Category: Investing

Dave:
Inventory, the all important metric that we are always tracking and always watching isn’t anymore moving in just one direction nationwide. In some markets, listings are rebuilding and buyers are having more leverage. While in other markets, inventory is still tight and in some, it’s actually going down. And that regional split is shaping everything, affordability, negotiating power, and where investors can still find opportunity. I’m Dave Meyer, and today I am joined by Lance Lambert to break down the latest regional inventory trends, why they’re happening, what outcomes they tend to produce, and what it means for the national housing market as we look ahead. We’ll talk about the drivers, the markets to watch, how this shows up in prices and sales, and Lance’s predictions for the next phase of this cycle. This is On The Market. Let’s get into it. Lance, welcome back to On the Market. Thanks for joining us again.

Lance:
Housing, housing, housing, always so much going on, and thank you for having me again.

Dave:
Of course. Man, you’ve been on a lot of times, but I think maybe just for anyone who’s new here, maybe just give us a little background, who you are and what you do.

Lance:
Yeah. Longtime financial and data journalist had worked at places like Bloombergrealtor.com. And then I was the real estate editor for four years over at Fortune Magazine before leaving to start Resi Club. And Resi Club is a news and research outlet that is focused on the US housing market. So a lot of our audience and clients are home builders, developers, single family investors and operators, and then a lot of mortgage and lenders who lend to single family or to lend to home building. And really just trying to figure out at any given time what is going on in a macro level throughout the different elements of housing, and then also distilling that down to a local level. Because you know better than probably anybody, just how much nuance is out in the market. And so trying to figure out what that nuance is at any given time and then why.

Dave:
Well, that’s what we’re going to do today. We’re going to hopefully try and get into some of that nuance. So we have this affordability issue, Lance. It’s been going on for a while. It does seem like the market’s slowing down more though, right? Even the last couple years, we’ve had modest appreciation. I think we’re probably heading for national price declines this year. Are we in a relatively slow, declining, flat, but stable market, or is there risk that it could change direction quickly here?

Lance:
Well, the thing that I would say is already where we are, we are in the bottom 25th percentile, historically speaking, for weakest housing markets. So we are already in a weak soft housing market, just not the GFC level period. We’re more in a period that’s similar to 1990 to 92, that early 90s window. But I think with housing, one of the things that’s interesting is just its effect to the overall economy. We had a blowoff of economic activity from the housing market that’s been gone since really middle of 2022. And it all happened very suddenly when you lost just that chunk of the resale transactions. But what’s interesting is that the builders in this period, they’ve had to do so much margin compression to maintain volume that if the housing market were to weak substantially more than it already has, in particular in those softest markets right now, which are down in the Sunbelt, those core home building markets, if we were to go further beyond what we’ve already seen and then builders were to really pull back activity levels, that’s going to hit the whole economy.
We’ve lost a part of the cyclical element of housing. We’ve gone down to the historically low levels of resale transactions, but home building and residential construction employment has really stayed resilient. Now, obviously you’ve seen the rollover and completions for multifamily, but overall home building has not seen a really big pullback in overall employment and activity so far. But if we were to push any further than the point we’ve already gotten to, we’re going to start to take away that economic impact and activity from residential construction to a level that could potentially be where you would historically think of as a recession.

Dave:
And Lance, what could cause that? You’re saying we’re okay right now, but we see any further leg down in terms of activity, it could expel problems. What could be the catalyst for that further decline?

Lance:
At any given time, you can always have downside risk in an economy from one area or another. And so I think that home prices in general were their most vulnerable right in 2022 when they were the most overvalued. Now actually four years out, we’ve seen a lot of the overvaluation actually come out of housing. So Austin was overvalued at that time by around 50 something percent. Now it’s around like 10%-ish, right? It’s kind of in a normalish area.

Dave:
How are you comparing that? 10%, what do you mean? Just compared to historical averages or incomes? What are you comparing it to?

Lance:
Yeah. So I like to use Moody’s Analytics overevaluation study. It’s something that Mark’s been sending me for about five years. Mark Zandy, their chief economy. And if you look at the Q2 2022 reading that Mark’s team put out, the most overvalued markets at the time were Austin, Puna Gorda, Cape Coral. And then if you fast forward to today, the three markets a cycle that have seen the most give up and price are Austin, Puna Gordon. The analysis was pretty good. And now there are outliers like San Francisco didn’t really have the overvaluation problem and they’ve seen give up in price and neither is New Orleans. But essentially what a valuation study is doing is saying that home prices relative to incomes in your market would historically be X amount today. And then it takes whatever home prices are actually, and the delta between the two is either the overvaluation or the undervaluation.
Got it. So Austin, during the pandemic housing boom, still home prices rip up 70% in just 18 months. And so very quickly, relative to incomes historically in Austin, they got overvalued by about 55% ish. And then nationally we were about 25%. Austin now, I’d have to look at the data. It’s much closer to like, maybe it’s 20, 15, 10, something in there. And then nationally we’ve gone from around 25% overvalued to actually it’s a single digit amount. It’s much, much closer historically line. So home prices themselves had the most downside risk, in my opinion, back in Q2, 2022. And now that we’re four years through this recalibration period, the risk is actually lower in my opinion. There are still markets of risk, right? And actually some of the Midwestern markets and Northeastern that have been more resilient the past few years have diverged a little more from their historic fundamentals lately.
Although the thing that they don’t have is supply elasticity, right? So when you have an affordability shock, a market like an Austin, Tampa, they have that multifamily supply, the new construction supply. Builders are essentially for sellers in a way, right? They’re going to move their volume. And so they’ll do the affordability adjustments that then pulls buyers over from the resale and existing market to new construction, pushes up resale existing market inventory a little more. Okay. Now I’m going to answer your question. I’m coming back. And so your question is, what today could be the risk or catalyst, right? Yeah. I think really you just have to … And it could be shortsighted where in six, 12 months, we’re not even talking about this thing, but you just have to … There is some risk to it, which is energy, right? Energy is a very elastic cost to an economy.
And so if you did have a scenario where things got out of control in the Middle East and we saw the price of oil per barrel spike well beyond what we’re currently expecting, that’s going to create an economic shock, right? Yeah. And so it’s going to create an economic shock. Already, when you look at housing, the weakest component of housing is the bottom of the market right now. Initially, when the rate shock occurred, actually the bottom of the market was kind of resilient, right? A lot of them were trying to get in first time buyers. You had some of the investors still, not as much today because what’s occurred is the longer we’ve stayed in this higher interest rate environment, the bottom of the market has really felt the squeeze of higher credit card interest rates and that credit card debt delinquencies have went up a lot.
They’re having to pay student loans again, and that’s put distress into a little corner of a market, although more of them are renters when you aggregate where the distress actually is and autos as well in these higher interest rates. And the other factor is that the single family supply that the builders have pushed into the market and also into the multifamily supply, a lot of that has affected the bottom of the market. So there’s a lot of deals on rentals in terms of like, if you want to go rent in Austin or Nashville, some of these cities with more supply. And so what it’s done is it’s pulled some of the entry level buyers away from buying into renting because they’re like, wow, my rent would be X versus my monthly payment to buy would be this. And so some of them have pulled more there.
And as the builders have done more of that entry level supply and the Lennars of the world have done that bigger discounting, that’s kind of created additional softening there. And so if you had oil prices spike up in a scenario where they really get out of hand, that’s going to squeeze the economy. It’s going to create some job losses and it’s probably going to really affect that bottom consumer. And so I think that that would have an impact on housing. And the other factor there is that if it came with an inflationary shock with it, not necessarily going to have the easing to rates that we would think of from a normal recession, that’s some risk to housing.

Dave:
All right. This is great stuff, Lance. Thank you. We do have to take a quick break though. We’ll be right back. Welcome back to On the Market. I’m here with Lance Lambert talking about inventory and migration trends. Let’s get back into it. Well, you’re saying energy. It’s kind of like a ripple effect, right? That oil prices go up, that could create a general economic slowdown, and that translates into higher unemployment, less demand for housing. Maybe there is forced selling or just more motivated selling, and that could push down home prices. I mean, I buy that. That makes sense to me. I’ve said on the show before, I think the big risk to the market comes if we see a significant increase to unemployment. And I don’t mean going from 4.3.4 to five. I don’t think that’s what does it. I think if we get to seven, eight, then you start to get a little bit worried.
Or as you alluded to, some sort of stagflation event where we do see both a slowdown in the labor market and general economic activity at the same time that we see inflation. And we’re recording this April 10th. Today’s not a good day for that. If you’re going to worry about it, today’s been one of the more worriesome days about that. We saw inflation shoot up from 2.4 to 3.3% today. And so I don’t think this is the most likely scenario that there’s a market crash, but I think it’s something personally I recommend keeping an eye on because that to me is where the risk is and it’s not trending in a great direction, at least right now.

Lance:
And one thing I should throw out there too, and that’s kind of why I did the zoomed back out to Q2, 2022, is that anything through this window where you’ve had some more frothiness on housing because of the pandemic housing boom, you had more risk of some type of job loss recession creating downward pressure on home prices. But the further we get away from Q2, 2022, and we go through this recalibration period, the less likely I actually think that a job loss recession would push down national home prices. Really? And if you go through the history of housing, there are many recessions that we’ve had where home prices kept going up. And so I think that the longer you go through this period and you have some of that overvaluation continue to kind of pull back from the market, you have the fundamentals recalibrating and you’ve also had a really long period of existing home sales below normal levels of turnover.
What you could have happen is you could have a recession, not now, but further out that could create a positive momentum for housing because it pushes down the long-term yields and material amount, they shift and that we’ve already seen that overvaluation kind of pulled back from the market. And so at that point, housing could react very different in a job loss recession. And I think the other reason that I kind of called out the oil shock type scenario is that particular type of scenario, that type of job loss recession might not get the relief in the long-term rates because in that scenario, in inflationary shock, the Fed’s kind of concerned about inflation and they are kind of figuring out which side of their mandate to attack.

Dave:
A hundred percent. Yeah. I actually just did a whole show on this. Anyone wants to listen. I released it in early April, basically talking about different types of inflation and why if you have … People often associate with home prices going up during inflationary periods, but if you’re in a supply shock or a supply push inflationary environment, that does not necessarily mean home prices are going to go up. That is different from the demand pull kind of environment that we saw in 2021, printing all this money, that kind of stuff. So that’s a super important thing, but that actually makes sense to me, Lance, that we’re not at the peak of housing anymore is kind of what you’re saying, right? Even though home prices on a nominal basis, non-inflation adjusted, have still gone up a little bit, a lot of the markets that were the worst in terms of overvaluation have adjusted.
And so they’re just less sensitive. They’re not at that peak and there’s probably less risk of panic going on because people are seeing that a little bit.

Lance:
And the longer that we stay in this period where the more cyclical type of housing markets have kind of go through this recalibration, that also creates potentially the upside for those markets. So if you look at net domestic migration, a market like Florida, they saw net domestic migration of 300,000 Americans between summer of 21 and summer of 22. This most recent 12 month period, it was like around 20,000. Now, the thing is, historically, where we are right now for net domestic migration to Florida is on the very low end of the bounds. Same with Texas. Over time, that’s going to swing up. If you wanted me to take bets that I’m certain of, in particular for Texas, we are at a low period for net domestic migration to Texas, and there will be a period when that swings up.

Dave:
Is that like a pull forward, just like pricing? You think we just got a lot of migration and then now it’s sort of the hangover, but we’ll go back to normal.

Lance:
Yes. And that’s also, in some ways, some of my views of international migration as well. Now, there are the political elements of some of the things that Biden administration has done and some of the things the Trump administration has done, but I think that we are in a period of very low levels of international migration. And some of that is because international immigration, some of it that occurred in 21, 22, 23, and into 24, some of that was pulled ahead from 25, 26, 27, 20. And so I think that over time, the international side will swing back up potentially from where it is currently at at its current levels. And the thing with the international migration is actually you haven’t fully seen what has already happened in the real world. So the data lags significantly. So like this March, we got data for 25, but the 25 data is summer of 24 to summer of 25, and we just got it March 26th.
And so that means from the summer of 2020 to summer of 21, we did not get that data till March 2022, which was the end of the pandemic housing boom. So by the time the pandemic housing boom ended, we started to get the official migration data. So migration data, yeah, there’s a significant lag there.

Dave:
You’ve actually done a lot of work recently, Lance, about migration trends. I’m curious if you could shed some light on it for our audience in terms of markets that might still be seeing strong internal migration or markets where there’s risk of declining demand because migration has either slowed or stopped.

Lance:
Yeah. So I will pull up an analysis for you. So in housing with net domestic migration, often when somebody moves from one market to another and they’re an adult, very often there is a housing transaction that comes. Unlike a birth where somebody’s born, they’re not going out immediately and buying a house, right? So when you look at this population change, normally the level of population change is very steady usually. But when you look at international migration and you look at net domestic migration, those are fairly cyclical, in particular, net domestic migration. And so in 03, 04, 05, the country saw a big jump up in net domestic migration into these markets like Arizona, Nevada, Florida, right? And then it pulled way back. And then we had very low levels of state to state migration during the GFC. Then it slowly rebounded through a lot of the 2010s, kind of got to where you would think of as normal levels.
And then we had the pandemic housing boom that had this really large unlock for net domestic migration. And so I’m going to show you here net domestic migration during the pandemic and you can see that dark, dark blue into Idaho, into Utah, into Arizona, Nevada, Florida, into parts of Arkansas, Tennessee, the Carolinas, Florida, and even up into like Maine and New Hampshire and Vermont.

Dave:
Lance, let me just stop you for a second, just so everyone knows if you’re watching this on YouTube, you’ll see it. But Lance is pulling up a map for us and showing us literally county by county migration. He just was talking about 2022 and as he was saying, the blue is where there was very strong net migration. That was all the states you just mentioned, Southeast, a lot of the Sunbelt, Idaho, some parts of New England, and then carry on netland. Sorry to interrupt.

Lance:
And then now you fast forward to the most recent 12 month period, you can see that in places like Idaho, Utah, Arizona, Texas, Florida, a lot of these areas are still positive for net domestic migration, but it’s not like it was before.

Dave:
It’s way less.

Lance:
Yeah. Yeah. And if you go through them, you can actually find some of these like Hillsborough County, Florida, where it’s actually seen net domestic migration that’s outward, negative net domestic migration. And so you’ve seen that shift there in the market. And a lot of this is tied to the lock in effect. And so one of the interesting things about the lock in effect is anybody who is affordability locked in where they don’t want to lose their payment to take on a higher payment, that is one lost seller and it’s one lost buyer, but where that lost seller could be and where that lost buyer could be, could be two totally different places. So if you live in Illinois and you were going to sell your house and go move to Florida, but now interest rates are around 6% and you have a 3% rate. A lot of that math that was attracting you to go to Florida, right, seeking some affordability, in particular with state income tax, maybe property tax for you, if you’re going from Illinois, a lot of it’s diluted now because their monthly payment would go up so much more for that higher interest rate.
And so if they aren’t selling their house, that’s one lost seller in Illinois, but it’s one lost buyer in Florida. And we’ve seen that in the market as well. And that’s also played a role in some of the regional bifurcation where you look through some of these Midwestern, Northeastern markets that are at the very low levels of their normal levels of out domestic migration. They were the people going to Florida, Texas, right, Alabama. And now they’re at their lower levels and then you look at the Floridas and the Texas and they’re not gaining as many at the moment because that state to state migration is just affordability constrained at the moment. And so that’s one element of the regional bifurcation. Another element is what we’ve already described, which is some of the overvaluation and the fact that prices overheated in some of these Sunbelt markets.
So they saw a bigger run up in price, which then detached themselves from local fundamentals further and created a greater demand shock once the market and the boom really fizzled out. And then local incomes, they had to rely more on them because there’s less of that domestic migration. And the other factor there, of course, is the fact that they are the supply elastic markets, right? When home prices rip up a lot, investor capital, they’re going to want to deploy. They’re going to want to deploy into multifamily construction, single family construction. They’re going to take on projects and those markets have the entitled land and the ability to push out and build more. And so supply, it takes a little bit to get into the market. And by the time it got into the market, a lot of it, the market had shifted into a more affordability constrained market.
They then had to do the affordability adjustments to meet the market, and then that creates an additional cooling effect onto the resale market. But at the moment, some of those cyclical factors, we’re not seeing as much of it at the moment. We are seeing the bifurcation very much so, but we’re not seeing inventory burst upward as fast in those Sunbelt markets versus everyone else. And actually inventory nationally, we’ve seen a deceleration. We’re only up around 7%. We were up 30% a year ago for inventory. And some markets now, Florida’s one of the very few states in Alaska where inventory is down year over year. And so some of the forward indicators suggest that the intensity of that cyclical cooling period has tampered off a bit. And my clients, I’m not going to name them, but a really big builder in the Jacksonville market, they’ve seen an improvement to their sales this year.
I’m hearing a little bit of stories in Orlando where things are getting a little better there as well. Now, I am still hearing in like some of these Southwest Florida markets in Tampa, still their pockets, still dealing with more of the choppiness, but you’re not seeing what you saw in 2024 into early 2025 when you had that really big burst of softening that was pushing into the market. And since around the middle of 2025, I would say that the burst of softening has led up and we’ve stabilized into what I would call a soft nationally aggregated housing market. And then some of those markets in the Sunbelt, still seeing some pricing give up and weakness.

