Category: Investing

Ashley Kehr:
You could offer the highest price on a house and still lose the deal or worse, win it and deeply regret it. Because of what was not in the contract, today DFW realtor and mortgage loan officer, Layla Smith, is going to walk us through the 10 things she puts in every buyer’s offer to protect her clients. These are the terms most people overlook and the ones that could save you thousands. Today, we are talking about one of the most underrated skills in real estate, not finding deals, not financing them, but actually writing the offer in a way that protects you from the moment you sign to the moment you close.

Tony Robinson:
Our guest today is a DFW realtor and licensed mortgage loan officer who started her career as an investor alongside her husband before earning her license. She knows what it feels like to be on the buyer’s side and that experience shapes every offer she writes.

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

Tony Robinson:
And I’m Tony J. Robinson. And with that, let’s give it a big warm welcome, Layla. Thank you for joining us today.

Laila Smith:
Thank you for having me.

Ashley Kehr:
Now, Layla, before we get into your list here, give us a 30-second version of your story. So you started as an investor, then you became a realtor and also a loan officer. What made you want to do all three of these things and how does the combination change the way that you write offers?

Laila Smith:
Well, I decided to start all three really because I actually started being a lender and then a realtor after that with investing as well, just because it made it a complete package for my clients.

Ashley Kehr:
I haven’t run into anybody else I know that is all three of those things. Do you know Tony? Especially an agent and a lender, I don’t think that I … Unless somebody just didn’t tell me that.

Tony Robinson:
David Green, no. Oh, wow. David Green, I think, is checks that box. And James Dainer. Jimmy has a lending company too. Okay.

Ashley Kehr:
Now you’re getting ahead of yourself. Okay. I know two people. Now three.

Tony Robinson:
Well, let me ask, right? Because I think that a lot of investors just kind of stay investors, but it does give an agent, I think, a slightly different perspective because there are a lot of investors who end up becoming agents. I think there’s fewer agents who are also investors. So how does that background of you being an investor maybe give you an edge? Or maybe was there a moment that you realized a lot of agents were leaving some of these critical protections on the table for their clients they were working

Laila Smith:
With? Yeah, I think it gives an edge because I know exactly when I go into investment transaction, I know exactly what the numbers are and what is going to be profitable and what’s not. So it made it easier to be able to pivot with investing and lending. And then real estate is just being a realtor was just given when it went into that.

Ashley Kehr:
And what about the investing? How did you start? What was your first investment that you did for real estate?

Laila Smith:
So we did a property over here in about 30 minutes away from my house. It was a single family residence that had been vacant for quite some time and came in and my husband and I, at the time, we gutted it out and then just built it from the ground up. And that was the first transaction. It was exciting and scary, but exciting at the same time.

Tony Robinson:
Yeah. I mean, a full gut on your first deal. That takes some guts. But now you’re here, right? And how long have you been in real estate in general now, Layla?

Laila Smith:
In the industry total, almost 17 years.

Tony Robinson:
Okay. So you’ve seen some of the ebbs and flows that come along with investing in real estate. Now, you shared a list of the 10 things you include in every buyer’s offer to protect your clients, and a lot of these are things that people overlook. So I want to go through each one of those 10 things, starting with number one. So the seller paid home warranty. Most buyers don’t even think to ask for this. So what is a seller paid home warranty and why do you fight for it in every offer? And what does it actually cover after the buyer moves in?

Laila Smith:
Yeah. So the seller paid home warranty, typically it is a warranty that is given to the buyers. Usually it’s paid by the seller for about a year. And some of the major items that those things cover is going to be like your appliances. It’s going to be a protection for things like your HVAC unit, plumbing, electrical, things that may happen within the first year of moving. That’s what it covers for the clients.

Tony Robinson:
Ash, have you ever had one of these on a transaction you’ve done, a seller paid home warranty?

Ashley Kehr:
No, I have not.

Tony Robinson:
Yeah, me neither. I’ve never dealt

Ashley Kehr:
With that. Yeah.

Tony Robinson:
Never even thought to ask for that. Layla, what’s the typical cost to the seller? Is this $500 or is it $5,000?

Laila Smith:
So a decent warranty usually is going to run you about $1,000, between eight to $1,000.

Tony Robinson:
And I guess how hard is this to actually get? Is this something that sellers are typically open to or is it maybe a bigger fight to get them to agree to this?

Laila Smith:
So most of the time it is more so by just asking. I think a lot of agents miss that for their clients. It’s not really difficult to get because most sellers are open to paying that small cost to, in a way of a good negotiation to sell the home, they’re more willing to do that. So not very difficult at all. It’s just about asking.

Tony Robinson:
Yeah. And I guess how many things are covered under the seller paid home warranty? You mentioned the appliances. I’m assuming larger systems as well, like the HVAC, but does it include the roof or if a window stops, how much wiggle room do we have within this warranty?

Laila Smith:
Yeah. So it wouldn’t cover things like the roof or foundation, but it will cover things inside the house. So like we talked about like the fridge or like the oven or just appliances that came with the home. It can also cover things like if there was any type of like plumbing issue, minor things that you may not need to go to your homeowner’s insurance for, the home warranty is going to be covering those things.

Ashley Kehr:
Yeah. I really haven’t had any experience at all with a home warranty. I know it’s pretty common with the new builds correctly where it will come with a home warranty, but I never even thought to actually have it, have the sellers get it for you. I just purchased a property that on the day of closing, the basement was flooded during the final inspection. And so the boilers underwater, the hot water tank’s underwater. And so it was like crunch time, what should we do? And we just kept thinking like, oh my God, thank God this happened before closing. This could have happened after we would be buying a new boiler, a new hot water tank, new sump pumps, draining this out. So it definitely puts it more into perspective of like things that can happen after closing. But what we ended up doing was they gave us a seller credit and that’s how we ended up working it out.
But if you’ve already closed on the property and something breaks or dies right after, then you can’t get that.

Tony Robinson:
Yeah. Now it’s yours right now you’ve inherited that issue. But it actually does because we bought our primary home as new construction and it did come with a one-year warranty from the builder. And I’m so glad that that came in because there was one day I was sitting in my dining room area and my sister was there with me and she kind of looks up and she’s like, “Hey, your ceiling’s wet.” I’m like, “What do you mean?” And I look up and like there’s this big wet circle on my ceiling and it turns out that my son’s bathroom is right above and there had been some kind of leak in the plumbing in his sink and it had been dripping, dripping, dripping. We were in the house for maybe six months at that point. So it had been a while and this water had just been dripping for six months.
Now, luckily because it was under warranty, they came in, they cut everything out. They literally had to rebuild basically his whole portion of his bathroom, redo all the drywall and the ceiling up there and obviously remediate whatever mold that had happened during that time as well, but it was all covered. All we had to do was make a phone call. Now to your other point, Ash, about finding surprises before you close, I was buying a home from a wholesaler. And obviously we expect these homes to be in disrepair. It was a home that needed a lot of renovation, but we walked the property, we got our scope of work and the day before, or not the day before, it was like maybe a couple days before closing. For whatever reason, we had to go back just like it went additional measurement. And when we walked back in, the entire ceiling had collapsed inside the main living area and talk about a big material change.
So luckily we found it beforehand, but yeah, things can get crazy if you wait until afterwards.

Laila Smith:
Yeah, definitely.

Ashley Kehr:
Okay. Now another thing that you like to put in is mentioning that the repair deadline is in writing. So what goes wrong when repair agreements are vague and what does it look like when you write repair deadlines the right way?

Laila Smith:
Well, we definitely want to have a clear language requiring the repairs to be completed and also be able to do a reinspection prior to closing. And most of the time we try to create a deadline where it’s like, if we’re going to be having repairs done, we want to make sure that we have a date set so we can be able to renegotiate with the seller.

Ashley Kehr:
I was selling a property and there was a telephone line down and they wanted the cable taken off the property or fixed or whatever before closing. And so I had my assistant take care of it and she called and one company came out and said, “Nope, that’s not our line. It’s this company, whatever.” She’s like, “Don’t worry, I’ll take care of it, whatever.” The day of closing, when they’re going to do their final inspection, they’re like, “Oh, this line is still down.” And it was kind of to the point the two agents were like, “Well, it’s not like we’re not going to close over this. So we’ll still continue to close or whatever and just they’ll have to figure out whose line it is and call and get it done.” So it wasn’t that big of a deal. But if the buyer in that situation, I would be kind of upset, you asked for this to be done, it was in the contract to be done and yet it wasn’t done and there was like no repercussions at all.
And I do like the idea because I don’t think in any of the contracts I’ve ever done, there’s like a date as to when the repairs had to have been done. But I’m also buying a lot of dilapidated properties where I’m not even asking for repairs to be done, but I think that is such a good idea of like to even give you time to inspect and make sure it’s properly done so it’s not the day of closing and you’re frantic and panicking like I was.

Laila Smith:
Correct. Yeah, we definitely don’t want to do that. And usually we’ll have an initial date that the repairs after we submit an amendment for the repairs to be done and then we have a follow-up. And usually I try to get it done a week before closing because you don’t want to wait until closing and be surprised that you’re excited to sign these papers, but all the repairs that were requested weren’t completed. So try to make sure that we’re kind of looking at the property one more time before going into closing and that everyone’s happy, the client’s happy and I walk into any surprises.

Tony Robinson:
Layla, for that re-inspection clause, you said like a week prior to closing. So since your due diligence period has already ended, if you get to that date of the re-inspection and they’re not completed, does the buyer now have the ability to walk away and still get back their earnest money deposit? Is that how you structure it? Or what happens if the work isn’t done?

Laila Smith:
Correct. Yeah, because when I submit an amendment for the repairs to be completed, that also said in my report, I am putting in there that it has to be done prior to closing. So depending on the amount of days, depending on when closing is happening, we’re going to have a set date that the repairs has to be completed by, whether it’s three days or it’s five days, depending on the length of type of work that’s being done to make sure that it’s done. If not, then yes, they will be able to get their earnest money back.

Tony Robinson:
I love that. I’ve never included a re-inspection clause into any contract. So I love this because I’m picking up some things for myself. So the third point you had, Layla, was that window coverings convey, and this one sounds small, but it can actually save you thousands of dollars. And I think a lot of people overlook this. So walk us through why window coverings matter and how buyers get burned when it’s not actually in the contract.

Laila Smith:
Yeah. I mean, you definitely want to have those things written out. So if you walk into a home that has blind shutters, things are going to be a little bit more of an expense. It’s not just your typical blinds, basic builder grades, blinds in the house. You want to make sure that we have that in a contract. So even like drapes, like the buyer walks in, they fall in love with the drapes. We want to make sure that we include that in a contract. So that is something that if it is present, I will include it to make sure that if the seller is going to leave it behind, we want to make sure that happens and not, again, walking in after you close and then whereas the beautiful drapes or the nice shutters that was put in, they’ve taken it to the next home.
So those are things I would definitely want to make sure that is included and I make sure that it is.

Tony Robinson:
Yeah. And you don’t realize how expensive those things are, but it’s like if you have a lot of windows in your house, it adds up. And again, my wife and I, when we bought our first home, biggest investment we’d ever made, this is before we were real estate investors and it was new construction. We just got to build or grid everything. And because of that, we got no window treatments at all. There was nothing on any window. And we lived like that for two years before we even bought blinds because we were just doing the math. It’s like, man, this is so much money for blind. So I love this.

Ashley Kehr:
Did you hang up sheets? College kids do hang up sheets.

Tony Robinson:
In our bedroom, we had temporary shades, at least for the one by our bathroom, because when get out the shower, there’s this big window there, so we had to figure out something. But Layla, what does the actual language look like to make sure that there’s clarity? Because I feel like maybe that there can be some ambiguity there or signals get mixed. So what does the actual language look like?

Laila Smith:
The language is going to be specifically like the fixtures convey. So we’ll want to be very specific because if they want to be able to keep the shutters and not really caring for the drapes, we’ll want to be able to write that out. So that’s something that I will write off specifically for the items that are going to be left behind because most of those things are personal items to the seller and sometimes they feel like they can take the drapes with them, but I do write it out specifically for my clients to make sure that the buyers are fully protected in that aspect.

Ashley Kehr:
Now, what about seller paid closing? Has This is your fourth item in here and you negotiate seller credits that actually reduce the buyer’s out- of-pocket expenses. And this is kind of what happened to me on the day of closing unexpectedly is I got a $25,000 credit at the closing table and actually took a check home. So how do you frame that ask without killing the deal and what does it actually mean for a buyer’s bottom line?

Laila Smith:
Yeah. So the closing costs on average can run anywhere between two to 5% on the purchase of a home. A credit that can be given to the client, especially for first-time home buyers that can be given to them to help out with closing costs. I usually go in with that negotiation as far as how long the property’s been on the market, how eager my clients are. And that would help me determine the amount of closing costs that I’m asking for my clients. But try not to kill the deal because you want to be fair as well, you’re working for a buyer’s agent, but you want to also be fair in looking out the seller, where they stand with the property and make sure that we are kind of fitting the right numbers, and which also kind of run into the type of loan the client has as well, can determine how much of a concession that I’m going to be asking for.

Tony Robinson:
Layla, can you elaborate on that? What do you mean by the type of loan they have and what are the restrictions depending on the loan type?

Laila Smith:
Yeah. So the difference would be between efficient and conventional, for example, and also depending on how much you put down. So efficient, you can go up to 6% in concessions. Conventional, you can start at 3% all the way up to 9%, but that really just depends on how much money they’re putting down. So it’s going to be anywhere from depending on the loan size, and we can start at 6% and try to negotiate to work our way down, but I always go in for the max. So full protection. Yeah.

Tony Robinson:
And why a credit versus a price reduction from the buyer’s perspective? Because for the seller, it’s the same thing, right? Whether they give a credit or they reduce the price, a lot of it works out to be the same in terms of cash to them at closing, but why is maybe one more beneficial for the other or over the other for the buyer?

Laila Smith:
Yeah. For the buyer, the credit actually makes more sense because it helps them with their bottom line as far as what they’re bringing to close in. And most people are going to be first time home buyers that I’m working with. So usually they need more help with the amount of money they’re bringing to the closing table. So if we can get a credit to help out with that overall cost that’s going to reduce their closing costs by 10 or 15,000, it’s more advantageous for them than just getting a price decrease that they’re still going to come up with the same money anyway at closing. So it’s actually better for them to bring less money to closing that they can put into their home when they first move in.

Tony Robinson:
And as you just said, you got to check at closing because of this credit.

Laila Smith:
Correct. Yeah. Yeah.

Tony Robinson:
Yeah. That’s crazy. And think

Ashley Kehr:
About that. I mean, yeah, they have to go and buy a new HVACs. It’s not like it’s money. I get to shove under my mattress.

Tony Robinson:
But it’s still a crazy concept that you can purchase a piece of real estate that’s going to produce cashflow, appreciate over time, give you tax benefits, and that if structured the right way with your loan, your down payment, your credits, that you can actually walk away with money in your pocket. Ash, we interviewed someone, and it was a while ago, I believe his name was Andre, but he used the NACA loan. And I’ve talked about NACA before, but it’s a 0% down loan that you can use on your primary residence up to four units. And he bought a four unit, I was able to negotiate some credits at closing, and because it was a zero down payment loan, I think he walked away with 20 grand at closing for this four unit property that he was unable to house at. So it’s like my mind is blown that more people aren’t trying to leverage seller credits to help reduce the cash they need to actually get into some of these deals, especially if you’re doing it for a house act.

Ashley Kehr:
Yeah, because your loan is set. So especially me getting a credit last day, your loan amount is already fixed. You’re proof for that amount for that house and they’re not changing and saying, “Oh, you’re getting a seller credit today. We’re going to take that money off of your loan and now you have a lower loan or whatever.” So that’s part of the reason as to why you walk away with the check, but yeah, it can be. So maybe it’s even better just to negotiate the seller credit at the last day.

Laila Smith:
Oh yeah. No, it’s so much better. And even on the loan side, I’ve been able to use some of those credit because we have a max amount that we can use, but on the lending side, we could use some of that credit to even bring their interest rate down, which reduces their payment as well. But the credit is always great to have for sure. Yeah. And I’ve had several clients actually walk away with money at the closing table, they’ve actually gotten a check because we have so much more.

Tony Robinson:
Yeah. And that’s a great situation to be in, getting paid to buy real estate. All right, Layla, so your fifth point is clear possession terms, right? So move out dates and penalties spelled out in writing. Why does this clause matter and what does it look like when possession terms are left maybe more vaguely than they should be?

Laila Smith:
Yeah. So I mean, the nightmares and error could be on closing date, your seller has not moved out and you are now roommates. So you definitely want to have that written out and have a clear possession date and which is always going to be on closing date for me when I do a contract. So we need to make sure that we don’t have any issues as far as like coming, they having completely moved that was their personal items or anything else, or if they need to have a lease back agreement, you want to have that clearly written out as well.

Ashley Kehr:
Actually, it was the first ever house that I bought on my own without a partner. And it might’ve actually been the first house that I bought that didn’t have tenants in it or wasn’t already vacant, but it was a family that lived there and they were moving out and we were doing a double closing. So they had to close on their house and then within that hour, they were closing on their new house. Well, when I went to do the final walkthrough inspection, they were literally still moving stuff out of their house. And this was like, I was on the way to closing. So I didn’t even get to see the house completely moved out. So when I actually, we went to the actual county clerk’s office to do the closing and we sat down at the table and my agent actually negotiated a credit for me because it was not clean at all.
It was supposed to be like broom swept or whatever and it was not like the fridge, I threw it out. It was so disgusting. And so their hands were kind of tied because they needed to close to close on their new loan. So it gave me a little bit of negotiating power, but that was like one thing I never wanted to do again is like do the final inspection and they’re not even completely moved out yet. Okay. So that’s five down and we’ve got five more to go. And the next batch is where Layla get into the clauses that most rookies have genuinely never heard of. So the appraisal protection clause alone could save you from one of the most common and most painful surprises in a real estate deal. So stay with us. We’ll be right back. Okay. Welcome back to Real Estate Rookie.
We just went through the five things that Layla has every buyer put into their offer. Now let’s finish the list with five more protections and these ones get into some territory most buyer’s agents completely ignore. So Layla, our next one, number six is appraisal protection. You’re using contingencies or capped appraisal gaps to prevent overpaying if the value comes in low. So walk us through what actually happens when an appraisal comes in under the contract price and how this clause protects your buyers.

Laila Smith:
The appraisal gap scenario that I can think of is you offer 350,000 on a property, but it appraises for 330. Without this protection, you’re going to be owing the difference. And typically I make sure that that is written out for my clients to make sure they’re not in that position to have to come out of pocket with that extra money. So we definitely want to have that written out in the contract.

Tony Robinson:
And what are the different ways that a buyer can go about protecting themselves if there is any sort of appraisal gap? What are you writing into the contract to give them some flexibility there?

Laila Smith:
So there is a contingency document that I usually add to every contract that basically saying that if the house does not appraise for the offer price, then my buyer can choose to walk or they can choose to renegotiate. So usually that’s the option that I have for them.

Tony Robinson:
This was like a really big thing.

Ashley Kehr:
Have you ever bought a house that didn’t appraise?

Tony Robinson:
The only time I bought a house that didn’t appraise, and this is kind of like a crazy store. I think I shared this on the podcast before. We were buying a new construction and it was supposed to be a four bedroom, but it ended up being a three bedroom. Oh yeah. So that was one where it didn’t quite appraise, but luckily we were able to get the builder to rectify. But aside from that, we haven’t bought any property that didn’t actually appraise. But I think like coming out of COVID when the market was going crazy, there were so many people buying properties way above appraised value. And it was like you had to almost include in your contract how big of a gap you’re willing to cover. But I’ve personally never done that. Ash, what about you?

Ashley Kehr:
The only one was new construction also, and it was my primary. And it was when we did all of our blueprints with the architect, we did a finished basement so that we would have the plans and the drawings for whenever we did decide down the road to finish the basement. And when we went through our final draw to close out our loan, they flagged it and had sent the inspector out and said, “No, it’s not finished. The basement needs to be finished. That was what was in your drawings.” And that was like panicking like, “Oh my God, we don’t have another $50,000 to finish off the basement.” And it had a bathroom, it had a bar, all this stuff, all these rooms. And so what I ended up doing was I fought it by saying, “Here is my contractor’s contract, his scope of work that you reviewed and you approved and you set the draw schedule to, and nothing in that contract shows any finishes to the basement.” So they actually honored it and they agreed and they said, “Yes, it wasn’t in the contract.
It wasn’t in the scope of work. You’re fine, you’re good. We can close out the loan, you’re okay.” But that was definitely like a really panicky situation there.

Tony Robinson:
Look at you, Ash, many lawyer over here, and this is like pre AI days, you had to do all that sleuthing on your own.

Ashley Kehr:
And that was like, I probably only like two properties, investments at that time. So very, very … And this was my first ever loan that I ever got from a bank too. So it made it even more scary, I feel like.

Tony Robinson:
Well, on that point, let me ask, because I feel like the appraisal gap was a big thing, like I said, coming out of COVID, are you seeing that as much of a necessity today? Have market conditions maybe shifted how often you’re including this one or is this one that you just always include no matter what?

Laila Smith:
It’s one that I always include no matter what, just because … And we don’t have a whole lot of homes that we’re dealing with that right now, especially like you said, after with COVID homes were inflated so much. And I think as the market’s starting to adjust, we just want to have that for protection because the house that was appraised for increased in value a hundred thousand four years ago is not going to be the same today. So just to make sure that my clients are fully protected, that is something that I always include in every contract. There is also a difference with FSA always is automatic with the appraisal that it has to meet that. But with conventional, definitely I always include that into the contract.

Tony Robinson:
Your seventh protection here is the option period leverage. Now, this is basically an inspection that allows you to renegotiate credits or termination if major issues are found. How do most buyers use the option period and how should they actually be using it?

Laila Smith:
Yeah. So the option period is a paid time that I usually discuss with my client. You’re paying for the house, kind of like you’re renting the house for X amount of days to have the right to terminate if the inspection does not go the way you want it to go. And there is a difference between the option period and option fee with option money, with earnest money, and also leveraging that as far as how much money they can put down for the option for us to buy those limited amount of days to have enough time to do inspection and then renegotiation after that.

Tony Robinson:
So let me ask that, because I just want to make sure I’m tracking. When you say it’s paid time, what do you mean by that?

Laila Smith:
Yeah. So option period, typically you’re paying per day. So it can range whatever you and your client talk about and feel like it’s the best fit for you. So anywhere from two to $300, like $50 a day, for example, that you’re paying per day for you to do your inspection. So you’re asking the seller basically take your house off the market for five days or 10 days. So we can do the inspection, we’ll pay you $50 a day as an example to do the inspection. And if it doesn’t work in our favor and we cannot come to an agreement for negotiation on the repairs, then I owe you that money and I can walk away free and clear. So it’s just really buying the client’s buyer’s protection at that time, but also giving the seller something back just in case it doesn’t work out for either parties.
I’ve

Tony Robinson:
Never heard of this before, so what’s the timing on this? Is this before you have an actual purchase and sell agreement accepted? Because you said take it off the market, but if you’re already under contract, then technically it’s still on the market, but it’s listed as pending or under contract. So what’s the timing of this paid period?

