A host in North Carolina recently said that one of his habits is refreshing his Airbnb dashboard “way too many times a day,” waiting to see if a sudden dip in views or an unexpected review is about to derail the month. 

One week, his listing disappeared from search with no explanation: no significant competition, pricing errors, or alerts. It simply vanished…and then reappeared days later. He described the experience as “working for a boss who never talks to you, but still controls whether you get paid.”

Almost every seasoned host has felt that same jolt of panic. It’s the emotional tax of relying on a platform you can’t control.

That story captures the underlying tone of the PriceLabs Global Host Report, which gathered data from more than 1,400 hosts worldwide. The big takeaway is that hosting today is not the dreamy passive-income fantasy it’s often marketed to be. It is work (sometimes meaningful, sometimes frustrating, usually rewarding), but undeniably work.

Yet the surprising twist in the report is this: Even with all the stress, hosts are overwhelmingly proud of what they’ve built, and most are planning to expand, not retreat.

Hosting is Flexible, But Hard Work

The report found that most hosts spend fewer than 10 hours per week managing their rental, but they happen in the margins of already whole lives. 83% of hosts work another job, so hosting becomes an evening, weekend, or “whenever-I-can-fit-it-in” commitment rather than a neatly defined schedule.

And the work that fills those hours tells the real story.

The tasks that consume the most time are ones that software can’t easily eliminate. Hosts spend the bulk of their energy coordinating cleanings, navigating maintenance issues, handling guest questions and administrative work like taxes and bookkeeping, and keeping up with shifting OTA policies. These responsibilities are unpredictable, often urgent, and emotionally draining.

What actually eats the most host time:

• Administrative work, bookkeeping, and taxes
• Cleaning coordination and maintenance
• Understanding and adapting to OTA updates
• Guest communication, complaints, and problem-solving
• Planning upgrades or new investments in the property

Calendar syncing might be automated, but the messy, human parts of hospitality are not. And that’s where the work truly lives.

Hosts Rely on Airbnb, Even When They’re Frustrated by It

One of the most striking contradictions in the report is that hosts routinely express frustration with Airbnb: its support systems, review policies, and decision-making. That said, after all these frustrations, Airbnb still outperforms every other OTA.

98% of surveyed hosts use Airbnb, and its satisfaction score (4.1 out of 5) is significantly higher than Vrbo or Booking.com. This creates a dynamic that’s both practical and emotional: Hosts depend heavily on Airbnb for revenue, but they don’t entirely trust it.

The data reflects that tension strongly. What hosts worry about most:

• Visibility and ranking on OTAs
• Sudden algorithm shifts
• Guest complaints or unfair reviews
• Inconsistent platform support

When one platform wields that much influence over a host’s income, even small changes feel huge. This is why many hosts describe hosting not as “passive income,” but as “always being on call.”

The Direct-Booking Wave Is Picking Up Momentum

For years, talk about direct booking came mostly from consultants or advanced operators. Now, it’s becoming mainstream.

Direct-booking websites are the No. 1 category hosts plan to invest more in over the coming year, with 30% saying they intend to strengthen or build their direct-booking strategy. I know Mark from Boostly is grinning ear to ear right now.

The motivation is clear. Hosts want:

• More control over who books
• Repeat guests to return without OTA fees
• Protection from fluctuating search rankings
• Better control over cancellations
• A way to build an authentic brand instead of a single listing

This doesn’t mean direct booking is simple. It requires systems, payment processing, guest screening, email marketing, SEO, and a functional website. But the desire for independence is growing, and hosts are recognizing that being “Airbnb-only” puts them in a vulnerable position.

Cleaners and Handymen Are Still the Biggest Bottlenecks

The words “cleaner” and “cleaning” appear 186 times in the free-response sections of the report. Hosts mention cleaners more than pricing tools, market uncertainty, regulations, or even guests. When one part of your operation depends on a handful of local people who may or may not show up, the anxiety never really fades.

Almost half of hosts say finding reliable cleaners is one of their biggest challenges, yet very few plan to invest in turnover technology. The real problem is hiring, managing, and retaining reliable workers, which is something tech can’t fully solve.

This is the one area where even seasoned operators admit they still feel vulnerable.

AI Has Potential, But It Isn’t Reducing Host Workload Yet

Artificial intelligence (AI) is everywhere in the STR conversation right now, but PriceLabs found that its actual impact on host workload remains limited.

Hosts fall into three almost perfectly balanced groups: some embrace AI, some ignore it entirely, and some feel overwhelmed by it. What’s most interesting is that all three groups spend roughly the same number of hours hosting each week. That tells us AI is enhancing quality, but not yet cutting time.

However, hosts do want more guidance from trusted tech companies. Nearly half said they rely on tools like PriceLabs, Lodgify, and PMS platforms to learn better systems and strategies. In other words, the next wave of STR tech won’t just automate tasks; it will teach.

Despite Challenges, Hosts Are Proud and Optimistic

After all the anxiety, platform tension, and late nights and last-minute cleans, this might be the most encouraging part of the entire report: 

• 69% of hosts say they’re proud of what they’ve built.
• 41% expect this year to outperform last year.
• 32% plan to expand their portfolio in 2026.

That isn’t the mindset of an industry in retreat. It’s an industry evolving: growing up and becoming more disciplined, more data-driven, and more entrepreneurial.

Many hosts began by listing a spare room or a second home. But as the report shows, a growing number now reinvest in upgrades, track their financials weekly, and treat their STRs as real businesses. Hosting is shifting from a casual side income to a full-fledged operation. And the people who lean into that shift will thrive.

What It All Means for STR Operators in 2026

Hosts are learning that the key to long-term success isn’t luck or timing: It’s professionalism. Pricing strategy, reliable ops, diversified booking channels, and guest experience are becoming the new baseline.

If 2025 was the wake-up call, 2026 is the year hosts step into the role of true operators. The ones who build with intention will be the ones who win. 

Winning hosts need to:

• Build strong cleaning and maintenance systems
• Diversify beyond a single OTA
• Use direct booking as a long-term play, not a quick fix
• Embrace tech that saves time without overcomplicating things
• Treat their listing like a business, not a hobby
• Actively study market data, seasonality, and pricing trends

This article is presented by Steadily.

I finally decided to quote out my rental property insurance. Between rising premiums, adding new properties to my portfolio, and hearing other landlords talk about how much they saved with Steadily, I knew it was time.

Here’s a look at the exact process, including why I decided to re-shop my policy, what the quoting process entailed, and what I learned comparing Steadily to my traditional insurer. Spoiler alert: Working with Steadily was faster, easier, and gave me better landlord insurance coverage than I expected.

Why I Decided to Re-Shop My Insurance

Before switching my insurance policy, my setup was as traditional as it gets. Every time I needed to make a change or get a quote, I had to email or call my insurance agent and wait for a response. There was no online portal, easy way to view my policy details, or visibility into my coverage across multiple properties.

As my portfolio grew, that lack of organization became a problem. Premiums were creeping up, some coverages didn’t match my current needs, and I couldn’t easily compare policies.

That’s what caught my attention about Steadily. Their online portal lets landlords view all their policies in one place, update coverage, and access documents anytime. It’s designed for investors managing multiple properties, not just a single home.

The Quoting Process, Step by Step

I started the insurance quote process as most people do: I requested quotes from my current broker and filled out requests across a few online portals. This process meant a long email chain with my agent, who would send forms, ask for information, and eventually get back to me when they could. As an investor with lots of things on my plate, waiting on my insurance agent and making sure I follow up if I haven’t heard anything would likely be something that falls through the cracks.

With Steadily, it was a completely different quoting experience. I went to their website, entered the property address I was requesting coverage for, and the system immediately guided me through a short, clear form that asked exactly what was needed to create an accurate landlord quote. Here’s what they asked:

• Property details such as year built, type of construction, and square footage
• Rental type (long-term or short-term)
• Ownership (LLC or personal name)
• Coverage start date
• A few personal details (date of birth and contact info)
• A list of any past claims

I didn’t have to dig through files or go back and forth via email. I just filled out the form online. It took about four minutes total, with one minute of that simply double-checking the year the property was built.

Once I submitted the form, a message popped up saying my quote would arrive shortly. Keep in mind that I did this at 6 a.m.

Within five minutes, I received a text from a Steadily agent letting me know they would call in 15 minutes to confirm my eligibility for every discount available. When we spoke, they asked how long I had owned the property, if it had a mortgage, whether it was one or two stories, if it had a basement, the age and type of roof, and if I lived within 100 miles of the property. That last question helps determine if a property manager might be needed.

In less than 15 minutes, I had a full quote in my inbox. With my old insurer, that same process could take a full day or more, depending on how quickly my agent got back to me.

Breaking Down the Differences in Coverage

Here’s where Steadily really stood out, not just in price, but in what was actually covered.

Premium

My Steadily quote came in at $867 per year for $231,000 in replacement cost coverage with a $1,000 deductible. Included in that premium was:

This was extensive coverage that is essential for landlords of any portfolio size. For example:

• Loss of rent coverage ensures you are covered if the property becomes uninhabitable and rent can’t be collected.
• Mold and remediation is a lifesaver for older homes or humid climates.
• Liability extensions protect you when working with property managers or contractors.

My old policy didn’t include some of these options—and the premium was more! 

Outside the coverage and ease, I also appreciated that Steadily broke down exactly where my discounts came from, not just vague line items.

What I Learned from the Process

After going through the quoting process, a few key lessons stood out:

• Investors often overlook insurance as part of asset management. Your coverage should grow with your portfolio.
• Cheapest isn’t always best, but transparency matters. Steadily made it clear what I was paying for and why.
• Insurance doesn’t have to be hard. The process took less than 15 minutes, and everything was handled online or by text.

I realized how much time I had been wasting going back and forth with traditional agents when a better system already existed.

My Takeaway and Next Steps

I plan to revisit my insurance quotes annually now that I know how quick and easy the process can be. Even if you’re happy with your current provider, there’s a good chance you’re leaving money on the table or missing out on coverage that better protects your assets.

For investors managing multiple rentals, Steadily’s ability to show all your policies in one dashboard alone is worth exploring.

Final Thoughts

Re-shopping my insurance through Steadily completely changed how I view landlord coverage. What used to be a frustrating, drawn-out process is now simple, transparent, and actually designed for investors like me. The platform made it easy to compare coverage, understand my premiums, and connect with an agent quickly, even at 6 a.m. The result was a better policy, more protection, and a faster turnaround time.

If you haven’t reviewed your policies recently, it’s worth getting a quote with Steadily. 

This article is presented by Rent To Retirement.

Have you ever sat at your desk, glanced at your pay stub, and wondered how you’ll ever build real wealth? 

You’re not alone. Thousands of BiggerPockets readers earn comfortable salaries, but feel stuck on the treadmill, watching the rich get richer while their own bank accounts grow at a snail’s pace. This story is true for the teachers, engineers, nurses, and nine?to?fivers who believe there has to be a way to turn a modest income into financial freedom. 

Spoiler: There is. 

