his full-time job and started Rent to Retirement, one of the nation’s leading turnkey real estate companies. Now, while everyone is waiting for interest rates to drop, Zach is doing the opposite, consistently unlocking 10% plus discounts on some of the newest rental properties in the country. And that’s on the low end of the discounts he’s getting. Today, we’re getting into why this could be one of the greatest and most heavily discounted rental investing opportunities of 2027 and how anyone can get in on these deals.
Zach LeMaster, welcome back to the BiggerPockets Podcast. I’m excited to have you here today, Zach, because Zach, if you guys haven’t heard, Zach’s been on the show, he’s been on the YouTube channel many times. He’s the CEO of Rent to Retirement, one of the biggest trusted partners, BiggerPockets does turnkey rental properties. But we were talking before the show, we’ve actually never heard your story, Zach, but you are an active investor yourself. So maybe you could just fill us in a little bit about where were you in life when you got into real estate investing?

Zach:
Yeah, I’m excited to share. And it’s been an evolution and it’s still a journey, right? I view real estate investing and business as a lifelong journey, but I think many of the audience, Dave, I started in a career path that had nothing to do with real estate. So my wife and I are both optometrists by education. I was on military scholarship HPSP, so I was commissioned as a captain in the Air Force. They paid for part of school and then I practiced optometry in the Air Force. This is probably about 15 years ago at this point. And that’s where I started investing with military in general, you get access to VA loans, which are fantastic loans because –

Dave:
Amazing.

Zach:
Yeah, in a lot of cases you can put no money down, you don’t have PMI to pay. I didn’t have any money to put down anyways early in my career, so that worked out. But I read all the books. I was a BiggerPockets member and just really liked real estate simply because it was a tangible asset. And candidly, Dave, I didn’t understand any other forms of investing, stocks, anything else. So real estate made sense. So I bought my first property. I house hacked it before I knew house hacking the term even, but bought a duplex with a VA loan, put no money down, lived in half, rented out the other half. Again, this is probably about 15 years ago at this point. I was stationed in North Dakota at the time. The next house I bought was another duplex locally and I continued to buy locally over the next few years and really just liked real estate.
I learned how to scale my portfolio through different creative methods because of course, like everyone, I ran out of capital to put down as down payments. We all do at some point and then just continually invested. At some point, Dave, I found that investing locally was maybe not what I wanted to continue to do and started to explore other markets where there was possibly higher returns.
My wife and I started to look at other locations and invested out of state. We had a terrible experience. We lost a lot of money on the first few deals, which that’s a learning experience. But then we refined our process and our system and then really just learned how to identify markets that fit our goals at best, offer the best returns and aggressively invested out of state. Eventually replaced our active income as optometrists, left the Air Force and started rent to retirement. But that was really the foundation in the early

Dave:
Stages

Zach:
Is just learning how to invest out of state because that made more sense for us.

Dave:
You were early on that. When were you starting to invest out of state? Do you remember what year it was?

Zach:
I think our first out-of-state property was probably 2013 – ish. We invested in Southside Chicago because the numbers were really good. We invested in Section eight housing, so low income housing, that was CHA Chicago Housing Authority. They call them two flats there, which are basically duplexes or tri-flats where it’s three levels. Did some renovation on the properties. The numbers on paper looked really good, but we really had a challenge with keeping the homes leased with ongoing maintenance, dealing with the housing authority. So it was just kind of an uphill battle of continual expenses, death by a thousand paper cuts type of thing.

Dave:
Looking back on it now, what would you have done differently for your first deal out of state? Because I know there’s a lot of people in the BiggerPockets community who want to invest out of state. There’s expensive markets, doesn’t make sense. You want to look at the Midwest. What lessons would you pass on?