Laila Smith:
So the timing usually is after the contract has been executed. So usually in Texas, when the contract’s executed, we have an option period. So the option period, again, it can be, depending on how aggressive the offer is, it can be two days, it can be three days, it can be on average, it’s about seven days, seven to 10 days that you’re technically asking the seller to remove the house off the MLS and say the house is technically on a contract, like a contingency contract, so you’re pulling it off the market. No one else can put a contract in at that time until the option period is over.

Tony Robinson:
That’s interesting. Ashley, is it like that in New York? Because I feel like for me, whenever I sign a purchase agreement, I have my due diligence period, which sounds or similar to this option period, but we don’t have to pay for it. It’s just like an understanding that, hey, we need the opportunity to get into the property and do our inspections. Is it like that for you in New York too, Ash, or do you have something similar to this?

Ashley Kehr:
Yeah, it’s the same. You have your inspection period and sometimes it’s actually very vague. It’s just like, okay, once the inspection is done, you have to let them know if you’re going to make any change or things like that. It really depends on the timing as to when your agent thinks that they can get an inspector out there. So sometimes it’s as fast as two days, so it’s like three days is your inspection period, could be seven days, but usually not over that for single family or small multifamily at all. All

Tony Robinson:
Right. So the eighth thing on your list is survey responsibility. So responsibility for the survey, existing or new, is something most buyers never even ask about upfront. So Layla, what is a survey? Why does it matter for an investor and what happens when this is left too vague?

Laila Smith:
Yeah. So the survey is basically kind of like you’re looking at a map of the property lines. So it shows anything like from the encroachment, easements, flood zones, any destination with that property that has to do with it specifically is what the survey shows. As far as for an investor, you can’t really build on a lot if you don’t have a survey to know how to expand and where your fence is going to be, you need to know your exact property lines. So the survey usually is something that is the seller’s responsibility to have it. However, if the seller doesn’t have the survey, there could be negotiation as far as them purchasing a new survey for the buyer. And if they cannot purchase it in the buyer, that’s going to be the buyer’s responsibility. But that is something that the seller usually will always have.

Ashley Kehr:
I’ve done it a couple times, and I haven’t done this in a while, but a lot of times I would write into my contract that I would accept an existing survey as long as it was done within a certain timeframe. And I can’t even remember what the timeframe was, but my attorney would advise me on that. But that actually did help me get some offers accepted because they don’t have to pay. I mean, now it’s like, I think I’m seeing thousands of dollars to get surveys done. So that is something I’ve done. And I’ve also, when I’ve accepted an offer on a property I’m selling, I also have asked sometimes if they will take an existing survey too, because it’s worth asking. But honestly, and probably in the last couple years, like every deal I’ve done, my attorney has just, they take care of hiring the survey or they take care of getting it done.
Or if I have an existing survey, I just give it to them and I don’t even know if it ends up getting used or they use a new one. I’d have to look at my closing statement. I don’t know.

Laila Smith:
Yeah. So the survey in Texas usually have to go through title and everything in Texas. Every closing has to be reviewed by an attorney. So we have to, when I put that clause in the document, in the contract, basically I’m saying that if the title company does not think the survey is fit, then that’s when a new survey has to be purchased. So you’d be surprised. I had a client that has lived in a home for 26 years and they presented a survey that was in meant condition. So we had no issues, but then you have people who live in the house for five years and the survey have coffee stains on it, right? So then it’s all ripped up and they have to order a new survey. So usually we have to get over to the title company if the client has the survey and the seller has it, and then the title company has to make sure that it has the right stamp on it and it has to be reviewed by the attorney.
And then that’s when we determine who pays for it within the contract.

Ashley Kehr:
I got to ask you guys, because I think about this all the time and I never actually ask anyone, how are you guys storing your title of abstracts in your surveys? Because they don’t like fit in a standard filing cabinet or they don’t scan easily. How are you guys storing them? Tony, where do you put all of your title of abstracts?

Tony Robinson:
Anything that I get back from title … Well, first, I always ask to get everything just emailed to me. But if I ever do get anything that’s physically sent, I don’t think I’ve ever gotten anything that couldn’t scan into my scanner before. So I don’t know. Maybe it’s just like a New York thing, Ashley. They blow it up for you too big because for me, I just scan it all in the Google Drive.

Laila Smith:
Yeah. Same here. I think usually I just get emails on everything and then …

Ashley Kehr:
Yeah. See like this right here.

Tony Robinson:
It’s on legal size.

Laila Smith:
Yeah, legal size. Yeah.

Tony Robinson:
Yeah. That’s true. I do- It’s all

Ashley Kehr:
Paper clipped together and

Tony Robinson:
They

Ashley Kehr:
Want the original when I close it on a paper. So I just have tons of them just sitting in a bucket basically.

Tony Robinson:
That’s true. I do have several of those in the legal size paper and yeah, I haven’t found an effective way to … They’re just sitting in my closet actually.

Ashley Kehr:
Editors, if an address or something on that showed, if you could please blur that off. I tried to flip it, but I think they probably showed the exact parcel or whatever.

Tony Robinson:
Well, Layla, let’s talk about HOA review rights. Again, it’s something I never really ask about. I haven’t bought too much in HOAs, but HOA documents, reviewing timelines, termination rights, this is one Ricky Skip probably all the time when it comes to HOAs. What are you actually looking for inside of the HOA documents and what could potentially make you walk away from a deal?

Laila Smith:
So for the HOA documents, I think specifically we want to make sure that the property is in good standing with the HOA. So if I have a client moving into a subdivision where the HOAs also include restrictions as well, but if the HOA have issues with any type of legal issues, if they have any pending lawsuits, if they have litigation going on or the HOA is not paying their dues, those things can affect our current buyer coming into the subdivision. So that is something that I have to make sure that it’s always covered, that we have kind of like a clear title, but it’s like a clear HOA that when the client’s moving in and also looking for any type of restrictions. So if the buyer is also thinking about possibly renting this property, as an investor, I should say, we have to think about what the restrictions are for an investor.
If they’re purchasing a property that have really stringent rules as far as how many renters can be in the community at a time, that’s something that we want to make sure that we are reading through the contract to make sure that that’s not going to affect my investor. Once the property’s purchased, now they’re like, oh, I can’t even rent the property out because we are over the percentage of renters that we can have in this neighborhood. So we want to make sure that that’s also clear too.

Ashley Kehr:
Okay. So we’re onto number 10, our final one, which is also the final walkthrough and utilities. So this one, you require that utilities stay on through closing, the keys transfer, and a final walkthrough is completed before any funding. Why is this important and what happens when agents skip this or treat it as optional? Well,

Laila Smith:
The final walkthrough is not more self-courtesy. It is a contractor agreement to protect the buyers, to make sure that everything stays on until the day of closing, and also that the buyers can be able to transfer in their name after the day of closing. So things like you want to make sure that things like that the water’s still … You’re not have any leaks in the house the day of closing, or you want to make sure that nothing’s wrong with the units in the house, turning on the HVAC unit, making sure that it does work, make sure the electricity on. That is something that you want to make sure that the electricity or utilities are kept on until the day of closing, until the buyer can actually transfer in their name.

Ashley Kehr:
And you want to remember to call to switch the utilities in your name too.

Laila Smith:
Oh, so that.

Tony Robinson:
And when you sell, remember to switch them out of your name because I’ve had some issues forgetting to do that as well. Now, Layla, we just went through all 10. Now, the last question, because knowing what to include is only half the battle, but how do you put a fully protected offer together and still actually win the deal? So Layla’s going to show us exactly how she does it right after a quick word from today’s show sponsors. All right, welcome back. Now we’ve got the full list, the 10 protections all explained. Now let’s kind of bring it home, right? Layla, the question everyone’s thinking is, can I actually include all of this and still be competitive? Can I actually still get my offer accepted? So we want you to walk us through how you write a winning offer that keeps every one of these protections intact.
So you’ve said that you can offer the highest price and still lose, or you can win and regret that you actually won. So talk to us about what winning and regretting looks like. What is the version of winning a deal that maybe actually hurts a buyer?

Laila Smith:
Yeah. So I’ll just give you some example. I mean, winning with no contingency, what happens with that is that inspection reviews that there are issues with the house and then now you’re purchasing the home or winning without the appraisal protection and now you owe 20,000 over the appraised value. Those are things that you want to avoid. And just having clear possession. So winning without that specific language with clear possession with the property, now you’re a landlord to your seller. So we want to make sure that even though we’re making this emotional decision that we are not trapped in something because we decided not to add these protections for the buyers.

Ashley Kehr:
Now, before we wrap up here, the last thing I want to know is as both a realtor and a mortgage loan officer, you are seeing the full picture before an offer is written. What is a conversation most buyer’s agents are not having with their buyer that you always have before that first offer even goes out?

Laila Smith:
Yeah. So the financing reality check, what their rate will look like, what the payments look like, what their cash to close will look like at the price that they’re wanting to purchase the home. We talk about things like rate buy downs versus closing costs, credits, and how offering, making a good offer can structure them to where they can be able to see their full buying power, right? Walking away with price and not selling because they have an emotional attachment to this house and just making a sound decision that is based more on the actual numbers at the end of the day.

Ashley Kehr:
Well, Layla, thank you so much for joining us today. We really appreciate you taking the time to share your experiences with the rookie listeners. Where can people reach out to you and find out more information?

Laila Smith:
Yeah. So I am on Instagram at Lila_Dallas_Realtor.

Ashley Kehr:
Well, thank you so much for joining us today. We loved going through your list of 10 things to help everyone listening write a better offer. I’m Ashley. Hey, Tony, and we’ll see you guys on the next episode.

 

Dave Meyer:
My guests today owned more than 10,000 units and built one of the most recognized brands in real estate investing. But they each started from a single property, just like everyone else. Ken and Danielle McElroy have invested through every kind of market cycle of the last three decades. We’re talking about recessions, booms, rate spikes. They have seen it all from individual condos to hundreds of multifamily units. So I want to know what are they doing in today’s market? Are they still buying and how do they stay profitable when everyone else is sitting on the sidelines? Today, Ken and Daniel are breaking down their market outlook, the strategies they’re using right now, and their advice for real estate investors, whether you’re looking for your first property or you’re trying to scale up to hundreds of units. If you want to know how experienced operators navigate uncertainty, this is the conversation.
What’s up everyone? I’m Dave Meyer, Chief Investment Officer at BiggerPockets, and this is a very special episode because I’m joined by Ken and Daniel McElroy, or you could say I am joining them because as you can see, I’m not at home. We are recording this live from their studio in Scottsdale. Let’s not wait anymore. Let’s jump in with Ken and Daniel. Ken, Daniel, welcome back to the BiggerPockets Podcast. Thanks for being here.

Ken McElroy:
It’s been a minute.

Dave Meyer:
Yeah.

Ken McElroy:
Excited.

Dave Meyer:
And Daniel, it’s your first time?

Daniel McElroy:
It is my first time.

Dave Meyer:
Well, welcome. It’s long overdue. Sorry about that. Thanks. For being here. Well, I think we should do a refresh then since Ken, it’s been a while. Daniel, your first time. Dino, maybe just tell us a little bit about yourself, your background in real estate.

Daniel McElroy:
Yeah. So I’m a real estate investor. I own five single family units and I started investing in real estate in 2016. My first investment was a property that I lived in. And I was actually met Ken when I was looking to convert from a condo to a home for myself. And he said, why don’t you rent the condo and buy a home where I was planning on selling the condo and then buying a home. And I was resistant, but I did it and that’s how I started in real estate investing.

Dave Meyer:
How’d you convince that? It

Ken McElroy:
Happens, right? I get it.

Dave Meyer:
Yeah, absolutely.

Ken McElroy:
You have all this equity and you’re like, “I need it to buy whatever next.” And I’m like, “No, no, no, no. Let’s use it to leverage to get a second one and a third one and fourth one. That’s

Dave Meyer:
The model, right? 100%. I mean, I talk about this on the show a lot. It’s probably, I think the biggest mistake I made early in my investing career. I started building equity in my first deal and I felt like that was my life savings there. That was my fallback option, my nest egg. Six years in, I was like, man, I could have 10 units by now if I had just done it strategically. But it takes a while to learn those things.

Ken McElroy:
And you also have to have a little bit of trust and education and all that stuff to be able to pull that off.

Dave Meyer:
And fast forward, it worked out.

Daniel McElroy:
Yeah. Fast forward, it worked out. I don’t do condo investing anymore, but on single family, I think it’s great. Yeah.

Dave Meyer:
Well, good for you. It’s awesome. Thank you for joining us. And Ken, maybe tell us a little bit, remind our audience about your background.

Ken McElroy:
Sure, sure. So I started in property management right out of college, managing properties for collecting rent and cleaning units and painting units and all that kind of stuff. And that’s actually when I learned the most, right? As you do on the operations side. So that gave me the courage to buy. I started buying about 10 years later, small stuff. Then I started scaling into the bigger stuff. So now we have about 10,000 units, mostly multifamily. We’re a builder, buyer, rehab, value add, ground up construction, kind of do it all, but we’re generally just staying in the multifamily lane.

Dave Meyer:
Let’s just start there, Ken. I mean, it’s been a rough couple of years for multifamily, for most operators. How are you feeling about the market right now?

Ken McElroy:
Well, I’m excited. I made the most moves financially, strategically in 08. So for me, this is what I went through in 08. Now I’m 15 years more wise, a lot more deals. And this is an incredible opportunity that we’re getting ready for. So I’m very excited.

Dave Meyer:
What did you see in 08? What were the hard lessons that you learned there and how do you think this is different?

Ken McElroy:
So what we had at that point was we had, I call it a Main Street crash. It was a single family main street crash. And so we had a big repricing. I had three, four million units on the MLS and it just brought all the prices down. So it’s a temporary crash on the single family, but then what do those people do? They move over to multi. So when you move out of a single family, you move into the rental side. So we went from 69.2% home ownership under Obama to about 65. So every percent just put more pressure on the other side of the equation or the rental side. So everybody that started in the multi-business after that, they looked like they were rock stars, but really it was just a shift from single over to multi. And so that kind of created that run.
This is really different. So this, we don’t have a single family crash, in my opinion. We’re under supplied. Leading up to 07, we were building a million and a half homes, let’s say a year. After that, we were building 500 to 700,000. So that’s where the shortage came from. It came from that, call it the healing period, right? Yeah. There’s so much inventory. Why would you build when you have so much on the MLS already? So this is extremely different where you have, depending on who you look at, realtor, Zillow, Fannie, Freddie, they all have different reports on this. Three, four, five million short, let’s say, whatever the number is. That’s a little bit different. So you don’t have a single family drop, but what you have is you have an interest rate issue here today. So people are used to these low rates. For me, this is normal.
Rates are normal. What’s not normal are the values. So the prices went up, so now that’s resetting.

Dave Meyer:
You said that you’re excited about this, but also prices have been resetting. Why is it taking so long? I guess for me, I have been waiting for multifamily prices to come down, and I have what, 15, 20% nationally. But I feel like the distress should already be here more than it is. And you don’t see inventory flooding the market. So why has it taken so long for the multifamily market to get back to some equilibrium? And when are we going to see transaction volume start to pick up?

Ken McElroy:
So we’re starting to see it now, but I’ll tell you what happens. There’s a slow unwinding that happens. You know these are all partnerships, right? So there’s a general partner and a limited partner with … And so the first thing that gets exposed are the people that don’t know how to manage. So the first kind of tranche is the people where they’re 50, 30, 40% occupied, expenses are out of control. They didn’t manage their CapEx or anything like that. That was kind of the first one. Those were the obvious ones. But the real issue, as you pointed out earlier, is that people’s loans are maturing, or those could be they had floaters or whatever they had. That’s all creating the paint. So the irony is you might have a property that is actually 95, 96, 97% occupied. They actually might be running the expenses and the revenue, not far from what the business plan said, but the biggest expense, which is debt, makes it negative.
The first thing is the partnership kind of tries to solve it, right? And then they try to solve it internally through cash calls and all that stuff. And then they try to solve it with the lender.
Then at some point, the lender’s got to rip the bandaid off because if I have a $20 million loan and your property’s worth 20, I actually don’t need you. Right? That’s right.

Dave Meyer:
Yeah.

Ken McElroy:
So I’m like, ” Well, I’m going to get rid of Dave, take the property back and I’m going to try to sell it for 20, which was my loan. “So you have all those scenarios going on. So that’s why it just takes a while.

Dave Meyer:
Yeah. There’s like a forcing mechanism now where the lenders are fed up, I guess, and seeing the risk on the wall and they’re going to just force these issues. And I want to get back to that because I want to talk to you both about private credit. But Danelle, tell us a little about what you’re seeing on the single family market. Is it similar to what Ken’s talking about in multifamily?

Daniel McElroy:
No, single family is different because single family people are locked into super low rates. So there’s not a lot of distress at this time in the single family market, at least in the Phoenix area. What I’m seeing a lot of is a lot of sellers de- listing because they can’t sell for what they want to sell for. And we’re seeing some really good deals, but a lot of those are coming from flippers that are stuck in a deal that are in hard money and also people that got into Airbnb because when people got into Airbnb, they thought, oh, this property’s going to make 12, $15,000 a month and Airbnb is oversupplied and softening. So now they’re not making that and their mortgages are six, seven, $8,000. They just need to stop the bleeding too. And in fact, I have one right now that’s a short sale because of an Airbnb.
Oh, interesting. So that is really happening a lot in this market. But as far as your average seller, I mean, I’m talking to them all the time. It’s like, yeah, I’m going to list this property and if it doesn’t sell, then we’re just not going to move. Right.

Dave Meyer:
Well, it’s so interesting what Ken was talking about in 2008, right? People who are in financial distress would move to multifamily. A lot of times now renting isn’t even cheaper if you have a two or 3% mortgage. So even if people are having trouble, they just stay put. And I don’t think we’ve ever seen a cycle like this really in residential before.

Daniel McElroy:
Yeah. And that’s interesting too, because the difference in a wait is people didn’t put any money down either. So it’s like if I don’t put any money down, it’s like, yeah, it’ll destroy my credit for a few years, but I’m just going to walk away from this. And just walk. Well, now people have put down five, 10, 20% of the average single family home, like a starter home in Phoenix is in the fours, maybe fives. So you put down a significant amount of money, they’re less likely to walk. Plus to your point, it’s not going to be cheaper to rent, so it doesn’t really solve much. And it’s not like they have a ton of equity if they just bought in the last few years. So I just am not seeing a lot of distress on … I know there is some distress, but just not a ton.

Dave Meyer:
Yeah. Well, I mean, that’s good. I feel like for society, right? That’s good. There’s a lot of distress in the housing market for ordinary people, but does this mean you’re not finding deals or how do you …

Daniel McElroy:
I’m finding great deals. Oh, really? Okay. Yeah. I’m finding great deals for clients and for myself. I just closed on something last week because what I have found is the people that have to sell have to negotiate. So I’m not really seeing … I get a lot of buyers that are like, “I don’t want to buy yet. I want to wait for prices to come down.” I’m like, “You don’t wait. You negotiate the price.” You force it to. No, yeah, you force it. And you have to find the right sellers that have to sell, but if you can find that, then it’s been really working out. And to your point, I’m still finding cashflow in deals. You just have to put more down.

Dave Meyer:
Right. Yeah. Everything cashes.

Ken McElroy:
A good

Daniel McElroy:
Deal you found. Yeah, exactly.

Ken McElroy:
Tell them about the deal. It’s a four bedroom house for 500 grand.

Daniel McElroy:
Yep. I found a four bedroom house and I’m renting it for 2,900 a month. And I actually think I could have got more, but I just bought it, so I want to get someone in right away. I think I could have got like 31, because I had so much interest at 29. But at the end of the day, people like to wait to buy because they’re uncertain about what’s going to happen with the market. But the way that I look at it is like, I bought a deal three years ago. It’s worth a little less than I bought, probably like 10 grand less than I bought it for. But in the past three years, I’ve collected over $100,000 in rent. Yeah.

Dave Meyer:
It’s amazing.

Daniel McElroy:
So I mean, you have to offset that to some degree. You can wait, but you also don’t know when the bottom of the market is.

Dave Meyer:
So I want to talk to you about this and how to navigate it, but we got to take one quick break. We’ll be right back. Most investors focus on returns, but the real lever is what you keep after taxes and how flexible your capital is along the way. That’s where Frech takes a different approach. With direct indexing, you’re not just tracking the market, you’re actively harvesting losses across your portfolio to help offset gains and reduce your tax burden over time. But here’s where it gets interesting. Instead of selling assets when you need capital, Frech also offers a PLOC, which is a portfolio line of credit, so you can borrow against your investments without triggering taxes or disrupting your strategy with no credit check and no strict monthly payment schedule. So you stay invested, you stay tax aware, and still have access to liquidity when opportunities show up.
If you want a more efficient way to manage both taxes and access to capital, check out FREC and schedule a free portfolio analysis. Welcome back to the BiggerPockets podcast. I’m here with Ken and Daniel McElroy. We’re talking about multifamily, single family market, how things have changed since 2008. And let’s start talking about opportunity because I think that’s what people are excited about right now is that pricing’s getting a little bit better, affordability is getting a little bit better. So Ken, we were talking kind of joking before that the situation we’re in right now, not great if you’re holding assets, good for buying assets, but you do both. So how are you sort of thinking about portfolio level strategy?

Ken McElroy:
Sure, sure. So I think it’s important that I’m a fixed rate guy, right? I think you should always head your- You sit to my ears. That’s your biggest expense. Fix it and make sure cash flows day one, period. So that’s been my philosophy from day one. That’s why we never got any trouble. I don’t buy anything with an expectation that rates are going down ever. I always actually think they’re going up no matter what. That’s where my head is. I like that. And I’m like, if they go down, great, but if they go up, then I’m hedging. And our whole portfolio, the other thing is, is we’re under 60% loan to value on our whole company. Amazing. We have some in the 30s, some in the 40s, some in the 50s. We have a few in the 70s, but not many. So I like loan to value and I like fixed, and then we have our in- house management.
So when I look at the blood in the streets right now, and it’s a lot, what I see are, I find low occupancy, I find poor operators, I find high expenses, I find stress, I find high expensive debt, all of that stuff disrupts multi. So I’ll just give you a couple examples. Two weeks ago, we looked at a deal in Texas, I won’t say what city, 5% occupied.

Dave Meyer:
What? What class

Ken McElroy:
Was it? B. 278 units. Now here’s the interesting thing. It was worth $45 million in 2021. And so it’s like a B minus, but they had dumped like five, $6 million of rehab money into it. And it’s got a 28, 29 million dollar loan on it. And we just made an offer for eight million to the lender.

Dave Meyer:
No, it’s a lender.

Ken McElroy:
Yeah. So now, am I seeing those deals every week? I am not. But I just looked at another deal in Kansas City, very poor occupancy. So what you have is you have this stress happening and we’re dealing with the people that own the debt. And usually it’s coming from a broker and sometimes the syndicator’s involved, sometimes not. So I think we’re at the beginning of, and we might not get those two. Certainly we made offers on both, but this is what I’m seeing. I’m not talking about 92, 88, 80, 85% stuff. I’m talking about deep, deep discounts. I’m talking about 2008 prices.

Dave Meyer:
That’s unbelievable. Yeah. I imagine it would be very difficult to resist something like

Ken McElroy:
That. Well, when we looked at that, call it the $8 million offer, we figured that it was going to be another eight million to fix it and the negative carry and all that stuff. So we’re trying to stay under 20 million all in, let’s say. But then stabilized, it should be in the mid 30s, so a good deal.

Dave Meyer:
Amazing.

Ken McElroy:
Yeah. Potentially if we can pull it off. But those are the things that we’re seeing.