It involves turnkey rentals, a bit of discipline, and some creative financing. We’ll follow a fictional investor (Sam) through his first six years of buying one rental property per year. 

Sam’s journey is rooted in absolute numbers and guided by experts. This method isn’t a get?rich?quick scheme; it’s a repeatable blueprint that helps maintain a steady paycheck while building a portfolio of cash?flowing assets.

Meet Sam: The $75,000?Salary Investor

Sam is a 33?year?old software engineer in Denver. He makes $75,000 per year and takes home about $4,500 per month after taxes. 

Like many professionals, Sam wants to build wealth, but has little free time for renovations or landlord headaches. When Sam stumbles upon the idea of turnkey rentals (houses that are already rehabbed and leased), he sees a path forward.

But first, he needs a plan.

Budgeting and Saving Without Tears

Sam starts by auditing his spending. He adopts the classic 50/30/20 rule, allocating 50% of his after?tax income to needs, 30% to wants, and 20% to savings. This forces him to rethink his lifestyle: He trims subscriptions, cooks at home more often, and resists the temptation to lease a new car. 

The payoff: He saves roughly $7,500 per year—10% of his salary—earmarking it for real estate. He also builds an emergency fund equal to three to six months of expenses, to build the cash cushion that investors need. 

Fortifying the Foundation

Before making offers, Sam polishes his financial profile. He checks his credit score and pays off lingering credit card balances to reduce his debt?to?income ratio (DTI). Lenders often require a credit score of 680-700, a DTI below 45%, and six months of reserves for investment loans. 

Sam also compares loan programs. Most conventional investment loans require 20% down for single?family homes and 25% down for multifamily dwellings. That amount of money isn’t easy to come by, especially as you are starting your real estate journey. Luckily, there’s another strategy.

Hack Your Housing: Sam’s First Deal

One evening, while reading BiggerPockets forum posts, Sam discovers house hacking. Under FHA guidelines, he can buy a duplex, triplex, or fourplex with just 3.5% down, live in one unit, and rent out the others. Even better, lenders let him count projected rental income toward his qualification. The only catch is that the property must be in livable condition, and he must occupy it for at least one year.

Sam’s agent sends him a listing: a triplex in a solid neighborhood, where each unit rents for about $1,200. The monthly mortgage for the whole building would be roughly $2,400. That means Sam could live rent?free while building equity. 

He runs the numbers with his lender, qualifies under FHA guidelines, and makes an offer. The seller accepts.

The Reality of House Hacking

Living next door to tenants isn’t always glamorous. Sam manages maintenance requests and gets used to occasional noise. He also pays mortgage insurance because of the low down payment and follows strict occupancy rules. 

But within a year, his unit has appreciated, he’s paid down part of the mortgage, and he has a taste of what passive income feels like. Sam now has enough equity and experience to repeat the process.

Choosing the Right Strategy and Market

After moving out of his triplex, Sam decides that his long?term plan is to buy one single?family home every year. Sam sets strict criteria so that he won’t exceed his budget, and he tracks variables like maintenance costs, taxes, and repairs to ensure profitability. 

He uses real estate tools and consults agents to find homes in landlord?friendly areas. He also studies turnkey markets in the Midwest and Southeast, where turnkey companies thrive. 

Assemble Your Team

Real estate investing is a team sport. It takes some work to build up a solid team, and you will have to go through some duds to find the winners. 

After some time, Sam builds a small but mighty crew:

• Mortgage lender: Someone who specializes in investment loans and can quickly preapprove offers.
• Real estate agent: A buyer’s agent with experience in turnkey markets, vetting properties, and negotiating.
• Home inspector: Even turnkey homes need thorough inspections to check roofs, plumbing, and electrical systems.
• Property manager: Turnkey companies often offer management, but Sam interviews others to ensure responsive service and low tenant turnover.
• Accountant and attorney: A CPA helps maximize deductions, such as depreciation, while an attorney reviews contracts and ensures compliance with landlord?tenant laws.

He ends up having a terrible experience with his maintenance company, and they cost him most of his profit that year after he did not vet them properly. Luckily, Sam sees the bigger picture and decides to keep going after his wealth-building dream.

Snowballing: Years Two Through Three

After that first house hacking win, Sam feels unstoppable, but knows he does not want to live next door to his tenants anymore. However, the next few years will test everything.

Year two

He moves out of his house hack and buys another property with 5% down. Now there are two mortgages, two roofs to worry about, and double the spreadsheets. He’s still saving every extra dollar and driving the same old car just to keep the momentum going.

Year three

With three rentals, the workload starts to feel heavier. A tenant leaves early, the furnace breaks in the middle of winter, and his cash flow vanishes for a month. The numbers still make sense on paper, but only because Sam tracks every dollar and refuses to quit.

Year four changes everything

After another round of late-night maintenance calls and surprise repair bills, Sam finally decides to do something different. He reaches out to Rent To Retirement, a company specializing in fully managed, turnkey rentals. They help him buy a property in a fast-growing market, with a completely hands-off approach. 

The home is already renovated, rented, and professionally managed. He locks in a competitive interest rate, connects with a reliable maintenance team, and, for the first time, isn’t the one chasing down contractors. The rent comes in, the property runs smoothly, and he finally breathes easy.

Years five and six

Encouraged by the results, Sam keeps going. He repeats the process through Rent To Retirement, adding one new property each year. His portfolio grows, his stress drops, and the income keeps rolling in. What once felt like an uphill battle now feels like momentum. 

By year six, he’s built a solid portfolio, steady cash flow, and a path to true financial freedom (without the sleepless nights).

The Hard Truth (and the Shortcut)

Building a rental portfolio from scratch is doable, but it’s slow, messy, and time-consuming. You have to find the right markets, manage lenders, and handle every surprise along the way.

Or, you can skip all that.

Companies like Rent To Retirement have already built and managed thousands of turnkey rentals for investors who don’t want to spend six years grinding it out. They’ve done the research, vetted the teams, and created cash-flowing properties that are ready to go from day one.

Their process is built for busy professionals with careers, families, and limited time to analyze deals, interview property managers, or learn everything through trial and error. Rent To Retirement identifies high-performing markets across the country, selects properties in areas with strong rent-to-price ratios, and oversees every step, from renovation to tenant placement. Instead of spending nights scrolling listings and guessing which cities are landlord-friendly, you get a property that is already renovated, rented, and professionally managed. 

Rent To Retirement also connects investors with lenders who understand rental financing, accountants who specialize in real estate tax strategies, and long-term property managers who protect your cash flow.

In short, they have already done all the heavy lifting that Sam spent six years figuring out on his own. You simply step in at the point where the property is performing, generating income, and being managed by professionals.

Sam’s story shows that building wealth through rentals is possible (even with a full-time job). Rent To Retirement shows that it does not have to take years of trial, error, and exhaustion to get there.

Remarkably, Fannie Mae has officially removed the 620 minimum FICO requirement for Desktop Underwriter (DU) submissions, aligning their approach with Freddie Mac’s LPA as of Nov. 15. Approvals are now determined entirely by DU/LPA findings rather than a hard credit score cutoff. Strong compensating factors have the largest impact toward obtaining A/E findings—e.g., larger down payments, shorter terms, excess assets, etc.

Within the first week, some top national lenders reported the following: 

• Many approved applications came in with sub-620 FICOs—roughly 6% of overall application volume—with some as low as 490.
• Several brokerages have already begun reevaluating their “fallout” files from the last 60 to 180 days, finding early wins among clients previously declined due to credit.

The 620 minimum credit score requirement—both for single borrowers and the average median score for multiple borrowers—was eliminated for new loan casefiles created on or after Nov. 16, 2025. 

Why Does This Matter to Investors?

The Trump administration is making a concentrated effort to loosen credit and make borrowing more accessible and affordable. 

Another example of expanding affordability is 50-year mortgages and, perhaps more important, mortgage portability. There are active discussions on how to enable homeowners to take their mortgages with them, similar to how consumers can port their cell phone numbers from carrier to carrier. The plan moves with them instead of the mortgage staying with the property. 

This is a novel idea that could have a major impact on inventory. It is estimated that one-third of U.S. borrowers have a mortgage under 4%, creating a “lock-in” effect, with downstream inventory constraints. 

By enabling borrowers to port their pandemic-era low-rate mortgages to either a downsized or upsized property, transactional activity would likely increase while relieving price pressures in some regions. 

Conversely, there are many considerations for how these programs would be implemented, and whether they would actually level the market or skew favorability toward those with lower mortgage rates. 

In the upsizing scenario, guidelines would need to be set for the property type. Could a primary mortgage be ported to an investment property, maybe after a certain period? And if the current loan balance was insufficient to cover the down payment difference on the purchase, will a second-lien program be introduced at more favorable rates? Otherwise, if the spread is large enough, the blended rate could actually be higher than a fresh conventional loan, albeit with the potential for extended amortization. 

From a lender and servicing perspective, mortgage notes would be much more likely to be held to maturity, which could influence rates or loan costs, and new guidelines would be instituted for a new class of borrowers. 

What to Do Now

Real estate investors should pay particular attention to developments in mortgage markets heading into and through 2026, as any significant revisions to “business as usual” could provide tight windows of opportunity to execute. Think of when rates bottomed during the pandemic, or the recently reimplemented 100% bonus depreciation for qualified and participating short-term rental acquisitions. 

Anyone on the qualifying FICO fence, or who was recently declined for conventional loan programs as a result of credit score, including FHA programs, should check in with their lender for an updated prequalification or approval letter.

Ashley:
Today we are talking about our very first deals. Tony and I are going to break down how we implemented action as rookie investors.

Tony:
That’s right now, both of our first deals happened a while ago, but there’s still lessons to be learned about how we found them, how we financed them, the lessons that we learned. And the goal is that you guys can take our first deals and use it as motivation to get your first 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 take a trip down memory lane and get into the stories of how Ashley and I both got started. So there’s two things we’ll talk about here. We’ll talk about prior to close, and then we’ll talk about post-close, what happened after that. Okay. So the first thing we want to talk about is market selection. So drum roll ash. How did you choose your first market?

Ashley:
I was a property manager in a market, and so I decided to invest in that market because I was already managing properties there. I knew what I could rent them out for. I also had gone to high school in that town, so I knew the streets, I knew the area, and that made me very comfortable. I have to be completely honest, I didn’t even know about out of state investing or even think about another market. This was the one that I knew, and I just thought, if I’m going to do this, this is the only place possible in the world.

Tony:
Yeah, me. It was a lot different, right? I mean, so you essentially invested in your backyard. I went into a market I really didn’t know much about, but I’m based in southern California outside of Los Angeles. And my mom, after she retired, she moved to Shreveport, Louisiana. My stepdad had family there. They ended up moving closer to be with his family for a short period of time. And when they moved there, they ended up buying a home and renovating it. And she kind of walked me through the numbers and I’m like, man, this seems like a really good place to buy real estate. And again, I’d never heard of it before, but because I had a connection to that market, that was my initial introduction was seeing what my mom and my stepdad did when they moved there, which made it a lot easier for me to build some confidence. So once we both chose our market, asked you in your backyard, me 3000 miles away, how did you go about building your team in that market? And who did you start adding to that team first?