Zach:
Yeah, there’s a lot and I wouldn’t actually change anything because that’s how we learned. But certainly we’ve applied the lessons both in our personal investing and our active business with rent to retirement. And that’s the foundation of rent to retirement is how to effectively invest out of state. And we lay the groundwork for that for our investors, but we did everything wrong in the book. First of all, we didn’t research the market enough to really understand is this the right place for us? Is this the right place based on our goals? We bought property probably too early. We built a team around the property and we had all the contractor issues. I mean, investing out of state is challenging, but I always tell people it’s no different than investing locally actually. There’s no, I think, huge benefit to being able to drive by or do things yourself.
I think a lot of times it actually puts you at a disadvantage if you feel like you’re required to do all those things because that’s probably not the best utilization of your time. And I think really building the team is the more important thing, focusing on your investing versus being in the weeds with it. But I think stepping back, being more intentional on what your goals are, finding a market that fits those goals. I think a lot of people, Dave, try to invest locally too much because that’s what feels comfortable to them when the reality is it’s like, is this even the right market for you? The chances are there’s likely a better market suited for your goals and a market that’s going to offer a better return outside of your local area. But a lot of people, they’re hesitant to take that first step because it’s daunting.
And as just mentioned, I had a bad experience, but you learn through that. And I think if you do open your mind to investing out of state, one, I think it’s a necessity to diversify your portfolio, but also there’s a lot more opportunity. I think it makes you a better investor long-term.

Dave:
I’m with you on that. I’ve done both. For the first 10 years of my investing career, I invested locally. I just happened to be in a good market. I was in Denver starting in 2010, one of the best markets you could have been in, looking back on it now, very fortunate place to be if you want to be a real estate investor. And then 10 years into it, I moved to Europe and everything is long distance to me at this point. So what’s the point of only limiting myself to Denver? And when I started to do that, it really changed my whole investing philosophy and I realized how much investing locally actually had held me back. And this isn’t true of everyone. Some people can scale really well locally, but I was just doing everything myself. I didn’t have property management software. I was doing that all myself.
I am famously terrible at maintenance, but I still tried. I would always go fix something up for a couple of hours before I hired someone, and it was just a massive waste of time. And I did that for 10 years. And looking back on it now, if I really wanted to have the more optimal situation, I would’ve built the team and outsourced a lot so that I could focus on the stuff I’m good at, which is sort of portfolio level strategy. That’s the stuff I like doing. Again, that’s not true from everyone. If you’re super handy, if you’re flipping, that’s a totally different story. But for someone like me, I’m totally with you and I’ve enjoyed investing out of state because it’s a skillset that I feel like I’m good at. So I’m curious, you said that people should really think about their goals when investing out of state.
What type of goals and what type of investor do you think best align with the out-of-state approach?

Zach:
Let’s talk big picture for a second, Dave, because a lot of people that we work with or speak to generally, I mean, they’re interested in real estate because they’re looking for some level of passive income to some degree eventually,
And having some level of residual income. Now that varies for every single person. That could be ultimately retirement and financial freedom for some people. In others, it could be just supplemental income and diversification in their portfolio. But very seldom do we come across someone that’s like, “Hey, I want to be actively managing my properties in the weeds, trading one job for another forever.” Generally, I think people think about investing passively over time. And so I encourage people to start there. Keep that in mind, a big picture, and actually start your goals there. So often we see people that jump into their first flip and it goes terribly wrong and maybe they learn some lessons, but it drags out and that’s wasted time. Again, to your point, that’s time that they could have been better spent building their strategy and trying to execute that. But when people are first thinking about real estate investing, do think long-term, big picture, understand how much time involved do you want to be?
Because real estate investing can be extremely time-involving. Think about your capital position. What is your risk position? Real estate investing, like any investing, can be extremely risky in certain assets, but there’s different type of asset classes that are more passive, less risk, diversified type of investing. Think about what your skillset is. And if you’re trying to learn a new skillset, maybe it’s best not to do that on your own, but find a mentor or partner with someone or invest with someone that has a proven track record and learn that. So I mean, these are all really important things for newer investors that I think are a necessity for you to think about to be successful and not have to spin your wheels and waste all the time that many of us did that have been very expensive and time-consuming mistakes that we would’ve been further ahead, right?