Dave:
All right, everyone. Lance is dropping some really good knowledge here, but we got to take one more quick break. Stick with us. We’ll be right back. Welcome back to On the Market. Let’s jump back in with Lance Lambert. Well, I feel like this is normal. This is what you would expect, right? The housing market is correcting. Inventory is lower. Sellers are reacting to the lack of buyers, right? So we’re adjusting and reaching some sort of equilibrium instead of the imbalance between buyers and sellers accelerating, right? Because when people say that there’s going to be a crash, usually what they’re saying is there’s going to continuously be more inventory and buyer demand is either going to stay stable or decline, and that’s how you get a crash. But what’s happening in Florida is a perfect example of what happens during a normal correction, which is that buyer demand goes down for all the reasons Lance just mentioned.
But instead of people panicking and selling more and more, fewer people are selling. He just said inventory is down in Florida. I don’t know if you know the new listing data off the top of your head, Lance, but I would imagine it’s either flat or somewhat down if we’re going to have lower inventory.

Lance:
Ish and some of these, yeah. And so a part of it is you’re not seeing a big jump there. You’ve also seen some of the de- listings where some of the sellers are like, “You know what? Markets come down too much on price. I’m going to wait this out a little bit.” You have also seen an increase in accidental landlords though too, in particular more in the weaker markets like a Florida where they’re not getting their price they would want and they don’t necessarily have the distress. And so they are trying out the rental market. Now, if you’re an investor, that’s a data point to watch and important because, and I’m not talking about like at a macro level, I’m talking down to the actual property. If you see a home come on the market for sale and it stays on and it’s not getting bytes and they’ve had several price cuts and then you see it go away and it didn’t sell and then you look at the rental market and you find it over in the rental market and that stays on there well.

Dave:
That’s a target.

Lance:
Yeah.

Dave:
That’s a

Lance:
Target. Someone who

Dave:
Might want to sell.

Lance:
Yes. So you start seeing those go from unsuccessful listing, they jump on the rental market, and then if they jump back on the for sale market, oh, you really have probably a seller who’s ready to throw it in.

Dave:
Well, Lance, this has been fascinating. Thank you so much for educating us on what’s going on here. Any other thing you’re covering that you think our audience of investors should know as we head into what might be a slow spring season here?

Lance:
So one of the positives that housing has had is that the spread between the 10-year treasury yield and the 30-year fixed mortgage rate, very quickly after the Fed started hiking rates and they stopped buying mortgage-backed securities, we saw that spread really widen, right? And so mortgage rates back in 2022 into early 23, they went up a lot more than other yields in the economy. And so that spread really widened, right? And the Fed wasn’t out there buying mortgage-backed securities, there wasn’t an immediate buyer who stepped in to replace them. Banks also pulled back on their mortgage-backed securities. And so you were waiting for another buyer to kind of come into the market to replace them. Well, over the past year and a half, we have seen considerable improvement in the spread between the 30-year fixed mortgage rate and the 10-year treasury yield. And earlier this year, after also Fannie Mae and Freddie Mac said they were going to increase their retained holdings and mortgage-backed securities by 200 billion additional, we saw the spread get closer to normal levels, actually into the historically normal bounds.
Now, since then, we’ve kind of went back up a little bit. So that’s the positive that the spread has come down and that’s helped mortgage rates fall more than other yields in the economy. But here’s the bad news. That lever has gone for us. So the easiest gains down on mortgage rates have occurred. Now the ones from here are going to be the tougher ones. These are almost like the ones that you might need the economy to actually weaken more.

Dave:
Yeah. Or inflation to go down significantly.

Lance:
Yes. So I wish I had better news on mortgage rates, but-

Dave:
Me

Lance:
Too.

Dave:
But we got to be realistic. That’s the whole point of the show is to help people identify what’s really happening. But like you said, this situation comes with more motivated sellers. It comes with some opportunities. You just got to figure out where to find it.

Lance:
Well, thank you for having me. Housing, housing, housing. Anybody who wants to follow my work, you could go to resiClubanalytics.com, put it in your email, get into my free email list. I send out a few articles per week, and then also follow me on Twitter @newslandbert or LinkedIn, Lance Lambert.

Dave:
Awesome. Thanks, Lance. We appreciate it. And thank you all so much for listening to this episode of On The Market. We’ll see you all next time.

In This Article

Real estate taxes are like piranhas constantly chomping away at the meat and bones of cash flow. There’s no way around them, and failure to pay can result in city liens and possible foreclosure. No one said real estate investing was easy.

That’s why finding a low real estate tax state that is still affordable and has decent rents and lower insurance rates is the Holy Grail of investing. However, they’re not a dime a dozen. 

After spending hours number crunching, you might feel you’ve got a better chance of stumbling across a unicorn foal. Don’t worry, they do exist, and once you’ve locked them down, they could end up paying you in cash flow for years to come.

The National Property Tax Picture In 2026

Effective property tax rates in the U.S. range from under 0.3% in the lowest-tax states to more than 2% in the highest. New Jersey leads the list with a rate of around 2.23%, while Hawaii ranks last at around 0.27%.

Property taxes are levied annually by your local government, based on your home’s assessed value. They are collected by cities, counties, and school districts to fund services that keep communities running. Thus, the common analogy is that the higher the taxes, the better the neighborhood, because homeowners are paying for higher-quality services (better-funded schools, roads, parks, etc.).

Generally, these high-tax areas are dominated by single-family homes and have few rentals. Property taxes fund about 27% of all state and local revenue as of 2022 numbers. It’s worth noting that property tax values are worked out by multiplying the rate by the value of the home. So, high-value markets can still generate high tax bills even though they might have low tax rates on paper.

The average U.S. household pays about $3,119 a year in property taxes, with effective rates of 1.5% common in the Northeast and Midwest, including New Jersey, Illinois, Connecticut, Wisconsin, New Hampshire, and Vermont.

Where Low Property Taxes Help Rentals Cash Flow

For real estate investors, the most attractive states are often characterized by low tax rates, reasonably priced housing, and high rental demand. Low property tax states, according to a SmartAsset 2025-2026 ranking, included Hawaii, Alabama, and Colorado, with rates well below the U.S. average of roughly 0.89% on this metric.

For example, Alabama’s effective property tax rate is about 0.38%, with a median home value of around $232,106 and a median annual tax bill of $1,249, making it one of the least expensive states in terms of its ongoing tax burden.

According to SmartAsset, the 2026 property tax ranking specific to homeowners and investors ranked the following states as having the lowest average effective property tax rates: 

• Hawaii
• Alabama
• Colorado
• Nevada
• South Carolina
• West Virginia
• Arizona
• Arkansas
• Idaho
• Utah 

The Most Landlord-Friendly States When Property Taxes Are Considered Along With Local Landlord-Tenant Rules

DoorLoop compiled a list of the most landlord-friendly states by combining property taxes with other essential factors such as eviction laws, rent control regulations, security deposit regulations, tenant rights and protections, and state and local legislation, and found the 15 most landlord-friendly states in 2025 were:

1. Texas
2. Indiana
3. Florida
4. Georgia
5. Arizona
6. North Carolina
7. Ohio
8. Alabama
9. Illinois
10. Colorado
11. Kentucky
12. Louisiana
13. Michigan
14. Pennsylvania
15. West Virginia

The Other Cash Flow Killer: Insurance

However, being landlord-friendly and cash flowing are often two entirely different metrics. A home in a state with low property taxes but high-priced real estate and moderate rents, regardless of the landlord-tenant rules, might not cash flow, whereas a state with substantially higher rents might, even if the other metrics are higher, too.

There’s always insurance to consider, too. As extreme weather events have become more prevalent, insurance has started to take a larger bite out of investors’ cash flow. The best cash-flowing states in 2026 tend to be those with low property taxes and insurance and solid rents. 

If it all seems a bit like threading a needle in a hurricane, fear not—there’s a method to the madness and a way to discern where you are likely to eke out some decent cash flow, despite the swirling data storm.

Let’s start by crossing Florida and California off the list of places you are likely to cash flow, given current insurance rates there. In California, despite high rents, acquisition costs are likely to hammer another nail into the cash-flow coffin.

Crunching all the data (rents, taxes, and insurance), the top 10 cash-flowing states for small landlords are:

1. West Virginia
2. Alabama
3. Arkansas
4. South Carolina
5. Tennessee
6. Arizona
7. Nevada
8. Idaho
9. Utah 
10. Colorado

These states offer a mix of relatively affordable home prices, average or better rents, and comparatively modest recurring costs, leaving the largest gap between gross rents and the monthly “nut” that landlords must cover.

The Top 10 Cash Flow States Factoring in Property Taxes, Median Price, Typical Rents, and Insurance Costs

Rank	State	Property Taxes (level)	Median Price (level)	Typical Rents (level)	Insurance Cost (level)	Overall Cash Flow Score*
1	West Virginia	Very low	Very low	Moderate	Low-moderate	Excellent
2	Alabama	Very low	Low	Moderate-good	Moderate	Excellent
3	Arkansas	Very low	Low	Moderate	Moderate	Very strong
4	South Carolina	Low	Moderate	Good	Moderate	Very strong
5	Tennessee	Low-moderate	Moderate	Good	High-moderate	Strong
6	Arizona	Low	Moderate-high	Good	Moderate	Strong
7	Nevada	Low	Moderate-high	Good	Moderate	Strong
8	Idaho	Low	High	Good	Moderate	Solid
9	Utah	Low	High	Good	Moderate	Solid
10	Colorado	Low	High	Good	Moderate	Solid

“Overall cash flow score” is a qualitative roll-up of:

• Taxes (SmartAsset, reAlpha, Realtor.com low-tax rankings)
• Median home prices (WorldPopulationReview/Bankrate 2026 median price data)
• Statewide average rent levels (WorldPopulationReview/RentCafe/Apartments.com 2026 data)
• Homeowners insurance (2026 state-by-state averages)

Final Thoughts

Some of the most cash-flowing states on paper, such as West Virginia and Alabama (low tax bills, median annual insurance, and rent costs that can exceed $1,100-$1,300 a month in many markets), are hardly the most glamorous. Appreciation and the tenant pool here might be limited, so investing is never an exact science where cash flow always wins the day.

The cash flow analysis doesn’t count for much if there is a poor job market and tenants can’t pay the rent, or if a high crime rate means the tenant pool is likely to give you sleepless nights. War zones always look cash-flow positive on paper because they are cheap—but they’re terrible investments. 

Still, a basic cash flow analysis based on the data used here is a good starting point, from which the other, more fluid factors must be accounted for.

Henry:
After having her second daughter, high school math teacher, Christle Stezskal had a choice to make. She could keep working for Little Pay and give up the time she had with her young children, or she could find another way to help provide. Her answer, rental properties. But not $400,000 homes. She couldn’t afford that, but what she could afford were small rentals. We’re talking 800 square feet that cost less than $100,000. That’s something she could do. She bought her first rentals out of state right when the lockdowns began, and she had a tenant moving out. Not a great start, but she didn’t give up. By rental number three, she quit her job and went all in. Now, Christle has 19 rental units using all her cashflow to keep investing while her husband’s W2 is paying their bills. That’s a dream team combination. She’s able to spend time with the two girls and provide the best experience to her tenants across her portfolio, and she should know because she self-manages these units.
Christle is still buying properties for around $100,000 and they’re still cash flowing. She shares the exact market she’s buying in, the renovations she’s doing to get her higher rents, and how she juggles it all while raising two kids. These small properties can make you financially free too. So let’s learn how.
What’s going on everybody? I am Henry Washington. I am here with an investor story from Christle Stezskal out of Illinois. She is building a portfolio to help her achieve financial freedom, so let’s jump in and learn how. Christle, welcome to the show.

Christle:
Thank you. Happy to be here.

Henry:
Why don’t you start off by telling us a little bit about your background and how you first jumped into all this crazy real estate stuff.

Christle:
So I was a high school math teacher. I taught for seven years. I really enjoyed it, but in that time, my husband and I started a family and we had two daughters, Lily and Cora. And after having Cora, it didn’t make sense for me to continue teaching. The pay was not offsetting daycare costs, that kind of thing. So we started looking for other options for me. My degree’s in math, so I went back and got my master’s and then made the shift into IT. Did that for a couple of years. But at the same time I made that shift, Alex, my husband, was doing a book club and they read Rich Dad Poor Dad. Gotcha. And it’s classic. So he came home and he was like, “Hey, we should really look into real estate investing.” He’s like, “I started listening to a couple podcasts. We should listen to more and we should read some stuff.” So we did.
We listened to, I feel like all the BiggerPockets episodes. It was all the time. We read all the books, all the audiobooks. And it quickly became like, let’s do this. Let’s put some effort in and see what we can make happen.

Henry:
We have a lot of similarities. My father and my stepmother were both high school teachers. My stepmother was a high school math teacher.

Christle:
Nice.

Henry:
I did IT for a while before I got into real estate. And I too read Rich Dead Poor Dad and my head exploded. So I get it. I get how this all pointed you in that direction. But reading the books and getting excited and translating that to actually doing something are very different things. So what’s kind of the first deal you did? How did you stumble into that?

Christle:
In our area, in the northwest suburbs of Chicago, things are more expensive than what we were able to do at the time. We had a little bit of money that we were willing to earmark for real estate investing, kind of try it out, but we couldn’t do that here. So we knew we had to find another market. So we landed on Kansas City, Missouri. We said, “Okay, let’s look for some boots on the ground.” We started networking through BiggerPockets and we found a realtor, decided to take a trip out there, meet him, see what he does, look at some places. We did that. It was great. He was fantastic. Came back. And then from there, what he did is he would send us things. We’d let him know if we’re interested. He’d go and he would walk it. He would do a video call with us and show us everything.
We ended up finding a place that we wanted to go under contract on. It was brought to us by a wholesaler, but then we had this realtor represent us in it. It still went through all the processes. We did an inspection because it was our first one, right? Yeah. We don’t do those anymore, honestly. But our first one, we did the inspection. There were some things that had to be addressed. We had a couple things addressed. We bought it at a low price knowing that there was going to be more work to put into it, but it did have a tenant and it was going to cash flow for us.

Henry:
Okay. So you picked Kansas City. And one of the things I want to highlight about this story, sounds like you knew what you wanted in terms of financial return and you figured, “I can’t get that in my backyard, so let’s start looking for places you settled on Kansas City.” You networked on BiggerPockets and found an agent. BiggerPockets has an agent finder now. That is a great tool for people when you’re looking to invest out of state, you can connect with an agent. And then after a couple video interviews, you said the one thing that people really never say when they’re trying to pick a market. You got your butt on a plane and you went to the market or you got in the car and you went to the market. And not with intent to buy anything, but to get a feel for the market.
And that is such an important part of investing out of state because there are just things you need to see, touch and feel in order to understand and evaluate deals as they come into your inbox. It’s not just that you want to go and buy something, but you want to go and figure out, okay, what are the neighborhoods that make sense? Where do I not want to buy? You ended up finding a deal. That deal came from a wholesaler, you said, but you had your agent represent you and you did an inspection. Everybody, if you’ve never bought a property before, do inspections. Absolutely. I don’t do them anymore either, but I am very experienced. If you’re not experienced, you should try to get inspections whenever you can. So about this deal, talk to me a little bit. What was the purchase price of that property?

Christle:
So we bought it for 52,000.

Henry:
52,000. And how much work did it need?

Christle:
We negotiated for them to do radon mitigation. And then as soon as we closed, I had somebody do the roof for us, but that’s all we did because we had that tenant in there. As soon as she left, we did a little bit of work. We ended up replacing the floor in the kitchen.

Henry:
So not a ton of work, which is good. So 50 some odd thousand is a ridiculously good price. And then to not have to do a ton of work and it be in decent livable condition enough to rent it out, that’s a pretty solid deal. What was it renting for?

Christle:
If I recall correctly, when we bought it, it was at 800.

Henry:
Oh, wow. That’s really good. Okay. And how did you fund this deal? Did you pay cash and refinance it? Did you just get a bank loan right away? Because some banks won’t fund a loan that low.

Christle:
This one, we did delayed financing on it. So we purchased cash, but we don’t have to wait to season it for a cash out refi. You can delay finance it and you can do 75% of ARV.

Henry:
Yep. Do you remember what it appraised for when you did that?

Christle:
I want to say like 75.

Henry:
Oh, nice. So

Christle:
You

Henry:
Were able to … Did you pull cash out or did you leave it all in there?

Christle:
We ended up leaving $13,000 in it, I want to say, and it cashflowed.

Henry:
Do you still own that one?

Christle:
We do. We still own it. Yep. Awesome.

Henry:
Okay. So first deal, sounds like it was a decent deal. You still own it. Cashflow, paid 52, did a light renovation, new roof, some infrastructure things. How did you transition from that into your next deal? Was it also an out- of-state deal?

Christle:
Yeah. So our second deal was also out of state. October 2019 was when we bought that first one. And then our second one, we actually bought at foreclosure auction February 2020.
Wow. It was pretty cool. So that was Kansas City as well. We were working with this guy. His whole business was, “I’m going to find people who want to purchase at auction. I’m going to identify auction properties. I will send out a list to all of my buyers. If anyone’s interested, I will go look at the house morning of auction. I will see if I can get pictures. I will see if I can identify any structural concerns, whatever. I will send that information to you. You tell me your max bid. I will go to auction. I will bid for you. If we win it, I will put the money down. You wire me the money. I will renovate for you. ” And for most of his buyers, he was also an agent and he would then sell it as a flip for them. For us, we told him, “We want to keep it, so you renovate it, but then we’re going to go ahead and take over and we’ll lease it up.”

Henry:
Huh. Did you find this person through BiggerPockets? I

Christle:
Don’t remember if we found him on BiggerPockets or not. Okay. But I don’t know how we found him either.

Henry:
Okay. Okay. Random stranger seems like a

Christle:
Decent

Henry:
Business model. All right.