Dave Meyer:
Well, I want to just sort of big picture this for the audience here because what you’re saying is, yeah, you’re taking some paper losses right now. And just for everyone, that just means the value of your properties sometimes goes down on paper.

Daniel McElroy:
You

Dave Meyer:
Don’t realize those losses unless you sell them. But it sounds like you’re basically able to say, “Yeah, that stinks not ideal, but you’ve just bought fundamentally sound properties, that cashflow with fixed rate debt.” And so yeah, it’s not as fun to look at your net worth statement probably, but you’re still cash flowing, you’re not worried about them. 100%. There’s stress in them. And that allows you to move on to opportunity and to see this time period as opportunity to buy rather than freaking out about your old

Ken McElroy:
Deal. Cashflow’s way down.

Dave Meyer:
Yeah.

Ken McElroy:
No question. Just higher vacancy. Higher vacancy, concessions, expenses are up, all of that. And net worth for sure took a hit, but that’s what a cycle is. Exactly.

Daniel McElroy:
You can’t time the market. And I think that a lot of, especially small investors or maybe people that haven’t invested yet, they don’t want to make a mistake, so they try to time the market. But realistically, look what Ken was saying, of course everyone would love to buy a good deal that they hit right at the bottom and then it just went up. But at the end of the day, if it’s cash flowing, it’s really just your ego, like you said, how much you’re worth. Because at the end of the day, the rent are pretty stable and you’re cash flowing the deal. So who cares if you bought it now and then if you would’ve waited a year, it would’ve been worth less. You don’t really hear too many people saying, “Oh, I bought in 2018. I wish I would’ve waited until prices…” Because they gained all that equity.
Exactly. And even now people that bought in 2010, you’re not hearing them complaining because they’re in the money too. So if you hold something long enough because of inflation, it’s going to go up. It’s just you can’t be forced to sell it.

Dave Meyer:
Yeah, exactly.

Daniel McElroy:
That’s the

Dave Meyer:
Problem.That is the number one way you lose money in real estate, sell when you don’t want to. People are just getting into this or the average homeowner who often tries to dissuade their friend from investing in real estate. I think what they miss is that market appreciation just like waiting for macroeconomic tailwinds to boost up your property price is one way you make money from real estate. And if you wait, you miss out on all of those other things. I’m not saying to go out and buy anything. You should be diligent and buy good deals, but you’re still making money even if you’re taking a paper loss for a couple years. I’m sure even with your vacancy and cashflow down, still paying down your debt, you’re still making cash flow on your single families or your multifamilies, right?

Daniel McElroy:
Yeah. You don’t really think about it. You just look for the next opportunity. You look for the next thing that cash flows. You don’t want to buy something that doesn’t cash flow. I made that mistake one time, but as long as you’re cashflowing, it really doesn’t matter.

Dave Meyer:
This is music to my ears. That’s what we talk about all the time. I like appreciation, but would never buy something without cash flow. It doesn’t make any sense. Otherwise, you’re just guessing. It’s pure speculation. So Danelle, tell us how you’re thinking about portfolio strategy, because you’re in a situation I think a lot of people are facing, which is you like residential, it’s stable, but prices are weird. You don’t really know. We’re going to go down a little bit this year, maybe up a little bit. That’s why people are tempted to wait. So how are you thinking through that?

Daniel McElroy:
Well, there’s a couple things. One, I had three single family homes and two condos. I 1031 both condos to single family homes in the last year. The reason I did this is because the HOA prices were just killing me and I’m like, “I need to move this into something that’s a better value.” Plus all of the class A’s that are being built are a direct competition to those condos. So my rent was going down and all my single family homes, it really wasn’t. So I made that transition into all single family. The other thing that I’m looking at is sellers right now are in a tough situation and they’re more likely to look at creative options and they’re more likely to negotiate to a lower price. So myself and my buyers, I’m having us look at, okay, at what price does this need to cash flow and how does this work?
What number could we buy to make this cash flow? And then you negotiate that price or you offer for creative financing and you’re going to get a hundred nos, but when you get that yes is when the deal works.

Dave Meyer:
Building up that thick skin to get rejected a little

Daniel McElroy:
Bit. Oh yeah. And just knowing you’re going to have to. I work with buyers sometimes and they fall in love with a house. I’m like, you can’t fall in love with it. It’s the worst. Because the numbers have to work. You have to be a little bit indifferent. You can fall in love with it after the inspection and after the offer’s acceptable. Yeah.

Dave Meyer:
Once you already own it, fall in love with it, but not until then. Yeah, that makes sense. And is it really a hundred to one? Do you feel like it’s really that many offers you have to make to get a deal right now?

Daniel McElroy:
It’s a lot. I think you can look for things. I look for Airbnbs because I know that those are going to be more motivated to sell. I look for flips because I know those are going to be more motivated to sell. But yeah, I mean, I think that you do have to make a lot of offers and you have to look at a lot of properties. And it’s one of those things you have to put more work into being a buyer right now to get a deal that pencils, but it’s very possible.

Dave Meyer:
Ken, on the multifamily side, you mentioned Texas and Kansas City.

Ken McElroy:
Yeah.

Dave Meyer:
What’s your buy box right now? Is this anywhere?

Ken McElroy:
No, we’re actually very, very strategic. We follow migration patterns, work, population growth, building permits, walkability, school districts, all of it. So we like markets that are progressive somehow, right? I’m not talking about politically either, but that has been a factor too. People have left because of those kinds of things. But it’s really simple. Without people, real estate doesn’t work. It’s so simple, right? Yeah, it’s your customer. They go to the end of the earth or they go to the edge of town because it’s cheap and they can’t figure out why they can’t get a tenant and all that stuff. So you’re better off to buy in areas that are growing progressively somehow for whatever it might be and focus on that. And so there are very specific markets that we like. And even I mentioned Kansas City, but there’s not very many areas in Kansas City we would buy, but there are a couple.

Dave Meyer:
Even within.

Ken McElroy:
You know what I mean? And the same thing in Tucson, the same thing in Phoenix and the same thing in Dallas. And on and on and on. You have areas like North Dallas that’s incredibly progressive. Richardson, Frisco, Carrollton, you’re going to have really good growth and that’s kind of the path of progress. So those are the things we look at.

Dave Meyer:
Danelle, how has your buy box shifted over time? And are you adjusting it at all based on just market conditions?

Daniel McElroy:
I’d say my buy box is right around 500,000 in North Phoenix or Scottsdale because I just see that those are passive growth. Tenants want to be there. I’ve never had any issues, any vacancies really. And I’m getting about the same rent I’ve gotten from the high. I might be down a hundred bucks a month, but it’s pretty darn close.

Dave Meyer:
That’s great.

Daniel McElroy:
Yeah.

Dave Meyer:
And so those are the deals you’re starting to see more of.

Daniel McElroy:
Yeah, I am. I’m not really seeing them at five, but I’m seeing them at like 550 and you might be able to negotiate closer to that 500 mark. I

Ken McElroy:
Think what might be interesting though is you could tell Dave … So Daniel had an imputed equity issue, which meant that she had a lot of equity in her condo, but it wasn’t cash flowing a lot, right?

Daniel McElroy:
Yeah, because the HOA was $400. And

Ken McElroy:
So she’s sitting at … So a lot of times people don’tlo. Yeah. They look at their equity, but it’s not actually producing. So even though she had a low fixed mortgage, she goes, “I’m going to- ”

Daniel McElroy:
2.8.

Ken McElroy:
All of a sudden she’s turned that into a big cash flower.

Dave Meyer:
Real cash.

Daniel McElroy:
Yeah. Yeah. I’m cash flowing 1,600 a month on this property, so that’s really great. But on the other one, I was only cash flowing $700 because of the HOA costs. And also, like I said, the downward pressure on condo rents due to multifamily building.

Dave Meyer:
Two things I want to reinforce here. One, thinking about your competition, I think is something a lot of real estate investors miss up front. They’re like, “This is a great property.” Might be. There might be 300 of them right next door and number two. And if they face some financial distress, they’re going to be quicker to lower rents than you are and that’s going to impact you.
The other thing that I want to mention is talking about return on equity and measuring the efficiency of your deals. A lot of people, when they get in, they’re like, “I just want to get 500 bucks a month in cashflow.” 100 bucks a month is great if you invested 15K into that property. If you invested a million dollars into that property, not so good, which is why we always talk about thinking about either cash on cash return or ideally the one we really like is return on equity, as Ken was mentioning. It’s a good problem to have. If you build up too much equity in your deal that your cashflow is no longer efficient, it is a problem. It’s a good one because you just made a lot of equity, but it is something you should address. And you do that either by doing a 1031 exchange, selling and optimizing, taking out a line of credit, whatever it is that you’re doing, but trying to access that equity to move it into another deal where you can do better, which it sounds like you’re able to do right now.

Daniel McElroy:
Well, what was interesting is when Ken and I first started talking about this, because about a year ago, I’m like, “I think I need to sell one of my condos just because of these HOA fees.” And I was going to sell the one that I just sold because I had debt on it where the other one was free and clear and I was cash flowing more because I didn’t owe anything on it. And Ken made me stop and think and say, “Okay, I know you’re making more on this one over here, but you have so much more money tied up over here.” So then we actually did the math and come to find out because I was sitting on this 2.8% mortgage, my return on equity was so much better on this one that had the loan. And so that’s what prompted me to sell the other condo first.
And to your point, I never would’ve looked at that. So I think some people are like, “Oh, this is paid off. I’m making all this money, but are you really making all this money?”

Dave Meyer:
Yeah, not efficiently.
And I mean, it sounds like a little difference, but difference between a 10% return on equity and even 12% return on equity, you compound that up for an investing career, it’s millions of dollars probably. And those kinds of optimizations, you don’t need to do it immediately in your first deal, but as you grow as an investor, this is one of the key skills, being able to optimize, trade up, trade out, you really got to learn how to do it. But I think it’s the fun part. Actually, I think it’s like where you get to tinker a little bit, move your chest pieces around is the fun part.

Daniel McElroy:
It’s not a bad problem to have. I always thought that I would be a buy and hold, never sell anything, just keep … And then you have to really start looking at your portfolio. And it’s been really fun, to your point, to 1031 some of these deals into better deals.

Dave Meyer:
Yeah, absolutely. All right, everyone. We got to take one quick break, but we’ll be back with Daniel and Ken right after this. Welcome back to the BiggerPockets podcast. I’m here with Daniel and Ken McElroy. Let’s jump back in. All right, so let’s talk some advice for our investors. Ken, you were talking about deals, you’re seeing them, but lenders are bringing you deals from your hard-earned experience and reputation. But how does an average investor who’s trying to get into multifamily and take advantage of opportunities in the market do that?

Ken McElroy:
I think it’s going to be hard right now, just to be clear. So what does a lender look for during times of distress? And I think that’s the issue. So by the way, you can do this, but the very first thing that they look for is, I’m a lender, I have a problem, and I’m going to sell something to Dave. Can Dave pull it off, period. It’s not if you have the money. Nobody cares about that right now because everyone has the money. Everyone can buy a distressed deal. The issue is, do you have the team? Do you have the experience? Can you pull it off? And so I’ll give you a really good example. I had one of the bigger banks in the country, had a 680 unit building in San Antonio that I bought from them directly, from the bank. So the bank took a right down, but the thing was 30% occupied, almost 200 people living there.
So obviously you couldn’t pay its bills, couldn’t pay us. So now what does the bank look at? The bank’s looking at my ability to renovate the property, manage it well, manage the construction, manage the renovations, manage the interest reserve and all the stuff. Do I have the systems and the people and the team to pull all that off? Because the last thing they want to do is just sell it, right? And they can’t. It’s not financeable. You don’t finance something

Dave Meyer:
That’s- So they are looking for you to operate it, not just to unload it.

Ken McElroy:
Yeah. So that’s the big issue. That’s going to be the defining moment for people. This is not about putting money together. This is about the team. This is where we’re headed, right? So this isn’t about going to a weekend seminar and learn how to syndicate. It It’s not. Oh really? Can you do a 30, 40 million dollar renovation
And manage your way out of this scenario for somebody else? And so the lenders or the debt funds or whoever they are, they’re looking at the team, the experience, the wisdom. And so if you’re new in the game, you can absolutely put those people together. Obviously this year at Limitless, we’re going to have, the room’s going to be full of those folks. The people that have been through it could help. And it’d be a great year to put together your team and your dry powder for what’s next. But just to go out and do it and to raise the capital would be very, very difficult because even though you might have the money, they might not want to take the risk.

Dave Meyer:
Yeah, that makes sense. And

Daniel McElroy:
You might not want to take the risk just because you have the money.

Ken McElroy:
Yeah,

Dave Meyer:
That’s true.

Ken McElroy:
It’s another really good point.

Dave Meyer:
Yeah, it’s a very good point. What about a smaller multifamily asset? If you’re looking at 10, 25, 30 units, do you think there’ll be distress with smaller investors? And could someone who’s got a small portfolio of small multis take something like that down?

Ken McElroy:
For sure. Yeah. Actually, they’re all over the place. Here’s what I would look for. I would look for a small multi-operator that did a full renovation and their prices are 30, 40% adjusted. You could step in and buy that thing for pennies on the dollar and not have to do anything.

Dave Meyer:
Because they bought, they did the renovation, their debt adjusted, and now they’re not covering their cash flow and they got to get rid of it.

Ken McElroy:
And even if it’s fixed, maybe they fixed and maybe they did all the renovations, but the cap rates are up over six now. So they probably bought it when they’re in their fours. A lot of people. Yeah. So you’re talking about two points on an NOI, even if they have the NOI. So I think if they’re holders, they don’t have to worry.

Dave Meyer:
Yeah.

Ken McElroy:
But if they have any kind of maturity in any way, this really boils down to the cost of the money.

Dave Meyer:
Yeah. Dino, what do you see on this single family? Do you have any advice for people who are wanting to get into this market and how do you navigate it? We talked a little bit about negotiating, but any other thoughts?

Daniel McElroy:
Well, I think there’s hesitation. I work with home buyers and I work with really experienced investors and I work with people maybe looking to buy their first investment. And the difference with the investors is we negotiate a good deal and they take it and it’s cash flowing. Where my first time home buyers, this is good advice even for home buyers. First time home buyers and beginning investors, they’re like, okay, but if they’re so desperate that they’re going to go from 550 to 500, maybe we should just wait and just see. And they always want to wait and see. And you can’t do that because you miss out on opportunities when you just wait and wait and wait. Sure, maybe you’re right. And maybe, but are you going to act if it does go down a little bit? No, because you’re going to wait and think it’s going to go down further.
So you just have to focus on the numbers. And if you’re able to cash flow, then that’s really all you need.

Dave Meyer:
Absolutely. I think for everyone watching this or listening to this, I think the key here is that multifamily has distress, probably will continue to have some distress. And that’s where you can see these huge discounts and hopefully we’ll see a rebound and you’ll be able to take advantage of that. With residential, the discount isn’t there. And even if it comes in the next year, at least everyone who listens to this knows my opinion about this, it might go down a little bit, but I don’t think we’re going to see some dramatic crash in housing prices. And so it’s really just about what you said, finding good assets that cash flow. If you find them, the question is, what else are you going to do with your money? Are you just going to sit on it and wait? If you have something that cash flows and is good asset, it usually makes sense to actually go out and buy that.

Daniel McElroy:
And just because the seller’s willing to negotiate with you does not mean if you wait, they’re going to negotiate more. I’ve had so many clients where it’s like, I’m just going to wait and then a few days later the deal’s gone. And you want to have the data and you want to make sure you’re cash flowing, but then after that, you just have to just trust and do it. And if you’re going to hold it, you’re going to be fine. Now, when people come to me and say, “I want an investment or to buy a home for five years, then I’m going to move or I’m going to sell it, ” then now might not be your best time to buy. Because who knows what the real estate market’s going to be like in five years. But if you’re planning on holding it, then you just need to just do it.

Dave Meyer:
Yeah. Great

Daniel McElroy:
Advice. That

Dave Meyer:
Easy. Well, that’s a perfect example of what Daniel and Ken just said of how we talk about looking at data, but grouping things into a metro area, especially in a place as big as Phoenix or LA or wherever you’re investing just doesn’t make sense.

Daniel McElroy:
You

Dave Meyer:
Really need to dig into individual levels. You can find that data. If you’re in the single family space, a lot of it is available for free. You can go on Redfin or Zillow, use ChatGPT with caution, but you could get some of that out there. It’s a little harder to come by in the multifamily space. Usually you have to pay for it. But if you’re going to invest in multifamily, go pay for it. You have to do it.

Ken McElroy:
Data is everything. Honestly, every single move we make is data driven.

Daniel McElroy:
I love it. Yeah. And you really have to look even going on Zillow or Redfin and looking at the different rents and the different areas and how many rentals are available in that area. I mean, it’s all … Everyone always asks my buy box, and my buy box is like certain roads, certain blocks. It’s not this big ever expanding area because you have to look at where you want to be and where tenants want to live. And because of that, I have very low vacancy rates. Where to Ken’s point, some people to get a better deal, they want to invest way outside of town. And that really works when rents are going crazy and everyone’s moving here and everything’s booming. But now that things have pulled back, those rentals are empty or they’re significantly discounted because now people can’t afford to live where they want to live.
And so you see them kind of moving inwards.

Ken McElroy:
Exactly. And I’ll give you a great example. We have an area, everybody has these old aging malls all over the country. We

Dave Meyer:
Passed one driving

Ken McElroy:
Here. Right. They’re everywhere, right? Yeah. So where Daniel decided to focus, and anyone can do this, a big, big developer bought the mall, they ripped it down. I’m talking about Macy’s, I’m talking about Sears, I’m talking about JCPenney, gone. And what did they replace with? Whole Foods, Lifetime Fitness, apartments, really cool, edgy, outdoor concept. It’s not very often you can buy a big chunk of town. So she’s like, “This area is going through a resurgence.” So she’s been focusing within several blocks of that. And she’s bought two properties over there.

Dave Meyer:
It’s just paying attention.

Ken McElroy:
That’s it. You know what I mean? It’s going on everywhere. It’s just paying attention.

Daniel McElroy:
But it’s important if you’re going to buy in an area that you don’t live in, that you have someone really knowledgeable about the area. Because if you’re not from Phoenix, you’re not going to really understand it. And I see investors do this a lot where they find a good deal with maybe a realtor or somebody that doesn’t know a lot about the area. And then now they have this rental that doesn’t rent what they thought it was going to rent for. It’s in a bad area, even though three blocks up might be a great area. It can be that nuanced.

Dave Meyer:
It really is. That’s the job of the investor, right? That is the research that everyone should be doing. And even if you have a great agent, go learn these things for yourself. It’s why I always recommend if you are investing out of state, go visit. I know again, it’s-

Daniel McElroy:
That plane ticket is worth it.

Dave Meyer:
But whatever, go do it. You will learn more in those 24 hours than you do months sitting on Zillow or listening to me blab on the podcast. I promise you, you will go learn more doing that. And you just get the vibes. The data is important, but you can see like, “Hey, I want to invest in this zip code.” But when you go drive around and see it, you’ll understand. And the other thing that you mentioned, Daniela, that’s so important is that it changes really quickly too. Sometimes if you’re looking at rental vacancies or where the supply is, or you might find out about this mall being redeveloped and if you’re two months late on that, people like Daniel who are smart are going to know to go buy that. So it’s something that you have to continuously pay attention to. It’s not like it takes that much work, but it is something that you need to build into your process as an investor when you’re going to acquire things.

Daniel McElroy:
But I also think when you hear of … I always tell my clients, I hate the word up and coming areas because I just hate that because to me that just means edge of town, they’re maybe building some new homes down there. But what you really have to look for is somebody putting a lot of money into an area to make it up and coming. Because to me, just because they’re doing a lot of new development and it’s far out, once again, you get into that same thing. People like to move towards the center of town if rents get cheaper. So I like to look at where’s somebody putting a lot of money. Where’s Whole Foods investing? Where are they putting a ton of money that they’re expecting this area to grow? Because that’s the stuff that actually moves the needle on home prices and rents.

Dave Meyer:
Yeah. My theory, when I first started, I started investing in Denver, booming. And my whole philosophy for like 10 years was just how close can I get to the center of town with a good asset? Something that’s good quality, get as close to it. And Denver’s going through a big correction right now. It’s not doing well, but my properties, they’re in that inner core circle. It might not have been the most units, but they’re still doing fine. And I think that’s what you see historically. If you look at the data, the pattern is always, people are going to move. If every rent comes down and your paycheck stays the same, you’re going to go take the nicer apartment with more amenities and a better place. And I think that that’s the opportunity right now is prices are coming down on these good assets. If you want to buy them and hold them for 10 or 20 years, I’m seeing better quality assets.
Even if the prices are still somewhat flat, the quality of the assets is getting better, at least in the residentials.

Daniel McElroy:
And you have more negotiation. If there’s stuff on the inspection, you can negotiate that. Where a few years ago it was just pound sand. So you have to look at all this stuff. And to your point, if you find an asset, like I always like the cheapest asset in the best area. And people are turned off by that like, “Oh, this house isn’t that nice.” I’m like, “Yeah, but the nice house that you want surrounded by crummy homes, that’s not going to rent well.” Yeah, you’re going to get

Dave Meyer:
All these tailwinds.

Daniel McElroy:
Right. What’s going to rent so good is this little house, it’s the cheapest house. People always told me, “Don’t buy two bed, two baths. They’re going to be two bad, two bath homes are going to be so hard to rent.” Well, that is three out of the five of my portfolio and they run amazing because guess what? A single parent with two kids will rent that all day. They get to be right in the heart of Scottsdale and they can afford it. And if they want to go up to three bedrooms, it’s expensive and people don’t have the money right now.

Dave Meyer:
Yeah, it’s true. If you just put yourself in the mind of the tenant, everyone decides where they want to live. Most people decide where they want to live, what neighborhoods before they decide on the unit. And so if you’re in those out of sort of tertiary areas, you don’t even get in the search when they type in Zillow. They’re not even going to be in there. So most people for convenience, for schools, for whatever, choose that first and you want to be in those good areas.

Daniel McElroy:
Yeah. And people are, they’re on budgets right now. So before everyone had a bedroom and it was really important. And now talking to single parents, it’s like, no, if it saves me 500 bucks a month, my kids can share a room. It’s not as big of a deal when people are limited on their budget.

Dave Meyer:
Yeah, for sure. All right. Well, thank you both so much. It has been long overdue to have you both here. This is awesome. If people want to learn more from you both, where should they do that?

Daniel McElroy:
Well, we have the Ken McElroy Show, which is a podcast and on YouTube, and we go live every Monday and we have a podcast every Thursday. And then also if you go to kenmroy.com, we have a subscription for $10 a month. You can subscribe and get a bunch of great content.

Dave Meyer:
Great. Well, Ken Danell, thank you guys so much for being here. Thank

Ken McElroy:
You. Thank you.

Dave Meyer:
And I’m soon going to be on the Ken McElroy channel as well. So make sure to go there and check it out. Thanks so much for listening to this episode. We’ll see you all next time.

 

In This Article

If you’ve been fretting about unanswered postings for your vacant apartments, you’re not alone. According to new data from Apartments.com and Realtor.com, the rental outlook has been decidedly mixed over the last year, with the Sunbelt states hit the hardest.