Dave:
Yeah. But you said something really important there, Zach, which is I think when people try and answer this question, they sort of look at it in a vacuum. They’re like local is better than out of state, but it really does depend on your goals as we talked about. But the resources that you have is such an important thing for you to sit down and audit and think through. I have this concept in one of my books, start with strategy where I say every deal, every portfolio needs three things. You need skill, you need money, and you need time. And so many people just focus on the money part of it and they don’t think about realistically how much time they want to put into something or whether or not they have the skill to execute the strategy that they want to pull off. Maybe you want to do BRRR, but you’re terrible at managing a renovation or you’re not handy.
Maybe you shouldn’t do BRRR and maybe that means you pick a turnkey kind of rental, which is perfect for you. When I did this, I did this thing called a time audit. It’s just budgeting basically for your time. It’s simple. I realized how much time I was spending doing property management, something I don’t like, I’m not good at, and it’s just not helping me grow my business. And so where you fall on these spectrums should really help you focus where you want to be. If you have a lot of time and you’re really handy, go flip a house. Go for it. If you aren’t handy and you don’t have a lot of time, either you need to buy something locally that’s fixed up and ready to go or you need to work with a partner. Both are fine approaches, but it’s just being honest with yourself about what you can bring to the table and what you can offer to your portfolio.
I think it’s just maybe the most important thing when you’re starting out to being successful long-term.

Zach:
Another common mistake we see with newer investors is that, and we’re all guilty of this, but they tried to do too much at once or they tried out too many different strategies. And it’s okay. Look, real estate investing, there’s a lot of different ways to make money and create wealth, but you can’t do all of them successfully at once. And so I really encourage people when they’re first getting started, because you don’t know what you don’t know, and if you want to reduce your risk and increase your probability of success early on, stick to the fundamentals of real estate. That’s why we like residential. Now, I personally invest in a lot of industrial and commercial retail and things like that at this point, but we still hold majority of our portfolio in residential real estate, specifically single family and small multi, because I think that is the most sustainable asset class.
Dave, I don’t know if you agree or not, but it’s like people need housing.
We have a shortage of housing in a lot of locations, especially affordable housing in different markets. And so that’s where the opportunity lies, but it’s really hard to screw up residential real estate if you’re underwriting it appropriately, you’re buying at a good price, the property cash flows, you got a good market, a good team. And so I really encourage people, choose one strategy and just go for that and stick to the fundamentals and stop looking for the unicorn deal that’s going to be a home run because those will come, but only after years of going through the base hits and the repetition. So you really got to just choose a strategy. I think one isolated strategy, stick to the fundamentals, and then at some point understand you don’t understand everything and just take action.

Dave:
All right everyone, we got to take a quick break, but we’re going to have more with rent to retirement CEO Zach LeMaster right after this. Welcome back to the BiggerPockets Podcast. I’m here talking to the CEO of Rent to Retirement, Zach LeMaster, about his own personal investing journey and his big picture strategy for 2026. Let’s jump back in.

Zach:
I’ll say the biggest, most impactful thing for us, just my wife and I in creating financial independence for us and real estate success in general is that I’ve invested in real estate every single year since I bought that first property probably 15 years ago. I’m not saying I’ve made money on all deals, but I’ve continually invested in any market cycle. And that’s really relevant today because underwriting is harder today, but there’s exceptional buying opportunities. So one, I’ve continually invested every single year because that’s, again, an educational thing to continue. And we’ve been growing our portfolio and trading up, 1031 exchanges, all the things. The second thing we did is we were very intentional. I kind of already alluded to this, but we were very intentional on where we bought. And I think sometimes people overcomplicate it, but at the end of the day, if you consistently, so that’s the continual investing, if you consistently buy good properties in good markets with good teams, that is a recipe to success over time.
Time is your biggest partner in real estate investing, and that’s why you don’t look for those home run deals because if you bought just a handful of typical homes or base hits, those will compound over time. So consistently investing in good locations. And then the third piece, candidly, Dave, is just being a creative investor to make deals happen and make the numbers work in a market that is challenging and maximizing your tax benefits. It is so advantageous for investors to take advantage of the tax benefits, things like cost segregation studies, things like 1031 exchanges, opportunity zones. These can catapult your investing huge and take you to the next level. So I just wanted to share that.