Christle:
Yeah, right. No, so he was another person that we went out and we met and we actually, with him, we said, “Hey, we’re very curious how this process works. Can we ride along with you one day?”
And he
Was like, “Yeah, meet me at seven o’clock at the McDonald’s and we will go together. You can follow me to a couple properties. I’ll show you which ones I’m looking at.” And then we went to an auction with him and it was really cool. Well,

Henry:
That’s cool. I think that’s another great piece of advice for people. If you are at all interested in buying auction properties, just go to a couple of auctions. Oh, for sure. See how it works. You’re going to learn so much, but also auctions are a great place to meet people who have money and might be willing to be a private lender for you. So if you continue to go and start to build a brand for yourself or start to build a reputation for yourself, I mean, in most auctions, you got to pay cash for properties, if not right away, then within like 10 to 15 days. So
These are great people who have cash on hand who like investing in real estate, who could be lender contacts, but they also have all the other contacts you need to invest in real estate. Auctions are just a great place to hang out if you want to build your network, because those are doers at the auction. They’re not playing games if they’re bidding on auction properties. So you vetted this person by going and seeing how they were doing what they were doing. You looked at some of the properties that they were bidding on. So that gave you a level of comfort, I assume. Yeah. And then he would go to the auctions and bid for you. Did it take a while before you wanted … Because auctions aren’t easy to win. People bid those properties

Christle:
Up.

Henry:
Yeah.

Christle:
It took a while. We probably worked with him for probably two, three months, honestly. We were looking at properties every night. Every night after the kids went to bed, we were looking at the properties and flagging anything we’re interested in. What’s tricky is you can’t actually make your final bid. You can’t set that number until you know the condition of the property, which you don’t know until morning of, if at all. There were so many times he’s like, “I can’t really see much. Don’t know what’s going to happen.” And that’s actually how this property was. He went to it and he’s like, “It’s tiny. It’s 850 square feet.” He’s like, “It looks like it started maybe getting some work because there was new siding on, but it wasn’t fully completed.” So he’s like, “This is a little bit of a wild card.” So we’re like, “Okay, well, what could it possibly cost to renovate this thing?” It’s 800 square feet.
And we set our price, but those mornings were so tense. And my husband and I were both working. So I can remember sitting at our desks being like, “Okay, we have 10 minutes, figures out quick, chat back and forth and then send him the info.” And we finally won that one. He told us, he’s like, “You’ll get one.” He’s like, “It takes time, but we’ll get it. ” And so this day, I remember I was sitting in a meeting, a one-on-one meeting with my manager
And I get a text message that says, “You won. I need the LLC name now.” I was like, “Oh my God.” I’m like, “What do I do? ” So I told my manager, I’m like, “I’m so sorry, but I just got a text message and I need five minutes.” I went hustled and did whatever I needed to do, but it was like, whoa, just wild. It was very cool.

Henry:
Okay. How much did you win the auction for?

Christle:
Yeah, so that house we bought for $21,000.

Henry:
21,800 square foot house.

Christle:
Okay.

Henry:
Was it a complete gut job? What’s the catch here?

Christle:
So it was, but not for us. The people who owned it before, it must have been an investor that ran out of money. I don’t know how you do on an 800, but I mean, stuff happens, but they had gone and they had completely gutted it and started drywall, flooring. So it was set up perfectly for us to just go in and finish it.
So
We did finish the renovation completely. They had started some tile floor in one of the rooms, but it was ugly and we’re like, “Just rip it up and let’s just do LVP through the whole thing.” So standard, we do the same finishes on all of our stuff to keep it easy. So dark wood LVP, white cabinets, black knobs, all white bathroom, just went in and did that. We did have to add AC. We had to redo the electrical because somebody had gone and pulled out all the wiring, but I think the renovation ended up being all in 40,000 maybe.

Henry:
Oh, wow.

Christle:
It’s

Henry:
Not bad at all.

Christle:
No, no. With all new AC, HVAC.

Henry:
So you’re all in 60, 65 grand. What’s that thing rent for? Well, what did it rent for then versus what’s it rent for now?

Christle:
When it rented at first, I think it was like 800.

Henry:
That’s

Christle:
Such a

Henry:
Deal.

Christle:
I know. Well, and we bought it cash. We funded the renovation ourself and then it appraised right away for 88. Oh, wow. So we pulled almost everything out of it. We’ve got $13,000 in that one too. Oh my

Henry:
Goodness, man.

Christle:
Most of our money back, cash flows and it’s up to 925

Henry:
Now. Oh my goodness. What a deal. Yeah. That’s awesome. It’s got to be scary to walk into a partnership like that though when you’re doing a deal like this. I know you said you vetted him by going and kind of seeing what he was doing.
Do
You have any other tips or advice you would give to people who are considering a partnership or a similar model for making sure that who they’re working with, they can trust? Is there any conversations you had upfront before you did anything?

Christle:
Yeah, so we also asked him for references. So I talked to three other investors that he’d worked with. And then the other thing that was nice is they, he had a team that he worked with. His team was very communicative. They used iCloud to record videos and send them to us. We had weekly updates on how the renovations were going. You got to just be in communication as long as that’s happening and you get videos. Pictures are one thing because picture can be taken anywhere. But if you see a video, it starts with your front door and you’re walking into the house, there’s a little bit more there to it.

Henry:
Awesome. I definitely want to dive into seeing how you continued scaling, but first we got to take a quick break.

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Henry:
All right. We are back on the BiggerPockets podcast with investor Christle Stezskal, and we are talking about how she built her real estate business. She did her first deal in Kansas City, Missouri. And I would say that was a solid double in terms of profitability. And then did a second deal in a semi-partnership. I’d call that one a double, maybe going on a triple.That’s a pretty good deal.

Christle:
Yeah, that’s a great one. Proud of that one.

Henry:
All right. So how did you determine what was going to be next? Did you continue this business model with this person? Did you continue in Kansas City? Where does the story pivot from here?

Christle:
Yeah. So to be honest, I think we would’ve continued with that process, but COVID happened and foreclosures were done. Yeah, they dried

Henry:
Up. They

Christle:
Dried up.

Henry:
Yep.

Christle:
So unfortunately for that gentleman we worked with, his business kind of shut down for a little while. At the same time though, we were reflecting and honestly people are like, “Why did you start out of state? You’re crazy.” It was great because it forced us to figure out how to do it with other people and systems. But at the same time, it is kind of nice to have things a little bit closer.

Henry:
There’s a price for convenience though.

Christle:
Absolutely. I

Henry:
Just think that out- of-state investors have a leg up because you have to build your business to run pretty much without you. That way when you want out, it’s a whole lot easier than where people like me, I don’t have to do that. I’m here, but I end up spending time doing things I absolutely should not be doing out of pure convenience.

Dave:
So

Henry:
Is there a benefit to investing in your backyard? Yeah, I love investing in my backyard, but you have to force yourself to build in processes even though you can do the things yourself. And when you’re type A like you, that can be sometimes hard to do.

Christle:
Yeah. So we decided let’s try to stay a little bit closer to home. So again, through networking, we found a realtor in Rock County, Wisconsin. So that’s just over the Illinois border, just north of Rockford, Illinois. For us, it’s about an hour. And we started working with him in Beloit specifically, and we started building a portfolio there. We got our first property in fall of 2020, single family, purchased it for 57,000, two bedroom.

Henry:
Was this on market?

Christle:
Yeah, it was on market. He brought it to us. I feel like he knew it was coming to market, so pocket listing. But yeah, it was just MLS. It was an investor that had it. He had a couple of buildings and he was trying to 1031 into some other stuff.

Henry:
And

Christle:
So we told him, “Yeah, we’re flexible to your timeline. So go ahead and get your other stuff figured out so you can 1031 it all together and we’ll just close when you’re ready.”

Henry:
Did this one need work? Was it already rented out? What’s the store?

Christle:
No, it was totally renovated. It was not …

Henry:
For 50 what?

Christle:
Yeah, 57. Yeah, it’s tiny. It’s tiny. It’s like 600 square feet.

Henry:
Okay.

Christle:
And renovated rental grade

Henry:
In Wisconsin.

Christle:
Yeah, I mean, but still. Still. I mean, LVP floors, white kitchen appliances.

Henry:
What was the rent that tenant was paying?

Christle:
It was not rented at the time. We rented it, I want to say our first rent was 725 on it.

Henry:
Oh, that’s solid.

Christle:
Yeah. That’s

Henry:
Solid. Awesome.

Christle:
It was

Henry:
Good.

Christle:
Okay.

Henry:
Did you pay cash and refi this one or how did you purchase it?

Christle:
We just financed it straight up on that one.

Henry:
So you did a conventional mortgage 25% down, 30 year fixed?

Christle:
Yep.

Henry:
So you found this amazing deal. You have now said, “All right, investing closer to home seems like a better fit now that we have some experience, plus we feel like the market’s affordable, things are growing in the right direction.” At what point in all these deals were you able to leave your job? How did you make that decision?

Christle:
Yeah, so it was kind of happening right around this time. It’s like one, two, three, we’ve gotten, they’re working. This is a thing. I had only been in IT a couple of years. I wasn’t super into it. I wasn’t super invested in that role and it just made sense for us. It was going to give me the flexibility to stay home with my kids and spend more time with them. And so we just decided to go for it.

Henry:
And when you say you went full-time, you mean just you, your husband continued working at W-2?

Christle:
Yep. Yep. So my husband’s still working his W-2. He’s an engineer. I’m very thankful that we found real estate and that we were both comfortable enough for me to leave. We didn’t necessarily need my income. His is the household income that supports us. We don’t use our real estate income at this point. Just put it right back in.

Henry:
That’s a lesson people learn I think once you start doing a few deals because yeah, the allure is buy properties, get cashflow, cashflow equals income, income replaces, job, then I do full-time real estate. But several things happen when you do that. A, you become less bankable. Banks love a W2. Even if your real estate business makes so much more than your W2, they will still love a W2. So you limit yourself from a bankability perspective when you leave your job too soon. Also, there’s something to be said about real estate being more enjoyable when you don’t have to feed your kids with the money your deals produce. But once it becomes, “I’ve got to pay my mortgage and feed my kids with my real estate business,” it can hurt you because you start looking at deals with different goggles on, right? Absolutely. And so knowing that no one’s going to starve and our bills are going to be paid regardless of if I do this real estate deal or not, A, makes it more fun.
B helps you make more solid investing decisions. I’m saying all this because everybody wants to quit their job. And I think there are some people that absolutely should quit their job. Sure. If you can generate enough cashflow and you have a terrible job and it’s limiting your life with your family, sure, you should try to figure out a way out. But if you at all like what you’re doing, you make a decent income, keep that job as long as possible because it’s just you can grow and scale faster. It will make your investing life easier. You will enjoy investing more. And then you can build up wealth faster. If you have a job versus not having a job, it will make real estate harder if you don’t have a job. So just don’t just do it because you can, do it because you have to or you need to.
I didn’t quit my job until it literally cost me money to have a job. But other than that, I was going to keep working. All right. I’m off my soapbox. Great. You were able to quit your job. Your husband still works. Can you give me a little bit of a breakdown? What does your portfolio look like now? Where are the properties? Did you sell anything that you’ve bought? Where are you standing?

Christle:
Our thing is we find houses that are in need of renovation, significant or light, usually more significant. We renovate them, we cash out and we hold them. We are at a total of 19 doors right now.

Henry:
Wow, congrats.

Christle:
Thank you. We’ve got 18 long terms and we just got our first Airbnb in summer 2024.

Henry:
In your backyard or did you go get one somewhere cool?

Christle:
So it’s in Wisconsin, but it’s just over the Illinois border.

Henry:
Okay. So it’s somewhere cold, but not somewhere

Christle:
Cool. Well, yeah. I mean, cold during the winter. So yes. But that’s where we’re at. But we love it. It’s a little lake house. It’s on a very quiet little lake. It is the perfect little retreat and we are so obsessed.

Henry:
Do you guys use it?

Christle:
We use it when we can, but it’s booked very often. We were supposed to go up there this week for spring break and it got booked and we were like, all right, let other people enjoy it. We’ll hang here. But yeah, our long terms, 18 doors long term, we have a four unit, we have a two unit. Both of those are in Wisconsin. We did just start working into Illinois a little bit more into Machesney Park, which is just north of Rockford. I did a direct mail marketing.

Henry:
That was going to be my next question is how are you snagging these local deals?

Christle:
Yeah, so this is kind of crazy to be honest. After I left, I was like, “Let’s try all the things. Let’s try banded signs. Let’s try direct mail, networking in investor groups.” Bandit signs, I got nothing off of. It was people calling me with … Dude, it was the most ridiculous numbers and-

Henry:
There was a time they worked. It doesn’t work anymore.

Christle:
Yeah, I have the same experience as you. I hated it. The direct mail, the first set of postcards I sent out, I specifically remember I did 83 test cards and one of those was to myself. So 82 cards went out to these targeted properties that I found. I used PropStream for a list and I wanted to see what they looked like. That was really the motivation. Let me get this. Let me see how it works. Let me make sure my phone number works.

Henry:
All right.

Christle:
I got two different deals off of that from two different investors from those 82 cards. Whoa.

Henry:
I couldn’t even believe it. That is unheard of. I was just about to fuss at you too because 80 cards is a waste of money. But if you’re doing it as a test, that makes sense. That’s actually a pretty smart thing to do. Send out a small batch, see what they look like. So your test case landed you two deals on 80 postcards?

Christle:
Yeah, it was ridiculous.

Henry:
Okay. I’m going to make a caveat here and then

Christle:
I’ll

Henry:
Ask That doesn’t happen. Yes. People who are listening do not do that. You are throwing money down the drain. This is a very rare occasion where you’ll get a deal from anything less than at least a thousand postcards. To send less than a hundred and get two deals is literally like a miracle. So congratulations. But I think here’s what I think worked in your favor, just based on all my years of sending mail. Mail has a much higher return in smaller, less popular markets because people there are not used to getting direct mail. They’re not used to hearing from real estate investors about buying their house. If you’re going to send 80 postcards in Houston, Texas, you wouldn’t have heard of Pete. But when you’re sending it in much smaller markets, people are sometimes getting direct mail about buying their home for the very first time.
They’ve never seen anything like it. So people respond. They’re not always positive responses, but people respond. Okay. So caveat out the way, congratulations. That’s amazing. So you got two deals from this direct mail campaign where a direct to seller, assuming they were decent deals.

Christle:
Yeah. Yeah, no, they were great. And at this time I was working with a small local bank too.That’s

Henry:
The formula. That’s my

Christle:
Formula. It was great. They basically set us up with a line of credit and then we could do our renovations using that line of credit or using our own cash, and then they would finance it for us at the end. We still work with them. They’re great. Such a good relationship.

Henry:
That’s the play. That’s the real estate investor, single family, small, multifamily playbook. If you can find a way to get direct to seller leads and you can get in with a local community bank or two that like those types of assets in those specific markets, they can get super creative with you about how they get to finance. You can really grow your real estate business if you nestle into that niche. That’s super awesome. All right, this is great information and I want to dive into some more, but we’re going to do that right after the break. All right. We’re back with investor Christle Stezskal talking about growing her real estate portfolio. Let’s jump back in. All right, so you sourcing some off market deals, but it sounds like your price points are still that sub $100,000 price point. You put some money into it if it needs it, and then you’re renting it out for somewhere between, sounds like between 800 and 1,000 to 1,200 bucks.
Is that the typical deal structure that you buy and are you continuing to buy at that price point?

Christle:
Yeah. So generally speaking, yes, we’re still in that same kind of price point. Obviously, COVID has changed things. It’s much harder to find those property values. Everything has increased significantly. Additionally, though, rents have increased significantly. So we are still purchasing usually around a hundred at this point. And then renting, those initial properties are still 900, et cetera. But we do have the last property that we did, we purchased for 110. Our renovation was right around 40. It appraised at 187.

Henry:
Wow.

Christle:
And then with that small bank, we did a cash out refi. So we were able to pull everything out except for 11,000. They had us keep 11,000 in it. It’s renting for 1,825. Wow.

Henry:
Yeah, that one’s pretty

Christle:
Good. That’s

Henry:
Really good. And when you’re buying sub-100,000 properties, what are the ages of these homes? Are they really old homes?

Christle:
Absolutely. So they’re definitely older. We started limiting ourselves. We don’t purchase anything older than the 60s at this point.

Henry:
Oh, that’s not

Christle:
That bad. It’s not. No. We were purchasing older stuff and we do have … Our duplex was built in the 1880s, old building. We don’t want those anymore. But yeah, they’ve been worn down and a lot of them I’m buying from investors. So it hasn’t been owned occupied. It’s been rented, tenanted, beat up. So we go in and this last one, we threw some new subfloor down in some of the rooms. We all new flooring, all paint, updated electrical in a couple places, a couple new windows, that kind of thing.

Henry:
People hear sub 100,000 and they just think these are the worst properties they’ve ever seen in life. And that’s not always the case. Every market is different. I still buy properties sub 100,000 sometimes, and they’re perfectly fine houses. Do they need work? Yeah, absolutely. But they’re not some home built in 1882. It’s a very reasonable home. I’m buying one that was built in 72 for $85,000. This can be done. It depends on your market. One last thing I wanted to cover with you is you’d mentioned earlier in the podcast that you self-manage, but it sounds like a lot of your portfolio is about an hour drive away, maybe a little more, plus you’ve got the stuff in Kansas City. Are you managing the entire portfolio and how does that impact or not impact your life?

Christle:
Yeah, so I manage everything. Any of the maintenance requests come through me. Anytime leases need to be renewed, it’s me finding new tenants. I do that. Honestly, I feel like when a rain is, it pours. Oh, of course. I’ll hear nothing, and then it’s like everything.

Henry:
Everybody’s HVACs out at the same time.

Christle:
Almost. Yeah. And it’s on a Saturday and it’s freezing.

Henry:
And the roof’s leaking. Yeah.