Ashley:
The first thing I did was I looked at listings and I found one listing. It was a smaller single family home. And I thought, this is little, it’s perfect. It’s I think a manageable amount of money. And I went ahead and I contacted the listing agent. And so I called the agent to set up a showing. And on the phone call, she told me that this property actually is in a flood zone and there’s issues with the foundation. Do I still want to see it? And I said yes. And I realized as I hung up, like, no, actually I’m scared of this project. I don’t want to do it. And I just never went to the showing. And I am so sorry that I wasted this prison’s time, but I was afraid of confrontation and calling back and saying that I did not okay. So that was my first chance of building a team member of my agent.
And then after that, I ended up contacting a friend of my mom’s who had been a family friend and reaching out to her. So my agent was my very first contact, my second contact I didn’t use for the first deal, but working as a property manager for another investor, I did a lot of the financing for him on his deals. So I had developed a relationship with a local lender doing his deals because I was the one sending all the information back and forth. So I had already built that rapport. So an agent and a lender were my first really big teammates. I guess

Tony:
For me it was the lender first. And again, that came from the introduction from my mom because it was a lender that she had used. And the lender then introduced me to my agent. My agent and my lender both recommended me to the same contractor. And then I did a little bit of homework myself to find a property manager in that market. But the first domino to fall for me was the lender. And because they were local, they had a really good finger on the pulse of who else I should be talking to. And I think that’s also the benefit of working with small, local regional banks is that if I would’ve walked into the local Bank of America branch, maybe the guy or gal working in that office knows all the agents and stuff, but it’s like the local credit union or small bank, they tend to know because they’re truly a part of that community. And working with investors, they tend to know maybe a little bit more. So for me, it was lender first and then everyone else. Now, luckily for you guys, everyone that’s listening now, BP has the agent finder and the lender finder. So virtually most major markets across the country, you can just plug in your city and BP will connect you with tons of investor friendly agents and lenders to help shortcut this process for you.

Ashley:
So next, let’s kind of move into our buy box. So Tony, you probably had a spreadsheet with the exact type of home you were looking for and the type of siding and everything like that. In me, I had no buy box. I had no idea what I wanted to go after. I just knew a small property, a small single family or a duplex or a triplex maybe. But that was really all my buy box is small, multifamily or single family. And in that area, that market.

Tony:
But even that Ashley, I mean, that’s a bit of a buy box to start with. How did you land on that as your first buy box?

Ashley:
I just didn’t think that I could take down bigger than that. And I honestly didn’t know about any other kind of investment strategy. I didn’t think of self-storage or think of campgrounds or think of short-term rentals even. So really it was just that I was clueless and thought this is the only way to invest in real estate. Honestly,

Tony:
What’s the saying? Ignorance is bliss, right? It’s like, Hey, you know what? For me, honestly, I mean at the end, I definitely did have a pretty tight buy box, but when I first started, it was pretty open. But my lender did give me some very clear guidelines on what I needed to do in order to qualify for the loan. And what I needed was a property where the after repair value, or really I should look at it the other way, where the purchase price and the construction costs where no more than I believe it was like 72.5%. It was a very specific number, 72.5% of the after repair value. So that was my initial guard rail. It was like, I don’t know if it really matters what I buy. I just got to make sure that my purchase price and my rehab are no more than 72.5% of the rv.
And then in working with my agent, she was the one that started to give me more guidance on, okay, maybe don’t go in this area, because my plan was to bur this property, turn it into a rental, talking with my agent, talking with the property manager that I wanted to hire. They kind of guided me toward, Hey, here’s the type of property that maybe makes the most sense given the strategy that you’re trying to execute. And from that, I was able to start analyzing different deals and saying, no, I don’t really like this spot. Or Hey, maybe they’re a little bit harder pencil out here. And I landed on, I want a three bedroom 1950 ish build in the 7 11 0 5 or 7 11 0 4 zip code. So I had narrowed it down from the whole city down to two zip codes within that city, and I ended up finding a three bedroom. I believe it was built in maybe 1958 or something like that in the zip code that I was looking for. But it came from getting insights from my lender, from my agent, from my pm, and they kind of guided me toward what my buy box should actually look like in that market.

Ashley:
Yeah, I think a big thing is to just show Tony and I weren’t perfect with our buy box. We just took action. If you’re somebody listening, that’s an analysis paralysis and feel like you don’t know everything, you probably don’t know everything. And neither did we. And we took action and we made it out. Okay, we survived that first deal. So I think as we go through our first deal stories, I may not have a lot of great advice or really cool or unique things I did because like Tony said, I just was ignorant and didn’t know any better. But I think the real motivation here should be that you can’t do this and you don’t need to know everything. So Tony, what’s our next thing after building up our team?

Tony:
How do we find the, so Ash back to you. How did you find this first deal?

Ashley:
The good old MLS, and I sent it to my mom’s friend and I said, I’d like to go see this. And I went and walked to the property. It was a duplex, and I, after seeing it, I decided, okay, I’m going to put together an offer. I honestly can’t remember what it was listed at if I offered lower or higher right at, but it was pretty close to what their asking price was. It ended up being like 72,000 or 74,000.

Tony:
Same for me, right off the MLS. And I was working with an agent and she kind of had me on her drip, and I can’t remember if I found it or if she found it first, but I do remember, I believe it was listed at $150,000. And I was like, Hey, I like this one. Here’s my offer. And I remember her saying, Hey, we should start lower. I remember that specifically. I can’t remember how off I was, but she was like, Hey, just come in that 100. And they ended up accepting that offer at the lower number that she suggested to me. So same right off the MLS. There wasn’t really a whole heck of a lot of negotiation on the deal because it penciled for me. And yeah, we moved forward from there.

Ashley:
Tony, what month and year was this?

Tony:
This would’ve been, we went under contract, I believe in September of 2018, because I remember closing, it was right before Halloween of 2018. So it was mid-October of 2018,

Ashley:
And mine was September, 2013, I think 2013 or 2014 maybe. I can’t remember which year. But one of those, yeah, so definitely very different markets, very different times, but still the same principles apply. We didn’t know everything. We figured it out along the way as we went and there was things we researched, things we studied, things we did that made us come out of this alive and successful. We have to take a quick break here, but when we come back, we’re going to find out more about our first deals. Okay. Welcome back. So Tony and I are going through our first deals and we went and walked the property and made our offers. So now we’re going through the due diligence phase. Tony, I did an inspection on my first property. Did you do an inspection?

Tony:
Absolutely. 1000%. And I feel that every rookie should do the same thing. It’s like 200, 300 bucks,

Ashley:
Especially now it’s days market. It was really hard to do a couple of years ago, but now you can add an inspection. I just put an offer in on a property yesterday, and usually when I am doing an offer, I’m taking out the inspection, especially if it’s a big rehab and I already know everything I need to do and it’s going to cost a lot. But I also usually say that I will clean out the house so you can leave whatever you want. And I took that out of the offer. I’m like, you know what? I don’t need to add that in anymore. Make them how they junk. Junk.

Tony:
And that’s the benefit of the market that we’re in right now. But obviously your offer is going to kind of flow with where we are in the market cycle, and sometimes we’re more competitive and other times are maybe not as, I did do a full inspection and we didn’t get to the financing part. We’ll touch on the financing in a little bit, but my financing did have this piece where they were funding the rehab as well. And as part of that, they wanted a full scope of work before they would actually fund the loan. So I had to get from a general contractor, a full scope of work the entire bid. And then that was part of my due diligence period as well, was having not only the inspection, but also I believe I had two general contractors go walk the property, give me their scopes of work along with their bids to give me a full sense of what needed to be done

Ashley:
With my inspection, I got the inspector referred to me by my agent, and I stayed there the whole time to see what he was doing and learn. And then I just remember afterwards giving me this binder with pages and it was just like, here’s the roof. And literally it wrote out, here’s what we look for on the roof, on the sheet template. So he was literally going through and filling out templates and following it list by list. So after that, I actually didn’t use inspectors for a while because I literally would take that binder and I would go through the property with my handyman and be like, okay, let’s go through. And I was such a savvy investor trying to save so much money that I was like, I’m not paying $400 for an inspection. I’m going to do this myself. And it paid off in the long run.
I learned a lot and things like that. Yeah, there’s some things that definitely got missed, and I had an inspection on my lake house a couple of years ago, and just seeing the difference of even just technology and different things that they have to do an inspection, I’m like, okay, this is way worth the $500 now or whatever it costs. But we ended up getting a couple things that needed to be replaced, like the furnace was no longer working in the upstairs unit. So we actually got a quote to do one of the Mitsubishi split units in there so the tenant could have AC also. And there was a couple other little electric things and stuff like that. And I think it ended up being around $5,000 of repairs that needed to be made on the property.

Tony:
So on that note, Ash, let’s talk about financing. So what funds did you use to take this deal down?

Ashley:
I got a partner, so I had no money. I had the $5,000 in savings that I used towards the updates to rehab that needed to be done after we close, but I found a partner. So I had planted the seed with him several times just talking about real estate investing. His father was a real estate investor, and I would just say, look at what your dad is doing. We should do this. And so when the time came and I found this property, he came and looked at it and he said, yeah, okay, let’s do it. And we set up an LLC and he deposited the funds to purchase the property, and we became partners on the deal. So I used about 5,000 of my own cash, which was literally my life savings to do the repairs and maintenance, and he covered the purchase of the property.

Tony:
My story was a little bit different because I didn’t use a partner, but again, it goes back to this local bank that I was using, but they funded 100% of the deal. So I think I paid for maybe my inspection and my appraisal. I closing costs, but I had no down payment. They funded everything, and that was part of that whole 72.5% that has to make sure that all those boxes checked out. But once they did that, they saw the property in its current condition, they looked at the scope of work that I provided to them. They said, Hey, we think that your property is going to be worth X once it’s done because of that, we’ll fund everything. So they funded the purchase price, they funded all of the construction costs, and the added benefit of having the bank fund, the construction was that before the contractor got paid, the bank would send out someone from their office, or maybe they hired someone, I don’t know, but they would send out their own inspector to go inspect the work that was being done on the property to make sure that it was actually being done correctly to protect their own investment.
So me being thousands of miles away had this bank who does this for a living, all they do is lend on real estate, who was validating the work that was being done. And it gave me a lot of confidence to say, Hey, I can do this remotely. I got multiple sets of eyes checking this work. So it was incredibly helpful for me as a new investor. So we chose our market, we found a team, found the deal, we have the financing in place. Deal finally closes. So let’s get into what happens after that. Ash, we get our keys in our hands. For me, I actually never saw the keys, but we get the keys. What happens from there? So you mentioned a little bit of rehab. How did you find your contractor? How’d you vet them?