Dave:
When you put it that way, real estate really is an almost stupidly simple business. We try and congratulate ourselves on being geniuses, but like you said, buy a good asset in a good location and wait. That’s really the business. It really isn’t that complicated, not even just for the last 10 years or the low interest rate or for centuries, this has been a thing that works. And so I really like the dollar cost averaging approach, like you said. If you guys haven’t heard that term, it’s borrowing it from the stock market, but the idea is you buy assets in any market cycle consistently. Sometimes you’ll pay a little more, sometimes you’ll get a great deal, but if you can just attach your long-term performance to the long-term performance of the housing market, you’re going to be good. Same idea with the stock market. The stock market has historically just gone up for generations, same thing with the housing market.
So you don’t need to be smarter than the housing market. You just kind of have to hitch your wagon to something that is already doing well. The trick is to just get in there and hitch your wagon. Zach though, you mentioned it’s hard to underwrite, which is true. So what is your big picture strategy or what you’re going out and looking for, what you’re trying to acquire?

Zach:
Yeah, I think a lot of people have pulled back, Dave, because of possibly limited inventory, market uncertainty, still interest rates that I think we should now just call normal interest rates, but I think times like this actually make you a better investor because you have to truly go out and hunt for deals and find creative ways to make deals happen. Investing when there was historically low interest rates that we’re never going to see again, that was easy. You could buy pretty much anything and it would cash flow decently and things appreciated. But right now, this is the time when you have to be a true real estate investor. And that

Dave:
Means

Zach:
Underwriting a lot of deals, making a ton of offers, exploring markets outside of your local market. One of your previous questions I didn’t answer is who’s the right person for out-of-state investing? Candidly, I think it’d be everybody at some point and should be because you would need to diversify and I think it’s worth exploring. But really the people that if your local market’s too expensive and you’re beating your head against the wall and haven’ taken action because it’s too expensive, it’s too regulated, it’s too taxed, whatever the case is, look at other markets. If you’re a busy professional and you don’t want to manage the property anyways, there’s no advantage for you to invest locally, then maybe you should start looking elsewhere and find a place that attaches your goals. But today’s market, you have to be creative to underwrite deals. Unless you want to put 30, 40, 50% down to make things cash flow, you can still get very good deals.
Where we see the best opportunity, and this is just our own experience internally, is working with new construction. We do a lot of build to rent, turnkey homes. And what we know working with some of the largest national builders and local builders is that they are highly incentivized to get stuff off their books.

Dave:
Yeah, they are.

Zach:
Especially this time of year before some of their fiscal years end in October, some in the calendar year. To give a practical example, we’re seeing upwards of 20% in some cases, 15 to 20% that the builder is reducing home prices by. They’re offering incentives as cash back to people and incentives to buy rates down. That is exceptional. So you could actually in theory still get a three or 4% interest rate. You’re going to pay a ton of points. That doesn’t mean you’re necessarily going to pay it. The builder will pay it for you. But the point is you just have to search harder for deals and find creative ways to make them make sense. And that I think is where you really hone your skills as an investor, whether it’s creative financing, better deal negotiation because you have the ability, this is a buyer’s market, you can negotiate and you should.
You just have to work a little bit harder, Dave. But this is where the best deals are actually bought before we get back into seller’s market and you ride that appreciation wave when everyone else is jumping in and there’s competition, right?

Dave:
I really love that Warren Buffet quote, “Be greedy when others are fearful and fearful when others are greedy.” And listen, it’s not the same as it was in 2010, but in some ways it reminds me of that time because everyone who’s starting now is like, “Oh, it must have been so easy in 2010.” No one was buying real estate in 2010. That’s why in retrospect it was easy if you were buying because no one else was doing it. Everyone else was afraid to do it. And again, prices were way cheaper then. It was a different kind of environment, but I do think it’s the same kind of thing. The people who figure out how to make it work are going to get the full benefit of the upswing. If you’re trying to design the best time to buy real estate, it’s before things recovered. And I just notice it in the markets where I invest, inventory is getting so much better.
Good assets are coming for sale. And to Zach’s point, it’s really just a measure of creativity. Maybe we can dive into some of the creative ways that you are making deals work. You mentioned seller finance or creative finance. You mentioned rate buydowns, new construction. What are maybe some areas of the country and some of the tactics you’ve used successfully? And if you have any examples of deals, that would be awesome.