Christle:
Right. Yeah. So yeah, I mean, there’s been things that it’s like, “Wow, I need to address this immediately.” Not convenient. My husband and I were out of the country for a wedding and I got a text from one of my tenants that the refrigerator started on fire. They opened it up and it was smoking and stuff. I was like, “Well, get it out the house … House.
And I send them a new fridge. And the Lowe’s delivery, they also take away the old appliance and done in 24 hours. So I mean, yeah, stuff’s going to happen and it’s not the most convenient time, but you just have to have, again, systems. I know that I can go to Lowe’s and I can get appliances delivered to any property and the old one removed quickly. I know that I can call this HVAC company and they’ll go to this set of properties and they’ll be out there today. I have plumbers that I can reach out to in each of the markets in Kansas City specifically. So we also inspect our units. I recommend that to anybody who’s starting out. And we’ve all admit, we’ve gotten a little bit lax with it. We started with quarterly inspections. Every single quarter we got- Do you do them

Henry:
Or do you send someone to do them?

Christle:
In Kansas City, I have somebody boots on the ground that he’s my guy. He goes and he uses my form, so it’s all consistent. And he schedules with the tenants. He has their numbers. He schedules, he goes out there, he takes pictures. The units here, I do them just so I can get in and see everything and say hi to my tenants. We have good relationships with our tenants. Our tenants stay with us for a really long time. We have very low turnover, but it’s all about relationships. We pride ourselves on being mom and pop and caring about our properties and not being run by a property management company where you’re just a number. But yeah, I mean, there’s trade-offs. It is a lot of work and you do have to be available. The whole tenants, toilets, and termites, right? Everybody says that. It’s not that bad usually.
There are times where it all hits, but it’s really manageable.

Henry:
All right. Well, this has been amazing. You have a fantastic story. What advice would you say or give to someone who’s listening to this, who’s maybe a teacher or maybe working a job where they know they need to bring in some additional income, but they’re very scared to jump in. What advice would you give to that person?

Christle:
Yeah, I mean, it can be scary. And the way that I combat scary things is by data gathering.
Get your hands on anything you possibly can. Listen to BiggerPockets Podcasts, talk to other investors, read the books and network and see what are other people doing? Are there opportunities in your area? Do you need to start looking out of state? And I mean, that’s scary too, but it does force you to figure stuff out so you can be confident to make that decision. So you can do it. You’re capable of doing it. You just have to set your mind to it and combat any fears by just gathering data. Now be careful not to get stuck in analysis paralysis. At some point you have to make a move, but there’s definitely a fine line. You need to make sure that you’re informed enough and confident enough in what you can do.

Henry:
I love that. Christle, you’ve got an amazing story. Thank you so much for coming on the BiggerPockets Podcast and sharing it with everybody.

Christle:
Thank you.

Henry:
All right, everybody. If you learn something from Christle’s story, then check out BiggerPockets Podcast, episode 1252. It was back on March 16th and it was with investor Joanna Caldera. Joanna’s another scrappy investor who proved almost anyone can improve their financial picture, starting with just one property. Thank you everybody for watching this episode of the BiggerPockets Podcast. We’ll see you next time.