Apartments.com shows that the states with the biggest rent declines in March, compared to the same time the previous year, were Fort Myers (-6.4%) and Naples (-4.4%) in Florida, followed by Katy (-3.3%) and Austin (-3.1%) in Texas, and Denver, Colorado (-2.8%). The Northeast, Midwest, and California fared comparatively better, with Chicago (+3.6%) and San Francisco (+7.8%) enjoying a bounce from the past 12 months.

“More Choice and More Time” for Renters

Realtor.com painted a slightly more somber outlook in its January 2026 report, citing 29 straight months of year-over-year rent declines for zero-to-two-bedroom properties and an average rental vacancy rate of 7.6% in 2025 among the nation’s largest 50 metros. Both reports agree that the Sunbelt is where renters have the greatest upper hand, but generally, renters are in a far more advantageous position than they were a few years ago.

Grant Montgomery, national director of U.S. multifamily analytics for CoStar Group, told Apartments.com that “for renters, that means the apartment search in 2026 still looks different than it did during the peak of the pandemic-era housing shortage,” emphasizing that “there is more choice, more time to decide, and greater negotiating leverage, particularly at newer or higher-priced properties.” He added that while construction has slowed, the Sunbelt is still working through an oversupply and that “the advantage [remains] with renters rather than landlords in most of these markets.”

Rental Competitiveness: A Nuanced Analysis of the Rental Market

RentCafe.com did its own number crunching, matching cities against one another for a competitiveness report that factored in the following criteria:

• How long it took for an apartment to get filled
• The share of apartments that were occupied
• How many renters were competing for each vacancy
• How many renters chose to renew their leases
• The share of apartments that were new

It found that the greatest demand for rental apartments was in tech-centric metros such as Chicago, San Francisco, Atlanta, and Silicon Valley. 

Other takeaways from the report include:

• Miami is the most competitive rental market.
• Lease renewals: Eight out of 10 tenants are renewing leases in New Jersey, the Philadelphia suburbs, and parts of the Midwest.
• Small cities are becoming increasingly difficult to find vacant apartments in, with Wichita, Kansas, the tightest small rental market in the U.S.
• The Midwest is far more competitive than it once was: Competition has heated up, and investors and tenants are fleeing high-priced cities.

The Most Competitive Midwest Markets

If you are one of those investors who, frustrated by prices in Northeastern and coastal markets, are planning to buy in the Midwest, I’ve got some bad news. It’s become far more competitive than it once was. Chicago and its suburbs, along with the suburban Twin Cities, are among the most competitive markets in the region, fueled by limited new construction and renters priced out of more competitive markets elsewhere.

Big City Coastal Markets See Competition Tumble and Vacancies Increase

In contrast to other rental reports, RentCafe.com paints a rosier picture for landlords based on geographic location. Nationwide, 92.7% of apartments are rented, with six people competing for each available unit.

However, there is still strong demand for new apartments, with only 0.6% of the country’s apartment inventory built in the past year, and newer apartments renting the fastest. Overall, it’s impossible to draw sweeping conclusions, with the actual numbers making for a nuanced read.

Veronica Grecu, senior real estate writer and research analyst at RentCafe.com, wrote in the report:

“While many major metros have heated up considerably since this time last year, others have moved in the opposite direction. Southwest Florida, Brooklyn, NY, Eastern Los Angeles County, Washington, D.C., and Louisville, KY are the five markets where competition cooled the most over the past 12 months. In these areas, apartments are taking longer to fill, fewer renters are competing for each unit, and lease renewal rates have dropped. Louisville and Southwest Florida, in particular, saw more newly built rentals in recent months, helping drive the shift.“

The Play for Small Landlords: How to Get Your Rentals Filled

As the rental market balances out, small landlords must navigate the shift from bidding wars for apartments to fierce competition amongst landlords to fill vacancies. Key strategies for renting apartments include the following.

Consider pricing and incentives

To counter a tiny 7.6% national vacancy rate, landlords are offering discounts, free months’ rent, and gift cards, which have become standard marketing tools.

Use social media

If you don’t have a robust social media campaign with compelling, snappy walk-through videos of stylish, modern apartments, you will be left behind by the competition. The hard sell isn’t always the most effective tool to draw viewers. Offer practical tips and educational advice to attract potential clients.

The power of retention

Nationwide, about 6 out of 10 tenants are renewing leases. Midwest markets like suburban Chicago and Lafayette, Indiana, see those rates above 70%. Renewing leases is far more cost-effective than finding new tenants.

Demand drivers

Rental demand remains high due to high house prices and interest rates, and construction is limited in many areas. Even though markets have softened from post-pandemic peaks, rent prices remain roughly 15% above 2019 levels.

Appealing to would-be homebuyers priced out of the owner-occupant market by offering rents marginally lower than the competition’s could be a winning strategy in a tight market.

Vet management thoroughly

Paying slightly more for a reputable property manager who is acutely familiar with the local market and good at maintaining high occupancy will pay dividends in the long run.

Final Thoughts

There’s no one-size-fits-all solution for the current rental market. While overall it has softened in certain areas, particularly in the Sunbelt and some pricey coastal metro markets, there is still plenty of competition in other areas such as the Midwest, tech cities, and even small-town America to keep units filled, provided landlords offer an attractive, stylish product with amenities such as washer/dryers and a dishwasher, an open-plan layout, and modern finishes—and price competitively.

In this market, it’s not all about squeezing tenants for every penny from the start, but rather attracting them with a reasonable rental price and renewing their leases so they stick around and you remain vacancy-free.

In This Article

At a time when property values are faltering around the country, New Jersey is experiencing something unique for a cold, high-tax state: soaring house prices.

The Garden State saw 6% price growth in February compared to the same month in the previous year, far outstripping the national average of around 0.5%, according to real estate data and analytics company Cotality’s house price index. In gritty Newark in Essex County, the price growth was even more pronounced, at 6.7%. 

So what gives?

Supply and Demand + Proximity to Manhattan

New Jersey stands out for several reasons. There hasn’t been the rampant development seen in the Sunbelt states, which has heightened demand, and in Newark, its close proximity to Manhattan ($3 for a one-way trip on the PATH train) and heavy investor buying have caused a rapid increase in house prices.

“What we kept bumping up against is what you see in the news and experts focusing on the supply side,” Katharine Nelson, associate director of Rutgers Center on Law, Inequality, and Metropolitan Equity (CLiME), said regarding a recent report exploring the 30% increase in housing costs between 2021 and 2023.

Nelson added:

“Yes, it’s a problem. But there is no single individual solution to the rental affordability crisis. We need to attack this on many fronts at once. That means building more homes, certainly. But the homes we are producing must be homes we need—very low-rent units and starter homes. At the same time, we need to address the consolidation of landlords and homebuilders, which are driving up prices, and find creative ways to assist very low-income households as federal subsidies disappear.’’

The New Jersey suburbs, particularly in North Jersey, around New York, have seen a rampant appreciation in house prices. According to the New York-centric data and analytics company Property Shark, which analyzed 387 suburban markets around New York City, the median home sale price in NYC suburbs has increased 86% between 2016 and 2025, double the 43% increase in New York City.

Rampant Appreciation in the Poorest Areas

New Jersey accounted for 74% of the 100 markets in which median sales prices at least doubled over the last decade. According to the report, 43% of these suburban markets have prices between $500,000 and $750,000, while only 8% are below $500,000.

“Consequently, what was once a suburban ecosystem with a wide range of price points in which NYC buyers could still find relatively affordable communities has since consolidated into a far more expensive market, dominated by mid- and high-priced suburban communities,” the report said. It shows that New Jersey’s once-affordable, largely rental communities in Newark, East Orange, Orange, and Irvington saw astronomical increases in median sales prices over the last decade: 

• 596% (Irvington)
• 509% (East Orange)
• 407% (Orange)

“In the last decade, NYC’s suburban housing market has shifted structurally: Communities that once made up the affordable and mid-priced tiers have moved into higher brackets, leaving a suburban market now centered on mid-six- and seven-figure home prices,” the report said.

Why High Taxes and High Prices Are Not As Much of a Factor in New Jersey

New Jersey gets a pass on its increasingly high taxes and prices, simply because of its location. It’s close to Manhattan, where house prices and rents swamp the suburbs, and close to the heavy, high-paid job sectors throughout New York and North Jersey. The Wall Street Journal reported last year that the Northeast is defined by “tons of demand and low supply,” in contrast to the Sunbelt, where zoning restrictions are less prevalent.

The rapid price increase has displaced Newark’s longtime residents, many of whom can no longer afford to live in the city. Consequently, Newark Mayor Ras Baraka has called on developers to complete 3,000 new affordable housing units over the next four years.

“If you have a credible plan to help us in this effort, then we will expedite your projects and make them our priority. Any project that has greater than 30% of affordable housing, we will help you get it done,” Baraka said, as reported by Homes.com, adding that the state was short of 224,000 affordable housing units.

Delving Into The Details: The Investor Take

Newark, New Jersey, has been a hotbed of investor activity for the last two decades due to its close proximity to New York City and the price disparity between the two cities. However, Newark and New Jersey in general are not monolithic.

Traditionally, much of Newark, particularly in its various wards, has been renowned as a high-crime area with a poverty rate that still hovers around 22%, which is 1.5 times the U.S. average, according to Census data, meaning that around one in four residents lives in poverty. Traditionally, investing here has not been easy because of the labor-intensive property management required.

However, in the heavily Brazilian and Portuguese-inhabited area of the Ironbound section of the city, the incomes are generally higher, and many landlords from Portuguese families have owned real estate here for decades, passing it down to family members or selling to community members, resulting in something of a closed shop for investors looking to get involved in one of the city’s better rental areas. Thus, new developments in the area have been met with robust community and activist opposition.

Final Thoughts: Buy-and-Hold Strategies for Emerging Markets

I once owned close to 20 units in Newark, New Jersey. I had the right intentions, but my timing was way off. 

This began two decades ago, when gentrification was just a gleam in a developer’s eye. The proximity to New York made it an obvious place to invest, but it was a war zone, and the stress and headaches of owning rentals here made it impossible for me to preserve my sanity and turn a profit. It seemed like I was in landlord/tenant court every week. Every time my phone rang, I feared another disaster.

It’s a classic case of “coulda, woulda, shoulda”: Had I managed to hold on to those units, I would be swimming in equity now. But I don’t regret offloading them—some back to the bank after the housing crash—or eliminating the stress from my life. 

That is a classic scenario that many real estate investors face when trying to get into an emerging market early. Here are some tips on how to do it:

However, I did run into other (Portuguese) investors whose families had owned in the Ironbound for decades, and that income, paid by loyal, hardworking tenants, put their kids and grandkids through college and made the patriarchs multimillionaires through equity.

It’s an important lesson about investing in emerging markets. Buying in the more stable sectors might cost you more in the short term, but it will ultimately pay off.

Dave Meyer:
How is the war in Iran affecting the housing market? I’ve been saying for years that a black swan event can always dramatically shift real estate dynamics. Well, here it is. In the last month, the war has reshaped the trajectory of mortgage rates, inflation, consumer sentiment, and more. And of course, all of these factors will impact home values and spoiler alert, the impact is probably not good. But that doesn’t mean you can’t invest right now. In fact, some of the best times to build your portfolio are when all of the headlines about housing are negative. You just need to adjust your buy box for a changing market. You’re probably going to see better properties become available. Sellers will even be more willing to negotiate and other buyers are probably going to be scared off. And in today’s April 2026 housing market update, I’ll explain how you should be shifting your strategy to take advantage of these shifting market conditions.
Hey, what’s going on everyone? It’s Dave Meyer, Chief Investment Officer at BiggerPockets, housing market analyst, real estate investor of 16 years now. Today in the show, we’re going to talk a little bit more about current events than we normally do, and we’re going to specifically be focusing on how the war in Iran is impacting the housing market. So let me just get to the point. The war in Iran is likely going to have negative implications for the housing market. Now, I’m not saying a crash and we’ll talk about that in a minute, but if you look at what has happened in just the last month, I think we are going to see slower home sales. We’re going to see mortgage rates up. We’ve already seen them go up half a point, and I think they’re going to stay elevated. And I think we’re probably likely going to see reverses in affordability and reverses in demand.
Now, that does not mean that there’s a disaster. And actually, as we’re going to talk about towards the end of this episode, that could spell really good buying opportunities for real estate investors, but I think we need to actually just break down how this works because that’s going to help you understand where the opportunities lie and where the risks lie in this housing market because there are going to be both. In short, the war is going to push up inflation. And actually, as of today, April 10th, when we’re recording this, we just saw the first inflation print since the war started, and it wasn’t a good one. It was ugly. We saw the CPI, the consumer price index, go up from 2.4% to 3.3% in just a single month. I do believe that inflation’s going to stay higher than it was before the war for the foreseeable future.
I’ll explain that in a minute, but let’s just talk about why inflation hurts and why I think it’s so important to the housing market. First and foremost, it impacts consumer spending. If people are getting stretched by paying more at the gas pump, they have less money to spend other places. The second thing is input cost for housing and other goods. We’ve already seen in the last year, the price of construction on the average price home has gone up between 10,000 and $17,000 per home. Depending on who you ask, that’s probably going to go up more in the near future because oil prices are up. That means it’s not just gas, right? When oil prices go up, you also see everything that goes on a ship go up. They use diesel. That’s oil. So if you are importing appliances from China, you are importing timber, copper, aluminum, whatever it is, those prices are likely to go up with oil prices as well.
That’s going to make input costs for housing go up as well. Construction becomes more expensive. But the really big one, the big thing that inflation impacts more than anything when it comes to the housing market is mortgage rates. And this is why over just the last month we have seen mortgage rates after dipping so briefly, we got it. We touched it. We touched 5.99 for the average mortgage rate at some point in February. Now they’re back up to about 6.3, 6.5. They’re hovering in that range the last couple of days. Because even before this inflation print came out on April 10th, everyone knew inflation was going up. You could see it in the oil prices. Oil is such a big part of the economy that seeing that gas prices went up more than 50% since before the war started, of course inflation was going to go up.
So that’s why mortgage rates have gone up. Now, before we go on, I just want to be clear that when I say inflation is high and getting higher and I think it’s going to stay bad for a while, I’m not talking 9%. We’re not talking about COVID 2022 levels where they were printing money and there was supply shock and there was all that going on. Right now I’m saying we were getting close to the Fed’s target of 2%. We’re moving in the wrong direction. Could inflation stay in the three to 5% range for the next year? I think so. I think that is unfortunately something that we are going to have to contend with. So yeah, inflation is not looking great. And I just want to call out, we’ve only had one print for the Consumer Price Index, which is the one that makes most of the media and that was not good.
But if you look at other measures of inflation, they’re also not good and maybe even arguably worse. If you look at the PCE, which is actually what the Fed looks at, we’ve actually seen three consecutive months of much higher inflation. That was even before the war. We were seeing 0.4% monthly growth three months in a row right now. If you annualize that, that means that measure could get up to 4.8%, even just staying the way it is right now. This is why I’m saying, could inflation go back to 3% to 5%? Yeah, I mean, there’s evidence of that. And this just sucks, right? It sucks for everyone in America, for you, for me, for everyone. But specifically, when we talk about the housing market, it’s going to keep mortgage rates higher. That is the unfortunate news for anyone who’s working in the housing industry because we talk about this a lot, but let’s just review how mortgage rates actually work.
It is not the Fed. It is not the federal funds rate. That is one factor in mortgage rates. But the real thing, the closest correlation to mortgage rates are yields on 10-year US treasuries. Treasuries are bonds. It’s basically how the US government funds all of the debt that we have. $39 trillion in debt that is funded by issuing bonds, treasuries. And the yield is basically the interest rate that the government pays investors, people who lend money to the US government. And this number, bond yields, they fluctuate a lot based on all sorts of complicated economic activity, but inflation is one of, if not the biggest variable in bond yields. I’m not going to get into all the details today, but what you need to know is that mortgage rates and bond yields super highly correlated. And when inflation goes up, bond yields go up. This is just one of the ways that the economy works.
And as long as we have higher inflation, we’re going to have upward pressure on mortgage rates. This is why they’ve gone from six to 6.3, 6.5 over the last couple of weeks. And it’s why I personally think that we’re not getting back towards six, at least in the next couple of weeks and maybe for months or more. And I should mention, I am not the only one who sees this. We actually do this survey at BiggerPockets. It’s called the BiggerPockets Investor Pulse, where we just basically take the temperature of residential, retail, real estate investors, people like you and me and what people are thinking. And the amount of people who are expecting lower mortgage rates has basically just plummeted. In Q1, so in the first couple of months, when we did this survey, I think it was back in January, about 30% of people were saying that lower mortgage rates were going to be a big opportunity this year.
That’s dropped to about 12%. When we did the pulse last time, the median, what most bigger pockets community members were expecting were mortgage rates to be somewhere between 5.5 and 5.99%. Now that has gone up to six to 6.5% with a huge surge in people actually expecting them to go up even higher. About 27% think that this is going to go higher up to six and a half, maybe even up to 7%. So people not particularly excited about where mortgage rates are going. So that’s my read of the situation. Inflation is up, probably going to stay elevated. Again, not 2022 levels, but elevated from where we have been the last couple of years. I think mortgage rates are going to stay high, and this is going to impact the housing market. How it’s going to impact the housing market is something we got to get into, but first we’re going to take a quick break.
We’ll be right back. As a host, the last thing I want to do or have time for is play accountant and banker. But that’s what I was doing every weekend, flipping between a bunch of apps, bank statements, and receipts, trying to sort it all out by property and figure out if I was actually making money. Then I found Baselane and it takes all of that off my plate. It’s BiggerPockets official banking platform that automatically sorts my transactions, matches receipts, and shows me my cashflow for every property. My tax prep is done and my weekends are mine again. Plus, I’m saving a ton of money on banking fees and apps I don’t need anymore. Get a $100 bonus when you sign up today at baselane.com/bp. BiggerPockets Pro members also get a free upgrade to Baseline Smart. It’s packed with advanced automations and features to save you even more time.
Welcome back to the BiggerPockets Podcast. I’m Dave Meyer, talking about the realities of how the war in Iran is likely to impact the housing market. We’ve already talked about the stuff that we know. Inflation has gone up. I personally think it’s likely to stay elevated for the foreseeable future. Again, not 2022 levels, but higher than where we were. And I think mortgage rates are going to stay in the mid sixes. They could even go up from here depending on what happens next. But even knowing what we know now about inflation, about mortgage rates, about recent trends in the housing market in general, we can start to project what is likely to happen in the housing market. And the main thing I think that we are going to see is a slower housing market. Now, if you’re thinking, man, the housing market is already really slow.
Yeah, it is. We had one of the slowest prints ever on record in January, 3.9 million annualized existing home sales. That is super low. It could go slower. Now, there’s this whole thing about seasonally adjusting it, but I think we are going to see a really reluctant market. When there are times of uncertainty, and although I feel like I’ve said this every year for the last six years that uncertainty is high, man, uncertainty is really high right now where we don’t know what’s going to happen with the war. We don’t know what’s going to happen with AI. We don’t know what’s happening with all of these other things in the economy. And I think that is going to slow down buyer behavior in the housing market. You see this data across the board. People just don’t make these kinds of decisions, but specifically, residential real estate investors are not feeling very good about it.
In our survey that we did in April, BiggerPockets members, we asked, “What impact do you expect the Iran war to have on the real estate market in the next three months?” And basically no one. Less than 5% of people combined said positive or very positive. About 30% were neutral. Over 50% said it’s going to have a negative impact and 15% said a very negative impact. So just saying investors tend to be on the more optimistic side of housing market participants and they’re all pretty negative. So you got to imagine how home buyers are feeling in this market as well. And this isn’t just psychological. The psychological part is important, but affordability is going to get lower. We started to see nine months in a row up until February, we saw improved affordability because mortgage rates were starting to come down. Prices were flattening out, but we’re probably going to reverse those gains because mortgage payments are now going up.
And if you combine uncertainty with less affordability, how do you get more demand? Where are the home buyers going to come from in that market where people are uncertain, they’re worried and things are more expensive? I just can’t see it. I think we’re not going to see a lot of demand. Now, again, I am not saying there was going to be a crash. And in fact, back in October when I made my predictions, I already thought prices were going down this year. Just as a reminder, I said, I think we’ll get national home prices somewhere between negative 4% and plus 2%. And I still think that range is probably close to right, maybe towards the lower end of that. If you ask me today, I don’t think we’re seeing positive home price growth. I’d say maybe negative two, maybe negative 3%, something like that. And that’s not that different from what I was projecting six months ago, even though the war is happening.
And I know that this sounds scary, right? No one in this industry likes to see home prices go down, but I do want to call out, it has pros and cons. There are trade-offs to this kinds of market. And as a savvy investor, there are things that actually benefit you about this kind of market. The cons we know, right? Appreciation is going to be slow, right? If you have an existing portfolio, some of your properties could and likely will go down in potential value, but let’s just call out that that’s potential value, right? We’re talking about a paper loss. If you don’t sell it, you don’t actually lose anything. And most people, if you’ve owned your portfolio for a while, the values of those properties have gone crazy. So it’s not like you’re actually losing money. You might have just made a little bit less money, if you know what I mean, right?
So those are the obvious downsides of this, but the pros are there too, because this does mean that there will be better deals, right? Because even if supply comes down a little bit, there are going to be more motivated sellers in this kind of market. I feel very confident about that. There is going to be less competition in this market, right? And so even if inventory is not skyrocketing, the number of properties that are going to sit on the market for a long time, they’re going to go up. I feel very strongly that days on market are going to go up. You’re going to have less competition. And that means that if you are a savvy investor and you adapt to these market conditions, you’re going to find better deals than have been available in several years. That is really good news if you are trying to build a portfolio.
So don’t mistake what I’m saying about the housing market to mean that you shouldn’t be buying. You can buy in any market, but it does mean you need to be careful. You need to follow the advice I’ve honestly been giving for at least two years now on the show about investing in a correction. And just as a reminder, what you got to do to buy in this kind of market is number one, buy under market comps. If prices are going to go down two, three, 5% this year, maybe not, but if you’re worried about that, you have to buy something seven, eight, 10% under market comps. And you actually can do that because you have negotiating leverage, because there’s going to be motivated sellers, because things are going to be sitting on the market longer. That doesn’t mean everyone’s going to accept your deals, but if you’re patient about this and diligent about it, you will be able to do that.
So that’s rule number one. Rule number two, don’t buy anything that doesn’t cash flow. Just don’t. In this kind of market, you need to be defensive. Cashflow is a defensive mechanism. You absolutely should be doing that. Number three, get fixed rate debt. I know it’s higher. Mortgage rates are higher. They could go up more. We don’t know. We just saw that. Literally everyone other than me and some other people, but most people have been saying mortgage rates are going to go down. Mortgage rates are going to go down. But trying to tell you that that might not happen and look what happened, right? Mortgage rates have gone back up. Thankfully, they’re not at 8% again, but it just proves that no one really knows what’s going to happen with mortgage rate. Fixed rate debt on a property that cash flows that you buy under market comps, that works in any market.
Other two things to think about, protecting against downside, right? You don’t want to buy anything super risky in this market, buy a great asset in a great location. That is really important right now. Don’t buy in the edge of town. Don’t buy something that isn’t going to have high rental demand. Even if it has some upside, protect against your downside first, then you focus on upsides. Once you found a deal that you feel is rock solid and is not going to be risky in this kind of market, then you look for the upsides that we always talk about in the upside era. This is stuff like zoning upside, rent growth potential, being in the path of progress, doing value add. Those things all work. So even though I really believe that some of the dynamics of the housing market are going to change by what’s going on with the war in Iran and rising inflation, the formula for what you should be doing right now hasn’t changed.
That is still the formula for what works. And if you’re nervous about the housing market, all you got to do to keep buying is adjust your own expectations, how much under market comps you’re willing to buy. If you’re worried about what’s going on, maybe you only buy something 10% under market comps or 15% under market comps. Means you’re going to have to do a lot more outreach, probably going to have to make more offers, but if that’s what makes you comfortable, fine. Do it. You’ll be able to get good deals. You’ll get cashflow and you’ll enjoy the many other benefits like amortization and tax benefits, all that that you get from real estate, but you can protect yourself against the one risk that is really out there, which is prices going down modestly in the next year. Now, I know people are probably thinking to themselves and asking the question, doesn’t inflation push up housing prices?
You’ve probably heard this. Isn’t real estate a great inflation hedge? There is actually truth to that. If you measure this like a nerd like I do, the correlation between housing prices inflation is really high, but there is actually a lot of nuance to this. It is not as simple as saying when there is inflation, housing prices go up, right? We’ve seen inflation above the Fed target for the last couple of years. Real home prices are down for the last couple of years. And that is because there’s actually two different types of inflation. There is something called demand pull and there’s something called supply push. And what happens with the housing market really depends on the type of inflation that there is. So demand pull is kind of the inflation that most people are used to. It’s basically when the market runs too hot, right? People describe this forum as inflation as too much money, chasing too few goods.
This is an example of what happened during COVID, right? People were flush with cash. They were getting stimulus checks. We were printing tons of money. And what happens when you print more money is people have money to spend and they want to go and spend it. But if there is not a proportionate increase in the amount of stuff to buy, prices go up, right? I think cars were a really good example of this during COVID, used cars. People had a ton of money. They were going out and buying stuff, but there weren’t all of a sudden more used cars to go buy, so people bid up the prices of that. This is what happened in the housing market during COVID, right? People had a lot of money. Mortgage rates were low. That increases demand. This is why it’s called demand pull, and the demand pulls prices up.
Now there’s another kind of inflation called supply push inflation. And this comes when the input cost to build and make stuff goes up. And unlike demand pull, which is associated with a hot market, supply push is associated with a slower market. This is when the cost to make a car, the cost to build a house, the cost to ship things from one country to another goes up. And because the producers and the infrastructure is more expensive, that stuff gets passed along to consumers, but it’s not because there’s more demand. And so this kind of inflation is often associated with slower economy, maybe even a recession, and slower real estate prices. And this is what we’re at risk of today. I want to be clear that when we look at the two types of inflation and the inflation we’re seeing right now, we are seeing supply push inflation between tariffs, between the war of Iran, it is getting more expensive to make stuff.
And that is getting passed on to US consumers, which slows down demand. Not just for cars, it slows down demand for everything, including housing. If people can’t afford housing, it’s at a 40-year low, right? If they’re already stretched for affordability in the housing market, and then other things in the economy start to get more expensive, they’re not going to all of a sudden bid up the price of housing.That’s why this kind of inflation is not associated with real estate prices going up. Now, one more thing I just want to mention, because I’m not trying to scare you all. I just want to be real with you about what I see in the market. My job here is not to rah-rah everything about the housing market. I want to explain to you what is happening, how to navigate risks, how to spot opportunities. There is a risk of what is called stagflation that is going on right now.
Now, people throw out that word a lot. I think it’s a lot of people who want to generate fear and clicks, and they use this word stagflation because it’s scary. And stagflation is scary. It’s not good. What it is, to the definition, is when you have a combination of inflation and a recession at the same time. Now, hopefully you can see why that’s bad, because it means that people might be losing their jobs, their incomes might be going down, and at the same time, prices are going up. That’s a nightmare for an economy. And there are degrees of stagflation, right? We saw this in the 70s in the United States and it got really bad. And I’m not saying we’re at risk of really bad stagflation, but is there a chance that inflation goes up at the same time unemployment is going up? Yeah, we’re seeing that.
We had one good print in March, but unemployment is going up. Actually, last month, personal incomes went down 1%, right? At the same time, we just saw three different measures of inflation all go up. So this is something that we all need to keep an eye on because stagflation has really bad impacts on the entire economy and could really damage the housing market. So we’re not there yet, but it’s something that we’re going to talk about in these updates every single month going forward, because if it gets worse, then we need to start talking about how to prepare and protect yourself against that risk because that can be dangerous. But for now, what we’re likely seeing is increasing inflation, higher mortgage rates, a slower housing market. And for me, the formula for what you should be buying hasn’t really changed. Now, we do have to take a quick break, but after the break, I want to talk about a crash.
We talk about this every month because everyone in the media is talking about a housing market crash, but I want to address this head on. Will the war in Iran create a crash? We’re going to go through the data step by step and actually see what the risks are. And we’ll also talk about some opportunities that are emerging in the market. Stay with us. We’ll be right back.
Welcome back to the BiggerPockets Podcast. I’m Dave Meyer. This is our April 2026 housing market update. So far on the show, we’ve talked about the war in Iran, how it’s pushing up inflation, taking mortgage rates up with it, and what that could mean for the housing market. And I’ve said this probably will put downward pressure on housing prices. It will probably put downward pressure on transaction volume, but will it turn into a crash? I’ve alluded to this, but I want to just share with you some evidence right now. No, I do not think it will turn into a crash, at least as of now. I’ll give it to you straight. The war isn’t good for real estate, but there are many structural reasons a crash remains unlikely. I talked about it a little bit before, but the floor of replacement cost. Inflation pushing up the cost to replace a home puts a floor on how far home prices are likely to fall.
Number two, people have massive homeowner equity. It’s at an all time high. People are not at risk of being underwater, of short sales, of any sort of foreclosure crisis. I know people love to say that foreclosures are spiking and going through the roof. That is not true. If you compare delinquency rates, if you compare foreclosure rates now to before the pandemic, they are lower. Yes, they have gone up from the artificially low era of COVID, but they are lower. So that is an important thing to remember. I say this every month on the show when we do this risk report, but if there was going to be a housing market crash, we would see it in the delinquency data. We would see spiking inventory, we would see spiking new listings, right? Supply would be going up. We would see spiking days on market, and at the same time, we would see rising delinquencies.
Those are the things we know predict a housing market crash. So let’s just look at them, right? Let’s look at inventory. People love to say inventory is going crazy. That’s why the housing market’s going to crash. How much is inventory up year over year, do you think? From last year to this year, according to Redfin, it is down. It’s down 2% year over year, right? So yes, is it up above where it was during COVID? Yes, but it is not going crazy. This is what happens in a housing market correction. Demand goes down. Talked about that before, right? Supply follows. That is what normally happens because if there are no buyers, sellers aren’t eager to list their home for sale. And when you see both demand and supply go down at the same time, what happens? Prices, they can move a little bit, but they stay relatively flat like they have.
But transaction volume is what goes down. Volume of transactions, how many homes are selling and trading goes down. Again, that’s what we have seen and that’s what I think will probably accelerate. I do think home prices are going to go down a little bit, but main impact of this is I think we’re going to have very low transaction volume. Now, could this change? Could inventory be spiking soon? Sure. But we would probably see that in new listing data. This inventory is how many homes are for sale at any given point. New listings are how many people decide to sell their home that month. That is up year over year, 2%, hardly a crash situation. Everyone’s out there screaming, all these crash bros screaming, “Oh my God, new listings are up. Inventory’s up.” Not really. It’s basically the same as last year. Inventory down 2%, new listings up 2%.
It’s basically flat. Basically, nothing has happened there. So this is one of the reasons why I don’t think we are going to see a crash. On top of that, delinquency rates, still below 4%. They went down from February to March. They’re still up where they were over COVID, just like a lot of these things because they were artificially low. But when you look at the big picture, is the housing market going to crash? It remains unlikely. Now, if we start to see stagflation, we’ll have to talk about that, but I still don’t even think there’s a high chance of a housing market crash if stagflation picks up. But if we see unemployment go to 8%, sure, there’s a risk of a crash, but we’re at 4.3% right now. And these things move slowly. It’s not likely we’re going to go from 4.3 to 7% in the next couple of months.
If we start to see seven, eight, nine, 10% unemployment, sure, there is risk of a housing market crash, but we are not there. There is no evidence that that’s happening. Unemployment actually fell last month. I think everyone is afraid of AI, myself included, but we just haven’t really seen unemployment spike in the way that a lot of people have predicted. And so as of right now, the risk of a crash remains relatively low. I think the slow, frustrating, annoying market that we’ve been in for a while is just what’s going to be here for the foreseeable future. So that’s my prediction. And what that means is the upside playbook that we’ve talked about, what you got to do in this great stall is still true. Follow the principles that we’ve been talking about buying. Make sure you cash flow. Buy under market comps. Generally speaking, be risk off.
Don’t take a ton of risk if you don’t have to in this kind of market, but find upsides and negotiate because buying opportunities are there. We are entering a buyer’s market in a correction, you go into a buyer’s market. That means you have the power. Don’t go buy anything. There’s a lot of trash out there. There’s absolute junk. I get sent it every day. A lot of it is junk, but the good deals are starting to come. I actually think cash flow is going to start getting better because if prices go down a little bit, but rents don’t go down, which is normally what happens during a housing correction, cashflow prospects are going to get a little better. Not all of a sudden going to be amazing, don’t get me wrong, but it is going to get better. The other thing I want to call out is everything that I have said What in the show so far is a national basis.
I’ve been talking about the national housing market. You got to pay very close attention what’s going on in your local market. I know not everyone’s going to do this, but I implore you. Please, if you’re going to go out and buy, do yourself a favor. Go on Redfin, go on Zillow, look up what inventory are in your current market, look up what new listings are in your current market and look up what days on market are. Just Google Redfin Data Center, that’s all you need to do. It’s a free tool. It’s super easy to use. Go look this up for yourself. Because if inventory and new listings are up, if days on market are up in your area, means prices are probably going to go down a little bit. But that also means they’re going to be more motivated sellers and your ability to negotiate is up.
So if you’re in that kind of market, that’s where you have to be very disciplined. You have to say, “Hey, this property’s on the market for 400 grand. I can only pay 330 for it. ” Make that offer. Nine out of 10 of people are going to reject that. But one of them might call you three or four months from now and say, “You know what? You’re right. 330 is the best that I can get. ” And they might sell it to you. That’s what you got to do in a correcting market. Now, some markets, if you’re in the Northeast, if you’re in the Midwest, go check those inventory numbers, go check the days on market numbers. If in your market, inventory’s still low, new listings are still low, you’re not going to be able to do that. Prices might still go up this year.
1%, 2%, 3%. I don’t think we’re seeing any double digit increases anywhere in the US this year, maybe 5% in the top performing markets, but they’re going to be slow. But because there are going to be buyers in those markets, I mean, you could still try, but you’re going to have to be a little bit more realistic. Maybe offer 380 instead of 400. Maybe you pay asking price. Sometimes you’re just going to pay asking price. If the numbers still work, if you underwrite your deals to the same principles that I just still talked about, there’s no reason you shouldn’t buy. If you follow the advice that Henry and I give you all every single week on this show, you can still buy. The point is, the market’s going to be slow. Use that to your advantage. Be aggressive about negotiating. While at the same time, be aware, be cognizant of the risks that the new emerging reality of the housing market present to us.
Mitigate those risks because you can. That’s the whole point of the show. Identifying the risks as we have today are the first step in mitigating the risks. You can still invest if you mitigate the risks and understanding the unfortunate reality. I don’t like this stuff, but the unfortunate reality is that with mortgage rates going up, with inflation going up, the market’s going to be slow. Appreciation’s going to be slow. And so if you acknowledge that, if you understand that, if you mitigate those risks, and at the same time, you take the leverage that the market is giving you in negotiations, that means you can go out and find good deals. Maybe the best deals, maybe some of the best inventory for sale that we’ve seen in several years. So that’s the lesson today. Understand the risk, but take advantage of the opportunity. That’s the message for April 2026.
And that is our episode for today. Thank you all so much for watching this episode of the BiggerPockets Podcast. We’ll see you next time. All