Ashley:
First of all, that used to be so exciting getting the keys at closing. And now I never see the keys either. It’s like, oh, they’re in the lockbox or something. Go get over. If the door’s unlocked, you’re going to change the locks anyways. It’s like closing. You see people posting on social media, they got the sold sign, they got their keys, they got the bottle shipped, paid. It’s like

Tony:
I actually did get the keys to that deal because I was so excited that I flew out to Louisiana for the closing. There was no value in me being there, but I was like, I just want to go there in person. So I remember I actually have a video. I was at the closing table, I got the keys, and I just drove to the property and I recorded myself unlocking the door for the first time and walking around. I remember that feeling. So I think that was one of the only times I got the keys at closing. But anyway, back to you. How’d you find your contractor? How’d you vet them for the rehab portion?

Ashley:
So as a property manager, I had a handyman that was working at the apartment complex. So my original plan was to use him to do a bunch of the work. And it was really just we wanted to put in, it was the upstairs unit only. There was someone living in the downstairs and it was in fine condition. So the upstairs unit needed vinyl plank flooring. We’re going to replace the cabinets, which is a really small job, super small kitchen, new countertops, and then paint throughout. And so my partner on this deal actually said, my roommate can do a lot of this stuff. I’m going to tell him he gets free rent living in my house and have him go and do the rehab. And I’m like, okay, this partnership is getting better and better. So we didn’t have to pay for labor at all. My partner, I guess, lost out on that rental income coming in.
I don’t know how long or honestly, I don’t know. Maybe they worked out another deal. I am not even sure. But that was the original deal that they had come out with and he went and he did it. But the actual cost of everything was like five to 6,000 to do that. And then we ended up finding out when we put the split unit in that we needed to update our electrical panel. So we didn’t realize that until they were there to install the split unit. They never told us that when they came and gave us an estimate. So we ended up spending even more than that. I think it was another thousand dollars all said and done with the split unit being hooked up in the new electrical panel to,

Tony:
I mean, you guys had a pretty good deal. That’s pretty solid, right? Free labor. So guys, there’s a lesson. Just offer free housing in exchange free labor, and that’s how you get the good deals. I mentioned for us, we found our GC through recommendations. So both our lender gave us a list, our contract or our agent gave us a list. And there was one guy that was on both of those lists. So he was the guy that I chose to actually do the work. And we funded our rehab again with the debt from the bank, and it was a super easy process for us. And what I would do, because I was remote, we would FaceTime. It was like every Friday we would get on FaceTime. Either him or someone from his crew would just walk me around the property. Obviously he’d call me during the week, ask me any questions on things as they popped up.
But that visual walkthrough allowed me to again, have some more confidence. So I was seeing it on FaceTime, the bank was sending an inspector, and then as we got closer to the rehab being done, I’d already selected my property management company and actually have them go out to do the final walkthrough to say, Hey guys, you’re going to be managing this. Is there anything you’re seeing that we still need them to blue tape here? Blue tape there to make sure they get dialed in. So for me, it was honestly the easiest rehab I’d ever done because I did nothing other than a few FaceTime calls. So we’re much more hands-on now, but that was probably the easiest. So that’s the rehab phase. Ash. Let’s talk a little bit about the management side. Once the rehab’s done, property’s not producing income until we get someone in it. So what did lease up and management look like for you on that first deal?

Ashley:
Yeah, so that was part of my value. I was going to be the property manager on the property, and there was already a tenant downstairs. I think maybe they were paying $600 a month or maybe five 50, something like that. So once the renovation was done, I’d have to lease the other unit. So I used what I was doing at that time for the apartment complex, and that was posting on Craigslist. I don’t think there really was a Facebook marketplace then at all, but I think it mostly was. Maybe I don’t even think I was posting on Zillow then, but yeah, that’s interesting. I’ll have to go back and look. But I think it was literally putting sign out front. Even at the apartments, we would put a sign out that there’s a unit available, call this number. But yeah, we were posting apartments on Craigslist for a while, and that’s how we did that first unit. And then I would do the showings, and then I did a lease agreement and then tenant screening. And then we definitely didn’t do a thorough job of tenant screening. And that was big lesson learned as to now there’s so many tools and resources of things that you can actually find out about a person, but I hadn’t implemented any of that besides just running a credit check on somebody.

Tony:
But it worked out. I mean, you guys got someone placed and the deal worked out for you guys. And again, for me, super hands off, had a property manager. So as soon as the rehab was done, keys went from the GC to the pm, PM did all the work to find someone. And we actually found someone relatively quickly. I don’t remember if we had to do a price drop or not. I think whatever price we listed at, I think we got it rented pretty soon. And I never met the tenants, couldn’t tell you what they looked like, or if I bumped into ’em the street, they wouldn’t know me either. But they were a family that was military. There was a military base in Shreveport or the city right next door. They were military. And I was making a whopping, I think after everything, like 150 bucks a month in cashflow. But for me, it was the best $150 I had ever made because it was proof of concept that this whole real estate investing thing could actually work. And that one deal is what gave me the confidence to continue doing real estate and obviously led me to completely change my life in the last whatever, eight years or so that it’s been investing. So guys, one deal. It’s all it takes to change everything.

Ashley:
We actually bought our second property in six months because of that proof of concept, like, wow, we did this. It’s rented, it is. Well, same, a little bit of cashflow, but it was like, okay, the mortgage payment is covered. My partner was like, wow. He was the one that put in the money. So we paid the mortgage payment to him to pay himself back. It was like, this is great. I’m getting this check every single month and I’m earning interest on my money that I invested. Like this is passive for me. Let’s do it again. And we did. Six months later, a house right down the street went up for sale and we ended up buying that one too. But I really think from this episode, the lessons learned are get out of analysis, paralysis, take action. You’re not going to know everything, and that is okay.
And third, if you’re listening to this episode and you’re annoyed that I kept saying, or Tony kept saying, well, we don’t really remember, it could have been this, could have been that, then you are a rookie investor that needs to come on right now because it is fresh in your mind exactly what you are going through to get that first deal, or you just got that first deal and we want to hear all about it. So go to biggerpockets.com/guest and fill out an application so you don’t get old like me and Tony and not remember every detail on the first deal.

Tony:
By the way, if you guys, actually, I think it was episode 10 of the Ricky Podcast where I was on as a guest actually before I became a host. So if you guys want the fresh story, I believe it’s episode 10, you guys can go back and listen to

Ashley:
Yeah. What’s going to be funny is people are going to go listen, and there’s going to be things that don’t match up who

Tony:
It was just straight up lying on this last episode. I’ve lost all faith in what he said, directionally correct. I believe everything I said on today’s episode was directionally correct. But yeah, episode 10, if you want the full details.

Ashley:
Well, thank you guys so much for listening. I’m Ashley, he’s Tony, and if you’re watching this on YouTube, leave a comment and let us know if you did your first deal, what market it was in and how you made on it. Thank you guys so much for listening or watching. We’ll see you next time.

Dave:
Hey everyone, Dave here. This Thanksgiving week, we are revisiting a few of our most popular recent episodes in case you miss them the first time around today. It’s an investor story originally published in September, 2024, but I think the lessons and insights from it are as applicable to today as they have ever been. The story is with Mike Baum, who turned to real estate investing in Idaho when a health condition forced him to retire early from a career in the tech industry. But what’s really cool and unique about Mike’s story is that his entire portfolio is just one investment property. This story makes for a great example of how you don’t need a huge, massive portfolio to make a huge impact on your life. Enjoy my conversation with Mike Baum from last fall, and we’ll be back with new episodes next week.
Hey everyone, it’s Dave. Welcome to the BiggerPockets podcast. Every Monday we like to start our week off by featuring a member of the BiggerPockets community and hearing about their investing journey. And today we’re hearing from an investor named Mike Baum and Fun facts. Mike is actually one of BiggerPockets communities top forum contributors. He has spent over 10,000 hours on biggerpockets.com posting and helping fellow investors learn about real estate. So if you’re a frequent visitor to our website, you’ve probably seen his name pop up, but Mike has a lot to share on top of just what he does for the community already. And in today’s episode, I’m going to talk to Mike about how an unexpected life change for Mike and a serious one started his journey in real estate. We’ll talk about how he selected his preferred strategy of short-term rentals and also why Mike has chosen to keep his portfolio small and how not investing can be an active and strategic decision. And this is going to be a great episode because I think it provides a really helpful and interesting counter narrative to what we hear most commonly in the real estate investing industry. And I get it, not everyone wants to stay small, not everyone wants to scale, but I think it’s really beneficial for all of us to learn from people who are doing something a little bit different. And Mike fits that bill perfectly, so let’s bring ’em on. Mike, welcome to the show. Thanks for being here.

Mike:
Thanks for having me, guys.

Dave:
Well, I am very curious to hear about your journey. And so let’s just start with your career. Prior to becoming a real estate investor, what were you up to?

Mike:
So I was a engineer at Intel for 19 years. I was a product owner and what they call a technical marketing guy. So what I did was work with our IBM or Lenovo with some of those platforms and helped them integrate our technology and supported our field sales staff. Plus I did demonstrations all over the country on stage and show prep and did shows and stuff like that. And then I did a ton of videos and how-tos and wrote a ton of technical documents. So that was my gig.

Dave:
Wow.

Mike:
Yeah. And I did that until 2011 when I had a huge undertaking, was working 70 hours a week. I actually slept in the couch in our lab, just go, go, go, go, go to get a product launch completed. And then one morning I woke up and I couldn’t see. The next morning I, I could see, but I had one eye pointing up this way and one eye pointing this way, and it was a sixth and a third cranial nerve palsy. So that was the first indication. The stress of the work had put me over the edge. So basically Intel put me on disability short term, and then after about a year of, there was no improvement. There never really is in a neurological degeneration. You can kind of arrest it as much as you can, but you can’t bring it back to where it was. So they put me on full-time disability, and that’s been 13 years now. So,

Dave:
Well, I’m sorry to hear that. It sounds like quite an ordeal. So did that mean you were left without an income after all of that?

Mike:
Yep. For me, yes. It’s not that we didn’t have any income. Intel has a very good taking care of their employees, so there’s a good solid long-term disability plan. And of course it requires that I sign up for Social Security disability, which I did. So yeah, I’m on disability. It was a pretty drastic income reduction. My wife is working, so that is good. So it’s not like we’re broke, but we certainly went from upper middle class to middle class. I guess you could say we were never rich.

Dave:
I’m sure it was a change financially, but just emotionally and psychologically, that’s a big just life shift to being someone who’s working really hard to having to manage your output in a more concerted way at this point. Is that when you discovered real estate or started thinking about real

Mike:
Estate? We’ve had a few rental houses we’ve bought and sold some stuff over time. Our vacation rentals located in Coeur d’Alene, Idaho on Lake Coeur d’Alene. And I’ve always wanted to have, I grew up there, always wanted to have a lake house, and a bunch of things kind of lined up for us to be able to afford to buy this house on the lake. And it was a way for us to replace because not contributing to retirement any longer because I have no way to, in normal ways, there are certain ways, but for the most part it’s very difficult when you’re on disability. You don’t have an actual earned income anymore, so you got to do something for retirement. So I figured, and initially we were not going to rent the house, we weren’t going to do a short-term rental. And basically BiggerPockets is what turned me all around to that. I have three kids, we have three kids, and we have three grandkids now. So we figured, oh, we’ll have this lake house and we can go and I’ll hang out there, but I came to realize it’s going to sit empty 80% of the time. It’s eight hour drive from where we’re at to get there. It’s not something you can just kind of bop on over. And traveling with grandkids is certainly not easy for their age.
Pick up, pack up and drive eight hours across the state to get there. It’s easier now that they’re older, but back then they were very young. And what year was this? 2017.