Dave Meyer:
Property taxes have become one of the fastest growing costs of home ownership in America. They’re actually up nearly 30% since 2019, that’s a national average. And now a broad political revolt is starting to take shape across the country. More than a dozen states are actively weighing proposals to limit, reduce, or fully eliminate property taxes. And some of these ideas are serious. They could actually be implemented. So the implications for the housing market and real estate investors are significant. Today on On The Market, we’re breaking it down. We’re talking about the great property tax revolt, how property taxes have evolved, how they’re impacting the market today, what remedies are being proposed, and which ones are likely to pass. And of course, we’ll talk about how this all could impact your portfolio and what you should be doing about it.
Hey everyone, welcome to On The Market. I’m Dave Meyer, investor and chief investment officer at BiggerPockets. Today on the show, we’re digging into one of the biggest sticker shocks investors have been facing and dealing with in recent years, property taxes. Back in the day, I remember fondly the time when property taxes were just background noise where you just didn’t really think about it. They kind of were what they were. Now they are a major expense category and the change in property taxes and how quickly they’re changing has become a constant source of stress. And it’s something that investors just have to deal with more and more because property taxes are significantly impacting the overall big picture costs of homeownership in the United States. They’re also impacting cash flow and overall return on investment for investors as well. And this problem is now starting to get more and more political attention.
Actually, more than a dozen states now have legislation to try and figure out some level of relief for homeowners and in some cases for investors as well. And this is everything from caps on how much property taxes can go up, full on exemptions, or even straight up elimination of property taxes is actually being considered in more than one state. So today on the show, we’re diving into it. What’s been happening, what some of the proposed solutions are, which ones might actually pass, and how this could all impact you. Let’s get to it. So first up, let’s just talk about the numbers. Big picture, how much have property taxes actually risen in the United States? I’m guessing if you’re already an active investor or a homeowner, you know the answer and it is a lot. I’ll break it down for you, but the national median annual property tax bill, so if you averaged everything in the country, what’s going on right now is that from 2019 to 2023, we saw a 23% increase in property taxes that went from about 2,500 bucks to over $3,000 a year, at least according to NAR.
Now, if you actually pull out condos and attached and you just look at single family homes, the average bill reached 4,300 bucks. That’s up 6% in just a year. So it’s still growing faster than the regular pace of inflation. And if you extrapolate that out to duplexes, triplexes, fourplexes, commercial insurance, all of that is going up as well. So really, no matter how you look at it, taxes are going up a lot. And this is impacting everyone, all sorts of people. You hear a lot about older folks on fixed income being hit particularly hard, but I think this is just across the board. It is increasing homeownership costs. So why is this happening? Well, the answer is actually not that complicated. This is actually a pretty simple thing to figure out, but basically home prices went up. If you look at the period of time from 2019 to 2024, where taxes on average went up 27%, home prices during the same exact period of time went up 50%.
And so based on the way tax policy works, when your home value goes up, your assessed rate goes up. And so your taxes go up because the way that property taxes work for pretty much everywhere in the United States is you kind of have two variables. One is the assessed value of your home. How much does the county or local government think that your property is worth? And then the amount that they tax that. The average across all states is about 1% of that assessed value per year, but that actually ranges anywhere from about 0.4% to 2% per year. And so what we’ve actually seen over these last couple of years is that tax policy has not really changed. If you look at the effective tax rate, again, that percentage of the assessed value, that has actually been relatively stable. It’s actually declined in some markets.
So what’s causing the increase in taxes is because appraised value has gone up. Now, fortunately, research shows that for every dollar that your property increases in value, your property insurance doesn’t actually go up proportionally. It only goes up about 0.3 to 0.5% for every 1% increase in property value. So that’s actually good because you’re building equity faster than your taxes are going up. So I want to just put this in the big picture. If you are a homeowner, if you’ve owned your property for a long time and you have seen your taxes go up, you’re probably still a net winner because your equity has grown so much that your net worth, if you’re judging it just by your total net worth, you’re still ahead. But where the problem comes in is cashflow, right? Because your equity that you’re growing is not money that’s coming into you every month.
And as an investor, that’s a consideration. But I think it’s even more of a challenge for homeowners because they’re usually not making money off their properties, but their taxes are going up. So that means more money each and every month or each and every year is going out of their paycheck or out of their pockets and towards property taxes, even though their home equity probably has gone up. So just keep that framing in mind. But just to sort of summarize what we’re talking about here, big picture stuff, there hasn’t been some big shift in tax policy. It’s just that home prices are way higher and so assessed values are up. But as with everything in real estate, it is super regional how much you pay. Tax policy is very different, not just depending on state. A lot of property taxes are implemented at a county or local level as well.
So where you live is really going to tell you what that effective rate is. Are you on the low end of 0.4% per year? Are you on the high end of 2% per year? It makes a super big difference. The highest effective tax rates, at least as of 2024, and I do not think they’ve changed. This is just the last month I could find data for. Illinois is at the highest effective rate at 1.8%. And we have New Jersey at 1.64, Texas, Nebraska, New York are also up there. Those are just in terms of the percentage that you pay. And I’m sure you can imagine that the two highest property tax, if you just figure out the total dollar amount, it’s New York and New Jersey because one, the home values are really high there and they also have really high effective tax rates, so no surprise there.
In Jersey, the average tax per year is nearly $10,000. In New York, it’s actually much lower than Jersey. It’s about $7,500, still a ton, but way lower than 10 grand in Jersey. Now, that shouldn’t be surprising. Those places have had expensive taxes for a long time, but I think what we’re talking about today where there’s kind of this just revolt where people are pissed straight up about property taxes. It’s because a lot of places that traditionally have not had high property taxes are now seeing them. So since 2019, Colorado has seen the fastest property tax increase, 53%. I invest there. I can tell you, historically, property tax is very low there. And although the assessed value hasn’t changed, 50% increase in your taxes is going to raise some eyebrows, right? We also see Georgia at 51%, Florida at 47%, and a lot of other Sunbelt states basically where price appreciation has been so rapid, that’s where the total dollar amount you’re paying per month is going up the fastest.
Now, if you’re curious about the lowest, Alabama, totally in a league of its own. Alabama just says, we’re not basically going to tax property. 0.37 is their effective tax rate, super, super low. We also have South Carolina, West Virginia, Delaware, Idaho, Nevada, Arizona are the ones that are really low, sort of near that 0.5%, much, much lower. So things are going up, but how does this tie into the total cost of homeownership and how does it impact the ever important stat that we talk about all the time on the show, housing affordability? Well, in 2025, the average US homeowner, again, is paying something around $3,500 per year in property taxes. That’s about 300 bucks a month and has to fit into the escrow payment that people are paying alongside their mortgage, which is principal and interest and alongside insurance. If you also have an HOA, you’re paying into that as well.
And so that is pretty significant, right? The average mortgage payment in the United States is about 2,800 bucks right now. So the $300 is a pretty big portion of that that is more than 10% of your total mortgage payment or I could just tell you off the top of my head, back in the day it was, I don’t know, it was probably like four or 5%. So it definitely has increased that. And that obviously comes out and impacts people on their monthly basis. But the other thing that I think a lot of people miss in this situation is it also is pulling people out of the housing market because for mortgage qualification purposes, lenders have to consider property taxes into debt to income calculations. If you go to get pre-approved, they’re going to be thinking about how much you pay in taxes and what you can afford.
And because taxes have risen so much, that means fewer people can qualify. The amount that people can qualify in terms of purchase price is going down because taxes are replacing that within the total calculation. And this can reduce demand, right? People are going to buy less. Just as an example, a buyer who’s looking to get qualified at today’s rates, 6.5% or whatever, in a state like Illinois or New Jersey. So I’m giving you an extreme example because these are the more expensive states in Illinois and New Jersey. If you are looking at this, they’re basically penalized six to $800 per month in property taxes versus a comparable home in a low tax state. So that alone is essentially the equivalent of having one full percentage point on your mortgage added to it, right? So instead of going to Alabama, if you’re living in New Jersey, that’s the same thing as basically saying, instead of having a 5.5 mortgage rate, I’m going to a 6.5 mortgage rate.
That is how much it impacts housing affordability. That is really significant. Or just put it another way, right? If you moved from Illinois to Alabama for a average price home, let’s call it 400K, that actually saves you roughly $6,760 per year or over $560 a month. And honestly, that can be the difference for a lot of people, the difference between qualifying and not qualifying for that mortgage. So yeah, this stuff really matters for the housing market. Another thing that it’s impacting as well is it kind of just adds on to the entire lock-in effect because now longtime homeowners who are sort of locked into low mortgage rates now face a second reason not to sell, right? They don’t want to give up their assessed value. Now, different states have different rules about assessing value. Some do it every year, some do it two years, some do it five years.
There are actually states like California, or now there’s a new law in Georgia that does this, that has assessment caps, meaning that not only are these homeowners in a state like Georgia or California locked into a lower mortgage rate, they are locked into a lower tax rate. So selling and moving somewhere else doesn’t just mean resetting your mortgage. It also means resetting your tax rate and that’s going to go up too. So another reason we’re seeing low inventory, it creates a powerful, sustained, disincentive to sell, right? People do not want to sell if they’re going to go move to an equivalent house and pay way more. We’ve been seeing that with mortgages for years, and I think we’re going to see it with taxes for the foreseeable future as well. Before we move on, I just want to mention one other thing that this is also impacting renters because often those costs get passed through to tenants in the form of higher rents.
And so it’s not just homeowners that are being effective. This is just raising costs throughout the economy. This is one of the things that just contributes to inflation. So it’s affecting everything across the board. Before we move on and sort of just talk about what states are doing about it, because I think this is really fascinating. I just want to mention that we had a guest on the show recently, Mike Simonson, he’s been on the show many times, really great housing market analyst. He mentioned something to me that you might’ve picked up on. He said that in states where there are higher property taxes, housing prices are suppressed and it actually makes housing more affordable. And I actually looked into it and actually he cited it and I sort of dug into this, but there was a paper, some research study done by the Minneapolis Federal Reserve.
And what they found is that higher property taxes can actually improve housing affordability, particularly at the entry level because they suppress purchase price, right? They keep prices down because there’s this other price going on that people have to contend with. So just look at Texas, right? They have a very high effective tax rate, 1.7%, median home price there is just 240,000. And so there is some research into that. I just want to call that out because people assume high tax states, there’s no benefit to that, but affordability is a benefit, right? You’re paying more tax, but you are paying less in your principal and interest. That’s what this Federal Reserve paper is saying is that when you look all told, high tax is not necessarily a bad thing. Now, if you’re in a state like New Jersey, kind of hard to argue there’s anything really good going on there, right?
You have high property values and property taxes, but when you look at the big picture, that is sometimes the effect, at least according to this paper. So I just wanted to call that out before we move on. So far, we’ve talked a lot about just general big picture stuff, houses impacting homeowners, affordability, but let’s talk about what this means for investors specifically. We do though, we got to take a quick break. We’ll be right back.
Welcome back to On The Market. I’m Dave Meyer. We’re here today talking about the great property tax revolt that is shaping up in the United States. Before the break, we talked about just how this is impacting the housing market in general, but I want to turn and just mention a couple quick things about how higher property taxes impact investors specifically before we get to the states that are really trying to curb this and what they’re actually specifically doing into it. So one thing is basically property taxes are factored into home values, meaning high tax areas produce lower purchase prices and low tax areas produce higher ones. Look at California, lower property taxes, higher prices. Jersey, New York, kind of an exception to that rule, but there are 50 states so we have to look at everything and the research shows that this is generally true.
This means, and pay attention to this because we’re going to talk about states that are potentially lowering their tax rates. This means, according to the research, that a reduction in property taxes does tend to boost home values, right? If a state is going to lower their property taxes, that can boost home values. As an investor, that is something you should be thinking about as we talk about what the states are doing in just a minute. On the other side though, that also means that raising taxes can dampen appreciation, which is why some economists argue high property taxes have kept its housing market relatively more affordable than sort of the growth that they’ve seen that the population growth, the business growth, the job growth would otherwise suggest. So again, a lot of this is academic, but I do just want to share this with you because we’re talking about states really changing their policies potentially.
And this could really impact prices in those markets. Now, of course, there are other things investors should be thinking about like just total demand, right? Market desirability. If there’s a really high tax environment, less people might move there. Or if you’re in a really high tax city trying to flip a house during an affordability stretch time, that could impact you. Of course, also you’re going to want to think about underwriting your taxes as an investor. You should be looking at how frequently your taxes get assessed. I think this is something a lot of new investors really miss. You say, “Oh, the taxes aren’t that bad.” But there’s states like Connecticut, for example, they have a five-year assessment period. In Connecticut, they haven’t assessed in several years, but that market is booming. Prices have gone up like 30%, 40% in the last five years. I think they’re reassessing this year in 2026.
So when they do that, property tax is probably going to go up 10, 20%. This is something you need to be paying attention in underwriting, and hopefully that makes sense to everyone. Don’t just take taxes for what they are today, understand tax policy in the places that you’re buying and project that forward for your own underwriting. All right, enough with the big picture stuff. We’ve done the history now. Everyone understands what’s happening with taxes, why this matters, and what might happen if a state changes their tax policy. So let’s talk about it. What is actually happening at the state level? Well, as of early 2026, there are at least, it’s kind of hard to get this information, but there are at least 12 states that are actively weighing proposals to eliminate or limit or reduce property taxes in some way, shape or form. If you’re wondering what those states are, they’re Florida, Texas, North Dakota, Indiana, Georgia, Wyoming, Kansas, South Dakota, Ohio, Illinois, Pennsylvania, and Michigan.
Now, just politically, these do tend to be Republican-led initiatives, but we’re actually seeing bipartisan support for these ideas in a lot of these states. So what is actually being proposed here? Because I think most people have seen this stuff in Florida. We’ll get into that where they’re just saying, “We’re going to eliminate it. ” But there’s a very big spectrum of what is actually being proposed. The approaches range from modest adjustments all the way up to those full elimination. And within that, there are five different buckets of ideas that are being proposed. So the first is assessment limitations and caps. Again, assessment is just basically when the government, the local government, goes out and decides what they think your home is worth, and then they tax you based on that. So one of the idea is limiting how much that assessed value can go up in a given year.
They’re basically saying they’re going to cap the annual growth of assessed values. California has this. They’ve actually capped it at 2% per year. Remember I was saying, this is why Californians tend to be locked in, right? California home prices over the last 10, 20 years have gone up hundreds of percent, but every single year, their taxes are only going up 2% max. So they have disproportionately low taxes compared to their home value. So that is what’s going on in California. Georgia actually just did something as well where they are linking the amount that they can increase assessments to inflation. So in inflation index, this is actually common. When I was living in Europe, this is sort of how they did it, not just for taxes, but for rents as well. So this is something that you see in other parts of the world. Georgia just implemented that, something like that.
But basically, this is being proposed in a lot of states. The idea here is that it protects existing homeowners. I will say it kind of shifts the cost burden to new buyers and to commercial properties. So this is not like a free lunch here. We see that in California or in these other places, but it does help existing incumbent homeowners. And you could argue, I think correctly, that it probably hurts home buyers in commercial property values disproportionately. So probably going to be very popular with owners, like boomers, right? They got all the money anyway and they want to keep it, but probably not that popular with young people who want to get into the market or people who are trying to build their portfolio. The next bucket, that was assessment caps. There’s next something called a levy cap. This is kind of similar, but it’s a little bit different in an important way.
It basically caps the total annual revenue growth of the property tax total. So it basically says, if you’re in Youngsfield, Ohio, I don’t know why I just picked that. Youngsfield, Ohio, right? And your total property tax revenue is a million dollars. It must be way more than that, but I’m just going to say a million dollars. They’re going to say next year, the most it can go up to is $1.1 million. Because that assessment cap disproportionately helps existing homeowners and kind of hurts new homeowners. The idea here is that this is a more equal way to limit property taxes and to spread the tax burden across existing homeowners and new homeowners alike. So that’s a popular one gaining some steam. The third bucket is the homestead exemptions. You might live in a state. A lot of states already have this, but this is basically a lot of states are saying, we’re going to reduce the assessed value of primary residences by a fixed amount.
So Texas has done this. Indiana is working on a system like this. I know Michigan has homestead exemptions. And this is something that is going to negatively impact investors, but help primary homeowners. And whether you like this or not, just going to say, I do think this one is going to be popular because it is a way that you can make homeownership more affordable for local residents than investors. It’s relatively cheaper for a resident to buy a home than an investor. And that’s a way to sort of equal the playing field without banning investment altogether. So just want to call off, there are trade-offs there, but my guess, homestead exemptions are going to become more and more popular, or at least homestead reductions in the assessed value. So that’s something to definitely keep an eye out for. The fourth bucket is rate or credit reduction.
So this is basically like applying a credit statewide against property tax bills is similar to other types of tax credits. North Dakota has a really interesting example of this. I’m going to talk about that in a little bit, but they have a primary residence credit, super interesting thing that they’re doing in North Dakota. So we’re going to talk about that in a minute, but I just want to get to the fifth bucket, which is tax swaps, basically replace property tax revenue entirely with something else. So the tax state says, we’re going to either lower property taxes, we’re going to get rid of it, and we’re going to place it with another kind of tax. That’s basically either sales tax, increase sales tax or add an income tax, increase the income tax. So these are options. They’re controversial because you’re just taking taxes from one place and putting them somewhere else.
So people argue and say that this could shift costs towards consumers or renters. Now, I’m not sure this will go anywhere. The full elimination proposals that are out there sort of fall under this bucket because people are saying that they’re going to just get rid of property taxes are saying that they are going to fund that, replace the income through some combination of maybe state surpluses, sovereign wealth funds. We’ll talk about that, what that is in just a minute, and other taxes like Florida and North Dakota sort of have the most advance of these ideas. But I’ll just tell you, these are really bold ideas and I’ve done the math and I don’t know if it really makes sense because basically where does the revenue go? If you just ask people, “Hey, do you want to get rid of property taxes?” Of course, everyone is going to say yes, no one likes paying taxes, right?
But property taxes are not just like some random thing that you pay. They’re in many ways the financial backbone of local governments. So not just states, but cities and counties as well. Property taxes actually fund about 90%, 90% of local school district revenue, so these pay for schools. They account for roughly 70% of all local government general revenue. So not just schools, firefighters, roads, police, all of that. 70% of it. When you factor in states, it’s about 25% of revenue nationally. And so this stuff really matters, right? The total amount collected in property taxes in the United States in 2024 was about $800 billion. And so in just the most extreme example, if you just eliminated that, that’s a lot of money for states. I know where we are with the federal government right now, 800 billion doesn’t sound that much, but if you look at state budgets, 800 billion is a lot of money.
And so every elimination, every proposal to reduce property taxes has to answer the question, what replaces this revenue? And that’s where that tax swap bucket I was just talking about comes in. And the typical answers that you hear are either higher sales tax, you hear state general fund transfers, like they have surpluses, higher income taxes, or a reduction of spending and services by state or local governments. You either have to raise revenue somewhere else or you have to spend less. And so as we talk through the proposals that are out there, just remember that there are implications for these. Some of them mean you’re going to be paying the same, it’s going to fall into a different tax bucket. Some of it means that local services and spending by your government might go down. So those are the buckets. Let’s talk about some of the policies that are actually being proposed and sort of where they are in the legislative process.
We got to take one more quick break though. We’ll be right back.
Welcome back to On the Market. I am Dave Meyer. We’re getting into the proposals that are actually moving. We’re going to deep dive into a couple of states and what they’re actually proposing. So Florida, kind of the boldest experiment, I think everyone kind of knows about it. It’s been in the news a lot, but basically what’s been going on is Governor of Florida, Ron DeSantis, has made eliminating property taxes on primary residents. So again, those are like those homestead properties. A big priority of his. This is a big political priority of his. It’s also a campaign year. And basically what he wants to do is reduce property taxes only on primary residence. Notably in Florida, vacation homes, investment properties, commercial real estate. For some reason, if they’re non-homesteaded properties, those would all still have property tax. And this is gaining steam. The proposal actually passed the Florida House of Representatives by a lot 80 to 30 in early 2026, but the bill sort of died when it hit the Florida Senate.
They’re actually revisiting this in just literally, I think next week, April 20th, when the Senate is going to introduce its own bill. I read about it a little bit. It’s apparently less generous. It’s not a straight up elimination. So it sounds like something will probably pass in Florida, but it’s not likely to be the full elimination. Apparently the Senate is not down for that. And even if that passed, you would need a constitutional amendment, you need 60% of voter approval. That would come in November 2026. So this is real, right? This is a serious proposal that could pass in Florida. So what does it mean? Well, Florida collected roughly $55 billion in property taxes in 2024, funding about 18% of all county revenues and eliminating non-school homestead taxes would cut local government revenues by an estimated 14 billion in the first year, 18 billion in subsequent years.
Now, Governor DeSantis argues that the state’s budget can cover it. They have a surplus, that is true. They’re saying they’re going to improve efficiency and that can cover the gap. But I will say, when you look at independent nonpartisan analysis of this, the math doesn’t really add up. They say that eliminating property taxes in Florida entirely would require raising $43 billion, so not enough because their surplus is five to eight billion. You’d need 43 billion, that’s roughly $2,000 per people to maintain public services that are currently funded in Florida. Now, there are some more modest bills that are being proposed probably because of this gap. That’s probably, like I said, the Florida Senate is going to sort of be a less generous bill, probably because this gap is too big. Just as an example, these independent analysts say that to compensate for the bill that passed the house, they would have to double the sales tax.
It’s currently at 6%. It would go to 12%. That would be one of, I think, if not the highest sales tax in the entire country. So this would probably help homeowners because they wouldn’t be paying those property taxes. They would be impacted by the sales tax. But you’re sort of shifting a lot of the cost burden to lower income folks. That’s what all of the research shows is that when you have a higher sales tax instead of property tax, lower income people are disproportionately taxed higher than wealthier people. And so if this passed, and this again, this is just an example, but if you decided no property tax, because Florida doesn’t have an income tax, you’re not doing that, you would have to basically double the sales tax that would really just be shifting the cost burden. Or the other option is to cut services, which might be what they are planning.
But either way, if this does pass, I think this would matter. The Florida housing market is suffering. And I do think this would really matter. Florida would become the only state in the country. It would have neither income tax nor property tax on primary residences. And the same independent analyses, nonpartisan, they estimate that this could add four and a half to 9% boost in property values. That’s a lot. That maybe wouldn’t get them back to their 2022 peak, but that would help a lot in a market that is really struggling to find its footing. And so if you’re looking to buy in Florida and this thing passes, now I don’t know if that’s going to happen in year one because we’re in a weird time with housing affordability, but long term, four and a half, 9% increase in home values, especially if you’re using mortgage, if you’re using leverage, that is a significant return on investment that is something to consider.
Now remember, investment and rental properties still would be taxed, but there is this idea that just there would increase demand. So if you were flipping, for example, or if you were to go and sell your rental property to someone who has the homestead exemption, then you could benefit from that increase in value. So that is something to remember. The other thing to keep in mind though is that there is potential for service cuts or fee shifts. The analysis I’ve read call out the idea that you could see, for example, public safety decline because if they cut the fire department or police services or something like that, that can negatively impact home value. So you need to be looking at both of these things. But generally speaking, most of the analysis I’ve seen show that if something like this does pass in Florida, it will probably be a tailwind to home prices for the next couple of years.
So that’s what’s going on in Florida. Next, let’s talk about North Dakota. I think this is one of the more fascinating ones. So basically what happened is the governor, Kelly Armstrong, laid out a phased decade long path. So they’re not doing it overnight. This is a decade long path to eliminate property taxes for most homeowners. And they’re funding it in a really unique way. Through the earnings from the state’s $13 billion C legacy fund. So basically they have a sovereign wealth fund in North Dakota. They have taken a lot of their oil and gas revenue. They have collected it as a state and invested it. And it is a fund for an interest earning, a ROI earning account for the entire state of North Dakota. And what they’re saying is that they’re going to fund property tax reductions through this fund. They’ve already enacted what they call the primary residence credit that offers up to 1,600 bucks per household in property tax relief for 2025 and 2026, funded entirely 100% from legacy fund earnings.
So local governments not losing revenue, right? I mean, I think this is pretty cool. They invested their money, they’re taking it, and they’re investing it back in the people who live in North Dakota. I think that’s pretty cool. Roughly 50,000 North Dakotan households, about 30% of all people had their entire property tax bill zero out for them in 2025 because of this program. They’ve also, back in 2025, capped annual local property tax budget increases to 3%. And so they are really making significant progress here. And I think it’s a cool model, right? They are not raising other taxes. They are not cutting services. They are just making money off of their sovereign wealth fund and they’re reinvesting it in the people of North Dakota. Now I want to call out, I think this is probably only possible in smaller states like North Dakota. They have significant oil wealth.
They have this big fund that is expected to grow. And so it probably can’t work anywhere, but I think this is a cool use of that sovereign wealth for a state like North Dakota. Maybe other smaller states might be able to do this as well. I’ll quickly go through two other states, Indiana and Texas that are making major stuff. So Indiana, they actually passed a law. It’s the biggest property tax reform in nearly 50 years. It’s projected to save homeowners in the state $1.3 billion over the next three years. Basically what they’re doing is a 10% homestead tax credit. Remember, we talked about that before starting in 2026, and they’re phasing in increases in the standard homestead deduction. Eventually, they’ll just be taxed on 25% of the assessed value by 2031, and there will be even bigger credits for seniors, veterans, and disabled residents. All told, two thirds of Indiana homeowners are expected to see a lower 26 property tax bill than their 2025 bill.
So that is real relief. But as with Florida, and unlike North Dakota, which really I don’t see many trade-offs, there are trade-offs in Indiana, basically revenue, right? Marion County, as an example, is projected to lose $43 million in revenue in 2026. That is basically the majority of the school budgets there. Businesses, commercial properties, large rental property owners. So all investors take note of this. They’re not getting the same relief. And in some cases, their effective rates might be going up. So you might see higher taxes in Indiana on rental properties and investment properties because of these cuts to homestead properties. Now, it’s not all. Some rental properties actually will see deductions, potentially significant ones, but those haven’t been phased in yet. They’re going to get phased in over the next couple of years. Last state we’re going to dive deep into is Texas. So they’ve basically just been making incremental plans.
They pass little bills here and there. They haven’t done one big comprehensive thing like these other three states. They’ve increased the homestead exemption to $100,000 up from $40,000. Voters with disabilities or over 65, they receive an even bigger exemption up to $200,000. But the governor there, Governor Abbott, has proposed a constitutional amendment for 2026 ballot. So people are going to be able to vote on this to abolish school district property taxes entirely. It’s a $40 billion per year commitment that would require a massive expansion according to every analysis, a massive expansion of sales tax to fund the schools. You’re actually seeing big disagreements within the government here in Texas. Lieutenant Governor Patrick, in the same administration, opposes this idea and says it’s fiscally unworkable. And so Texas is kind of in this cycle where it’s like making incremental progress, but really things haven’t changed that much in Texas.
So those are the big states that I get asked about a lot, but there are other states to watch as well. Wyoming is exploring the elimination being a switch to sales tax funded model. Analysts say that that would cause a revenue reduction of almost $650 million. State government there is saying they’re going to increase the sales tax by 2%. That would not fully offset it. And again, it kind of shifts the burden to lower income people disproportionately. That’s what people are saying about the Wyoming proposal. In Montana, they already passed a tiered property tax system that taxes second homes, short-term rentals, 2% while offering relief to primary residents. I think this is going to be another thing that becomes more popular. We talked about Georgia. They implemented a assessment cap similar to Florida. South Dakota, Kansas, Nebraska, Iowa, also sort of like working through things.
There’s been a lot of proposals, but nothing specific, but those are states to watch as well. So that’s what’s going on. But before we go, just want to talk about what this means for real estate investors. So near term stuff, property taxes almost certainly going to keep rising in most markets, with the exception of some of the ones I mentioned over the next couple of years, because even if property values don’t go up, even if tax policy doesn’t change, a lot of states will have these new assessments, right? The assessed values will catch up from all the appreciation over the last couple of years. And so we are probably going to see higher taxes, but I do think it will slow down. We are not in the COVID period where we had so much appreciation. I do think taxes will start to level out, and in states where they’re starting to limit it, they even could go down in some areas.
But like I said before, if you are buying property, you need to be looking at how frequently your taxes are assessed, when the next assessment is, and how likely it is that your tax bill is going to go up. That is an important part of underwriting in today’s market. The second thing is in the state’s passing major property tax reform could create demand, right? Let’s just be honest. If you’re in Florida or Indiana or North Dakota or Georgia, it could create demand for owner occupants. This lower cost of homeownership, lower carrying costs do improve affordability, and they can help prop up appreciation. Not saying it’s going to go up, but it is a tailwind, right? It applies upward pressure to housing prices in those markets. But remember, most of these relief programs explicitly exempt investment properties, commercial properties. So investors in these states like Florida, for example, they’re going to continue paying full tax while they’re owner-occupant competitors, right?
If you’re doing a house hack, for example, potentially pay none. And this is a structural shift in the competitive landscape. You’re going to have more competition from regular homeowners for a single family home or for a small multifamily in these states because they pay less than you, right? They have an advantage over investors in these states. So there is a risk reward here in any of these markets, something that you should be thinking about. So that’s what’s going on. I’m really curious what you all think about this. I’ve read a lot about this. I think there’s some interesting proposals. I think there’s some kind of crazy proposals out there that are really sort of ignoring some of the budget problems that they could create, but I’m curious what you think. What do you think about property taxes, how much they’ve gone up, and what should be done about it?
Please, if you’re watching this on YouTube, let me know in the comments. I would love to hear what the on- the-market community is thinking about this. That’s what we got for you today. I’m Dave Meyer for BiggerPockets. I’ll see you next time.

 

Ashley Kehr:
You got a message from someone you’ve never met asking if you’d sell your house. Before it even hit the MLS, do you know how to evaluate that? Do you even know what your property is worth off market and what question should you be asking before you even sign anything?

Tony Robinson:
Today we’re answering three questions straight from the BiggerPockets forums covering what to do when you inherit a tenant mid purchase, how to evaluate whether short-term rental is worth it in a saturated market, and how to know when you’re actually ready to scale from one door to …

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

Tony Robinson:
And I’m Tony J. Robinson. And with that, we’re going to jump into our first question today, which comes from the BiggerPockets Forums. Now, this question says, “I just closed on a single family rental.” Congratulations, by the way, and found out that the current tenant’s lease isn’t up for another seven months. The previous owner never mentioned this. This tenant has been there for three years, pays on time, but the rent is $300 per month below market value. I want to raise the rent when the lease expires, but I’m also scared of losing a reliable long-term tenant. How do I approach this situation as a brand new landlord inheriting someone else’s setup? All right. I love this question because I get to use my favorite phrase, which is an estoppel agreement. So if you’ve been around for a while, I’ve learned how to both, what that word is and how to spell it on the podcast.
But Ash, for our listeners that maybe aren’t familiar with that, break down what an estoppel is and why it might be beneficial in situations like this.

Ashley Kehr:
Yeah. So this is too late for this person asking this question, but before you actually close on the property, you should ask the seller if you can give an estoppel agreement to the tenants. And this is basically a forum that the tenants are filling out with how much rent they’re paying, when their lease expires, when did they move in? Do they have any pets? What appliances belong to them, what utilities they pay, which ones the landlord pays. And basically you’re taking the information they are telling you and you’re verifying it with the lease agreement or with what the landlord says. And that way, if there are any discrepancies, you can figure it out before you actually close on the property. So if a tenant fills out and says, “Hey, I pay $300 a month, but I own all the appliances.” But the landlord is saying, “No, I own the appliances.
You’re buying them with the property.” You can figure out that situation and how to handle it before you actually close on the property. Because if that tenant moves out and all of a sudden you have to buy all new appliances,
That could be a big chunk of money out of your cashflow that you need to cover to be able to rent it back out. So try and do that always when you purchase a property that is not vacant and has tenants in place. What you can do now is it really depends on your state laws. You could always offer a lease. If they agree to the renegotiation of the lease and they sign the new lease without thinking they’re getting kicked out and things like that where they’re signing it under false presences and they agree to the increase, but most likely you cannot raise the rent until their lease has expired. And in some states, there’s even regulation as to how much you can actually raise the rent on them. So even if they’re $300 below market, it may be several years before you could actually even bring it up to market because of those regulations and those caps on raising rent.
So the thing I would do is give them the most notice you can. So I would give them a lease renewal now that starts in the seven months. So that way, if they decide that they’re not going to accept that lease agreement, you’re also going to want them to sign a form saying that they’re going to terminate their lease when it expires. And you can also give them the option to terminate it early if you wanted. I usually don’t. I usually let it go, the period, but if you wanted them out so you could get somebody else in there, you could do that too. But you give them those two options and it’s their option if they decide to renew at the new price or if they are going to vacate the premises and are not going to accept the new lease agreement.