 

Ashley Kehr:
Today we’re getting into one of the most common things we hear from rookies. It’s not how do I find a deal or how do I get a loan, but how do I get my partner on the same page? We’re going to give you a real framework for having this conversation the right way. This is The Real Estate Rookie Podcast. I’m Ashley Kim.

Tony Robinson:
And I’m Tony J. Robinson who also invests with his spouse. So let’s get into it.

Ashley Kehr:
So the first thing we want to bring up is why do partners even push back? And it may not be why you actually think. So we’re going to go over three common reasons a partner would not be interested in investing in real estate with you. Okay. And when we talk about partners, we can talk about this could be your best friend that you want to invest with. This could be your spouse. This could be your significant other. This is somebody close to you that you want to invest with and it’s important to you that they are on board. So in some scenarios, this could even be a parent that you want their approval, you want them to be on board with what you’re doing for whatever reason. Okay? But especially if you are in a relationship with someone, I do think it is very important for this person to be on board.
And I want to clarify that because I had a conversation once with someone that came to, I think Tony or even there, came to us and said, “I need to get my wife on board.” I think she would do such a good job managing the tenants and communicating with them. And she doesn’t want to do it. She doesn’t see the vision that I have and things like that. I think the really important piece to this is your partner doesn’t need to be involved. They just need to give their support. And you could go off and do real estate without their support, but we’re all about creating loving, communicative, supportive relationships on this show. So you read our book, Real Estate Partnerships. You can find it on biggerpockets.com or Barnes & Noble or Amazon. Tony even references the five love languages because it does apply here into your real estate relationships.

Tony Robinson:
And one thing I’ll add to that, Ash, is when I think about getting someone on board, there’s really, I think, three layers to it. The bottom layer is they’re just opposed to it. They’re like, no. And I’m thinking more so about a spouse in this situation where it’s like your husband and your wife is like, “Hey, we’re not doing this. I’m not okay with us investing money into this risky thing called real estate investing. I’ve seen too many TikToks about how that isn’t a thing to do right now.” So that’s like the bottom layer where they’re just opposed to actually doing it. Then the next layer is that they’re approving of it. They’re like, “Hey, this makes a lot of sense. I can see the value in it, but I personally have no desire to do anything.” Like, “Hey, Tony, go do your thing, but I’m going to sit back here and I’m going to do my own thing over here, but I support you.
” And then the final, and not even maybe the final, because you don’t necessarily have to graduate, but then I guess the next level would be not only are they supportive, but they also want to be involved. And I think where a lot of rookies get, where they get stuck, obviously it’s easy if they’re at that bottom level of like, “Hey, my spouse just doesn’t even want me to do this. How do you start having some of those conversations to get them to that second level?” But sometimes it’s understanding that being at that second level of them just being supportive but not involved, that’s totally fine because if it’s not their thing, don’t make it their thing. Let their thing be supporting you and your thing be actually doing the real estate. So it’s just important for Ricky to understand their different levels to what being on board actually looks like.

Ashley Kehr:
So a couple things before you actually sit down with your spouse is you need to kind of have a game plan and think about how you’re going to approach this and what you’re going to say and not just telling them, “We’re going to invest in real estate. I’m taking all the money out of our savings and we’re buying a duplex.” That would be exciting to me. That would be exciting to Tony. But for somebody who’s not heard of the realm of real estate, it may take some time to actually approach them about this idea. And it shouldn’t be pushed. It shouldn’t be shoved. It should just let the person think with it because it is a scary thing. It is risk and it is, especially if you have your finances tied together, it is very much their money. But also I want you to think about it’s not only money that it takes to invest in real estate, it also takes time.
So this means time away from your family, that you’re analyzing deals, that you’re going and walking properties, that maybe you’re managing tenants, maybe you’re going to be the handyman on their property and do your own maintenance or repairs, and that’s you going over to make a repair on a Saturday afternoon and it ends up being your kid’s birthday party that day. Okay? So there are more things that come with real estate investing rather than just the numbers or just the capital. And I think those are some of the negatives that I said that can happen as to taking time away. But also I think it’s very important that when you’re sitting down, you talk with your spouse about what would be their specific concern. Is it the financial commitment? Is it the time commitment? But I think you also need to go in and ask them what they want out of life.
What do they like? What don’t they like about their finances right now, their life right now, the lifestyle you live? What would they want different? What do they dream about? What goals do they have? And then try and take that information and build that into, here’s how I can get that dream life for you with real estate. And I think the more that you can put this in writing, maybe it’s drawing it all out as a diagram, maybe it’s running the numbers using the BiggerPockets deal calculator, printing out the analysis to show them. But I really think the very first important step is to include them into the conversation of what they want out of life and work backwards. We always say that to investors, “You want this? Work a plan backwards and figure out what’s the first step you need to take.” Don’t think, “Oh, the first step I need to take is I need to buy a house.” Why do you want to buy that house?
What are you going to do with that house? What’s your strategy? And your strategy all depends on the future. What do you want your life to look like? What do you like to do? What do you want out of this? Then we can tell you what type of property to buy, what strategy you should be doing. So I would start the conversation that way, talking about your life, what you want out of it.

Tony Robinson:
I think another big piece too, Ash, is understanding the worst case scenario and being able to talk through like, “Man, if things just go absolutely terribly wrong, what does that actually look like for us?” Because let’s say that you guys have a hundred grand that you want to invest. And aside from that hundred grand, you still have your emergency savings, you’re still saving for retirement, that’s just extra money that you guys have and you kind of walk through it. Okay, well, the absolute worst case scenario here is that we maybe invest some of this capital like, “Hey, let’s not even invest all of it. Maybe we invest half of it. ” So we take 50,000 bucks and we go use that to try and buy a property somewhere. And if it doesn’t work, then maybe the worst case scenario is that we own this property for a year or two, we hate the experience or it doesn’t make as much money as we want, we have to sell it maybe at a loss, and we lose 50 grand, 60 grand, however much.
Are we okay with that scenario? And if the answer is yes, well then, okay, cool. Then we know what the worst case scenario is and we can move forward with some confidence that we’ve already planned and prepared for that. And if the answer is no, well, then how do you adjust whatever your plan is so that you can live with that worst case scenario? Maybe instead of investing 50 grand, maybe you’re like, “Okay, I feel okay with 30 grand.” If we can cut our losses at no more than 30 grand, I feel okay with that. Okay, great. Well, then there’s the benchmark that we need to move toward. So I think just thinking through the worst case scenario is important as well.

Ashley Kehr:
Coming up, we’re going to go over the actual conversation framework, what to say, when to say, and how to bring your partner along without pressure or ultimatums. We’ll be right back after this. All

Tony Robinson:
Right, guys, welcome back. So we’re going to get into a five-step framework for actually having this conversation. What are the five elements that we should really focus on as we think about how do we present this crazy idea of investing in real estate to our partners? So the first step, and we talked about this a little bit before the break, but it’s to start with your shared goals, not necessarily your investing strategy. You have to remember that you’ve been the person who’s probably been consuming all the content about real estate investing and you’ve been watching the podcast and the books and the meetups and whatever it is. So you know what Bird means, you know fix and flip, you know house hacking, you know co-living. Your spouse or your partner doesn’t know any of those things. So they’re not going to necessarily be excited by the niche that you’ve chosen.
What’s more exciting to them is to say, “Hey babe, we’ve been spending X amount every single year in taxes and I think if we buy this short-term rental, there’s this little strategy called the short-term rental tax loophole, which might allow us to not only have this property in this vacation place that we’ve always wanted, but we’ll also get a really big tax refund that next year, which lo and behold will then allow us to buy another short-term rental. And then we’ll get another tax refund and then we can buy another one. And five years from now, we could have five properties and five places that we love going that they’re all cashflow positive that have all produced this big tax benefit for us.” How do you feel about hearing that? That’s a very different strategy than saying, “Babe, you won’t believe all the research I’ve been doing on ADRs and occupancies and regulatory risks and all these different markets, and I think I might’ve found a good deal.” It’s like sales 101.
You want to sell the benefits of what you’re talking about and not the features of what you’re talking about. So that’s the first piece, tie it to your goals, not necessarily the investing strategy.

Ashley Kehr:
Okay. So the next thing is to implement, number two, step two is to connect real estate investing into how it can actually reach their goals. So for example, if they want a better life and you can explain to them that why maybe just not investing into your retirement with your 401k is going to give them those changes that they want immediately. How can buying a duplex and what can happen within the next five years, 10 years, instead of waiting until the age of retirement for the retirements that you’ve been saving for. Show them the difference of different investing options and how maybe doing different strategies like Tony mentioned, the short-term rentals as to you have a vacation home you can go to one or two times a year, plus you’re saving in taxes doing the short-term rental loophole or if you did a long-term rental, here are the benefits you could get from this and you could get some cashflow and things like that.
So maybe not even like pressuring on here’s the strategy we should be doing, but laying out the different options so they can see that it’s not, “Oh, if we buy a long-term rental, that means that’s the only investing we’re going to be able to do. ” Real estate has many different realms to them and different ways to actually invest in real estate and different strategies.

Tony Robinson:
And then step number three, which we’ve talked about a bit already as well, but it’s to address the worst case scenario out loud before they bring it up. I’ve been fortunate enough, both as an entrepreneur and as a W2 employee to conduct interviews to potentially hire people. And one of my favorite questions to ask is, what is your weakness? And I always preface this when I ask this question of like, “Hey, don’t give me an interview answer where it’s like, hey, my weakness is that I’m a perfectionist or my weakness is that I work too hard.” Those aren’t real weaknesses. I want to know what your actual weakness is because if I can meet someone who’s self-aware enough to know what their weaknesses are, that’s also someone who hopefully has figured out how to mitigate those weaknesses. And that is so much more important to me than just the person who’s trying to hide and pretend like they don’t have any weaknesses.
So it’s the same thing when you present this to your partner and to your spouse, don’t try and just fool them that everything’s going to be perfect because there is risk in real estate investing. That is true. And it’s better that you can show them that you’ve identified what those risks are, as well as the ways to mitigate those risks, because that’s how you actually build confidence in your spouse that you’ve actually thought through this in a full and meaningful way.

Ashley Kehr:
And step number four is giving them a role or making them feel involved if they choose to be. Okay? So maybe somebody wants to be active and wants to be a part of this. If they want this to be an open book, open the book, show them what you’re doing, show them where the money is coming from for the capital, show them what you’re doing during the process, how you’re analyzing the deal. This could definitely make your partner feel more comfortable with them seeing everything that’s going on instead of it just being like closed doors like, “Don’t worry, I’ll take care of it. We’re going to buy a house and I’ll rent it out. I’ll take care of everything.” And not seeing the actual transaction, seeing how the deals analyze, things like that, maybe it would make them, depending on the type of person they are, more comfortable to be involved in some aspect or role of it.

Tony Robinson:
And then step number five is to propose a small first step. Don’t ask them to jump in with both feed on day one, but just a small baby step. And I personally think that one of the best first steps that you can take with your spouse is taking them to a place where other investors are getting together. You can go to a local meetup, maybe take them to a one-day workshop, take them to a conference, take them to BPCON, because it’s one thing if they’re hearing it from you about why real estate investing is a great idea. It’s a different thing if they’re standing in a room full of people who’ve already done it. And those people can speak to like, “Hey, here’s how my life has changed because I made this decision to do X, Y, and Z.” So I think a great small first step is just getting them to network with other folks who’ve already done it and let those people kind of be your advocates as well.