Zach:
Where we see the best opportunity right now, Dave, is still the Sunbelt. I think that’s been a trend that’s been continuing. We do a little bit in the Midwest where I have more affordable housing, that’s more of a cashflow play. So again, we have a diversified portfolio, but about 80% of what we do is Southeast, new construction homes in growth markets. These are areas in Alabama, Georgia, North, and sometimes South Carolina, Florida, Texas. This is one of the biggest lessons I’ve learned over time, Dave, is that we bought so many houses and we did the renovations and we’re just older homes. And while we got good

Dave:
Price

Zach:
Points on them, they were older homes and they came with a lot of maintenance issues. And at some point, even if we’re getting great deals on them, I’m like, I just don’t want to deal with the noise. Even if we have property management, I just want consistency and I want things to be easy. You get that over time. You’re hungry when you’re just starting out and you’re trying to make every deal work and be scrappy. Over time, you want simplicity and

Dave:
Consistency.

Zach:
And so that’s the thing is we started to focus on new construction because you have builder warranties on everything. Everything’s new, it attracts better quality tenants, you have longer term tenants, but there are builders out there, and I mentioned the numbers already. So this is one that’s just negotiating deals. You should be able to go to any builder that has an established presence in an area and negotiate at least 10% with them. And that could come in different forms of incentives, but if you’re not getting at least 10% right now, and this is on single family, small multi in Southeast, then there’s better opportunity to look at. Of course, being in better neighborhoods I think is essential because I guarantee you, we work with national builders that have inventory in all markets. 10% is baseline. Builders are going to hate me for saying this.

Dave:
Whoa.

Zach:
On a $300,000 property, that’s $30,000. That is real numbers today

Dave:
That

Zach:
People should be expecting. If you’re not getting that, I would question there are some markets that are more competitive. We’re not talking about luxury houses. We’re talking about your bread and butter sub 500K homes, 250 to 500K single family in A or B markets throughout the Southeast. So that’s one tangible item.

Dave:
So the 10% that you’re getting a discount, is that coming in an actual top line price reduction or are you getting that through concessions?

Zach:
So it could be a price reduction. Some builders get to just give it back to you as cash back,

Dave:
And

Zach:
That could come in different forms depending. Some lenders have a limitation of 2% at closing and they’ll do the rest of the 8% as management credit later. You can get creative with that. Sometimes it’s a rate buydown where, like I said, you could get into the threes on a 30-year fixed loan,

Dave:
But

Zach:
It’s going to cost you a lot of money. And again, I don’t think that’s the best utilization. The most opportunity I think is where the builders let you choose and they are out there. We work with many of them. They let you choose how to use that so you can craft a deal that makes sense for you. And just to finalize on that point, Dave, that is not normal. That is something where you have a builder that needs to get things off their books, they’re willing to take a loss on it. It doesn’t mean the market’s depressed and it’s not a good investment market. It’s just catering to their business model.

Dave:
Yes. What these builders are doing is they’re building at mass scale and they can’t sit on their inventory for long term. It doesn’t work for their balance sheets. Whereas if you’re buying from either a previous landlord, someone who lives in the home, sometimes, actually quite often they’re like, “Oh, I don’t get my price. I’ll just wait six months.” It’s fine. Builders who have sometimes thousands of homes on their books, they need to start moving them. The pace at which they can move them is crucially important to their business. And you can be the beneficiary of that right now because if you look at days on market for existing homes, I think it’s like 45 days on average now. I think for new construction, I think it’s almost six months. It might be more, something like that. I don’t know the stat off the top of my head, but it’s super high.
And so you really, really have the lever in that situation. And to Zach’s point, that’s where you get creative because not every builder is willing to do a rate buydown. Not everyone’s willing to offer, give you cash back. But if you’re creative about how you approach your partnership and you’re working with them, usually you can extract a lot of concessions and a lot of values on it. This has been a consistent thing I’ve heard from people like you, Zach, who work with both Main Street and Wall Street investors is all of them are saying this. Go talk to builders right now. We got to take one more quick break everyone, but we’ll be back with Zach right after this. Stick with us. Welcome back. Let’s jump back into my conversation with Renter Retirement CEO, Zach LeMaster.