Tony Robinson:
Yeah, Ash, all great points. I think the only thing I want to add to that is just to also do the math. You said yourself, this is a reliable tenant. They’ve been there for a long time. I guess we won’t know just yet if they’re the kind of tenant that causes a lot of headaches, but assume that they’re just an all around solid tenant. There’s also, I think, some peace of mind math that we can incorporate as well. At $300 per month below market value, I mean, that is a significant amount that’s $3,600 per year in potential risk or missed rental income. But you also have to compare that against, okay, if I do let this tenant go, how long do I think I’ll be vacant for this listing? And let’s say that your rent is maybe 2,000 bucks per month and you’re vacant for two months.
Well, you’ve just eaten up for that entire year, all of that potential extra profit you’ll gain by getting to market value. But hey, if every rental unit is gone before it’s even fully vacant, well, then maybe we’ve got a really good case there to relist this at the new price. But as you have that conversation, Dion McNeely, who we’ve had on the podcast a few times, you’ve spoken toBecon. I love his approach, what’s called the binder method. We won’t go into it in detail here, but if you just search the Real Estate Ricky YouTube channel for binder method, you should find our episode with Dion McNeely and he walks through how he actually gets the tenants to agree to a rent increase and he’s just presenting them with options. So it’s a really, I think, unique way to be able to raise the rent while still keeping a really good relationship with your clients or with your tenants.

Ashley Kehr:
Coming up, short-term rentals are everywhere right now, but is it actually the right to move in a market that’s already flooded with Airbnbs? We’re going to tackle that question next right after a word from our show sponsors. Okay. Welcome back. So now that you know how to handle a tenant you didn’t choose and how to increase their rent, let’s talk about a strategy a lot of rookies have questions with in our wrestling right now. Okay. So this question comes from the BiggerPockets forums and it says, “I’m analyzing a property in a beach town that I think could do well on Airbnb.” But when I search the area, there are already hundreds of short-term rental listings. The long-term rental numbers don’t work as well, but at least they’re predictable. How do I decide if short-term rental is still worth pursuing in a saturated market and what data should I be looking at beyond just the number of listings?
Well, good thing. We have our in- house analysis, non-paralysis, Tony J. Robinson here to break down analyzing a short-term rental. And first of all, Tony, saturated markets, yay or nay. This is rapid fire here. Yay or nay.

Tony Robinson:
Yay.

Ashley Kehr:
Okay. And then we’re going with software. Off the top of your head, what’s the first tool, the first piece of software that you need to actually start analyzing this deal and get the numbers and the data?

Tony Robinson:
Air DNA. Easy.

Ashley Kehr:
Okay. Okay. Now tell us more.

Tony Robinson:
I think the word saturated is a bit of a nuanced phrase. I think a lot of people throw that word around without understanding the different layers or things that go into saying whether or not a market is actually saturated. Just because there are a lot of listings doesn’t mean that a market is saturated. There could be just a lot of demand in that market as well. So I’ll break it down. The things that I look at to actually gauge whether or not a market is quote unquote saturated or if there’s maybe an imbalance between supply and demand. I do look at the number of listings, but not just the raw number of listings. I look at how those listings have changed over time. What is the percentage increase in a market over the last, call it three years of the number of listings in that market and what rate is it increasing at?
It’s not bad to see listing growth in a market because it means that more people are coming in because maybe there’s more opportunity. But then I compare that number to the actual demand in that market. And when you use a tool like AirDNA, you can actually see across an entire market how many nights were actually booked for that market. And if I go back again over the last three years and I see that supply has been growing at 4%, but demand has grown 10% over that same timeframe, well, that’s actually a really good balance, right? Demand is actually outpacing supply. In other markets, maybe supply is flat, but if demand is decreasing 3% year over year, that’s a bigger issue, right? So I’m not just looking at listings in isolation or demand in isolation. We need to look at them together, understand the trends between both, and then understand what that balance actually looks like between the two of them.
So supply, demand, and the other things I look at is across the entire market, how is occupancy changing, how is the average daily rate changing? So if I can see a market where there’s steady growth in supply, there’s steady growth and demand that’s hopefully at or above supply, and I’m seeing healthy growth and occupancy and average daily rates, to me, that is a market, even if there are hundreds or thousands of listings in that market, that there’s a good balance between supply and demand and therefore not “saturated.” All right guys, we’re going to take a quick break before our last question, but while we’re gone, be sure to subscribe to the Real Estate Rookie YouTube channel. You can find us @realestaterookie, and we’ll be back with more right after this. All right, let’s jump back in. Our final question is for anyone steering at their first deal, wondering if they’re actually ready or maybe already trying to figure out when the second one should happen.
So the question says, “I bought my first rental property eight months ago and everything is going well. Tenant is solid, cashflow is positive, and I’ve got some reserves built up. I keep hearing that I should scale, but I don’t know what that actually looks like or how to know when I’m ready. How many doors should I have before I try to grow? And what does scaling actually require that most rookies don’t plan for? ” This is actually a good question. No one really talks about how do I know if I’m ready to scale. But first, let me say, the fact that you’ve got a solid, we’ll call it like you’re on base, maybe not a home run of a first deal, but you made the first base with your first deal. That is a great starting point. You said you’ve got reserves built up, cashflow positive, so you’ve learned a lot.
I think when we talk about scaling, what it really comes down to me is more so what are your goals as it relates to real estate investing? Is this something that you’re doing maybe in the background to help supplement your retirement? Is this something you’re doing to maybe build cashflow aggressively? Are you doing this because you want tax benefits? And depending on which one of those things is really motivating you to invest in real estate at all, I think will help you decide what type of scaling makes the most sense for you. Because I know some people who invest in real estate and they’re high income earning W2 folks who enjoy what they do. They have no desire to leave and they plan to do this for the rest of their lives. For those people, scaling maybe looks like buying one property every one to two to three years and just letting it build cashflow or build appreciation and letting that cash flow stack.
For other people, they want to move more quickly, right? They want to get into this full time. They want to make this an active business. Their approach is different. So for me, I think scaling the first question you have to answer is, what do I actually want out of this?

Ashley Kehr:
I think the problem is in this question is that you’re coming at as people are telling you, “This is what you should do. You should scale.” And that’s the problem that I had, as in I thought I should be doing this because people were telling me to do this or people were doing this and I saw them doing this on social media and I thought, “I need to get to that point.That’s the next step.” And just like Tony said, you really have to evaluate what your own progression and what your why is and what you want out of real estate. So you’ve already got one duplex. I think a really great next step would be just to buy another duplex. I think it is really important to build a solid foundation of what you know, what’s working for you and what you can be successful at.
So you’ve already got one deal that is working for you, replicate that. And yes, it’s the boring way. It’s not flashy, it’s not shiny, it’s not the hottest new strategy of 2026, but that is going to help you down the road. If you do decide to take on a different strategy to pivot or the market changes, you have to pivot, but if you have that strong foundation, it’s really going to help you. And the biggest thing is don’t forget about your lifestyle. Don’t forget about the things you want. If you start growing and scaling too fast, that’s going to eat up more of your time, more of your energy and focus now on building systems. So as you’re buying this second property, literally document every single thing that you are doing so that when you go through it for a third time, you have your whole process to follow that you’re not forgetting things, you’re not getting overwhelmed with stuff and you have it all together.
One thing that I didn’t do for a really long time, and it’s the number one thing that I do now is a utility sheet. So probably my first 10 properties, I didn’t do this, but I am, as soon as I’m setting up utilities, pretty close to closing, I have a sheet that, what’s the name of the company, what’s the account number, how do I pay it? Is there a login? What’s their website? What’s their phone number? Where is the meter located on the property? What is the meter number? So it sounds like something so simple, but all of these little simple processes and tasks that you can put together and document will make your life so much easier down the road. So I think that’s something you should focus on now is like building out those systems just for that first property. What are some things that you can do now and then slowly take your time into buying that second one?

Tony Robinson:
I think the last thing I’ll add, Ash, is just from a timing perspective, you’ll also know if you’re ready if you have enough cash to actually just buy that next deal. And it sounds like you’ve got cash flow coming from this property that maybe you don’t need because you’ve got a job that you’re working. Let that cash flow continue to grow and then save whatever else you can continue to save from your day job. And if you look up in another 18 to 24 months and you’ve got another nice pile of cash, well, then there’s your sign that I’m ready to buy that next deal. So I think a lot of times we try and overcomplicate the idea of scaling, but sometimes it’s just as simple as save money, save your cashflow, buy a property. Now you’ve got more cash flow, save some more, buy another property.
And it really starts to snowball because when you bought your first deal, you got zero properties helping you save for that first one. When you buy your first deal, now you’ve got one property helping you. When you buy your second deal, now there are two properties helping. So each property helps fund the next one if you save all of that cash flow. So don’t overcomplicate it, right? Just save, buy, repeat.

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

Dave Meyer:
For a decade, real estate investing was easy. It was predictable. It was profitable. So what happened? Well, the market changed and those easy deals are much rarer today. You don’t find 1% rural deals on the MLS in most markets. In some places, they’ve been gone for years. But frankly, I’m not even sure that’s a bad thing. Investing in real estate might take more work today. It might be riskier, but it is still the best way to grow your net worth and one of the only ways to achieve real financial freedom. And now there’s actually fewer people doing it, which means there’s less competition for good deals because most people just aren’t willing to put in the work. But I am. I’ve adjusted my strategies and real estate is still growing my net worth. Hey everyone. I’m Dave Meyer, chief investment officer at BiggerPockets. Henry is here, of course, too.
Henry, what’s up, man?

Henry Washington:
Hey, what’s up, buddy? How are you?

Dave Meyer:
Good. I’m doing well, despite all this negativity out there about real estate. But I mean, I think it’s fair to say that real estate has changed a lot over the last couple of years. How would you describe that shift?

Henry Washington:
You know what? It feels like a shift to people who probably started investing during the last 10 years, but I think to people who were investing prior to that, it’s just part of a cycle. Real estate isn’t supposed to be easy. And I think we’re just now, if you started in the Goldilocks years, you’re just now seeing the hard part for the first time.

Dave Meyer:
I think that’s exactly right. So much of this is about expectations. And I mean, to be fair, I started investing in 2010, so I haven’t really seen a situation like this personally, but I do think I have the advantage of spending so much of my time looking at the history of the housing market and just can understand from the data and information and research that this is kind of normal. The fact that it goes into these cycles that it ebbs and flows and things get better, they get harder and then they get better again is just a normal part of not just real estate, but any economic cycle. Same thing that happens in the stock market, same thing that happens in cryptocurrency or anything that you invest in.

Henry Washington:
Is it wrong to say that I think it’s good?

Dave Meyer:
No, dude, I think it’s good too. Why were you saying that though?

Henry Washington:
Because everybody’s doom and gloom about it, but I think it’s a good thing for several reasons. A, I think it’s a good thing if you want to buy assets because in any investing scenario, it’s always easier to buy at a discount when there’s some sort of uneasiness or pain involved in the market. So there’s opportunity to buy a little bit lower right now. And it’s not super easy. It takes work, but there’s still the opportunity to do that. I think that it weeds out people who aren’t great at investing or maybe were in your way of buying deals before and not doing a lot of research when they didn’t have to because everything was a deal. It was tougher. And I think if you get started now and you get your reps in in a difficult market, when the market does come around and it becomes easier, you’re so much better positioned to clean house because you learned and you got prepared during a challenging time.
If you do it the other way around, you can sometimes get smacked in the face when the hard times come because you’re so used to it being easy. So I think this is a great time.

Dave Meyer:
I actually think that makes a lot of sense, just trying to learn during a more challenging time. I mean, I think that’s what sort of like the last generation of great real estate investors. A lot of them were investing through the financial crisis.

Henry Washington:
It’s

Dave Meyer:
Not like they had perfect market timing and started in 2009 or 2010 and then just rode the wave. Most of them, whether it’s our mutual friend, James Daynard or Brian Burke, who we were talking to the other day or Jay Scott, all these people learned how to really be good and stick to the fundamentals. Because if you can learn in a market like that,
Then you can succeed in a market that has some tailwinds. And I think really, ultimately, what is going on in the market? If we’re trying to answer the question, what happened to real estate investing? I think people’s expectations just have gone crazy. They’re completely out of whack. And that is due to, I guess, some combination of the Goldilocks era. If you listen to the show, we call the Goldilocks era the time between about 2012 and 2022, when literally everything was perfect for real estate investors. Prices were low, rents were high, you had structural supply shortages, you had super low interest rates. There was an abundance of information from bigger pockets and other sources that made it easier to learn the business. It was just so much easier to do it. On top of that, we got to call it out. We had a lot of people on social media raising people’s expectations even on top of that and showing off and perhaps even exaggerating, I dare say, their results of what they do and how well they do on real estate.
And that just created this idea that real estate is something that is not, that is a get rich quick thing or that retiring within two to three years and quitting your job and not having to work and that it’s totally passive, that that’s a thing and it’s not, and it never was. And I think that is the fundamental challenge that this industry is having is resetting expectations back to what it’s like to be a real estate investor in normal market conditions.

Henry Washington:
Yeah. Especially when you look at things that are a little bit more risky because we were talking a little bit about this with Brian Burke. If you got into large scale multifamily syndications and you were raising money in the Goldilocks era, it probably felt like you couldn’t miss. You raised some money, you go buy an asset, you start producing returns for your investors and it feels great. And then the market shifts and things aren’t as easy. And a lot of those people are getting themselves into trouble because like I said, they got it in a good time and when the market shifted, it smacked them in the face. And so if you were dabbling in single family, you probably took a lot less of a hit or were a lot less in shock when the market turned versus if you were doing something that required a lot more capital and a lot more experience.
And now the market is forcing people to be much more fundamentally sound if they want to produce results. And if you didn’t develop those fundamentals in the beginning, you’re going to have to develop them now and it’s going to cost you something to develop them now.

Dave Meyer:
A lot of people rightfully started. They bought single families that bought multi-multifamilies during this Goldilocks era and they’re like, “Hey, I could do this. I could do a multifamily.” I could do it all day. And then all of a sudden, all of these tailwinds that we had that was just lifting all ships, the rising tide was lifting all ships. I benefited from it too, probably thought I was smarter than I was on some of deals. And I think that’s kind of just what happened with a lot of real estate. And now it’s just become work, which it’s supposed to be. Real estate investing is entrepreneurship. You’re going to have to work on it, but that part hasn’t, in my opinion, fundamentally changed. The things that allow you to do value add investing or to generate cashflow or loan pay down or all that still there.
It’s really just this era where you could get appreciation from doing nothing and count on massive gains with easy, cheap money, that’s gone away. But even without that, I still think there’s good opportunity and I still think it’s better than other opportunities. I see other things that I would choose to do with my money.

Henry Washington:
Yeah, I’m not shifting. I’m staying here.

Dave Meyer:
Yeah, right. Well, that’s a good question. Do you see your margins changing a lot or are your returns on individual deals worse now than they were? I mean, they have to be a little worse,

Henry Washington:
Right? Yeah. Yeah. I mean, we’re trying to mitigate that by just ensuring that we underwrite more conservatively and we buy at deeper discounts to maintain our margins. But that usually means you have to increase your volume of offers in order to keep the same amount of deal flow, or you have to be willing to do less deals because you’re willing to pay less, but the deals end up being more profitable. So yes, you can still get the margins if you adjust the underwriting, but I would be lying to you if I told you that I bought deals that are giving me the same margins now that I was getting in 2016. Now that’s just not true. The margins are not as good.

Dave Meyer:
Yeah. And that makes sense to me because just to do a little bit of a history lesson here, what happened during the great … As long as back as we have data since the Great Depression, since the 1930s, it was the biggest drop in home prices. So would deals coming out of that be the best that people have ever seen? Yeah, definitely. They definitely would be. 100%. I truly don’t think we’ll ever see that again in our lifetime. I think it’s unlikely that we see those kinds of deals again. And I think that’s where people get hung up is they’re like, “I compare the deals and the returns that I get here in 2026 to what I can get in 2016.” And it’s frustrating. Yeah, everyone wishes they could get easy money. I do too.That would be great. But the job of the investor is not to say, “I’m not going to invest today because I got better returns yesterday.” The job of the investor is to say, “What is the best use of my time and my money here in 2026?” And real estate still seems better to me than every other thing out there.
And so yeah, margins are probably lower, harder to find deals, but can I still find today a real estate deal on market that is better than what I think the stock market will do over the next three years? Yes. To me, yes. And that’s the important thing, right? It is worth it to me to do the extra work of real estate investing because if I can get a 15% return instead of an 8% return, you compound that over 10 years, that is millions of dollars, millions and millions of dollars for the average person. And so is that worth the time? Hell yeah, it is.

Henry Washington:
Yeah, 100%. It’s absolutely worth the time.