Ashley Kehr:
Or if you’re both readers, buy one of the many BiggerPockets books and read it at the same time and kind of look over, see what part they’re at, see what they’re thinking and have a little mini book club together. But another thing I really think is important when you’re having this conversation for this five-step framework is the setting. While one of you is cooking dinner, the other one is packing lunches for school, the kids are running around, it’s night, you’re tired, you want to get the kids to bed, you’re ready for bed yourself. That is not the time or place to have this conversation. So this should be a quiet time, just the two of you. It shouldn’t be when you have five minutes or you got to be out the door, maybe not even riding in the car. It should be sitting down. Maybe you go out to dinner and you have this discussion at dinner, or you make yourself a dinner at home, or you’ve planned that you are going to have a couple hours at home without the kids.
You’re not going to be doing laundry, you’re not going to be doing the dishes, you’re going to sit down and have this discussion together. So I think when and where you have the discussion also plays a role in how you handle this framework.

Tony Robinson:
I just want to add one last thing. What happens if your partner does say no? If you go through all these five steps and they still say no. I think the first thing, and this is, I think, hard for some people to hear, but you maybe have to do some self-reflection and understand, have you actually earned a yes from your partner yet? Have you actually earned a yes from your spouse yet? Because if you’re someone who maybe throughout the majority of their adult life has struggled with consistency, you’re someone who’s struggled with discipline, you’re someone who’s struggled with actually seeing things through, then your partner or your spouse actually has a pretty strong argument as to why maybe you shouldn’t invest in real estate and you shouldn’t take a big part of what you guys have saved up financially and put this into this thing that maybe a week from now you’re going to lose interest in.
So part of it is proving to your partner, to your spouse that you’ve actually earned the right to present this opportunity to them.

Ashley Kehr:
I always think of the movie The Founder with the guy from McDonald’s, Ray, is that his name and how his wife was getting mad because he’d be out selling different things and he was doing the milkshake machines and it was always one thing after another and trying to get out there. But I think if your spouse does say no or your significant other, clarify why, what is their biggest fear and kind of go back to that and then maybe reassess the situation, give it some time, don’t harp, don’t nag, but maybe do a little more research, figure out different ways that you can make them more comfortable with this idea and be riding in the car and be listening to your Real Estate Ricky podcast and let it go in one year and maybe it goes out the other, but at least it might trigger that aha moment.
We all have them. A lot of people had those for real estate as that aha moment. I can remember mine, I was sitting in an attorney’s office, there was an orange shag red, there was wood paneling on the walls. And that was my aha moment during that time as to, wow, this is what real estate can do for someone. It wasn’t for me at that time. It was for someone else, but it was like, wow, I need to do this.

Tony Robinson:
Yeah, the shag rugs will do it. Maybe that’s the trick guys. Just get a shag carpet for your spouse or for your partner. All right guys, don’t go anywhere. We’re wrapping up with the most actionable part yet exactly what to do this week to start shifting the conversation in your own household. We’ll be right back after this.

Ashley Kehr:
All right. So if you are actually serious about getting your partner on board, not only do you listen to this podcast and to have a conversation with them following the framework, but we’re going to give you action items that you need to do this week. You are serious about this and you want to take these steps to get your partner on board to actually start investing in real estate. Here’s what you need to do. This week, you are going to write down the three biggest financial goals that you have and your partner is going to do the same. Okay? You don’t even need to bring up real estate investing, just three big financial goals. Maybe it’s something as paying off a credit card that has a $500 balance that’s kind of just been sitting. Maybe it’s setting up savings and having some reserves. Maybe it’s getting a repair done on the house you want to save up to do this repair.
Maybe it’s to get a brand new kitchen. Whatever these big financial goals are for you, I want you to write them down and have your partner do the same. I got to laugh because if you guys are watching this on YouTube, you see that I’m really struggling with the sunlight coming at it moving constantly. Literally slouched down right nw coming in the window. Every time

Tony Robinson:
Your camera cuts back to you like in a different position.

Ashley Kehr:
But we usually don’t record it this time, so usually it’s not a problem. But yeah, so I think I want you guys to sit down and each do that and then compare your goals and see how they differ and see how they are similar.

Tony Robinson:
And then for this month, just ask your partner to read one chapter of a BiggerPockets Real Estate book or listen to one episode of the Real Estate Rookie podcast or shows together or say, “Hey, babe, instead of binge watching our favorite YouTube or Netflix show, I’m sorry, let’s watch Tony and Ashley, just one episode, and here’s one that I think you might like. ” And even better if you can find a story that might resonate with your partner, but just ask for one small ask this month to get them on the road to start indoctrinating themselves with all things real estate.

Ashley Kehr:
And not this episode. We want one that’s actually about real estate. And then before you actually bring up a specific deal, like maybe you already have a property you know that you’d like to try and buy, do a full deal analysis, a scenario, every single exact dollar where the dollars would come from, how much you would need to pay each month. Maybe you plan to do a flip or do a bur where you’re going to have to rehab the property, bring your estimate, everything like that, put together almost like a pitch or a packet that literally has everything explained into it because a lot of people are visual. Being able to visually see the numbers, visually seeing the math, seeing how it would work and what the outcome would be instead of just saying like, “Hey, I think that we can buy this house. We’ll spend $20,000 and then we’re going to get a $1,000 cash flow.” For a lot of people that don’t know about real estate investing, that sounds great, but it’s hard to comprehend and wrap your brain around.
Some of the things you’re telling me about real estate investing, they sound too good to actually be true. Well, thank you guys so much for joining us for this episode of Real Estate Rookie. I’m Ashley, he’s Tony, and we hope you guys start real estate investing if you’re not already. If you need more resources, make sure you go to biggerpockets.com. You also sign up to be a pro member to get a ton of pro perks, including discounts on lenders, discounts on your insurance, free property management software with rent ready and huge discount from Home Depot, and plus many, many more. So you can go to biggerpockets.com/pro. And we’ll see you guys on the next episode.

 

Dave:
The war in Iran, AI displacement, a confusing labor market, declining consumer sentiment, and higher inflation. All of that made the news in just the last week. It’s a lot and it can be hard to keep up and understand how all of this news and information impacts your business and your portfolio. But you don’t need to be overwhelmed or worried when instead you can be informed and prepared because that is how you navigate and even thrive during uncertain periods. And that’s exactly what we’re going to help you do here today on On the Market. We’re going to dig into the absolute avalanche of economic news and data that’s come out in recent days, and we’re going to distill it into what actually you should be paying attention to and what you can ignore. This is On the Market. Let’s get into it.
Hey everyone. It’s Dave. Welcome to On the Market. Today on the show, we’re going to be digging into recent events and data that are genuinely shifting expectations for the entire economy and for the housing market. And I’ll just be honest, this is a lot happening recently. It can be tough to keep up and try and piece together all this information that feels like it’s coming from every single angle. Every part of the economy, every news that you hear kind of shifts your brain about what you should be expecting for your business. And it can be confusing distilling that into actionable steps that you can actually do to help protect your business during uncertainty and actually help it grow. But I think I can help. I think I can help distill all the information that we’ve heard in the last couple of weeks down into some digestible takeaways, a couple predictions and actions that you as investors or industry professionals can take away.
We got a lot to cover today, so we’re going to just jump right into this thing. So first up, we’re going to start with the news that I think personally is the biggest news for the housing market in general. And I do think it’s going to drive a lot of economic decision making, a lot of monetary policy, a lot of consumer behavior for the foreseeable future. And that was inflation really starting to pick up again. Fortunately, since 2022, since we saw the insane inflation of 9.1%, that’s where it peaked, things have been steadily coming down. For the last year or so, they’ve been up or down. It’s been kind of volatile. But this last month, which reported on inflation data from March of 2026, we saw a pretty dramatic reacceleration of the Consumer Price Index, which is the most publicized way of tracking inflation. Overall, the overall CPI, the top line number, went from 2.4% to 3.3% in just a single month.
So it went up 0.9% in a single month. That’s not normal. At least not in COVID, but in a normal month in the last two, three years, we would expect 0.2, 0.3% in one direction or the other. But seeing 0.9 is a pretty dramatic acceleration in inflation. And although it’s just one month, and I always say on the show, we don’t want to get too obsessed, too overly concerned about one month of data. There are a lot of reasons and evidence that suggests that this wasn’t a one-time anomaly and it might actually get worse. Because if you think about what happened in the last month and why things went up so much, yeah, it’s easy to point at oil prices and the energy shock that is resulting from the war in Iran, but I don’t even think we’ve seen or measured the full impact of that in the economy.
Sure. If you look at crude oil prices, yeah, they’re up like 50%. Even after the ceasefire, that’s very shaky right now. I’m recording this on the 13th of April, comes out on the 15th. So who knows what happens in just the two days between recording this and releasing it. But as of right now, this morning or yesterday, President Trump announced the blockade of Iran. We’re now seeing oil prices up above $100 a barrel again. But even with the ceasefire in place, they were still around a hundred bucks a barrel. That’s still 50% higher than they were back in February. And so yeah, that’s pushing up inflation. But oil is also an input cost for so many things in the economy, whether it’s construction because they use diesel or because they have to import things that are put on ships that also use diesel or food prices because 30% of the world’s fertilizer goes through the strait of hormones or service businesses that are now incurring themselves higher costs because of gas prices, because the cost of plastic is going up.
All of these businesses are going to have input cost increases. And we don’t know if and how much of that is going to get passed onto consumers, but I would guess we’re going to see a lot of it, right? Actually, another measure of inflation. So I’m talking about the consumer price index, what it costs you and me to go out and buy stuff at the store, that’s gone up. But there’s something also called the producer price index, and this actually measures what it costs people to make stuff. And that was up 0.7% in just a month. And I was looking at forecast for this month, and it’s going to be up over 1% in the next month. That is a lot for a single month. And we don’t know if they’re going to pass it on to consumers, but if I was a betting man, sometimes I am.
I would bet that those prices are going to leak into the rest of the economy and we’re going to see prolonged inflation. And this just is in theory. It’s not just my opinion here. If you look, this isn’t the first energy shock that we’ve had in the United States. It’s been going on for decades, right? And historically, if you look at energy shock, price shocks like this, they do tend to ripple through the economy with other prices. We are probably going to see more upward pressure on inflation. And we already had some upward pressure on inflation, right? It’s been going up, not a lot, but over the last couple months because of tariffs, we have seen inflation go up a little bit. And this just adds to that. So if you’re asking me, I think inflation is going to stay elevated definitely in the threes.
I think it could go up even more than it is last month. Now, I am not saying it’s going to 9%. I don’t think that’s happening unless something else happens. But just the trajectory right now, could it hang in the three to 5% range for the rest of the year? Yeah, I do think so. And that in itself has profound implications. I know it doesn’t sound crazy. The difference between two to 3% in inflation might not sound like a lot to you. And in some ways in your personal pocketbook, it might not be that much. But if you think about some of the macroeconomic or monetary policy things that are based off of this number, the inflation number, it really does matter. And I’m going to explain why. First and foremost, you should know that inflation and mortgage rates are very highly correlated, right? When inflation goes up, bond yields go up.
When bond yields go up, mortgage rates go up. That’s just how it works, right? That’s why in the last month in March, we saw mortgage rates on average go from about 6% to now 6.4-ish percent where they’re sitting today because the fear of inflation. That is why. Now, since this print came out, this inflation print that came out Friday, I guess the relatively good news is that the bond market and mortgage markets, we’re already expecting this. When they saw oil prices go up so much in the last month, they already adjusted. That’s why mortgage rates went up so quickly. So luckily, this inflation data that we got last week hasn’t pushed mortgage rates up even more. And I don’t think they’re going to go up even more right now. We’re going to have to wait and see further inflation data and see where that goes.
But right now, they’re hanging in the mid sixes. But the thing I want everyone here to know is that I don’t really see a reason to expect that they’re going to go down. Can anyone articulate to me why mortgage rates are going to go down this year? If you listen to the show, I’ve been saying for a long time, I don’t think we’re out of the woods for inflation. I did not predict this war in Iran. I’m not saying that, but there are a lot of reasons we have inflationary pressure in the United States, whether it’s tariffs, whether it’s our national debt. Generally, geopolitical uncertainty increases the risk of inflation. So I’ve been saying this for a while, but I am feeling particularly confident in that advice right now because how are they going to go down? You need one of several things to happen.
First and foremost, you need inflation to go down. How does inflation get better at this point? Might we see oil prices go down? Yeah. If there’s a deal with Iran struck, maybe we see oil prices go down, but even if there is a deal, if you look at some of the analyses by people who know way more about oil than I do, Goldman Sachs and these big companies, they’re saying that even if the straight afore moves opens and we start getting oil flowing again, oil prices are likely to remain elevated for about a year and we don’t have a deal. So is inflation going to go down? I hope so, but I don’t really see that happening in the meantime. What about Fed rate cuts? Is that going to bring down mortgage rates? Well, going into the year, the markets believe that there’s going to be two rate cuts, half point rate cut throughout the entire year.
Now, people who literally bet on this stuff say there’s about a 75% chance that there are no rate cuts this year. I should mention that even if there are rate cuts that might not bring down mortgage rates, but rate cuts in themselves might not happen. The other thing I hear people say is, “What about a new Fed chair?” Nope, don’t see that happening either, right? New Fed chair can come in and say, “Yeah, I’m going to cut rates even though inflation’s high.” I don’t think he’s going to do that, but he could. But he’s also one of 12 voters, right? The chairman of the Fed does not unilaterally make monetary policy in the United States. He’s one of 12 people. Not to mention the fact that Senator Tom Tillis is refusing to bring Kevin Warsch’s nomination to a vote until the Department of Justice withdraws its lawsuit against Jerome Powell.
So we might not even get a new Fed chair on May 15th when we’re expected to. So all of these reasons, whether it’s inflation staying high, the lack of rate cuts, tariffs, the uncertainty about a Fed share, all of those are reasons why I do not believe mortgage rates are going to come down. I’ve been trying to say this for a long time and here we are, right? I think people are finally starting to accept it. I’ve been arguing with people on social media about rates for years, people saying, “They’re going to be in the fives, they’re going to be in the fours.” I don’t think so. And I’m feeling more validated about this. I hope I’m wrong, right? It would be great if we got back into the fives. I think a five and a half mortgage would be a great place for us to be sitting, five to five and a half.
That’s normal. That’s great, but I don’t think we’re getting there in 2026. I think it’s less and less likely every day right now. And I’m not happy to be right about this. It sucks. Let’s just admit it. This is not fun. We’ve been in four years of low affordability, of a slow housing market. I hate it. No one likes this. If you’re a home buyer, right? We are reversing this trend where we are finally starting to see affordability increase. That’s reversing now. And it sucks, but my job on the show is to be realistic, to help you all prepare your businesses, to prepare your portfolios for what I think is going to happen. And I will be wrong in the future. I’ve been wrong in the past, but for three, four, five years now, I’ve been pretty good on rates and home prices. And I just want to say, expect higher mortgage rates.That’s it.
Make your decisions with higher mortgage rates. Now, of course, it’s not just about the number you see when you get a pre-approval. This is also going to have implications for the housing market, and this higher inflation is also going to impact other parts of the economy that you need to be paying attention to. We’re already starting to see evidence of this. It happened quick. Normally in housing, data lags a little bit, right? Current events, you start to see it a couple months later, right? The impacts of it, but we are already starting to see some of the impacts of higher mortgage rates and the war in Iran hitting the housing markets. And this is stuff you do really need to pay attention to. This is stuff that matters. We’re going to get into it in detail, but first we have to take a quick break.
We’ll be right back.
Welcome back to On the Market. I’m Dave Meyer going through recent news. I just kind of want to summarize what’s been going on in April so far because it’s so much and I want to help you understand what it means for the economy and the housing market. Before the break, I just talked about inflation, why I think it’s going to stay high in the mid threes at a minimum. I think it might go higher, and that mortgage rates are staying in the mid sixes for the foreseeable future. I hope that changes. Maybe something happens. Maybe the trade of hormones opens up. Maybe we get a little bit of relief, but right now, I don’t really see these things coming down. I don’t see any evidence, any narrative that suggests that they would. And this is impacting the housing market in measurable ways already. First and foremost, I think the thing you need to know is that we’re starting to see the housing market slow down even more.
We saw one of the slowest Q1s first quarter of 2026 that we’ve ever seen, one of the slowest times. And now we’re even seeing things slower. Now, not every data provider tells us inventory or pending sales numbers on a weekly basis. We’re going to have to see where April comes in, but Redfin does actually do weekly data. And what it’s showing is that pending home sales are down in the beginning of April. They’re down two and a half percent year over year. Might not sound like a lot, but we are already extremely low. So seeing them go down another two and a half percent, it’s going to hurt. The NAR also released their existing home sales data. We just got this today on Tuesday, April 13th, and we saw almost 4% decrease monthly. And I should mention this data is seasonally adjusted for all those nerds out there.
So this is even accounting for the seasonality that we see in the housing market. And right now, we are on pace for under four million home sales. Now, that’s not crazy by recent standards between 2023 and now we’ve been hovering around that four million sales number. Long-term average is about five and a quarter million. So we’re down a lot from there, more than 20% off of normal. We’re down a lot over COVID where we were over six million, but that’s kind of not normal either. But I think a lot of people, myself included, were hoping that the affordability gains we were starting to see would start to pick up the housing market. We would see more inventory. We would see more home sales, but I actually think we could go lower. I know, again, this isn’t good news, but if you look at everything that’s happening right now, there is not any reason to believe that we are going to see more home sales.
And I think if anything, the evidence suggests that the market could go lower. So why is that? Why am I making this statement? Because I know it’s not fun. This isn’t news that I like to share, but there are reasons that I believe it. Number one, we already talked about, declining affordability and mortgage rates, but there are other reasons. Right now, American consumers, American homeowners, for lack of a better term, they’re just not feeling it, right? They just aren’t in the mood to buy stuff. Last week, we got April’s consumer sentiment score. This is something that has been measured for 70 years, and it was the worst consumer sentiment that we have seen in 70 years. That, my friends, is ugly. That is historically ugly data. And again, don’t want to make too much about one month of data, but it’s been hovering near these lows and it has gotten even worse in the last month.
Economists were expecting it to go down. It went down even more. 70 years, it is the lowest point that we have seen. That is crazy. Now, I want though to put this into context because hearing that, it can make you think that we’re in this abysmal economy, right? Are we actually in the worst economy in the last 70 years? No, of course not. We’re not even really close to that. There have been far worse economic times than the one that we are in. I’m not saying that was good. I don’t think now is good. I think we have a lot of structural challenges in the economy that we need to contend with, but is this the worst economy in 70 years? No. But sentiment matters. People don’t feel good. They don’t feel optimistic about the economy, and this spills into the economy. It actually can be a lead indicator for economic activity.
And my take on this is that even though this isn’t the worst economy ever, the stock market has been resilient. The labor market, surprisingly resilient, I think people are just tired. I think people are tired of five straight years of inflation, of the fear of AI, of a very slow hiring market, of much higher mortgage rates and lower housing affordability. People need a break from what feels like an onslaught of uncertainty and economic risk, and they’re not getting it. And it compounds over time. I’m sure you feel this. I feel this, right? I absolutely understand this. You see, every time you go to the store, every time you go to the gas station, every time you go to buy, look at a listing on Zillow or realtor or whatever, prices just keep going up and up and up and incomes aren’t keeping up. So I get why people have low sentiment.
And for the economy, I guess fortunately, it depends how you see it, but in some ways it’s been good because it’s not like we’re in a huge recession. People are still spending. The economy is still flowing. But I do think at a certain point, the rubber hits the road, right? Sentiment is down. Wage growth is starting to go down. If we see this inflation stay where it is, we’re probably going to see negative real wage growth this year, which if you remember, last November, I think I put on an episode defining what I call the regular person recession. I don’t really care about GDP and the grand scheme of things. I care about it, but it’s one data point. I don’t think that should be the barometer of a recession. I think the barometer of recession should be are average Americans doing better or worse than they were a year ago or a month ago or whatever.
And negative real wage growth, if your wages are growing slower than inflation, that just saps that. I think there’s a good chance that we hit that. I think it’s actually probably likely at this point that we’re going to have real wage growth and people that’s going to impact people, right? I am surprised as you, how much people keep spending despite the economic uncertainty, but at some point I have to believe that people are going to pull back. I’m not saying this is going to be a depression or anything like that, but I do think we will probably see a decline in economic activity because of all this stuff is going on. Now, I should mention, it’s not just consumers who are worried. Actually, at BiggerPockets, we do this sentiment survey and I write it. So I sent out this survey that asked, “What impact do you expect the Iran war to have on real estate market in the next three months?” And it’s just overwhelmingly negative.
People just feel over 65% of people, more than two thirds of people think that it’s going to be a real detriment, a real negative to the housing market. Everyone else said neutral. No one else really thinks it’s going to be positive. So I’m just saying if investors who I might mention tend to be on the more optimistic side of the consumer spectrum, they’re not feeling great about some of the recent developments in the economy. And so I think that’s going to spill over everywhere. Now I don’t have any idea if they’re going to call it a recession or not, but I think the reasons for fear that people are experienced are real. The risk of recession, at least in my mind, is growing. Again, my hot take, if you remember back in December, my hot take for 2026, we are going to enter a normal person recession, and I think that is getting more and more likely.
Now, I’m not saying that nothing is going right. In fact, unemployment has been kind of decent. It’s at 4.3%. That is good. But if you zoom out and look at the labor market picture as a whole, not looking so good, right? We had a good March print, a lot of jobs added in March, but we’ve consistently seen those numbers revised down after that. And if you just zoom out and look at sort of the overall picture for the last, I don’t know, 15 months or so, it hasn’t been good. We’ve had multiple months where we’ve lost hundreds of thousands of jobs. If you look at the revised data for 2025, we averaged only 15,000 jobs added per month. That’s not a lot for context. And I think we’re just in for more of that. Again, I’m not trying to spread fear. I just point me in the direction of data that suggests the labor market’s going to get better.
I haven’t seen any. Even the most bullish people, right? Even the most bullish people about AI who say the economy’s going to be ripping and roaring because of AI. They’re saying that because they believe that the CapEx, the capital expenditures into AI are going to carry the economy, not because the labor market is good, right? The people who are bullish about AI are the ones who are most vocally saying that the labor market is going to get worse. Point me in the direction if you think I’m wrong, put in the comments. Why do you think the labor market’s going to get better? Because I have a hard time seeing in the immediate term, I’m not saying AI is going to take all our jobs and we’re all going to be unemployed. I don’t know if that’s true, but I’m not on that end of the spectrum where I’m like, “Oh my God, everything’s over.” But in the short run, almost everyone agrees that there’s going to be labor market disruption.
So again, risk of recession is going up. I think overall, when you look at these things together, if you look at the risk of recession, if you look at lower affordability, higher mortgage rates, demand for housing is going to stay low. And I do think it could even fall. And I know that is concerning and I know that is worrisome because you might be worried about a crash or if you’re a real estate professional, you’re probably worried about your business. So let’s talk about that. Let’s talk about what lower demand or consistently low, maybe lower demand in the housing market means, but we do have to take one more quick break. We’ll be right back.
Welcome back to On the Market. I’m Dave Meyer. Today, just going through recent data, summarizing my analysis for what’s going on in the housing market and the economy. And as you can tell, I’m not particularly optimistic. I’m not saying that there’s going to be a crash. We’ll get to that in just a minute, but I think that affordability is going to stay low, mortgage rates are going to stay high, demand for housing is going to remain low. Now, does that mean there is going to be a crash? Not so fast, right? We’re going to do a little bit of an econ lesson. Hopefully that makes everyone rest a little bit easier because I am not just saying there’s not going to be a crash based on gut feel. I genuinely do the analysis on this kind of stuff and I just don’t see evidence. Again, everything I’m saying here, there is opinion, but it is formed by evidence what we actually know, the data, the things that we can actually measure.
And right now, on top of this low demand and potentially lower demand, which I think might happen, the other thing that is happening is that we are seeing inventory and new listings start to moderate. And this, if you were worried about a crash, if you were worried about significant price declines should be reassuring to you because the way … Econ 101, right? Let’s talk about supply and demand. If demand declines, a lot of people assume automatically that means prices are going to go down. Could happen, that is one scenario. But if supply goes down at the same time, the market price wise can stay in equilibrium. But if you’ve ever looked at an economic supply and demand graph, you would know that even though prices can stay relative, what happens when demand and supply go down, lower transaction volume, right? They can stay in balance with one another, but there’s just less of both.
And that is what we are starting to see in the market. Now, make mode of stake, inventory is up over where it was during COVID. You’re going to see all these headlines and say, “Inventory is up 20% year over year.” Not really, actually. Maybe in some markets, but if you look at inventory numbers, the total number of homes that are on the market right now, how much are they up? They’re not. They’re down. They’re down 3% year over year, right? So all the people saying, “Crash. Oh my God, there’s no demand. Market’s going to crash.” Well, there is less demand, not that much actually. If you look at mortgage rate applications, it’s pretty stable year over year. My take is that it might go down in the future because inflation and higher mortgage rates and potential job loss recession, that kind of stuff. But it’s actually pretty stable right now.
And we are seeing the normal response to this, which is lower new listings, right? We’re seeing lower inventory, which is good, right? If you don’t want prices to crash, and we’re seeing lower new listings. Now, this isn’t good if you want to see more transaction volume, but if demand’s going to be low, seeing supply go down at the same time means that it puts a floor for how low prices are likely to go. And this is what you expect. I talk about this a lot, right? This is what you expect a seller to do. If there’s less demand for your home, fewer people are going to list their properties. That is actually what you would expect. And this dynamic is what I expect we are going to see this spring. I think demand is going to remain low. I think inventory and new listings are going to start to moderate and we’re going to see a very slow market.
I don’t think we’re getting above four million home sales anytime soon. It could drop to 3.9%. It’s not crazy decline from where we’re at right now, but I think most people are hoping we’d see modest improvement. I was expecting we go from four million to about 4.1 million this year. So I wasn’t expecting a huge increase, but I thought better affordability might put us in the right direction. Now I think the higher probabilities, if it moves, it moves in the wrong direction. It moves to a slower, but I don’t think prices are going to decline rapidly. I still stick by my prediction. I said we were going to get single digit declines in the national housing market this year. They’re flat right now. They’re not down. They’re like flat nationally, actually up a little bit, like 0.5% up year over year. But I do think it will come down.
That is what I expect. So what do you do then, right? I’m sorry for being sort of negative about this. I do just want to be honest about what I’m seeing in the market. I don’t want to just rah rah the housing market and make it sound like things are going to get better when I genuinely don’t think that they are in terms of sales volume, in terms of affordability, in terms of appreciation. I don’t think that’s getting better soon. So what does that mean as an investor, as a professional in this industry? Well, if you work in this industry as a loan officer, as an agent, I’m genuinely sorry. I can’t find a silver lining for this. I can’t. I’m sorry. It sucks. It has been four difficult years of low transaction volume. And every time we start to think that we’re turning a corner, like we had nine months of affordability improvements, right?
Now they’re moving in the wrong direction. So we’re not out of the woods on this. I’m not an agent, I’m not a loan officer, so I don’t have particularly advice on how to endure this or make your business more resilient. My job, or at least the thing I can help you do is just understand what’s likely to happen. And I don’t want people thinking we’re right around the corner from a turnaround in the market. Maybe I’m wrong, I hope I’m wrong, but my hope is to help you prepare for the worst, right? To be realistic about what is going to happen this year, and so you can prepare yourself and prepare your business for that. Now, if you’re a real estate investor, there is a silver lining, right? There is stuff that we talk about in this market. Every market has its pros and cons.
And although I’ve been relatively negative in this episode about what I think is going to happen, because I think we’re not heading towards a healthy housing market. That’s what I’m negative about. I want us to get to a healthier housing market and we start Stubbornly cannot get closer. But as a real estate investor, there will be better deals.That is the silver lining of this situation. And that’s true even if there’s lower inventory. Even if sales volume is going down, I just think we are going to see better deals. I’m already starting to see it. Days on market, they’re going up. There’s going to be more motivated sellers. If prices come down like I think they’re going to and rents stay flat, which is usually what happens in a sort of uncertain or down economic period, cashflow prospects will actually get better for new acquisitions. So my advice for real estate investors is to stay the course.
Don’t panic. Don’t exit the market, but be disciplined. Stick to your buy box. The things I’m doing, buying below current market comps. You got to buy 5% below comps, 10% current comps, not listing price. Buying below comps. Buy great assets. This is the opportunity. Things are going for sale. Great assets in good locations are sitting on the market. Not every seller is willing to take the offer that you have right now, but they will more and more. That’s what happens in these kinds of buyers market. That is the opportunity for investors. And the best advice I can give, and I think this is probably true for real estate professionals or real estate investors the same. Is think long-term. Real estate is a long-term game. It works in cycles. This is not uniquely bad times for the housing market. It works in cycles. You go through booms, you go through corrections.
We are in that correction. We are in that slow period. We are enduring a difficult time in the housing market. I’m not sugarcoating it, but it will come back. The housing market works in cycle. We’re in the hard part of the cycle. It can’t always be fun. But if you think long-term, you can find good assets. You can get good deals right now. You could pay good prices for good assets. If you find the assets you want to hold onto for 10 years and you get a good price on it, that’s great. You should do that in any market. So don’t mistake my sober analysis of the economy and the housing market right now for negativity in general about real estate investing because that’s not it. I still think there’s going to be opportunity. I think there might be even more opportunity in the next couple of months, but we’re going to have to sift through bad deals.
We’re going to have to sift through relatively low inventory. We’re going to have to endure higher mortgage rates. But if you can do that, you absolutely can still position yourself for success as a real estate investor. That is always true if you buy good assets at good prices and it’s especially true right now. All right, everyone. That is the show for today. Thank you so much for listening. I hope this analysis is helpful for you because I got these questions all day every day. People are like, “What does inflation mean for the market? What does the war at Iran mean for the market? What does consumer sentiment mean for the market?” And unfortunately, you can’t look at just one thing right now. You have to look at all of these data points and develop a thesis. And mine is that we’re stuck. The market’s going to stay slow.
Affordability is going to stay low. And I don’t really have a line of sight on when that’s going to get better. I hope it’s soon. It’s not happening in the next couple months. I can tell you that maybe by the end of the year, but something will have to change because the evidence right now suggests it’s not. But don’t panic, stay the course. Take long term, that’s how you can still succeed as an investor. For On The Market, I’m Dave Meyer. I’ll see you next time.