Zach:
So the first thing I think that is an action item for people in today’s market to be successful is just look for creative deals. I shared one example that’s not the only, but certainly there’s a lot of opportunity in new construction being able to buy below price points that in a different market cycle you would not be able to get. So the second thing, Dave, I think that’s really relevant today is taking advantage of the tax benefits. I think with a lot of newer investors, they hyper-focus on cashflow early on, and that’s because it’s tangible, it’s real, it’s easy to calculate. For

Dave:
Sure.

Zach:
It’s like, hey, if I had 20 rentals, 10K a month, that’s 120K a year that I could off to the races there if they’re using that calculation for cashflow. What I found in my experience investing, I’m curious of yours as well, but is actually wealth is built and multiplied quicker with all the other things outside of cash flow, things like using leverage appropriately, appreciation,
Using the tax benefits today, which is still relevant to investors because of how the tax code is written today, that it is very advantageous. I mentioned 1031 exchanges previously. That’s a huge benefit where you can perpetually, if you’re doing accelerated depreciation, things like that, perpetually delay taxes to be paid and pass it on to your generations at a step up basis. So that’s some generational wealth planning, another benefit to real estate. But we do cost segregation studies, which you accelerate the depreciation on every single property that we buy. I think this is one of the most highly discussed topics on BiggerPockets, I believe, because people are just so confused by it, but interested in doing it. For example, a lot of the short-term stuff that we do both for our investors as a business, but also personally is going through, instead of doing real estate professional status, I am a real estate professional based on our business, but a lot of people qualify through doing a short-term loophole, but they believe that they have to have 500 hours or a hundred hour minimum test.
The reality is actually look up the substantially all test under the IRS code. I think it’s 1.
4695A2. Don’t quote me on that, Dave.

Dave:
Don’t quote me on this incredibly specific number that I’m quoting. Just Google it and people will find it. Yes.

Zach:
Yeah,

Dave:
Substantially

Zach:
All tests. You can qualify, for example, this is an action item. You can qualify as a short-term, if you’re renting out your property, if you’re doing all the work, you’re not hiring

Dave:
Out

Zach:
Management, cleaning anything. If you’re doing all the work, there is no hours to meet on that. If you don’t have to qualify as a real estate professional, you can take your accelerated appreciation, which we run at 30% on a 300K property, that’s $90,000 that you can take against your active income. People don’t know that. If you make $100,000 or less, you don’t even have to be a real estate professional short-term rental. You can take appreciation and offset up to $25,000 against your income and you don’t have to. So those are just a couple of examples on the tax side that I think are really important for people to understand because a lot of people don’t understand it and then they miss out or they do it inappropriately. The third thing, Dave, I think is relevant today is just financing options. Obviously, interest rates are elevated, but DSCR loans and some different type of creative loan structures have become very attractive, even some arms which were almost taboo to talk about historically.

Dave:
I know. I’ve been using them.

Zach:
Well, they make sense right now because you can always refinance properties in the future, but if there’s a really attractive arm on a five or seven or 10 year term, those are attractive loans if it allows

Dave:
You

Zach:
To cashflow better. So understand those. There’s some loans where you don’t have to put 20% down on a single family. You can do five, 10, 15%, not have private mortgage insurance. Those are with local credit unions. So I’ll stop there. I could go on and on, but hopefully those are some concrete things.