Dave:
Okay. So you, for a while after your diagnosis, had it got into real estate, it took a couple years for you to start?

Mike:
Yeah, well, we had a couple of long-term rentals we had sold.

Dave:
Okay.

Mike:
Yeah, so I mean, it’s not that we were completely green, but never really looked at short-term rentals in 2017. It was kind of, that wasn’t to say the wild, wild west of short-term rentals, but it was a different world than it is today. So I mean, I got to get to know Luke Carl and Avery Carl on BiggerPockets. We joined, I think I joined a little after they did. And I started hanging out on the BiggerPockets short-term rental forum and was reading everything I possibly could about doing this. And we were a little nervous. I mean, when you’re first thinking about doing a short-term rental, you have this asset as like you’re basically handing the keys over. It’s not a 1973 Toyota Corona, you’re letting your buddy borrow. It’s a whole house sitting on the lake filled with furniture. And when we got started, the house was completely empty, so we had to furnish it and get it all ready to go. And that took a long time. Not really that long, but it’s an expense and trying to figure it all out. But if it wasn’t for BiggerPockets, I don’t think I would’ve done it.

Dave:
Well, we’re glad to hear that and you’ve paid us back in spades because as I mentioned at the top of the show, Mike is one of the most prolific members of the BiggerPockets Forum communities, which we greatly appreciate. You’re always in there answering people’s questions. We got to take a quick break, but stick around because later in the show, Mike’s going to explain why he’s almost immune to fomo or fear of missing out, and it’s super interesting. So stick around. They say real estate is passive income, but if you’ve spent a Sunday night buried in spreadsheets, you know better. We hear it from investors all the time, spending hours every month sorting through receipts and bank transactions, trying to guess if you’re making any money. And when tax season hits, it’s like trying to solve a Rubik’s cube blindfolded. That’s where Baseline comes in. BiggerPockets official banking platform. It tags every rent, payment and expense to the right property and schedule E category as you bank. So you get tax ready financial reports in real time, not at the end of the year. You can instantly see how each unit is performing, where you’re making money and losing money and make changes while it still counts. Head over to base lane.com/biggerpockets to start protecting your profits and get a special $100 bonus when you sign up. Thanks again to our sponsor base lane.
So what was the learning curve like for you? Because I imagine going from being in product development and software engineering, are there overlaps between that and managing a short-term rental?

Mike:
There is because 50% of my job at least, was creating processes for people that needed to understand how to implement our technology. So you really just take that and you apply it to processes for short-term rental. I’m a huge believer in self-management of your short-term rental, but you have to have all your ducks in a row. You have to have everything working. You have to make sure your maintenance schedule is on right, on the money because the last thing you want is this X, Y, or Z breaking down. So all your hard systems need to have steady maintenance. You need to hire the right people to be a handy person to come over and take care of something. So you have to have somebody there. You have to have a top notch cleaner, and sometimes it’s going to take a while. I’ve been through four cleaners since we started.

Dave:
That’s actually not that bad. I think I’ve been through way more.

Mike:
It isn’t that bad considering we’re really rural. I mean, we are 36 miles down the lake from Coeur over an hour to drive down there, and it’s a tiny little town, and there’s very few professionals of this kind. There’s another town about 18 miles farther south called St. Mary’s that has some, but the cleaner comes all the way from Coeur d’Alene. It’s a whole day job for her to drive down there, clean the whole house, top to bottom, do all the laundry, and then drive back. So that’s always a key, but getting all everything in place and all the processes in place, once those are running, then management becomes a lot easier. I’m a huge believer in personal communication with the guests. I don’t rely on automated communication. I don’t rely on bots of any kind to answer things. Somebody asks a question, does an inquiry on Airbnb or VRBO, I’m the guy who answers the question. I give them my personal cell phone number that they can get ahold of me anytime and I can count on one hand the amount of times I’ve been contacted for problems.

Dave:
Really?

Mike:
Yeah. It’s been seven years.

Dave:
Is that because the house is just in great condition or you find great guests?

Mike:
Both. I think I vet every guest. We do not have auto book turned on for anybody. Everybody has to talk to me and I got to get a feel for they are. We get a lot of fake bookings.

Dave:
Really.

Mike:
Hi, this is Steve. We are looking at staying at your house. Are these dates available? You can almost hear it, and it’s obvious the dates are available. We had one just come in the other day, November 1st through the 26th. I’m like, wow, that’d be a great booking. I’ve only had two bookings that long ever that were real, but I knew right away because the wording, and then it takes them about a week and a half to get back to me when I say Yes, great. My wife and I and kids are going to be going on a vacation and my business is going to be paying for it. Can I please send you this fake third party out of country check?

Dave:
Oh gosh,

Mike:
Give me all your personal information so we can make this happen. Yay. And you’re like, Nope, only work through the tool. I only take payments through the tool, sorry, and then they disappear.

Dave:
Good for you. I mean, it sounds like you’ve got some really good systems in place. I want to take a step back quickly though, because you’re sort of in your timeline. You bought this house for personal use, you found BiggerPockets, and I think one of the common challenges that a lot of our audience hears is how long do you research and learn before just jumping in? Was it quick for you to just start renting it out or are you more the type that spent a lot of time educating yourself prior to, like you said, handing over the keys to this very valuable asset to people you’ve never met before?

Mike:
Right. So analysis paralysis is probably the biggest hurdle for most folks who have never done anything like this before. It is a gigantic expense for most people, and it’s a real risk and roll of the dice. So both sides of that, what you just stated, because I am not risk averse, but I plan, plan, plan. If you fail to plan, plan to fail, you look at everything, you read everything. And I was at an advantage being disabled. I basically had time so I could learn everything there was to learn. And being more technical minded, it basically allows me to get a better understanding of the way finance is supposed to work and how insurance is going to play out. I have a couple of algorithms that I have written that hunt the web that are for data. That’s why I can post Mike’s deals of the day because I scrub, I can scrub the internet on my own and find stuff that takes a while to become public to everybody else. That’s why BiggerPockets is, and I hate to keep coming back to that. I’m not trying to be a shill for BiggerPockets here, but that forum is so valuable because there’s so many of us on there that have done this and been doing it. And if you have a question, I can answer that question or John Underwood could answer that question or a dozen other people can answer that question.

Dave:
Well, first of all, Mike, if you want to be a sch for BiggerPockets, you’re in the right place. This is the one podcast you’re probably allowed to show BiggerPockets
As much as you want. We really appreciate it. But just so everyone knows, what Mike is talking about is a completely free resource to everyone. The forums are free. If you want to learn something about real estate, go ask a question. I think there are a lot of people who listen to this podcast who don’t even know we have these forums. Go check it out, ask a question, go see what other questions people are asking. I promise you’re going to learn something. And I think you’re right, Mike, I wanted to just get back to this idea of finding the right balance between preparation and fear. Everyone’s going to have some fear. That’s just a normal part of it, but you have to find the right level and the right way to cut it off and say, educating myself is not going to help me anymore once I’ve spent dozens or hundreds of hours, whatever it is, learning and reading, listening to the podcast at a certain point, you just sort of have to jump in. And it sounds like you did that and were you successful right away or did it take a while for your business to

Mike:
It’s going to take a while.

Dave:
Yeah.

Mike:
How long? The first year was lean, we lost money the first year because I was a little hesitant. We’re getting the house set up, we’re filling the house with all kinds of new stuff and I want to make sure that it works. I went through two different types of sheets before settled on a sheet brand that worked really, really well because the first one, really soft, super nice sine weave sheets that the first person with heels that were kind of needed some work on because they wear sandals all the time, pour the heck out of the sheets.

Dave:
Oh gosh.

Mike:
They were peeled up. You wouldn’t believe. So I had to toss ’em out after one stay, things like that. So your first year, anybody who’s going to do a short-term rental, your first year is probably going to be on the lean side. My area has got low saturation on Lake Coeur. There are not a lot of places for rent on the lake. I have dozens of people in competition, not thousands. So I price everything accordingly. But even then you can have a rough year. So you just really never a hundred percent all the analysis and all your thoughts and air DNA and the enemy method and going through and comparing everything, trying to set your prices and figuring out your occupancy and making sure you have the right amenities and the right stuff in the house isn’t a guarantee that you’re just going to knock it out of the park. So you have to go into it with a understanding that is something that you could do less than break even. But like anything, no risk, no reward.

Dave:
Absolutely. And it sounds like, Mike, you got it together pretty quickly, I mean relatively quickly and in 2017, and by all accounts, from what we’ve talked about, you’ve run a successful short-term rental business. But one of the main reasons I was so excited to talk to you, Mike, is that you are clearly very passionate about real estate and about short-term rentals. You’re on the forums all the time. I can hear it in your voice, but you’ve also chosen not to scale your portfolio. You have one short-term rental and you’re happy with that. Tell me why you’ve made that decision.

Mike:
So we have tried to buy a few other places. Unfortunately, as the farther down the road after COVID is when we started really starting to look well, the interest rates went nuts, and that was crazy. And property values went up and property values in an area where we were choosing to do our investing in Idaho, shot through the roof. I mean, it was one of the highest in the country.

Dave:
Oh yeah. I mean, forever in listening, if you’re not aware, places like Quarter d’Alene Boise just had some of the fastest appreciation in the whole country, was kind of going crazy during that time. But Idaho might’ve been the epicenter. Idaho and Austin I think were the two places that were just booming even more than the rest of the country. So, sorry to interrupt, but go ahead.

Mike:
No, no, that’s okay. Yeah, absolutely. Our houses, our lake house is worth four times what we paid for it now.

Dave:
Oh my God. In seven years.

Mike:
Yeah.

Dave:
So yeah, why buy poor if you’re doing it that well with your first one?

Mike:
Well, we’ve looked at other places. We did a scouting trip down to Sedona, Arizona, looking around there. We went out to New Mexico, angel Fire, looked at some things like that and all of it. We liked all of it, but unfortunately the places that we liked the best ended up either selling before we even got home, started talking about it, or they got pulled off the market or there was various different reasons. We took out a pretty good sized HELOC on our primary, so we have cash for down payment and to get the house all prepped, and now we’re kind of in a holding pattern, but we found a place out on the ocean that we were looking at. It was a successful short-term rental. It was doing pretty well, and we were ready to pull the trigger on. It needed some updating, but we were ready for that.
And then the people pulled it off the market. That was late last year. So we looked at a couple other places, one in Coeur d’Alene, it was on the pond, Dorey River, which is a major inflow into Ponderay, which is an enormous lake north of where we’re at. And it was beautiful. It was great. And they pulled it off the market as well. So it’s not that we don’t want to expand it, but now we’re getting to the point where my wife’s going to retire in a couple of years, and we started kind of late in life in this particular game. So had we known more earlier, I think we would’ve done better. If you’re younger, I think there’s still going to be a lot more opportunity moving forward. It’s a more sophisticated market now than it was seven, eight years ago. So,

Dave:
All right. We got to take a pause for some ads, but we’ll be back with this week’s investor story on the other side. Has it been hard, Mike, to be patient so much has gone on in the last couple of years?