Dave Meyer:
All right. So that’s, I think, a fair assessment of what has happened to real estate investing is that it was abnormally easy to be a real estate investor, and that’s great. I’m happy that that happened. Now, I think we’re back to just more normal fundamental style real estate investing, but I want to talk to you specifically, Henry, about what has gotten harder, the specific things that people should be looking out and why that has caused such a shift in, I think, mentality and psychology in the market, even if the return profile of the best deals hasn’t changed that much.

Henry Washington:
Let’s

Dave Meyer:
Get into that, but we do have to take one quick break. We’ll be right back. Welcome back to the BiggerPockets Podcast. Henry and I are here answering the question, what happened to real estate investing? And before the break, we talked about just expectations have changed. They were high. People were expecting returns that are probably not sustainable well into the future, but Henry, tell me a little bit, what has relatively become harder for you in your day-to-day that has changed so much in the last 10 years?

Henry Washington:
Yeah, I think everything got more expensive all at the same time. When interest rates started going up, that was just kind of a shock for people because we were at such historically low interest rates to then jump up to around … I mean, for investors, we were getting deals with nine, nine and a half percent interest rates at the height of the interest rate hikes. And when you have one of the real estate levers that goes up, you can make an adjustment. And I think people were still finding ways to find deals or make deals work even at an eight or 9% interest rate. But at the same time, insurance started to go up dramatically. There were storms across the country. There was problems in California. So insurance premiums started to go up like crazy right around the same time. And then taxes started to go up and we were getting hit with higher than ever tax bills.
Then we weren’t seeing the rent growth that we were used to seeing. So rents weren’t growing as fast as we would’ve expected or wanted rents to grow. It’s

Dave Meyer:
Just been one thing after the other. That is

Henry Washington:
True.
And then yeah, prices were still going up. Even with all these other factors, some people were expecting prices to come down a little bit and they just didn’t, not drastically. And then on top of all of that, seller expectations did not adjust with the new pricing. And so if you were being a fundamentally sound real estate investor and you were adjusting your underwriting for all these new higher expenses, which essentially means you need to offer at lower price points, sellers were not here for it because they just felt like their houses were worth substantially more than what a good fundamentally sound investor could pay. And that just made finding and buying good deals extremely challenging.

Dave Meyer:
Yeah. I think you’re right. It’s just this one thing after the other. And I do think this is a real thing. If you look at behavioral economics, people just have an anchor in their brain of what things are supposed to cost. And once that changes, it just fries your brain. I experience this every day, right? You go to the gas station, you’re like, “This is wrong. I think you are incorrect about what you are charging me. ” And I think this is happening in real estate, right? You start underwriting a deal and you just get insurance and it’s like, all right, it’s going to be three grand for insurance on this $200,000 house. You’re like, “No.” Even if you underwrite the deal and it makes sense, you’re just like, “No, I refuse to pay that. ” But this is what I mean by being expectations and less about actually what the bottom line winds up being.
It’s just we’re all still trying to adjust to this new reality that has changed really quickly. And so that’s why that I think people are feeling like these things don’t work, but you wouldn’t be doing deals if they don’t work, right?

Henry Washington:
So

Dave Meyer:
Somehow you are making them work.

Henry Washington:
Yeah. Now I will say 2024, going into 2025 was probably the lowest volume of deals I’ve done in a single year because of the things that I mentioned. I was making adjustments in my underwriting. So I was offering price points that would still allow me to make money, but I just couldn’t get people to say yes enough. And so we did our lowest amount of volume that year. But yeah, I mean, we’re still buying deals. And I think part of what’s changing is sellers’ expectations are adjusting a little bit. They’re starting to realize- Finally. Yes. They’re starting to realize that, okay, in some markets, homes are valued at what they were before, but in some markets, things are coming down and buyers aren’t expecting anymore that if they say, “Someone buy my house,” that 37 people are going to raise their hand and say, “Here’s an offer.” They start to realize that now.

Dave Meyer:
Yeah. I think that’s the big thing that is starting to shift. And I think that’s honestly where a lot of the negative sentiment is. I truly believe you can invest in any kind of market. History has proven that. That is just absolutely true. But normally, I feel like the peak, the transition between a seller’s market like we’re in for a while to buyer’s market, which we’re going into is faster. You usually go and you start to see, okay, inventory’s going up, maybe things are a little bit less affordable. So prices start coming down. You get better deal flow. But it was like 18 months. It’s like two years of time where it was like the pendulum was about to swing back and you’re like, “Has it swung back? Has it started? Has it started?” And it hasn’t come fully back. And it has started now.
I feel pretty confident that we are moving in that direction, but it kind of hung out there for a while. And I think deals were just really hard to come by. And that didn’t mean you couldn’t find them, but you have to be patient. And I think that’s the other thing that has happened is you could just buy anything for so long. No one has patience and understands that maybe 2% of leads are deals, maybe 1% of leads are deals. And that’s okay. If you were in any other kind of market, if you were a stockpicker, you don’t get half of your stocks that you look into you buy. If you’re a private equity firm, you don’t buy 10% of deals, you look at one or 2%. It’s just normal. You have to be willing to look for the cream of the crop.

Henry Washington:
The market that we’re in, which I don’t think is a terrible market, what it is forcing us to do is to operate like a normal real estate investor, to do the proper amount of due diligence, to actually evaluate a good number of deals before making a buying decision. And the market’s allowing for you to do that. There’s not 37 offers on every house. You can take your time, you can evaluate deals, you can make lower offers, you can ask for concessions like this is what you should want. You used to be a fundamentally sound investor and then buy something confidently. And if you can buy deals that work in a market that’s a little tougher, I am telling you, when things shift and you start to see better opportunities that are more profitable, you’re going to be so much better positioned to jump on those and beat out the competition when there is more competition because the market’s more favorable.

Dave Meyer:
100%.

Henry Washington:
You’re going to be in a better cash position to do it. You’re going to be in a better education position to do it. You’re going to have more confidence because if you can build confidence now, this is, I think, a really good thing for a lot of investors.

Dave Meyer:
It’s hard to buy at the top. That’s the thing is we’ve just been at the top for a while. You could still do it. You’ve done it very successfully, but it’s just harder. It is harder. And I do think things are going to get easier. I’m not saying they’re going to get more obvious though. I don’t think we’re going back to this age where it’s like, oh my God, I’m going to do a perfect deal and be really bad at investing. And that’s good. Honestly, that’s really good. Because now we’re not going to have as many people who are bad at investing who are competing with us. If you’re willing to get good at this, this is an advantage for you over the long run. I think that’s really good. So I want to talk to you a little bit about some of the upsides and ways that you’re looking for deals in this, but before I need to ask you something.

Henry Washington:
Uh-oh.

Dave Meyer:
What do you make of all these people on social media? People who are or were real estate investors saying real estate is dead. How do you interpret that?

Henry Washington:
I just don’t understand how you can say real estate is dead. Unless laws change that stop normal people from buying real estate, I don’t think it’s ever going to be dead. And also, if they’re making money and not making money doing the thing they’re trying to teach you how to do, and that’s probably a red flag for me.

Dave Meyer:
Totally.

Henry Washington:
The people that I see saying that are usually the people that I just can’t verify that they actually do any real deals themselves.

Dave Meyer:
Yeah, I think that’s absolutely true. Or they were making so much money selling courses or doing BERS or coaching or whatever. And now the market has shifted. There’s lower interest in real estate. I think that’s just true. This is what we’re

Henry Washington:
Saying.

Dave Meyer:
There’s going to be less competition and maybe it’s not worth it to them because they have this very high expectation of what they’re supposed to be able to earn, not just off real estate, but off of teaching other people real estate. I think that’s another part that’s going on in our industry as well. And they’re just negative about it because this is the same thing with expectations. They anchor their expectations to the best time they’ve ever had. And that’s just not the case. I personally, maybe I’m really negative, people are going to disagree with me. I just think investing returns across every asset class for the next five to 10 years are going to be lower. I just don’t think they’re going to be as good. And if you look at history, this just happens. It just happens. It’s just part … We’ve had some of the best probably last 15 years.
It was incredible to be an investor. That can’t last forever. It just does not happen. I hate when people say about investment, what goes up must come down. That is not true. That is just historically completely just dumb. That is not right. But can you have an ever accelerating rate of growth? No, it’s going to slow down. And so I think everyone needs to just understand that returns are going to probably be lower across the board, but can you still make 15, 20% return on real estate on a rental property? Yeah. Can you still make 50% on a flip? Yeah, that is unbelievable. Sorry, I’m cursing because it’s just so much better than everything else. The stock market average is 8% to 9%. If you look at any projection in the stock market over the next few years by any professional person, they say we’re going to have a bad decade.
So why would you call real estate debt when it’s still … Almost everyone agrees it’s going to outperform every other asset class. All right, we got to take a quick break, but Henry and I will be back to answer the question, what happened to real estate investing right after this?
Welcome back to the BiggerPockets Podcast. Henry and I are here level setting, raising people’s expectations to modern normal levels and discussing what has actually happened in real estate over the last couple of years and what you should expect going forward.

Henry Washington:
We’ve been talking about essentially you have to adjust your underwriting so that you can buy deals that perform, but everybody underwrites deals a little differently. And so can you explain to us a little bit about how you adjust your underwriting or how you underwrite a deal a little differently now than maybe you would a few years ago?

Dave Meyer:
Great. Yeah. For me for just buying regular rental properties, I am assuming no appreciation. I think that’s the way to go. And it’s funny, I’m looking back on it as a lesson learned, but I wrote a book with Jay Scott, great investor, done it all. And he said he never underwrites for appreciation, never has. Even during the Gold Lakes era, never did it. And I thought I was being conservative because I do like 2% appreciation way under what we were getting, but I just thought that made sense.That’s the historical average. And now I’m just seeing the wisdom of just doing zero, just 0% appreciation unless you’re doing value add, unless you’re forcing appreciation, unless it is under your control, don’t count it. And I just have come around to that philosophy a lot. I am not saying I think it’s going to be zero. I have just reset my own standards to say, if it is zero, does this still make sense?
I have always underwritten deals with a total return. I have a calculator on BiggerPockets. You can get that for free. I’m going to biggerpockets.com/resources, but it’s cashflow plus tax benefits, plus amortization, plus value add. If that equals 12 to 15%, that’s usually pretty good for me if it’s a low risk deal. If it’s like, I’m going to have to put a lot of money into it, maybe 15 to 20%, something like that. That just hasn’t changed, but I’m putting zero in to the equation there, which just means my cashflow has to be better or my value add opportunity has to be better. And so that’s just the way I’m looking at it. And although it hasn’t shifted, the pendulum’s still holding, we’re still at the top, I think cashflow is going to get better,

Henry Washington:
I think

Dave Meyer:
Prices are going to come down and rents are going to stay exactly where they are or grow. And so I think that’s going to be the opportunity and that’s how I’m going to underwrite deals.

Henry Washington:
The other question I have is it’s easy to adjust your underwriting. What’s hard is when you find those deals that are just outside of your new underwriting that maybe would have performed if you underwrote it the old way, are you finding it easy or hard to say yes or no to those?

Dave Meyer:
Easy. To me, that’s easy because I don’t buy the same volume of deals as you. So I’m patient. If I buy five deals this year, I buy two, I don’t care. I just want these deals that make sense to me. And I just think the window, I think some people say, “Oh, the window of it’s buying is the next six months. The Fed’s going to lower rates.” I don’t buy it. I think we have two or three years where we’re going to have flat and declining rates. We’re going to be in a buyer’s market for a while now. So I just don’t see any incentive to rushing

Henry Washington:
Into

Dave Meyer:
Something or fudging your numbers.

Henry Washington:
Yeah. I mean, I agree with you, but I think that’s where a lot of people struggle, especially if they are doing some sort of volume. Or where I really feel like people struggle is people who are full-time investors, who’ve got to feed their family by doing real estate deals, find it the easiest to kind of fudge numbers or just be comfortable with things they shouldn’t be comfortable with. And this is not the market to do that in.

Dave Meyer:
So what do you do though? That is hard.

Henry Washington:
Well, you got to keep in mind that if you are doing some sort of volume, which means you should be generating leads on some sort of volume, whether that’s leads you’re getting for free by making offers on the MLS or whether you’re doing off market stuff like me, you have to just always remind yourself there’s going to be another deal to underwrite very soon and there’s going to be another opportunity. And you have to be comfortable leaving potential money on the table even though the deal doesn’t pencil. Because what we’re saying when we adjust our underwriting isn’t that a deal just outside of our underwriting won’t make us money. It totally could if everything goes perfect, but we are purposely not banking on everything going perfect. And so we are comfortable. What we’re saying is I’m comfortable leaving that amount of money on the table.
There’s too much risk for not enough reward. And so you’ve just got to be very comfortable with your risk to reward profile and your risk to reward ratio and your underwriting and be okay leaving 10, 20, 30 grand on the table because you want to get a deal that’s got 40, 50, 60 grand.

Dave Meyer:
That’s right. I actually think this is the hardest mental thing
For me too. I don’t do a ton of volume. For me, the shift I’ve made in the last two or three years just mindset wise, not even underwriting is priority number one in every deal is protect against downside risk. Priority two is make money. Right now, the idea is like, think about everything that’s going to go wrong. And that does mean you’re going to be able to do less deals, but that’s okay because you’re going to have rock solid deals.That’s the way I want to see is like, this is just bulletproof. That is what gets me away from the fear because there’s so much uncertainty right now and it’s inevitable. Everyone is afraid. You read the headlines. It’s scary stuff, right? But it’s like if you’re like, “I just am being such a grumpy dude. I hate everything. I think everything’s going to go wrong and this one still works.” I’m like, “Okay.

Henry Washington:
Yeah.

Dave Meyer:
I could cock myself into that.

Henry Washington:
” Yeah. I just want to highlight what you said for a second because that is probably the most valuable thing that was said on this show to date that we’ve talked about today. He said he’s changed his priority from protecting against downside risk as priority number one when underwriting, and then priority number two is making money. Because I guarantee you, most people who underwrite deals still prioritize profitability over risk. And in a market like this where it is very likely that you can do a deal and lose money, protecting against downside risk is making money because- Exactly. Yes,

Dave Meyer:
That’s exactly right. And if you protect against downside risk because then you’ll hold onto a deal, you’ll guarantee to make money. Yes, guaranteed. Absolutely going to make money. It might not be tomorrow. It might not be the highest, fastest return, but it will be the most reliable.

Henry Washington:
I mean, you and I have talked about this on several different shows. The way to really lose in real estate is to not be able to hold onto your asset. So even if you buy a deal that doesn’t work out on your numbers like you wanted it to and you’re losing a little bit of money, 10 years from now, somebody’s going to call you a genius for buying that deal. You just got to be able to stay in the game that long. So protecting against downside risk is making money.

Dave Meyer:
A hundred percent. And I’ll just call out people worry about the market as the risk as the number one thing like, oh, our price is going to go down. Yeah. Okay, that’s a risk. To me, I think the bigger risk that people ignore are like the risks of vacancy. If there’s too much supply in your area or you haven’t kept up with your units and they don’t look as nice as everyone else’s and you’re not going to be able to attract good tenants and expenses risk. Are your taxes going to go up? Are you going to … I invest in Colorado, hard to get insurance here. Same with places like California or in Florida. Those are the risks I’m trying to protect against because if the prices go down 2%, I’m not going to love it. I’d rather them go up. But the things that endanger my ability to hold onto them, those are the risks that I think you really need to be protecting against.

Henry Washington:
Yeah. And I think another risk that people don’t think about because it’s not part of underwriting is the risk of running out of capital or additional capital that can help you stay afloat, right? Yes, we underwrite these deals to pay for themselves. In most instances they do, in some instances they don’t, but the people who end up building true wealth over a long period of time are the people who were able to maintain a stable level of cash reserves to cover them when deals didn’t work out, when vacancy didn’t work out like they wanted to. And over leveraging by buying too many assets that aren’t penciling all at the same time is going to deplete your cash reserves so quickly and then you don’t have any other options if things aren’t working out, you’ve got to sell or you got to let it go.

Dave Meyer:
Well, before we get out of here, I want to end on a little bit of a positive note because

Henry Washington:
You’ve

Dave Meyer:
Been saying a lot of things that have gotten harder, but I think there are things that are also getting easier and better, and that is lower prices. People look at this correction in a market and say that it makes it impossible. No, that actually makes things more affordable. We’ve seen housing affordability get better for the better part of a year now, which is much better. And I actually think cashflow’s getting better and you’re going You have better negotiating leverage. So yeah, things have changed, but some of it is for the better. It’s just about establishing that discipline to be able to only look for good deals and then work with what the market’s given you.

Henry Washington:
Yeah. Over the past, I would say 90 to 120 days, we have been seeing some of the best spreads on deals that I’ve seen in a long time since the 2017, 2018 timeframe. Seriously,

Dave Meyer:
That’s

Henry Washington:
Encouraging. And I think a lot of that has to do with sellers, A, starting to finally loosen up with what they’re expecting. I think a lot of that has to do with people just getting comfortable with the level of uncomfortability that the market has been providing. People start to settle in eventually. Interest rates went crazy and then they’ve come down a little bit. Now they’re just kind of chilling around the same. They’re hovering a little bit, but it’s not drastic changes like it was before. Expenses, they went up. They’re higher than they were a couple of years ago, but they’re not continually rising so drastic. People are just comfortable with how much things cost, with how much real estate costs. And now people are willing to trade because a lot of people were locked into sub 4% interest rates, but now you can go get a new mortgage at 6%.
And a lot of people are willing to make that trade if they’re getting a better house and a better neighborhood or if it’s providing something else for their lifestyle. And so I think people are a little more comfortable. Sellers are a little more realistic. People still need to sell. That’s creating opportunity for us to come in and find deals that actually pencil with our new levels of underwriting.