Dave:
You’re right. It’s just this is the job of an investor today. This is the job, is go out there and figure out a way to make deals work because that’s what the market is giving you. Sometimes the market gives you great cash flow. Sometimes it gives you cheap prices. Right now, it’s giving you negotiation leverage. That’s the tool that you have. And whether that’s talking to different banks, talking to new construction, talking to different sellers, if you can just be patient and disciplined and know what you want, you can go out there and find it. It’s just a matter of whether you’re willing to put in that effort or to find partners who are putting in that effort and to work with them. It just works. I think that residential opportunities are there. We didn’t even get into this. I think multifamilies opportunities are really starting to come.
So I’m more bullish on acquisitions now than I’ve been in several years, I would say, because I’m a long-term investor. I’m someone who’s trying to hold onto this for 20 years for now.

Zach:
Being long-term is going to, I think, give you a different underwriting perspective. Where you get into trouble or where I think it causes a lot of additional stress is putting yourself in a position where you have to sell a property within a certain period of time. And that is flipping, that’s true. That is a higher risk type of thing. But if you underwrite properties with a long-term mindset, I mean, it’s very rudimentary and we talked about it at the beginning, but that’s what you have to have that mindset because time will cure all wounds. And like we said, it’s really hard to screw things up long-term if you’re buying at good locations.

Dave:
Well, Zach, this is awesome. Thanks for being here. It was really cool learning a little bit about your history. I’ve known you for a while. I did not know about your origin story as an investor and really good insights on the market today. I think as Zach has shown everyone, there’s great stuff that you can be doing in this market. Zach, obviously in addition to just being an investor yourself, you were the CEO of Rent to Retirement. So what deals are you doing right now outside of your personal investing with Rent to Retirement that might be interesting to our community?

Zach:
We dive deep into what we spent some time talking about, Dave, with the new construction stuff. So we partner with these national builders across the country where actually, and this is relevant today because there’s been some political pressure and change on institutional buyers being able to come in and buy. So that’s something we haven’t talked about, but there’s more regulation on institutions coming in. These are the REITs and Blackstone’s coming in and buying large groups of homes. That also has contributed to builders being willing to get more properties off their books because they’re selling less to institutional buyers, which provides an opportunity for the individual investor. But that’s what our company does is we go to these builders and we do build some homes ourselves as well and manage those for investors across the country in some of the best markets. But we’re also going to these builders and we’re buying and negotiating large groups of homes at institutional type of discounts, Dave, that then we’re passing on to the individual investor, making institutional buying opportunities available to the individual investor that they wouldn’t otherwise have opportunity to because they’re not buying in volume.
It’s economies of scale. And our average, I know we talked about 10%, but our average that we’re seeing when we’re talking about groups of homes is 13 to 15%. I mean, think about that. If you put 20% down on a single family home in a new construction A-class market and you’re getting 13 to 15% possibly as cash back, your ROI is going to skyrocket, allows you to buy more real estate. Totally. So
What we talked about is exactly what we’re doing both personally and professionally. And yeah, I think that’s where the best opportunity is currently.

Dave:
That’s super cool because as we talked about, even if you’re an experienced investor, working with builders is just different. As I was kind of talking about it earlier, you have to understand their business model and negotiate, but it sounds like if people are interested in new construction, want someone to do that for you, check out Rent to Retirement. Zach works should they find you?

Zach:
Yeah, rent to retirement, that’s renttoretirement.com. We got our own podcast, YouTube. We put out a ton of stuff. We’ve had Dave on our podcast a few times,

Dave:
Picking

Zach:
His brain. But yeah, put out a lot of content, guys. We’re passionate about this. Like I said, I do full-time real estate and we started this business because we love real estate. It’s allowed our family to build a life we wouldn’t otherwise be able to, and we’re passionate about helping other people accomplish the same thing.

Dave:
Awesome. Well, Zach, thanks so much for sharing your knowledge and what you’re up to. It’s super helpful for me and for the community. Great to have you here and I’m excited to see you at BBCon. I’ll see you in a couple of weeks.

Zach:
We’ll see you soon. Thanks, Dave.

Dave:
And thank you all so much for listening and watching this episode of the BiggerPockets Podcast. I’m Dave Meyer, and I’ll see you all next time.