Mike:
Well, you know what? I’m not really much of a FOMO guy. Fear of missing out. It happens on occasion that I get frustrated, but for the most part, I look at it like, well, you know what? It just wasn’t meant to be, so I’m not going to worry about it. I’m just going to move on and see what else I find. I still scan. I spend actually a lot of time on Craigslist looking at buy owner stuff and what people have been trying to sell. I’ve been driving around North Idaho quite a bit down back road, seeing if there’s something interesting, just kind of floating around and I’ll write an address down and nothing’s popped up. But if you get mad and try to jump on every single deal that comes along, it’s going to bite you, in my opinion. Eventually it’s going to bite you. You really got to watch that.

Dave:
And what do you attribute that lack of FOMO to? I mean, I think it takes confidence, right? To not be jealous or running, chasing every little shiny object. How do you stay disciplined?

Mike:
Well, I would have to say that it’s easier for me being someone who is older than, I mean most of the investors that come in that are asking questions, they’re in their twenties, twenties and early thirties, husband and wife or single person trying to get started. They liked the idea of short-term rentals, and when I was younger, I was probably way more aggressive than I would be. Now, we have to plan for retirement. We can’t be, you have that looming over your head the entire time. Do I sit there and I just take $200,000 and put it down on black? Because sometimes you feel like that’s what you’re doing. You’re putting it all on black,
Hoping that it’s going to pay out in the end. Now, it’s not like that, but every real estate deal is a bit of a gamble. You can plan and you can get processed, you can do all kinds of things, and you could still lose and nobody wants to lose. We saw a lot of that in the last few years. I think things have evened out now. So experience and just life experience in general and seeing things come and go and come and go, and your life isn’t worse because you didn’t jump on this or you didn’t jump on that. I mean, I don’t spend a lot of time kicking myself in the butt for not buying Apple at $25,

Dave:
Right? Yeah. That wasn’t the part of life you were in

Mike:
Right at that time. I just don’t think about it. We get quite a few young folks coming in. They want to do short-term rentals. Off the bat, they’re single. And my advice to every young investor wanting to get started is to not do short-term rentals.

Dave:
Oh, really? Why is that?

Mike:
Well, because there are better options to build a base off of.
There was one young guy, he’s 19, he’s in the military. He’s going to be able to take advantage of VA loans, and he wants to get into short-term rentals once he gets out in about three years. And I told him, what you should really do is take advantage of the VA loan. Or for those who don’t have access to VA loan, it would be FHA low down 3% down loans. Buy a duplex, buy a triplex, buy a fourplex, right? You buy something like that, you live in one and you have three renters. You do some minor rehab. You do it after a year, you have to live in the place for a year. Then you basically exit the place, rent that last unit, and then do it all over again. You have to convert that one FHA loan to a conventional, you refinance. Then you move over here and you do it again, and then you do it again, and maybe one more time.
And now you’ve got duplexes, triplexes, and fourplexes, all of them producing all of them, income producing for you, maybe 10, 15, 20% at this point. After doing it for a few years, maybe you have one that’s paid off. You have all these assets that form this really, really nice piece of bedrock that you can build the rest. So if you’re young, you don’t have kids, you can move every couple of years or every other year or whatever without dragging a whole family and changing school districts and blah, blah, blah, blah, blah. Then that’s what I would do. And then once you do four or five years of that, then you can start looking at some other things.

Dave:
You’re speaking my language. I mean, that’s sort of what I did is just started with long-term rentals. And over time I’ve branched out and I started investing in syndications. I do some private lending. Now you do some different stuff, but I feel comfortable taking risk because I have a solid portfolio of low risk, high performing assets. And not all of them were amazing when I first bought them, but I bought 10, 15 years ago. And that’s the beauty of real estate is over time you hold onto these things, they perform. Yep.
Well, Mike, I wanted to say thank you because I have only been hosting this podcast for a few months, but I’ve been a member of the BiggerPockets community for a long time, an employee for a long time. And it’s honestly, people like you who choose to share their time and share their knowledge with people for free out of the goodness of their heart, that it’s made the community so strong. So I just wanted to personally thank you. Thanks. So last question, Mike, what are you excited about in the short-term rental or realistic industry right now?

Mike:
I think there’s a lot of opportunity to be had, unfortunately, at the expense of folks that were overzealous in their FOMO purchases of short-term rentals. Guess you could say sometimes you can almost feel the desperation of some folks just to get out from underneath that mortgage because they bought high at the top of the market. Their interest rate is crazy. Interest rates are starting to drop. I think we’re going to see a couple more drops in the next few months. I think it’s going to be a very interesting 2025.

Dave:
Yeah, likewise. Well, Mike, thank you so much for sharing your story and your insights with it. We really appreciate it. And if you want to connect with Mike, we’ll put his contact information, but just go check out the BiggerPockets forums. You’ll see him all over the BiggerPockets community. Thanks again, Mike.

Mike:
Thank you. Have a good day guys.

Against the backdrop of increasing discussion about the bifurcation of the U.S. economy and the concentration of economic contributions by the affluent, here’s a look at some of the quiet fractures in the U.S. real estate market over the past three years. 

Instead of one national market moving in sync (think pandemic-era boom), we now have bifurcated environments, driven by mortgage rates, regional economics, and demographics. Understanding this divide is crucial for investors, brokers, and anyone waiting for “the crash” that has yet to arrive.

Locked-In Owners vs. Active Buyers

Roughly two-thirds of American homeowners hold sub-4% mortgages. They’re staying put. Inventory remains historically thin, and that shortage keeps pricing elevated in many regions—even where demand has cooled.

On the other side, buyers entering today’s market are absorbing twice the borrowing cost for the same home, reshaping affordability and shrinking buying power. The result: a frozen top layer of the market, sitting above a strained active layer.

The Trump administration is actively exploring options to loosen lending standards, such as offering a 50-year mortgage. It’s also considering mortgage portability, essentially allowing low-rate borrowers to keep their mortgage and “port” it to a new property, similar to how U.S. cell phone plans allow customers to bring their numbers from carrier to carrier. 

Well-capitalized investors could also explore mortgage assumptions, which are occurring with increasing frequency. In fact, we were recently able to assist a multifamily investor assume a pandemic-era $3M+, sub-4% loan on a 20+ unit property that the lender worked overtime to facilitate.

Boomtowns vs. Reversion Markets

Some metros—think the Southeast, and cities like Austin, Texas, and select Sunbelt and Appalachian cities that blossomed during the pandemic—have seen sharp corrections or explosive inventory growth. In these markets, home values are sticky, competition remains, and new construction is filling the gap. 

These are the markets where prices have softened or stagnated. The gap between the two groups has widened every quarter since 2022.

The dust seems to be settling, or at least reaching an equilibrium. If these markets are on your radar, aggressive negotiations could be more well-received than anticipated. Consider incentives beyond price, such as furnishings, seller concessions to cover closing costs, and a transactional schedule and closing that is most conducive to your timelines and budget. 

In strong markets, timing is critical. Keep your proverbial foot on the investment gas, and make the effort to tour (virtually or physically) prime listings as close to coming to market as possible. Be decisive and utilize your contingency period to validate the offer and property condition. 

Single-Family Strength vs. Multifamily Stress

Another fault line is forming between single-family homes and multifamily assets:

• Single-family properties remain structurally undersupplied. 
• Multifamily faces a wave of new inventory, softening rents, and tighter lending.

Investors who assume all real estate is moving together should drill deeper into local insights and recent transactions. Multifamily investors should connect with specialized local commercial real estate brokers/agents, gather insight from reputable local property management companies, and get boots on the ground. There is no substitute for pounding the pavement and experiencing the investment opportunity firsthand.

Speaking with tenants and neighbors can provide subtle insight that can make or break the enthusiasm for a particular area or property. In our investment experience, a strong no is more valuable than an iffy yes.

The Affluent Buyer Market vs. Everyone Else

Sales growth remains concentrated at the top of the market. In October, homes priced over $1 million saw a year-over-year jump of more than 16%, and properties between $750,000 and $1 million rose 10%. In contrast, sales between $100,000 and $250,000 inched up only about 1%, while sub-$100,000 homes declined nearly 3%.

Our forecast for 2026 and 2027 is for the luxury single-family, second home, and short-term rental markets to be exceptionally strong as a result of tax incentives (like the STR loophole), diversification and profit-taking from equities, and an anticipated reduction in mortgage rates amid the end of quantitative tightening (with the potential for easing). 

What This Means for 2026 and Beyond

The U.S. market won’t “correct” uniformly. Instead, real estate investors should expect:

• Strong appreciation and demand in second home and STR hubs
• Flat or declining prices in shrinking metros
• Continued single-family demand at all levels, with price pressure on entry-level and first-time homebuyers
• Pressure on overbuilt multifamily and basic new construction areas and developments 
• More uneven, hyper-localized pricing cycles

As the old adage goes: Real estate is about location. Understanding localized market conditions and financing options will be essential to successful real estate investment in 2026 and beyond.

This article is presented by Connect Invest.

Office loan delinquencies are surging again. In September 2025, Fitch Ratings reported that U.S. office delinquencies jumped after a $180 million loan tied to Manhattan’s 261 Fifth Avenue defaulted—the latest in a string of commercial real estate stress signals. Nationwide, delinquency rates on commercial mortgage-backed securities rose by roughly 10 basis points to 3.1% in the first quarter of 2025, while the Mortgage Bankers Association logged higher delinquency rates across lodging and industrial loans in the first quarter of the year.

Office mortgages that have been securitized into commercial mortgage-backed securities (CMBS) have been the hardest hit, with a delinquency rate of 11.8% reported in October—the highest since the Financial Crisis of 2008. Delinquency on these loan types hit investors directly (secondary financing is often not permitted), making them particularly risky. 

It’s Not Just High Interest Rates

The causes for these delinquencies are familiar, including high borrowing costs, soft leasing demand, and expiring low-rate debt that can’t be refinanced on the same terms. For lenders and investors, it’s the next phase of the “delinquency wave” that began in the office sector and is now spreading outward.

The first, most obvious pathway in the current wave of office loan delinquencies is default at maturity. The financing landscape is just vastly different in 2025 compared to five or 10 years ago, when interest rates were at historic lows. It is not at all surprising that owners and investors want out.

When interest rates rise, long-term property loans—often five to seven years—become risk traps. They tie up capital in assets that may lose value or face vacancies before maturity. 