In This Article

One of the downsides to real estate is that the best ways to invest require a lot of money. 

If you buy properties directly, you’ll likely need at least $50,000 to $100,000 between the down payment, closing costs, initial repair costs, and cash reserves. 

You’ll need just as much if you invest passively in syndications—at least if you do so by yourself (which is why I go in on them with a co-investing club and invest $5,000 at a time instead). 

But if you do want to get to $50,000 fast, what are your options? 

The Income Side

You can grow your savings rate from one of two directions: earning more or spending less. Ideally, you do both at the same time. 

Sell your stuff

Have a yard sale (or garage sale, rummage sale, or whatever you call it in your neck of the woods). 

Sell all the stuff that’s cluttering up your basement, garage, and closets. Post the best and most valuable items on Facebook Marketplace and Craigslist first, and encourage people to come to your yard sale to see what else you have. 

You won’t make a fortune, but you’ll have more money and less clutter, which is always nice. 

Rent your stuff

Don’t want to part with some items forever, but not using them either? Rent out your tools, camera gear, ski equipment, or whatever else has real value that you’re not using. 

You can also rent out storage space in your home through websites like Sparefoot and Neighbor. For that matter, you can also rent out parking for cars, boats, RVs, and more if you have the space for them. 

Bring in a housemate

When I bought my first house, I rented out the other bedroom to a stranger I met through Craigslist. Fifteen years later, she and her husband are two of my best friends, and their kids are close to my daughter. 

Start or expand a side hustle

I’ve written before about real estate side hustles that can pay $100K+ a year. But no one says it has to be real estate-related. 

Do graphic design, bookkeeping, or freelance writing on the side. I myself still do some freelance work as a financial writer, and I love it. 

Prefer working with your hands? Offer handyman services. Bake customized cakes. Get creative. 

You can even flip free or cheap stuff you find on Facebook Marketplace, Craigslist, Freecycle, and garage sales. Clean it up and sell it at a premium. 

Get a raise

If you’ve coasted for too long at work, consider cleaning up your resume and taking a new job for a pay raise. 

Or sit down with your boss and say, “I believe in what we’re doing here, and I think I could do more to help. What opportunities do you have for me to take on more responsibility and advancement?”

It’s not always that easy to get a promotion—but sometimes it is. 

The Spending Side

Even as you’re adding income, trim down your spending to supercharge your savings rate. 

Use the subscription kill switch

Suspend or pause every subscription you have. Every…single…one. No exceptions. 

That goes for entertainment like video and music streaming services, of course. But it also goes for convenience services, software, and more. 

Do an audit, going back over every credit card statement for the last year. Look not just for monthly payments but annual renewals as well. 

Pause every one, and in a month from now, go back and resume the few that you really, truly left a gaping hole in your life. Leave the others behind. 

Cut out commercial food and drink

I love a great meal out as much as the next guy. But for a savings sprint, you should prepare everything yourself. 

That goes for meals, of course (including work lunches), but also beverages like coffee, tea, and alcohol. No more Starbucks lattes or happy hour beers. You can only have what you’ve stocked at home until you’ve reached your savings goal. 

Take the pantry challenge

We all throw things in our freezers and pantries, only to forget they’re there. 

Take the pantry challenge: Eat only what you already have in your kitchen until you’ve cleaned out your freezer and pantry. You can make an exception for ultra-perishables like eggs, but that’s it. 

Need recipe ideas? Tell ChatGPT what you have and ask what you could make. You’ll be surprised at the creative ideas you come away with. 

Enter a shopping moratorium

Likewise, you’re not allowed to buy any clothes or personal items until your savings sprint finishes. 

You can make an exception for bare essentials like toothpaste. But no expensive beauty products, shoes, jackets, or clothing of any kind. 

You have plenty of clothes in your closet for survival. And if you go a season without wearing the latest clothing trend on TikTok, that’s the price of building real wealth rather than the appearance of it. 

Embrace free entertainment

It’s easy to pay for prepackaged entertainment, especially with kids: amusement parks, video arcades, restaurants and bars, escape rooms, and travel. 

On a savings sprint, stop paying for entertainment. Embrace hiking and biking. Borrow free audiobooks, e-books, and paper books from the library. For that matter, borrow movies, video games, and jigsaw puzzles from the library, too. Have game nights with your friends or significant other. 

You’d be surprised how much fun you can have for free. 

Bike or scooter instead of driving

For six years, my family lived without a car. It was awesome. 

Granted, you probably aren’t willing to give up a car entirely. But every time you go somewhere, ask yourself if you could bike there instead. 

As they say, biking saves you money and runs on fat, while driving costs you money and makes you fat. To this day, I aim to walk or bike or scooter to get around town, even though we have a car again. 

Explore Ways to Invest With Less

Yes, you need $50K-$100K for real estate investments like rental properties or syndications—if you invest by yourself without exploring alternatives. 

One option you may not have explored is joint venture partnerships. If you want to buy directly, or if you know a skilled investor, you could partner on a deal together and come up with less money. We form plenty of private partnerships in my co-investing club as well, whether to flip houses, land, or build barndominiums. 

You can also go in on syndications with a group of investors, something else I do every month in the co-investing club. I put $5,000 at a time in different deals. 

Or you can lend money through a secured note. I do that too.

For that matter, you can invest in real estate investment trusts (REITs). They’re liquid and easy to buy, and you don’t need much money to invest. The problem: They share too close a correlation with the stock market. In fact, they’re effectively just another sector of the stock market. 

Go on a savings sprint. But rather than putting $50,000 to $100,000 in a single investment, consider spreading that among 10 to 20 different real estate investments for true diversification. Practice dollar-cost averaging, investing $2,500 to $5,000 a month in new investments rather than one-off $50,000 investments. 

Take it from someone who’s invested both ways—it’s a more comfortable way to invest.

In This Article

You’ve probably heard the phrase “misery loves company.” Turns out, money loves it too.

The latest IRS migration data, set to visuals on Realtor.com, show that well-heeled individuals are quietly packing their bags and leaving high-tax coastal markets for lower-tax Sunbelt and Mountain states.

The wealth migration isn’t just for the likes of Jeff Bezos and Elon Musk; smaller real estate landlords are getting in on the exodus and, in doing so, reshaping rents, demand, and long-term appreciation.

The New Map of American Money

Visual Capitalist released its own map of the movement in America in 2023 based on IRS data and the Realtor.com analysis. It shows that, by far, Florida is the most popular state for Americans to move to, followed by Texas, the Carolinas, Tennessee, Arizona, and Nevada, bringing their billions with them from other states. 

Rank	State	Net Interstate Income Flows
1	Florida	$21B
2	Texas	$6B
3	North Carolina	$4B
4	South Carolina	$4B
5	Arizona	$3B

Conversely, California and New York, where residents are taxed at higher rates and real estate is more expensive, saw large population outflows.

Why Wealth Loves Florida

Despite its unpredictable weather and high insurance costs, Florida attracted roughly $20.65 billion in taxpayers’ money—more than any other state. Texas followed with $5.5 billion in net gains, with South Carolina at around $4.1 billion and North Carolina at $3.9 billion, highlighting the attraction to America’s Southeast. 

Meanwhile, the coastal hubs are bleeding taxpayers’ cash. The Wall Street Journal’s Allysia Finley said on the Potomac Watch podcast:

“You see the same trends that were already occurring before the pandemic, and in part, you’ve got a lot of people from New York, New Jersey, the Northeast who are moving down to lower tax climates in the Sunbelt. So the top states that have lost adjusted gross income, and that’s how the IRS actually breaks down the data, by adjusted gross income…New York lost $9.9 billion. Illinois’s $6 billion. Massachusetts, $4 billion, New Jersey, 2.6 billion. Maryland, $1.8 billion. And Minnesota, $1.5 billion.”

Fellow podcast host Kyle Peterson was quick to point out that it wasn’t just the Sunbelt that was attracting residents: “New Hampshire, Wyoming, and South Dakota are gaining income in this IRS data. You’re not moving to South Dakota for the weather.”

High Earners Are Leading the Exodus of High-Tax States

While large swaths of everyday workers and real estate investors have decided to give up on higher-tax states, it is billionaires and multimillionaires who are making the headlines, encouraging others to follow suit.

“You’re driving away at the top earners, and you saw that with Washington State…which has lost Jeff Bezos as well as Howard Schultz (founder of Starbucks), entrepreneurs who started their businesses in Washington State,” Finley said in the podcast.

Jasper County in South Carolina Is the Fastest-Growing County in The U.S.

The loss of tax revenue is directly linked to housing supply, with Sunbelt states not only having the additional cash to support housing initiatives but also residents to absorb the new construction of condos and apartments.

One of the immediate beneficiaries of the exodus from high-tax states has been South Carolina’s Jasper County, where the U.S. Census Bureau shows the population has increased by 9,000 in the last six years to 38,000 residents, making it the fastest-growing county in the U.S. centered on its main city, Hardeeville. That has resulted in a housing boom, according to the New York Times.

“Our goal is not to get to 100,000 people, although that may happen someday,” Hardeeville Mayor Harry Williams told the Times. “Our goal is to bring job opportunities to our young people.”

What This Means For Investors

The equation is simple: The wealthier the state, the more people will pay for rent, and the greater the population, the greater the incentive to build more housing, which in turn will help equalize home prices.

The IRS data shows that Florida’s Palm Beach County received about $3.04 billion in income in 2023, with residents’ average income around $178,085. The greater the diversity of migrants in a state, the greater the need for diverse housing that supports mom-and-pop landlords rather than just deep-pocketed investors buying pricey condos or second homes to rent out on a short-term basis when they are not there.

“Texas is growing fast, but its migration story is broader and more working- and middle-class than Florida’s,” journalist Jack Salmon wrote on The Unseen and The Unsaid Substack when commenting on the same 2022-2023 IRS data as Realtor.com.

While much of the country struggles with affordability, Forbes notes that the rising share of wealth held by the top 1% “has reached a new record,” which, when combined with the migration patterns across the U.S., portends high rent growth and property values, though it must be noted that many of the extremely rich will buy rather than rent. Still, the increase in property values, like an incoming tide, causes all else to rise up with it.

Final Thoughts: Using the Migration Map to Create a Practical Investment Game Plan

If you are not looking for a simple, safe place to park your cash but rather to leverage it, there’s no point in investing in Miami and the other pricey metros attracting high-income residents. The rental market generally won’t support cash flow from rentals.

Instead, look to more affordable markets in North Carolina and away from the big tourist attractions, where a mix of retirees, remote workers, and future first-time homeowners might want to rent for flexibility or to save. There are also higher-end homes here that could double as short-term rentals. But again, the more expensive, the less sense it makes to leverage.

Elsewhere, Tennessee, Georgia, and Arizona will also offer pockets of investor-friendly real estate that might not cash flow given current interest rates but could look like a prescient move when the hallowed day of sizable rate drops finally arrives, or you simply hold on to them long enough to pay down the mortgage while rents increase.

Ashley Kehr:
He took out a mountain of law school debt, about a 440 square foot apartment he could barely rent out, and then his government shipped him overseas before he could do anything with it. Today’s guest turned that accidental start into a multi-property US portfolio, managed remotely from the US embassies around the world, including right now in Vienna, Austria.

Tony Robinson:
And what’s wild is that the skills he uses to analyze foreign governments, well, he’s used them to build his buy box. And we’ll get into all of that, the diplomacy, the debt, the 12-year kind of hiatus, and the tactical playbook for investing when you can never visit your market.

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

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

David Epstein:
Super happy to be here. Really appreciate the opportunity. Thanks.

Ashley Kehr:
Now, before we get into any details and further into your portfolio, just give us a scorecard. How many doors, how many years since you started really getting serious about investing in real estate? And you’re calling in from Austria today. How did you get there?

David Epstein:
So right now, we’re sitting actually only on three doors. We previously had four. We recently sold one back in 2024, and we’re now in the process of reacquiring a fourth property as we try to rebuild the portfolio towards our end state goals. So how we got here and how we got serious really started back in 2017 after I had had, as you mentioned, a 12-year hiatus. I was an accidental landlord at first, which is what probably led me to bigger pockets, led me to thinking about real estate, but life, career, things like that got in the way. And then from 2017 to 2019, I got my second property. 2023, I did a cash out refi, and then I bought the fourth property. And then as I mentioned, in 2024, we sold that fourth and we’re looking to pivot to use that money into a new fourth property as we go back into growth stage.

Tony Robinson:
Talk about long distance investing, and we’ll get into that here as we go through your story. But Dave, I mean, I guess take us back to 2005. You’re fresh out of law school. As we know, law school is a very expensive place to go, and you decide to buy a 444 square foot co-op in New York. So first, what is a co-op for those that don’t know? And then what was the logic and what did you think you were going to get when you stepped into that first deal?

David Epstein:
So for most people who don’t know what a co-op is, I know Ashley invests in New York, so there might be co-ops near your market, but the short answer for most real estate investors is a co-op is a mistake. But the fact of the matter is, you basically are buying shares in the corporation that owns the property that then gives you the right to live in a unit. There’s a board of directors, there’s an interview to buy. When you eventually get the right to rent out, which you usually can’t do before, say, five years of owner occupancy and so forth, the potential tenants go before a board. Also, it’s really quite cumbersome. But because I bought it thinking I would live there, start my career as a lawyer, and there would be no problem, I saw no problem. It turned out to be quite a problem because within about two years, I was joining the foreign service as a US diplomat, getting sent to my first overseas assignment, and I had to choose between selling it or figuring out a solution.
And as you mentioned, I had a lot of debt. So any decision had a potential significant financial consequence.

Tony Robinson:
Dave, just one follow-up because I’ve never heard of a co-op before. I’m in California. I don’t know if we have those here, but I guess what is the benefit to a co-op versus just simply renting a space out or trying to buy like your own 440 four square foot apartment? Yeah, like a condo.

David Epstein:
I think for a lot of people, there is a lower price point because of the sort of onerous restrictions that exist on it. So because you don’t own the property, you’re limited in what you can do with it. For some people though, that also means because there’s a higher vetting process, there’s more hands-on management from this board that have to be comprised of people who live in the building. There’s usually a really good maintenance schedule that takes place, whether it’s just taking care of the facilities, the grounds or things like that. I mean, things tend to work. And so what for me was a very low price point in 2005, about $125,000 might have been closer to 200, 250 for a nearly identical property that was a condo. So there are advantages for people who want to make that, again, their primary residence, but if you’re going the investment route, it’s really not the way to go.

Tony Robinson:
Was it easier, Dave, to get approved for this? I mean, because I’m assuming you’re coming out of law school, you probably have a lot of student debt behind you. Just like ballpark, how much debt did you have coming out of law school?

David Epstein:
Probably about $125,000 in debt coming out of law school, three years of law school. And part of that is they’ll just let you sign anything and give you any amount of money to attend law school. And when you’re in your early 20s, you say, “Sounds great. What could be the problem? I’m going to become a lawyer. I’m going to become a multimillionaire and everything will be great. So sign on the dotted line.” But buying this property, it wasn’t that difficult. First of all, it was 2005. They were basically checking for heart rates to give out mortgages at the time. And the good thing for me was I had a very, very low risk tolerance, partly because of all this debt and partly just my own personality. So I didn’t go for an arm, which probably would’ve killed me as the bubble burst in 2008, people were losing their shirts and such.
So I had a fixed rate mortgage and I put 20% down. Because I had my degree and I had a job as an attorney, they were willing to sign over. But again, it wasn’t a big chunk of cash and it wasn’t a big purchase price. And so it worked out until, as again, it didn’t really work out so well.

Ashley Kehr:
So you got that call and you’re going to, what was that, Central America and you now realize that you have a problem. So what specifically did you do to get around this rule that you have to occupy this property as your primary residence?

David Epstein:
Yeah, I was lucky because maybe this was a sort of foreshadowing to the skills I would learn as a diplomat, but I developed a very good relationship with the building management company. And we looked at the documentation, it benefited also that I was a lawyer and we looked at the documentation. And as long as a family member moved in, there wasn’t going to be a violation of me trying to rent out as a non-owner occupier. So I convinced my sister to move in. I said, “Listen, you need a place to stay. I can give you probably the best possible rent you could get for an apartment of this size. You’re two blocks away from the train station right into downtown Midtown Manhattan and you’re working in the area that we grew up in, so it’s perfect. You have everything you need.” So she agreed and it was perfect for her for a couple of years.
And just right around the five-year mark, she moved in with her now husband and that’s kind of how I really became a landlord because I then had to figure out, do I sell or do I rent?