In fact, this has already happened—with pretty drastic consequences—to prominent commercial properties that went into delinquency before loan maturity. One example is the fate of CityPlace I in Hartford, Connecticut. The property had half of its value slashed in 2023 following a decision by UnitedHealthcare not to renew its lease at the tower. At the time, the exit was downplayed as “just bad timing,” but it is clear at this point that CityPlace I is indicative of a wider trend.

A very similar fate has recently befallen Bravern Office Commons in Bellevue, Washington, which was at one point fully leased to Microsoft, but has stood empty since 2023, when the company announced its exit from the premises. The property lost 56% of its value since the most recent appraisal (in 2020), and has gone underwater at 12% below its loan value.

It’s not just companies pulling out of office spaces that are creating the issue. There’s a domino effect, as less footfall at commercial properties overall means fewer office spaces and fewer amenities that would typically service workers at these buildings. 

The familiar structure of downtown commercial hubs is breaking down. A stark example is Starbucks announcing in September that it would be closing hundreds of locations nationwide—one of them at the now-delinquent 261 Fifth Avenue in NYC. 

The pattern of recent delinquencies is clear: Office spaces that relied on long-term, single-occupant leases (Microsoft, UnitedHealthcare, etc.) have suffered the most spectacular value losses. Bigger companies with large workforces have had to make the most drastic decisions in the wake of the pandemic.  

Navigating the New Landscape

It is still possible to navigate the market successfully; it just requires investors to adjust to a less predictable pattern of occupancy. What used to seem like a safe bet—a building with a long-term lease by a large, respectable company with a vast, nationwide workforce of full-time office workers—is now anything but. 

Direct commercial property ownership is also now a far riskier proposition, given the very real possibility of going into default and then having trouble with all the conventional remedial options, e.g., refinancing that is too costly, a sale that may have become impossible because the building is now worth less than the outstanding loan balance, etc.

The practice of “curing” commercial loans by negotiating an extension or being removed from the delinquency list by paying off the interest are temporary fixes that still leave investors with the same problem on their hands—just a few more years down the line. 

Investors need to think beyond traditional investment models and loan durations to survive the tectonic shifts rocking the commercial market. Short-duration real estate debt limits exposure to those long-tail risks. Six- or 12-month notes can adjust faster to market conditions, helping investors stay liquid while capturing yield from ongoing deal flow.

The Short Note Solution

This landscape of delinquency is where Connect Invest’s Short Notes stand out. Each Short Note pools investor capital into a diversified, collateral-backed portfolio of real estate loans across acquisition, development, and construction phases. Every note carries a fixed annualized rate of 7.5% to 9%; monthly interest distributions; and defined maturities of six, 12, or 24 months.

Because Connect Invest’s loan originators maintain loan-to-value ratios under 80% and perform internal portfolio diversification reviews, investors gain exposure to real estate credit without the risk concentration of a single property default.

So while office loans may be buckling under refinancing pressure, investors can still access the income potential of real estate debt—without locking up capital for years or shouldering the risk of direct property ownership. Connect Invest’s Short Notes make it possible to stay invested in real estate’s credit markets while sidestepping its most volatile corners.

Explore current Short Notes and start earning real estate-backed income today at connectinvest.com.

Worried that artificial intelligence (AI) will replace lower- and middle-income jobs, and only create wealth for business owners? 

Billionaire Ray Dalio argues that AI is making the bottom 60% of Americans more dependent on the top 1% to keep the economy afloat. He notes that 60% of Americans can’t even read at a sixth-grade level—how could they hope to compete in our increasingly knowledge-based economy? 

Early warning signs only fuel these fears. A worrying report by J.P. Morgan notes the high unemployment rate among recent college graduates and weak job growth in many white-collar careers that AI can replicate. 

What about real estate? How AI-resilient is income from real estate, both active and passive? 

AI-Resilient Real Estate Business Models

There are dozens of niches in real estate investing, most under no threat of replacement by AI. 

Flipping houses

No software can flip a house from start to finish. Think of the steps involved:

• Marketing to connect with off-market distressed sellers
• Person-to-person sales to convince the owner to sell at a bargain price
• Assessing repairs and estimating costs and profits
• Financing arrangements
• Filing permits
• Interviewing, hiring, and managing contractors, and overseeing repairs
• Working with human inspectors to sign off on repairs and approve permit completions
• Listing, staging, and marketing the property for sale
• Negotiating terms with buyers

House flippers know there’s more to it than that, like coordinating with bank inspectors to release escrowed draws, and a dozen other mini-steps. 

Flipping houses is a business, whether you do it full-time or part-time. While AI tools might help streamline individual tasks in that business, it can’t run the entire thing. 

Rental investing

Some rental investors effectively flip houses to themselves, refinancing them and keeping them as rentals (the BRRRR strategy). It takes just as many steps as outlined above.

But even investors who buy turnkey rentals have to go through plenty of steps that AI can’t do for them, from financing to inspections to use and occupancy permits. 

Again, AI tools might help here and there, but rental investing is a side hustle business. Anyone who tells you it’s completely passive is selling something. 

Wholesaling

Sure, wholesaling real estate involves fewer steps. But it still requires human-to-human sales and negotiation. 

Aside from evaluating the property and its repair costs, you need to convince the owner to sell at a discounted price. And you need to build a network of buyers who know, like, and trust you. 

It’s a fundamentally human business model, and AI tools can only take you so far. 

Flipping land

You can automate more of the marketing and sales for flipping land. Unlike flipping houses, this is more of a paper business, where you don’t actually visit most land parcels, and there’s no physical renovation or construction. 

Even so, it’s a business—and AI can’t run an entire business. Leverage AI to automate as much of the business as possible, while you simply make the final decisions and handle negotiations. 

AI-Proof Passive Investments

Not everyone wants to replace their active income by starting a real estate business. Some people (like me) just want to invest passively and earn strong returns. 

Private partnerships

Passive investors can simply partner with real estate operators. 

For example, our co-investing club partnered with a house flipper last year. We funded a series of flips in exchange for a cut of the profits. Likewise, we’ve partnered with a spec home developer to build a handful of single-family homes. 

We simply invested as silent partners in these real estate businesses’ deals. 

Real estate syndications

Our co-investing club also invests passively in syndications, where we effectively become a partial owner in a large real estate project. 

The same principle applies: They’re running a real estate investment business, buying apartment complexes, industrial properties, or mobile home parks, and we’re simply investing passively in individual properties. 

Because we invest together, we can each put in less money, $5K apiece instead of the typical $50K to $100K required. 

Real estate funds

Last month, our club invested in a land flipping fund. The operator flips about 50 land parcels each year, with an average hold time of around 4.5 months. He can’t use bank loans for these raw land flips, so he raises money privately from people like us—and pays a consistent 16% return in the form of quarterly distributions. 

Private notes

Alternatively, you can lend money privately through a secured note at a fixed interest rate. 

We’ve lent money before on secured notes paying 10% to 16%, secured with a lien against real property. Again, the borrowers run real estate investing businesses that can’t be replaced by a chatbot, and we’re simply funding the properties. 

Intrinsic Protections

Real estate is, well, real. It’s physical, existing in the real world. To build, renovate, show, sell, or lease requires flesh-and-blood people. 

Then there’s demand. Real estate has intrinsic value: People need physical places to live, eat, and produce things. To some extent, they also want places to shop and work in person, too. 

That doesn’t mean AI can’t or won’t be a useful tool for people working in the real estate industry. But AI can’t run an entire business, swing hammers, or walk prospects through a property and pitch them on it convincingly. 

Real estate will always require humans, and that will increasingly make it an AI-resilient refuge for entrepreneurs and investors. 

If you believe AI is a net threat to employees and a net gain for entrepreneurs and investors, become one of the latter. And there’s no more AI-resilient industry to do so than real estate.

Ashley:
If you’re having trouble finding deals, this is the episode for you. We’re going to break down what strategies work in today’s market.

Tony:
We’re also going to talk about when, if ever it makes sense to buy a deal at negatively cash flows, which is a hot topic for Ricky Investors. Today

Ashley:
We’re going to cover what makes a good investment versus a bad investment, and Tony and I will actually give our own personal opinion on this. Welcome to the Real Estate Rookie podcast. I’m Ashley Kehr.

Tony:
And I’m Tony j Robinson. With that, let’s get into today’s first question.

Ashley:
So this question comes from the bigger pockets forums. We just recently sold our house and finished our first deal. Congratulations. We’ve been looking for deals and haven’t had much luck, cold calling or driving for dollars. Any other strategies that have worked for you guys? So I thought this was a perfect question for right now, we’re getting to the end of 2025 going into 2026, and the market has definitely changed since a year ago even, and we’re definitely seeing it more as a buyer’s market. So Tony, what are the ways that you have found deals this year or I guess even leads even if they didn’t turn into deals?

Tony:
Yeah, I mean I think the first thing I’d say before I even answer that question is they didn’t give a whole heck of a lot of context. They just said, we’ve been looking for deals and haven’t had much luck, cold calling or driving for dollars. I think the first thing I would ask is how much activity has gone into how much effort and time have gone into cold calling and driving for dollars? Did you call 100 people or did you call 10,000 people? Did you drive for two hours or did you drive for 200 hours? I think oftentimes Ricky Investors underestimate how much time it takes to really build that pipeline of going off market for deals. We’ve interviewed multiple folks who, wholesalers or just people that do a lot of direct to seller marketing and typically if you can get your first off market deal within your first 10 to 12 months, you’re actually doing pretty darn good.
So if it’s been any shorter period than I’d say even six months, I think maybe you just need to continue to work at it to make sure that you’re doing it long enough to have that momentum start to build. So I think that’s the first piece. The second piece is the actual strategy that you’re following within cold calling and driving for dollars. If we look at cold calling, you and I could both have the same exact list, but how we approach those phone conversations can make all of the difference. Have you trained yourself up on best practices when it comes to sales or are you just kind of winging it every time you hop on the phone with someone? Do you have a script that you’re working from that’s been validated and tested and iterated? Or are you flying by the seat of your pants because someone picks up the phone, you’re calling them out of the blue one question, Hey, this is Tony, I’m looking to buy your house.
I went to the main street is very different than, Hey, is this Ashley? Hey, it’s super weird question, but this is Tony. I hate to call out of the blue, but I think you own 1, 2, 3 main street. Which one of those is going to entice that person to continue that conversation, right? So working on your script for the cold calling could have a big impact as well. And same for driving for dollars. Where are you driving? What kind of properties are you taking down as you’re driving? Are you looking at the properties that are big and beautiful and like, man, that’s just a really nice house. Lemme see if I can get that one. Or are you only taking down the ones that have the overgrown weeds in the front yard, the garage doors is broken, the windows are boarded up, what type of property are you adding? So I think before we just say, what else should I be doing? Let’s make sure that we’ve actually done everything that we can within the strategies that are in front of us to validate that we’re doing it the right way.

Ashley:
And I just think right now with the market, there’s a huge opportunity just to buy off the MLS as to there are off market deals and there’s huge opportunity there. But what about, what’s actually on the MLS too? I look to pull up Zillow list sort everything by most recent, and then I go to the very end of the list and see what’s been sitting. I would try to find out why it’s been sitting. I go and I look at, see if they have any debt on the property, how much could I offer? Do they have a ton of debt on there that there’s really not any wiggle room they need to pay that off? So I think using right now the market as an opportunity to make those low ball offers where there are more and more properties that are sitting longer on market than they were say a year, two years ago, three years ago.
So that would be the first thing I’d look at. But also what type of properties are you cold calling and are you door knocking? So is it just you’re driving by and you see a house that looks distressed? Is it you’re dropping by and you see a house that looks vacant so then you’re finding their information and calling them? So one thing that has worked very well for me in the last couple of years is older people’s homes that either passed away or they’ve gone to assisted living or gone to live with a family member. And until I just read that question, I didn’t even think about this, but in the last few years, four or five of the houses that I have bought have been from somebody that passed away or moved out to assisted living or a nursing home. And if you include my sister, that’s six houses actually.
So I think really defining what your list is as to what types of properties, is it properties in pre foreclosure, is it properties that there’s an owner out of state? So for me, what has been working, and I haven’t even realized it is actually going after homeowners who maybe are moving out, going to assisted living. And a lot of these came from just word of mouth. People know that I buy houses, people reach out to me, my dad is going to assisted living, we have this property, do you want to come and see it? And actually the property I’m sitting in right now was word of mouth. The mom had moved in with one of her kids and I was able to purchase the property off market from that too. So really define what you’re going after, what type of person, what type of seller you’re looking for, because if you just do all across the board, it’s going to be a broader net and it’s going to take more of your time and more of your money to contact all of these people. But if you can kind of narrow down the actual seller you’re looking for, that will help.

Tony:
Yeah, you made an important point, Ashley, about where we’re at in the market cycle. And I think right now the MLS still does have a lot of good opportunities. Last year that we bought was right off the MLS and we got it at a pretty steep discount. So the MLS is definitely still an option, but I think the last piece here is maybe you’re just not good at cold calling. Maybe you’re just not good at going direct to seller and not everyone is. And if that’s the case, then maybe just focus on networking with the people who are good at that. We recently interviewed Dominique Gunderson on an episode and the majority of her deals come from wholesalers that she’s networked with and she just super hard hit the local meetups in the area that she was investing in looking for wholesalers. Now she gets a lot of her deal flow from those relationships.
So you could do the same thing. You could continue to invest time, effort, and energy in trying to specialize or improve your skillset when it comes to going direct to seller. Or you could just say, my time is better spent networking with wholesalers who are doing that work for me or I know I have a friend Brian Avio, who’s based out of Vegas and he wholesales both in California and in Vegas. And the majority of his deals comes from networking with agents. So he just cold calls agents all day and he says, Hey, do you guys have any off market deals that look like this? Things maybe don’t make sense to go on the MLS. And that’s how he gets a lot of his deal flow. So you can just bypass the work of trying to find it yourself and go network with people who are already doing that and they can probably do it better than you can.

Ashley:
We’re going to take a quick break, but when we come back we’re going to talk about what happens if you have a negative cashflow. We’ll be right back.

Tony:
Alright guys, welcome back. Alright, so let’s go to our next question, which also comes to the BiggerPockets forum. And this question is from Vin. Vin says, after hearing a lot of episodes about negative cashflow, I’ve got a question. I’m currently living in my primary residence and I’m planning to purchase an investment property and it’s going to be negative cash flow. It’s in the bay area of northern California, very expensive market. But I am of the opinion that as long as the rent on the investment is at least going to be greater than my current primary residence mortgage, it can still be considered as a positive cash flow investment. The investment property is going to be in a much better location than my primary residence. I might be totally wrong in my thinking. What am I missing? So let me just make sure that all of us here are understanding what the question being asked here is.
So VIN is saying that they have a primary residence already, and for round number’s sake, let’s say that their primary mortgage is $1,000. They’re going to buy this investment property and say the mortgage is $2,000, so double their primary residence and the rent is call it $1,500. So we have their primary residence at 1000. The rent’s being collected at 1500, the mortgage on this investment property at 2000. Their question is, does it make sense to buy this investment property that is technically losing $500 per month? But it still maybe makes sense because 1500 is more than what they’re paying on their primary residence, which means that money can be used to offset the $1,000 that they’re paying and still have some money left over. It’s a good question and I get the train of thought they’re trying to follow, but I think they’re looking at it from the wrong perspective because even if they’re making money on this investment property, they’re still losing money at the end of the day, right?
There’s still worse, and I’m using air quotes here, financial position than if they just didn’t buy the investment property from a purely cashflow perspective. I do think though that there’s nuance to this and Ash, I’m curious what your thoughts are as well. I do think there’s nuance because it does depend on what your personal financial situation is and what your motivations are for investing in real estate. If you’re buying this because you believe strongly in this area that you’re buying and that is going to appreciate incredibly well, and your goal is just to have this paid off in the next 30 years. So you’ve got maybe a multimillion dollar property in the bay area of California that you can then use to fund your retirement and you’ve got maybe a lot of active income, maybe you work in tech, you get a lot of active income from your day job.
So whatever 500 bucks a month that you’re losing is negligible, then sure do the deal because it makes sense for you. But if your focus is, I’m doing this because I want income or I want to maybe subsidize my living cost, this is a bad deal because you’re losing money. It will make more sense maybe for you to go out and buy a duplex or fourplex and house hack or a house with an A DU. So that way you really are subsidizing your living cost and not trying to wrap it into an investment that’s losing money. So that’s my initial take. Ash, what are your thoughts?

Ashley:
Yeah, I think the point that I would add is that they did say this investment property is in a better location. So maybe there is more opportunity for appreciation that okay, you want to invest $500 extra every month into this property knowing that in five years you’ll be able to make that money back when you sell the property, plus make a ton more money off of the appreciation. And David Green talks about this as to breaking even and how appreciation is a play. And there’s a bunch of other investors that actually followed this where they’re okay paying into these negative cashflow properties because even though they’re paying a couple hundred dollars each month, they are banking on appreciation that in several years, five years, 10 years, they’ll be able to sell the property, recoup all of that money, they invested it into it, plus make a bigger return and cash out then.
So that could be the thing, but you really have to define what your why you’re investing if you can afford to cover that additional amount and you want to for the long term. I mean right now we’re not seeing, if you were to buy a property right now, we’re not, probably not going to see huge appreciation in that property from today to next year today just because we’re seeing it become a buyer’s market. And even properties that I saw up for sale a year ago, some of those are still sitting including one of my properties. So I think if you’re able to afford to hold the property long-term and continue to pay into it and think about it, you also have to cover any capital improvements that come up, any repairs and maintenance that come up. You have to cover any vacancies now you’re going to be paying your mortgage and the mortgage on the investment property. So just remember there’s more that goes into it than just that $500 in negative cashflow a month too.

Tony:
Ash, incredible point. And I would encourage Vin who asked this question to run this deal through the BiggerPockets calculator so that way you can make sure that you’re really accounting for all of those other ancillary expenses that maybe you hadn’t considered because maybe that delta is a lot bigger than what you initially anticipated.

Ashley:
Okay, we’re going to take our last break here, but when we come back, we’re going to get into what you should actually know before getting into real estate. We’ll be right back. Okay, so our last question here says, what should I know before getting into real estate? Is there a technical analysis part everyone should know, like cash on cash return or other metrics? What separates a good investment from a bad one? So this is definitely a loaded question here and there’s so much to look at and so much to consider and very individual as to what will matter to you and won’t matter, I guess. So Tony, I want to start backwards actually on this. For you personally, what is a good investment versus a bad one? How would you differentiate in as little words as possible? What is a good investment from a bad one?

Tony:
My motivations for investing in real estate are in priority right now. Cashflow, tax benefits, appreciation.

Ashley:
I’m going to add one more to your list. And as in time, how much time I have to actually put into the property into the deal, like the operations, things like that too.

Tony:
Absolutely. So for me, as I’m analyzing different potential opportunities, it’s against that lens of will it generate a good amount of cashflow? Will I be able to perform a decent cost segregation study on this property and will it give me some meaningful appreciation so that in 30 years when the loan is paid off, that it’s appreciated? At least to some extent. And since I have very strong clarity on what my motivations are, for me, good deals are easier to spot than maybe someone else who doesn’t have that clarity. So a killer deal for me right now, north of 20% cash on cash return is probably really good. If it’s in the single digits, it’s probably not worth my time. Bigger deals typically give better cost, segregation, tax benefits versus smaller deals. Super, super rural cities aren’t going to give me any appreciation, whereas maybe ones that are in two or three hours outside of major cities or in maybe more popular tour destinations will give me that. So that’s a good deal for me. What about you, Ash?

Ashley:
Yeah, the three that you said. Plus the fourth thing I think are the great metrics of understanding. I’m definitely, we’ll take a little bit less cashflow if I can be more hands off on the property too. So there’s that give and take of like, okay, how far do I want to take the scale to here’s my income, but also that means I’m going to be putting way more time, energy, and effort into the property too. So I try to find that happy medium, but also another metric or measurement that I use that isn’t just cash on cash return or anything like that. It is when I am looking at the property, what else could I do with that capital? So if I’m putting $50,000 into this deal, what are my other options that I could do with this? Could I invest that in any other way?
And not even could I buy another property or invest in a syndication or things like that, but are there other ways to grow my business? Could I take that 50,000 and say, you know what, this year I’m actually going to hire a project manager and I’m going to have him work for me and give it a year and see if he’s able to take my rehab projects from here to here to the ceiling, like 10 exit. And so I think that is a big thing I think about too, or what are the other opportunities I have. And then also just along with the time commitment, the stress as in, is this going to be cause me a lot of stress? Am I confident in what I’m going to be doing in this deal? Am I confident I can take it on? And a big piece of that is I don’t like to take risk financially and stress myself, stretch myself because it stresses me out. And I think that’s a big piece of it too. I could have a good deal, but in order for me and my situation to take that deal down, I would have to stretch myself financially. I’m probably going to say no and not take that risk, even though the reward could be amazing and great. I don’t like that feeling of being stressed financially. And that would be something that I would avoid in a good deal.

Tony:
Yeah, and I think part of the question too is just what else should I know? So we just talked about, hey, what’s important to you? How do you determine what’s a good deal? But I think you should also just have a good foundational knowledge of the different things that go into being a real estate investor. And at a high level, if we were to kind of split it up into different chunks, there’s the acquisition, which is choosing a market, getting approved for financing, finding deals, all of that is part of the acquisition buckets. You’ve got to have some foundational knowledge there. It’s the intermediate, what happens when you find the deal. So negotiating your purchase agreement, your due diligence phase, what does that look like from going under contract to actually closing on the deal? And then it’s what happens afterwards. It could be just the management. If it’s something that’s more turnkey, it could be the rehab. So just having some sort of working knowledge in all of those big buckets I think are important to give you the confidence to be able to step out and take that first step of actually getting that first deal done.

Ashley:
Well, thank you guys so much for joining us today. For our rookie reply, I’m Ashley. He’s Tony, and we’ll see you guys on the next episode.