Ashley Kehr:
So during that timeframe, it was a family member that was staying there. So it was kind of like an exception to get around the rule. Yeah. So now that you’ve hit this five-year mark, you have these options available to rent it and to sell. What kind of information or data did you look at to help you make that decision and what did you choose?

David Epstein:
Well, so part of it was now that we’re five years past the purchase, we’re in the midst of the housing bubble burst, right? It’s now 2010. Selling it was probably not a good idea. I was going to take a massive, massive hit. But what I did know was the location was great. I mean, one of the reasons my sister was willing to live there was a few blocks away from a highway, a couple of shops nearby, as I mentioned, two blocks away from a train station right into Manhattan. And so I thought, listen, I think I can rent this out. I think someone will at least cover my mortgage and be happy to live there. Even though it’s a studio, I’ll probably have turnover, but I did the numbers on the back of the envelope. I didn’t have the benefit of BiggerPockets or anyone really to talk to, but the numbers seemed to work.
And we got someone in there and they covered it and they went through the board process and they approved them. And so I said, “Listen, I’ll do this for a year and see what happens,” because I was in an assignment overseas. It would’ve just been too difficult to do anything else.

Tony Robinson:
So can you just discuss for the listeners, Dave, what was it like to maybe own this property that you couldn’t actively manage?

David Epstein:
So as I said, I owned it in an area that I was from. I grew up in this same town. And so I did have a little bit of hands-on help. I mean, my father could answer a phone call here or there, but again, it was about relationship building. I spoke to the super of the building, the members of the board, the doorman of the building, all the people that were really the lifeblood of how the building operated, and they were willing to keep in touch with me and help me out. If I reached out to them and said, “Listen, the tenant had this question or this issue arose between you and the tenant. I can help assuage these problems.” And again, it was all relationship building. And so it wasn’t formal property management and it wasn’t self-managed because like I said, my dad could show up and make a quick Home Depot run and get them a new smoke detector or something like that, but they weren’t doing anything.
So it was again about building these relationships and they were willing to help me out. And I’m still grateful to them to this day, even though I’ve sold the property and I don’t maintain that relationship in any formal way, but it really was about relationships.

Ashley Kehr:
Now that accidental hold taught you something powerful and eventually helped set you up and put you down a rabbit hole that just completely changed how you thought about building wealth. So when we come back, we’ll talk about the 12-year gap between that first property and your second, and that’s the exact moment that bigger pockets flip the switch. We’ll be right back. Okay. So David, you bought that first property in 2005. Your next one wasn’t until 2017. That’s 12 years. For a lot of our listeners, people sitting on the sidelines right now feeling like life just keeps getting in the way. I really want to understand what that stretch actually felt like for you.

David Epstein:
Yeah. So I will say the first year or so of that stretch didn’t really feel like that much of a distraction or a deferred action because as I said, I was an accidental landlord and I barely kind of scraped through becoming a formal landlord by design at that five-year mark. So the first couple of years, I was really focused on my career. I mean, I left El Salvador. I was then going to Jerusalem. I was in Israel, and that’s where I met my wife. And what happened was that’s when I discovered BiggerPockets or sometime in that timeframe, 2011, 12, I don’t know when you guys kicked off, but somehow I discovered BiggerPockets. And I don’t know why I discovered it. I don’t know what I was searching for that day. There wasn’t as much of a in- your-face algorithmic ad push that existed. So I found you, I’m grateful for it.
And it started getting me thinking, I have this property, it’s working out. I’m now married and I’ve managed to now turn over two tenants, two generations of tenants, and it’s still working out. It’s still paying for itself.
And so I started doing as much research as I could. And the first thing you always hear on BiggerPockets is analysis paralysis. And I have, as I said, a very, very low risk tolerance. And so I just started trying to come up with formulas and ideas that I could be comfortable with. But again, buying a property from far away, in my case, not even traveling to the market to take a look, walk the streets, and then buy it from far away. It was literally, that was not an option. So I just started putting together what I considered to be made up metrics, and I tried to come up with some idea of what made the most sense to me. And I came up with a couple of markets based on some conversations I heard on the board, some ideas I heard on the boards, whether it was millennium population or Fortune 1000 company headquarters, all these different metrics, just to get something that made sense to me.
And I came up with a couple of markets and then a lot of turnkey operators started coming online as well that were a lot easier to use remotely instead of just in your own market. And so my wife and I, at that time then, we had two kids and we said, “Listen, we have money put aside. We’ve kind of been talking about this for a few years. Let’s take the plunge.” And one of the markets that we decided on literally was about cost of entry between two markets we were really leaning towards. One of them was Jacksonville, Florida, and it had a lower entry point at the time, about 110, 120,000 was your average three bed, two bath property. And we went for a turnkey and it was an absolutely fantastic opportunity for us balancing the distance and the demands on my time with a family and my job to look for this option.
Now, it’s not going to cash flow as much as some rundown place that I add value to, but it was a wonderful option for a person in my circumstances. And it’s, again, thanks to BiggerPockets giving me these ideas and how to get confident with making a decision.

Tony Robinson:
And for our listeners that aren’t familiar with the phrase turnkey, a turnkey provider is essentially someone who, in a lot of situations, they’re buying something that’s in need of a value add like needs renovation, they’re buying the property, renovating it, placing a tenant into that property, and then they’re selling the fully renovated, fully leased property to another investor. And to Dave’s point, oftentimes you are losing some of the margin on those deals. What you lose in margin you make up for in convenience, peace of mind, and the potential speed at which you can find these deals. So there’s a give and take there, but for someone who’s on a different continent, there’s probably a lot of value in having something that can do that for you. But Dave, you describe yourself as someone who analyzes foreign governments for a living, identifying patterns, making judgment calls when maybe you don’t always have all of the information.
How did you apply that professional skillset to building your kind of buy box for real estate investing?

David Epstein:
Yeah. So I mean, every single day I have to make decisions that are based on very, very incomplete information. Either I don’t have access to the information or someone doesn’t want to give me the information. I mean, we’re dealing with geopolitics. There are countries that want to do things and have motivations that they want to keep things close to the vest. And so I think one of the ways you can think about it is trying to look at the climate rather than the weather. The weather is a daily occurrence. It’s a snapshot in the now, whereas the climate is about certain trends, certain data, certain pieces of information that while you always hear past performance is not future guarantee of outcome, but you can certainly look at an environment and you can derive or at least guess some things about where it’s going. And so as I mentioned, I just started coming up with these metrics, hearing different chatter on the BiggerPockets message boards and such.
And so like I said, I was looking at things that I thought just made perfect sense to me. So one of the criteria was proximity to military presence. I said that’s a constant turnover, but it’s also a constant reliable market of people coming who are reliable tenants as well. I mean, they’re subject to the universal code of military justice, right? They can’t just trash your place and run away.
There’s the reality that with that comes secondary economic benefits, just supermarkets and school supplies and things when they bring their families and so forth. I was looking at millennial population trends. I was looking at Fortune 1000 company headquarters because I figured those don’t close every time the wind blows. So again, I was looking at it, what I think of as more climactically rather than the daily weather forecast. And then I picked a few markets. And then the other thing is I said to myself, I’m married. I have two kids. Now I have three kids, but at the time two kids, I said, three bedroom, two bath is sort of the standard fare in housing when you look at it. And I am giving some new consideration to that, but overall, that is a reliable strategy that others have used. So again, you take these different data points, you take the information that people are willing to give you like on the BiggerPockets boards and you draw a picture for yourself.
And then of course you have to take action based on whatever picture you’ve drawn for yourself.

Ashley Kehr:
David, what market did you end up deciding on for this second property?

David Epstein:
So this was Jacksonville, Florida, and we’ve been very, very happy with this property. In fact, the tenant that’s there since 2017 is still there.

Ashley Kehr:
No turnover. That’s great.

David Epstein:
Zero turnover, zero turnover. And she and her family have been wonderful. She’s been very communicative through the property management company I have, lets me know about things that she would like to have done to improve the property. They’re always reasonable and I think that helps maintain the value of my investment. And so I think it’s a really good relationship.

Ashley Kehr:
And now when you found the turnkey provider, were they someone that was specific to that area or were they kind of more all over the place and they helped you pick that market?

David Epstein:
So they, at the time, they were focused on a handful of markets. So it was the Jacksonville area, Orlando area, I want to say one or two of the markets in Tennessee, North Carolina, but they were Southeast US and they hit a couple of markets there. And so I also felt confident with that because they were clearly kind of focused in on an area of the country. They also had information about the companies that were currently managing the properties. And I was able to pick up the phone and call that management company and ask them a lot of questions, which I took from your message boards.

Ashley Kehr:
Do you have any other tips or advice for our rookie listeners on vetting a turnkey company? We talk about vetting property managers, agents, things like that. But what about a turnkey company? You said you liked that they were very specific to one area. That was a good sign. What are some other green flags that you see for a turnkey company?

David Epstein:
Yeah. I mean, well, first of all, I feel like I went in this direction out of necessity, partly. So I don’t want to say that it’s for everybody. I would certainly do it again though, especially with this company that I used. I felt comfortable with it. I think one of the things was I was also able to talk to people from the turnkey company. I mean, it wasn’t just some marketplace where you’re just clicking on things online or sending emails. I was able to get on the phone and talk to people. And again, using the BiggerPockets Message board, I had ideas of some questions to ask. I mean, I’m always trying to learn more. I’d probably go back in time and ask 20 other questions. Fortunately, it worked out for us, but just being able to connect human to human, right? I still think that even in the age of the internet and everything, we’re having this conversation from however many thousands of miles away.
Human to human relationships is still critical, I think, to being able to make judgment calls and make good decisions. And so having those relationships.

Tony Robinson:
Dave, one thing that you mentioned that I just want to circle back to is the metaphor of weather versus climate. And I’ve never quite heard it described that way, but it is such an apt way to describe how you can make certain decisions is to not get so fixated on what’s happening today, but to sometimes look at longer time horizons. And I know for a fact that where a lot of rookies get overwhelmed is in the dreaded analysis paralysis. We don’t live today in an age where we have a lack of information. If anything, there’s an overabundance of information. That’s usually what drives people to not take action. So I think the question along with that concept of weather versus climate is that within that, sometimes there are a lot of data points. How do you not get so caught up in trying to find the next data point and the next data point and the next data point and just getting to a point where you can actually make a decision?

David Epstein:
Well, first of all, a lack of time to be able to do that. I mean, I would love to be able to do some of the things that you hear on either your podcast or the more general BiggerPockets Real Estate Investing podcast and dig down into crime statistics or literally look at every property and get on Google Maps and walk the street if I can. But I just don’t have that time. And so you talk about the buy box a lot in bigger pockets, and I think part of it is not just saying, “Oh, I want a three bed, two bath, this is the maximum price. I’d like this size lot or this proximity to a school.” But just saying, “This is the amount of information that I want, whatever it is, and I need no more information.” Now, that doesn’t mean the next day you’re going to make an offer or the next day you’re going to close a deal because you might have to make 20, 30 offers and do the math on 20, 30 properties.
I’m also, I am not a good math guy, so I’m doing very rough math on mortgage insurance, taxes. I’m looking at maybe Zillow, Redfin for 10 different monthly rental listings, and I’m just looking at what makes sense. Again, I’m very risk averse, so I’m rounding down a lot on the income, I’m rounding up a lot on the cost, and I’m just making sure that that at least kind of hits that delta that I need.

Tony Robinson:
Yeah. Dave, you said something insightful is that you identify what you actually need to make a decision and then nothing more than that. But I think that’s where I want to drill down. How do you decide where to draw that line? And I think so many people, the line just kind of gets pushed out every single time they get a new piece of information, they realize there’s something else that they don’t know, and that the line just kind of moves further down. So how do you, both as a real estate investor and even just like in the work that you do for the government, how do you decide where to draw that line?

David Epstein:
Well, I mean, again, you make a point here is that it does get back a little bit to my work. I mean, sometimes you just have to stop and you just have to say, “This is the information that I have and it has a real significant value.” And I can share that in the case of sharing it back with Washington DC, sharing it with my supervisors, when is it worthwhile to share this information and why would they need any more at this moment? And the same thing with real estate. To know that a property in this area or properties in this area that are three bed, two bath or whatever the situation is, go for this amount of money and this is the rent and here’s what the insurance and here’s what the mortgage rate would be. And again, building in a cushion of conservative estimations, you just say, “This is enough information.” I mean, because as you and others in the podcast say all the time, it is a question of math, right?
I mean, you shouldn’t fall in love with a property, maybe not even with a market unless you really know the market and you’re more in love with those dynamics in the market, but it should be enough when the numbers work. And if you have enough information for the numbers to work, you should be able to stop. You don’t need to know, “Oh, it has a really beautiful bush in the front yard that might be fun to decorate on Christmas.” That’s irrelevant to buying the property and knowing that the numbers will work and a family will be happy to live there and might stay, so reducing your turnover, et cetera, et cetera.

Tony Robinson:
And Dave, I appreciate you walking us through that. And I know I’m harping on this a lot, but the reason I do is because I know that this is where so many people get stuck before ever even buying their first deal. And just to compliment what you’ve shared, I think what I want all of our rookies to walk away with is that there is a distinction between comfort and confidence in a decision. And what a lot of rookies wait for is comfort when in reality, what they should be searching for is a certain degree of confidence in a decision. It is if you’re doing anything of substance, anything that’s new, anything that’s pushing you outside of your normal boundaries, by definition, it means you’re stepping outside of your comfort zone. So it is physically impossible to be doing something new, doing something of substance, doing something that’s pushing you to grow while also being comfortable.
So if we wait for that comfort to arrive, we never get to a point where we can make a decision, but if we instead accept that we have to be a little bit uncomfortable and instead look for a certain degree of confidence in our decisions, that’s how we actually move forward. And Dave, I mean, again, doing this from, I don’t even know where Vienna is at on a map, but the fact that you’re doing it from there and you’re buying real estate, I think is a testament to your ability to do that. So Dave, you’ve got your framework, you got your first intentional deal, and then life delivers another opportunity, a diplomatic assignment to Colorado Springs, which is a place I do know, which is actually one of your target markets. So when we come back, we’re going inside his full remote investor playbook, how he manages properties from embassy housing in Vienna and what any long distance investor can steal from his system.
All right, we’re back here with Dave. Now, Dave, you’re opposed to Colorado Springs, a market you’d already been analyzing, and I want you to walk us into that moment. You’re living in a city that you’ve been researching as an investor, and you have a two-year window, and I want to know what you did with it. So you actually bought in Colorado Springs while you were stationed there, and you’ve built out your portfolio from postings in multiple countries. Again, right now, today you’re managing from Vienna. What does a typical week look like as a property owner?

David Epstein:
What does a typical week look like as a property owner? I mean, thankfully due to some amazing property management, it is very, very hands off. Now, like everything, you take a hit on the backend because you’re paying for that level of service. Again, I met my property manager in Colorado Springs through the BiggerPockets message boards. I went out, I met with a few property managers in the area, sort of interviewed them, and I had come in with some ideas and some numbers that I thought I understood well, and I was sort of testing them and asking them to give me some ideas when I showed them just some properties and just some very basic details. And this one guy was able to, almost down to the dollar, was able to tell me, “This is what the mortgage will be. This is probably what the rent will be in a year from now when you leave,” and so forth and so on.
And I just felt incredibly confident with this individual. He was himself a property owner, an investor, but also running this property management company. And this was another example of luck because, as you said, Colorado Springs was one of the other markets we were looking at. It had the businesses, it had the millennials, it had the military location, beauty, I mean, just unimaginable beauty in the Colorado Springs area. So it had tourism. And I was very lucky because we found an amazing realtor. She started taking us around. I had to start my job. My wife started looking at properties. My wife called me up one day and said, “I think I found something.” I said, “To be honest with you, I’m about to run into a meeting. I don’t have time. If you believe in it, I believe in you. Go sign some paperwork and go do it.
” And we lived there for two years with our kids and we absolutely loved it. My kids still talk about how much they love that house. It was also where we spent COVID, so we got to know the house very, very well. And it really made us very confident in the Colorado Springs market. And we refinanced it down to 2.15 during the pandemic. So it’s also become a really strong cashflow property that helps us sort of build our capital and buttress when we have a lull in some of our other properties.

Tony Robinson:
Dave, did you say 2.15?

David Epstein:
Yeah, but unfortunately, a DOD friend of mine got 1.99 through a VA loan and he beat me and I was furious about it. It was the same week. It was the same week. I was furious.

Tony Robinson:
I think you might hold the record right now for lowest interest rate we’ve heard on the podcast. I mean, you’re episode 704. So we’ve had 703 other stories before yours, and I don’t think I’ve heard anyone get to a 2.15. Ash, do you know anyone?

Ashley Kehr:
God, never paid that off.

David Epstein:
No, I’ll never refinance it and I will never pay it off.

Tony Robinson:
Yeah. We’ll let that ride forever.

Ashley Kehr:
Well, David, you talked about how key it is to have a property manager and one you can rely on, but were there any mistakes that you made from the beginning when you decided to be your asset manager remotely?

David Epstein:
Well, I mean, I mentioned my wife and thank God for her because I tend to not get emotional about a property, but I tend to get a little excited about completing a task and maybe not doing all of the analysis that I should do once I’ve decided on something and started down that path. So I might be looking at 10 or 12 properties, but once I start into the conversation, maybe earnest money or something like that, then I tend to kind of become a little bit fixated and she is certainly a balance there. And I think one of the mistakes I made, maybe at least twice now, is Really jumping into a deal and then not continuing to do analysis and checking numbers and checking the process once I had shot off the starting gun. And I think that it’s not so much falling in love with the property, but it’s sort of that sunk cost fallacy where I say, “Well, I’m in.
I’m in. And so maybe I can make it work or maybe this conversation I’m having with this person isn’t as bad as I think it is. ” Now again, it’s worked out, but I think that my wife has done some of that course correcting for me.

Tony Robinson:
Yeah. And I invest with my wife as well, and I think there’s always a good balance there. And what I found is that a lot of times what makes two people work as a husband and wife also kind of lends itself to being business partners because in the same way that we compliment each other in our marriage, we find ourselves complimenting each other that way in our business as well. And it’s just kind of cool to see that dynamic play out. I guess just separately, just because I’m curious on this piece now, we get a lot of questions from rookies about how do I get my spouse on board with investing in real estate? And usually that conversation is, “Hey, honey, there’s a house 10 minutes away that I think might be a good deal for us.” And even that’s kind of like an uphill battle, but you were talking about doing this from a different continent with a young family.
What was that conversation like for you, Dave, to get her on board with the idea of building this real estate portfolio?

David Epstein:
I guess part of it helped from the fact that I owned this co-op in New York before we met and got married. And so there was a little bit of a proof of concept. But I mean, my wife is incredibly smart. I mean, business savvy. I mean, she understands numbers and stuff like that. And so part of it was, I was able to show her the math when we looked at the turnkey. I said, “Here’s the amount of money we have. Here’s the amount of money it will cost.” We’re not in 2008, nine again. So worst case scenario is the person moves out, it’s empty for a while, we just don’t see it as working. We sell it, we lose a few bucks, but that worked out. And then when we were in Colorado, the math was simple to say, “If we rent for two years, it’ll cost us this amount of money, but this market is good.
It’s something we previously actually talked about, so a bit of serendipity there. And here’s the numbers even after two years in terms of mortgage pay down, possible appreciation, stuff like that. ” So I said, “It’s just numbers again. It just all comes down to numbers.” And then once that proof of concept happened and when we had this property manager we loved, that’s when we bought the second property in Colorado while we were actually at the time in Belgium. So we refinanced the property in Jacksonville, pulled out some money, not down to 2.15, but we refinanced it and pulled out some money and used that to buy the second property in Colorado. So it’s a town called Fountain. It’s right down I- 25. It’s about maybe 20 minutes south of Colorado Springs. Same property manager, excellent experience, and we’re really happy with that too.

Tony Robinson:
Yeah. So it all starts to stack. And I think that’s the cool part of investing in real estate is that oftentimes property one can help you buy a property two, and properties one and two help you buy properties three, and it all starts to kind of snowball from there. But Dave, I mean, you’re living in Vienna, you’re raising three kids, managing a career that sends you literally around the world. What does the next chapter of your portfolio look like? And I think more importantly, what does financial freedom mean to someone who’s kind of already living? You’re living abroad, you’re traveling, you’re living in Europe on a government salary. What does that look like for you?

David Epstein:
Well, so the first thing it looks like is to stop traveling. I want to give my kids stability. So my number one, what do they say? Moving and public speaking are like the two most stressful things. You’d rather be in the casket than giving the eulogy. So all I do is move and speak publicly. All right. So I would love to stop that. Not the public speaking. I enjoy that. But the moving for my kids’ sake, they’re now 12, 11, and seven, so they’ve had to leave friends and it does now affect them. It’s hard for us, no matter what being part of an embassy community or otherwise, to plug and play and have a social life instantly. My wife, who has a degree in marine biology, I’ve now brought her to three different postings in the mountains, so she hasn’t really been able to pursue that.
And so we would like to find a way to have what we call a forever home and find a place for us and still pursue real estate investing. So we’re now looking, like I said, to repivot to the growth phase and buy a fourth property. We’d like to try to do about maybe one property every two years. Again, I’m risk averse and there’s a lot of other things on my plate. And then I’m working with a partner now to launch a nonprofit and we’d like to have some financial independence on our own after I leave the State Department at some point where I can focus on that without having to really take a cut in lifestyle. I won’t necessarily be living in Vienna, but without taking a big cut and lifestyle and being able to provide the things for my kids and my wife and things like that.
So I figure if we can get to five or six properties by the time I retire, which is not so far off, then we would have a significant cash flow. Then I’d have a pension. I have a government version of a 401k and a second chapter, a second career that would really be the bulk of my salary because I can’t actually stop. I can’t stop working. I just want to move to something else that has a little bit of more physical stability.

Ashley Kehr:
Well, David, thank you so much for joining us today. We really appreciated you taking the time. I know it’s late at night there, so thank you so much for joining us. Where can people reach out to you and find out more information?

David Epstein:
Well, I do have a BiggerPockets profile. Unfortunately, my activity ebbs and flows. I’m also on LinkedIn. I would love to talk to folks who are interested in the Florida market, who are interested in the Colorado Springs market, want to ask questions, want to give me advice, or even young people who are interested in careers in the state department. I mean, I would be happy to talk to people about stuff like that because I think it’s really a wonderful way to provide service to your country for folks who think that that might be an angle for them versus other options.

Ashley Kehr:
What about any ski tips for? Well I’m terrible. My wife and I are

David Epstein:
Terrible. My wife and I are terrible at

Ashley Kehr:
Skiing. No ski tips.

David Epstein:
We’re terrible at skiing. We go once in a while for the kids, but we’re absolutely awful at it.

Ashley Kehr:
My kids have a worldwide bucket list of places they want to snowboard and stuff. And I mean, they’re like, “Oh, Japan, we want to go there. Austria,” like all these crazy places they want to go.

David Epstein:
Can I plug Bulgaria? It is an amazing country, exceedingly friendly people and very, very affordable luxury. It is one of our favorite places in the world. We go back and visit quite frequently.

Ashley Kehr:
My dad owns a business and he only has a couple employees and two of them are originally from Bulgaria and they go back there several times a year. Ask them about the skiing. Yeah, so interesting. I’ll have to talk to them more. Well, David, thank you so much for joining us and everyone else, thank you so much for listening to this episode of Real Estate Rookie. I’m Ashley. He’s Tony. I’ll see you guys on the next episode.