Dave Meyer:
I don’t want to say that we’ve reached peak challenging. Who knows what’s going to happen? There’s so much uncertainty. But there are reasons to believe that this era of really high prices, really high interest rate, and rapidly expanding expenses and no rent growth. Those are what, five of the hardest things that you could probably deal with as an investor. They’re starting to ease. It’s not going to happen overnight. Those people who are waiting for that magical day where it’s all going to get better. It’s not true, but it is getting relatively easier. And I think it’s just going to continue. And it’s for the people who aren’t getting discouraged. Those are the people who are going to benefit from this, means there’s still a lot of garbage out there. You’re still going to have to be super, super patient. But that’s the discipline I encourage everyone to start thinking about and practicing over the next month, year, two years.That is going to benefit you for a decade or more, even if it means it’s a little frustrating right now.

Henry Washington:
I think the goal right now is get a comfortable level of cash reserves. Stick to your underwriting. Be willing to leave a little bit of money on the table. Only buy deals that fit into your buy box. Don’t fudge it at all. And in five years, you’ll look like a frick fracking genius.

Dave Meyer:
All right. Well, Henry, thank you so much. This was a lot of fun. I always love ranting with you about this. It’s

Henry Washington:
One of my favorite things to do, is just to stand on a soapbox and rant about things. So anytime you need me for that, I’m in.

Dave Meyer:
Absolutely. And thank you all so much for listening to this episode of the BiggerPockets Podcast. He is Mr. Henry Washington. I’m Dave Meyer. Thanks for listening. We’ll see you next time.

 

In This Article

If Hartford, Connecticut, were a movie character, it would be Keyser Söze from The Usual Suspects. The once-unassuming city, known as the insurance capital of the world, has, for many years, masked a darker alter ego, only recently revealed: America’s most cutthroat real estate market.

In all fairness, even veteran real estate investors likely never knew their hometown would become Zillow’s hottest housing market of 2026, prompting bidding wars with all-cash offers like it was 2021 and driving prices up by 70% over the last six years. 

So how did Hartford go from mild to wild? It’s a plot twist transformation that serves as a good case study for small investors chasing the latest rental hot spot and knowing when to turn or risk getting burned.

Why Hartford Earned Zillow’s Coveted Top Housing Market Spot

Hartford’s win wasn’t merely clickbait. The combination of expected home price growth this year, based on last year’s numbers, which saw 66% of houses sell for over list price and sit on the market for only a week, combined with low inventory—still 63% below pre-pandemic levels—earmarked Hartford for an intense year of price hikes and bidding wars.

Zillow senior economist Orphe Divounguy said that in Hartford, “buyers must compete to elbow their way to the front of the line, which creates hot conditions that elevate a market to the top of the list.”

Investors Flood In

Zillow also noted that many of its top markets were in the Northeast and California, close to large job centers, but where new housing construction has been slow. According to The Wall Street Journal, the pandemic was a game-changer for Hartford, which sits halfway between New York and Boston—a two-and-a-half-hour drive to both. As prices started to increase, investors from surrounding big cities began flooding in, looking for flips or rentals.

“Right now, houses don’t last more than a day on the market if they’re priced correctly,” Kristen Duchene, a Connecticut real estate agent and broker, told the Journal. 

The key for investors looking at cities like Hartford is to try to see what’s around the corner. Its proximity to densely packed urban centers means it has always had the potential to be a rental hot spot. However, its housing market was decimated after the 2008 financial crash, with job growth in dire shape and homebuyers able to negotiate prices lower at will.

“There was no competition,” investor Eben Busa, who bought his first home in the area in 2017, told the Journal. “I would come in and say, ‘I want your grill,’ or ‘I want this wall repainted,’ and then I would still come in with an underbid.”

Stable Industries and Affordable Prices

Recovery hit Hartford’s leafy suburbs first, with stately older homes housing employees in the state’s main industries in insurance, healthcare, education, and aerospace. The older housing stock made it a haven for flippers. The lack of inventory meant that flippers who could find deals made tidy profits in record time when they listed their projects.

However, despite the increase in house prices, Hartford is still relatively affordable, with the average home in the city costing $189,744 and the average rent $1,529 as of January 2026, according to local newspaper The Bulletin, meaning that it is still possible to cash flow or at least break even.

The city’s low supply means those prices will surely increase. For now, with low prices and assuming the neighborhood is not treacherous, the numbers make sense.

Good and Bad Neighborhoods

That’s a big assumption, because just because a market is deemed to be “hot” doesn’t mean it’s a good investment, like many cities. Hartford has its good and bad areas. 

Many investors fail to realize this as they rush in from pricey cities like New York and Boston to cash in on the hype around Hartford and its low prices. Last year, WalletHub ranked Hartford among the worst state capitals to live in, based on cost of living, affordability, education, economic well-being, and crime, among other factors.

Chip Lupo, WalletHub analyst, said in the report:

“A state’s capital city is more than just the seat of its government—it’s also often the center of its economic activity. Some state capitals boast incredible job markets, high average salaries, world-class universities, and an abundance of attractions. Unfortunately, others have populations that are struggling financially, failing public education systems, and poor public health systems. States should aim to make their capital city a shining example of the best they have to offer.”

In Hartford’s defense, a slate of new development projects and housing will have a major impact on the city’s complexion, which is why, with a still surprisingly reasonably priced housing market, Hartford is attracting the kind of buyer interest it is.

That’s reflected in Realtor.com‘s projected 17.1% median price growth for Hartford in 2026, with the listing site’s economists citing “chronically tight inventory” as the driver. The pricier areas of Hartford are pushing buyers to look elsewhere in the city, where they can get more bang for their buck, and driving price growth outward.

“People are saying, ‘OK—I can either continue to search in West Hartford and go for a small home, or I can get a larger home [elsewhere],” Alexa Kebalo, Connecticut Realtors president and a broker in the West Hartford office of ENRG Realty, told CT Insider. “I think a lot of people are realizing that you can have a dream list…but then you have a ‘what can I actually afford list’—the real list, in that your finances are what your finances are.”

Final Thoughts: Lessons From Hartford, Connecticut, for Investors Eyeing Cutthroat Markets

For investors looking to buy in similar “sleeper” markets like Hartford, recent data offers a few practical pointers. 

First, the combination of low inventory and short days on market, highlighted by Zillow, means that financing and underwriting need to be in place before making any offers in Hartford. In this market, 2021 rules apply—no contingencies, over-asking-price offers, and all-cash buyers jump to the front of the line.

Secondly—of particular interest to buy-and-hold investors—rents are still rising year over year while the rest of the market cools, which augurs well for cash flow. 

Finally, and this is a biggie: The limited concentration of older homes, especially in the city, means that single-family or small multifamily rentals are the prevalent type, favoring small landlords.

However, a large number of tenants (55%) are cost-burdened, and many of the city’s landlords were recently cited for violations of poor living standards. Much of the rental population is working-class and financially strapped, and the real estate is often in poor condition. This rental market is not easy to navigate if you want a stress-free life as a landlord.

Yes, the housing is relatively affordable and increasing in price, but you will need good property management, cash on the sidelines to handle repairs, and you will have to work for every penny of cash flow and equity. There is money to be made, but don’t believe the hype; it won’t come easy.

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There has been a lot of conjecture about the short-term rental market recently. Many hosts have complained about oversaturation, while increased local restrictions have led many investors to revert to regular yearly tenants or mid-term rentals.

For those committed to booking short-term rental guests, it’s clear that the landscape has shifted, and simply providing a spare room and a few towels will no longer cut it. Increasingly, guests are after luxurious experiences with resort-style residences and are willing to pay top dollar for the privilege. 

While glam pads at Coachella or the Catskills are curated and managed by well-heeled, upscale management companies, that doesn’t mean everyday mom-and-pop investors have to be squeezed out of the STR luxury rental experience—or the profits it brings.

Turning Drab to Fab

According to a recent report in Forbes, everyone can get in on the luxury trend—whether you own an estate, a small multifamily building, or a condo. Upgrading it with luxury hotel-like amenities has seen a dramatic return to profitability in the STR world.

Stephen Wendell, founder and CEO of Mountain Shore Properties, told Forbes:

“The ‘easy money’ phase is over, but the asset class isn’t. Short-term rentals have matured into a true hospitality business—returns now depend on design, operations, and differentiation, not just owning the asset. Airbnbs can still be a great investment, but travelers now expect hotel-like amenities; therefore, Airbnb owners and operators have had to level up to succeed. I view this as a healthy correction that was inevitable.”

Leveling up means upgrading features such as fire pits, outdoor cooking facilities, and curating interiors accordingly. The investment—according to Rental Scale Up, a subsidiary of the revenue management and market data platform PriceLabs—results in greater revenue and insulation from the vagaries of the rest of the short-term rental arena.

“We’ve adapted our short-term rentals for wellness-focused travelers by prioritizing calm, light-filled spaces with ocean views, private outdoor areas when possible, and a clean, serene design,” Maximillian A. Kostyashkin, CEO of MAK Vacation Rentals, a Miami-based company, told BiggerPockets.

Demand Splits Between Chill and Thrill

Curated luxury stays are increasingly split between rest and relaxation with a focus on wellness and high-energy events such as concerts and sports, according to Airbnb. However, trying to have your rental fit into a one-size-fits-all category is not a good idea, Rental Scale Up advises. Picking a lane, sticking to it, and promoting your stay accordingly is the best bet to gain traction and attract guests.

Whether your short-term rental is catered to the World Cup or wellness, providing the right experience for your guests will bring dividends. As the World Cup is once every four years and wellness is a lifestyle choice without an expiration date, catering to the latter will capture the widest market.

Market researchers forecast that wellness tourism is set to grow by nearly 10% in 2030, from roughly $974.6 billion to over $1.06 trillion, as travelers seek trips geared toward stress reduction, preventive health, and mental recharge. For property owners who can fit it into their budgets, that means adding amenities such as cold plunges, saunas, yoga decks, filtered water, and sleep-optimized bedrooms. 

The good news is that it’s not as expensive as it sounds and can generate sizable returns. According to Market Reports World, young professionals, expats, and city dwellers are willing to pay 4.5%–7.5% more in rent per square foot for wellness-themed stays.  

“In competitive-priced apartments, the luxury comes from practical touches: spotless presentation, comfortable furnishings, personalized service, and concierge add-ons like in-suite massages, facials, private dining, and beach, spa, or fitness access (where available),” Kostyashkin said. “The goal is to make the stay feel restorative and elevated while still keeping it affordable.”

Safeguarding Your Investment

It’s a good idea to do some research before you upgrade to ensure your market can justify the added expense. AirDNA’s Best Places to Invest in Short-Term Rentals report provides segment-specific rankings that investors can filter according to budget and location. 

What is interesting about the report is that home prices are affordable, and the revenue potential is considerable. “This year’s results challenge some of the usual assumptions about where short-term rental opportunities exist,” said Jamie Lane, chief economist at AirDNA, in a press release. “When revenue and growth aren’t viewed in isolation, affordability plays a much bigger role in how returns stack up across markets.”

Across the top 10 markets listed, the average home cost $296,000, and the annual revenue potential was $40,500, yielding around 14%. The markets attract year-round demand driven by workforce travel, healthcare, education, and government- or military-related activity. That doesn’t mean upgrading amenities to ensure a more well-rounded, wellness-themed stay won’t be appreciated by travel-weary guests with stressful jobs.

“2026 is one of the strongest environments we’ve seen for short-term rental investment in recent years,” said Rohit Bezewada, CEO of AirDNA, in a press release. “This report lays out the framework to identify the best opportunities, and investors can apply the same approach within AirDNA to evaluate deals at a more granular level.”

AirDNA’s Top Markets to Invest in 2026

• Port Arthur, Texas
• Abilene, Texas
• Downtown Saint Paul, Minnesota
• Charleston, West Virginia
• Springfield, Illinois
• Lake Charles, Louisiana
• Montgomery, Alabama
• Akron, Ohio
• Lebanon, Pennsylvania
• Jackson, Mississippi

Cross-referencing this report with AirDNA’s Best Places To Invest In A Short-Term Rental for $250k or Less (unsurprisingly, many of these are in the Midwest) combines affordability with ongoing year-round rental demand. With gross yields just under 20%, these offer a great way to generate revenue without the hassle of chasing rents and dealing with evictions.

With a strong property management team in place, a reliable cleaning service, and stylish, functional finishes, the need to upscale to luxury isn’t a prerequisite with less expensive residences. As the report states: 

“The guests booking homes worth $100K–$250K are likely booking for practicality, not luxury. Lean into that practicality by marketing a comfortable space, parking, easy access, and flexible layouts. Aligning the home with how guests actually travel in that market, especially guests on a budget, is key.”

Final Thoughts: FHA Loans and STRs—Turbocharged Scaling

There are distinct advantages to scaling a short-term rental business rather than a regular rental, because under current FHA rules, you can use an FHA loan to buy a home and rent part of it out, provided the home is your primary residence. That is easier with a short-term rental than with a 12-month guest, because yearly tenants usually require their own kitchen and bathroom and want to bring in their own furnishings, while a short-term guest can be limited to one or two rooms that are already furnished.

You’ll have to check your local short-term rental rules to see if renting for under 30 days is permitted. If not, advertising part of your home as a mid-term rental or with a 30-day minimum stay will offer flexibility and a brand-new swath of potential guests, such as travel nurses and workforce housing.

Once you have been in the home for a year, satisfying the FHA’s owner-occupant requirement, you can refinance to a regular mortgage and rinse and repeat with a second property using an FHA loan and renting it as an STR to offset the mortgage payment while saving the 3.5% down payment for your next purchase.

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Many seasoned investors consider college rentals a real estate gold mine for both long- and short-term leases. Secure a rental apartment near a coveted institute of higher learning, and you can almost guarantee your income each year. With parents willing to safeguard the leases, even when other markets cool, the demand for student housing is such that landlords can anticipate uninterrupted revenue.

If you’re wondering which college towns to invest in, don’t think purely about the housing cost and cash flow. There are numerous other factors to consider.

Location is one. Often, college campuses are surrounded by sketchy neighborhoods, which can make for a bad rental experience.

Taking into account the overall character of the surrounding area is paramount. Is the local economy strong? What are the enrollment stats? Are college rental properties reasonably priced? 

If the deduction process seems daunting, RentCafe.com has analyzed 244 college towns and compiled a best-of list for small landlords to take note.

Why College Towns Are Still Resilient in 2026

Before diving into the rankings, let’s widen the lens and examine why college markets are a good place to invest in 2026. As with many rental communities, a shortage of housing is driving up occupancy, enrollment remains high, and federal funding is driving on-campus projects, according to a recent report by Berkadia, with Texas and the Midwest enjoying the greatest rental gains.

This contrasts with the rest of the U.S. housing market, where the balance of power has started to shift back to buyers amid softening rents. Investors, meanwhile, have identified affordability and quality of life as primary drivers of investment.

College towns fit the narrative. According to RentCafe.com’s ranking of the best college towns in the U.S. for 2026, Bozeman, Montana, leads the list for the third consecutive year, followed by a mix of Western and Midwestern communities anchored by their local universities. 

Bozeman, Montana, Is Raising the Bar for College Towns

Bozeman is on a tear in the RentCafe rankings. A persistently high performer and home of Montana State University, Bozeman’s rise has made national headlines, with the FOX-owned LiveNow reporting that the city’s access to nature, low crime, and a student-friendly cost of living make it an ideal college town. However, it’s not a place for rookie investors, as the average home value, according to Zillow, is over $715,000.

For small investors, those factors, helped by national headlines, boost the occupancy rate, as RentCafe points out, which, coupled with the university’s growth, has propelled Bozeman up the rankings and made local landlords who have owned in the city for a while flush with cash.

The Midwest and the South Generate the Most Profit       

However, larger investors usually choose vast apartment complexes to park their cash, leaving a gap in the market for astute mom-and-pop investors to buy smaller single-family and multifamily homes off-campus in nearby neighborhoods, where purchase prices are more affordable. 

According to RentCafe’s list, more affordable housing is likely to be found around several colleges in the Midwest and South, such as:

• Clemson, South Carolina (Clemson University): Average home price $399,130
• Laramie, Wyoming (University of Wyoming): Average home price $363,855
• Gainesville, Florida (University of Florida): Average home price $293,024
• Athens, Ohio (Ohio University-Main Campus): Average home price $237,159
• East Lansing, Michigan (Michigan State University): Average home price $302,521

RentCafe’s exhaustive list of colleges covers every region and price point in the country. It’s a good starting point for investors, but not a definitive guide. Once cross-referenced with other reports, such as WalletHub’s 2026 Best College Towns and Cities study, a clearer picture emerges.

WalletHub analyst Chip Lupo says:

“Towns with a low cost of living, plenty of activities, and large student populations can make your college experience a lot less stressful and a lot more enjoyable. In addition, cities with a great economic environment can make it easier to get a job during or immediately after college.”

Investing in College Towns for Long-Term Income

GoBankingRates’ October report highlighted five college towns and cities where landlords could look to generate reliable, long-term passive income from their investments. The personal finance site uses stats from the Education Data Initiative and the Mortgage Research Network, which identified where buying and keeping a property for 10 years would bring the best returns.

Top of the list were institutions where room and board ran high while home prices were relatively low. The top spot went to Philadelphia (Temple University), where the report attributed the following stats:

• Median home value: $234,799
• Three-year cost to own: $21,162
• Three-year cost of room and board: $50,904
• 10-year profit: $73,030

The other four college towns on the list were:

• Huntington, West Virginia (Marshall University)
• Newark, Delaware (University of Delaware)
• Tuscaloosa, Alabama (University of Alabama)
• Memphis, Tennessee (University of Memphis)

Best College Towns to Buy a Short-Term Rental Property

A recent AirDNA report crunched the numbers to find college towns where short-term rentals perform best and found that the best performers were those with affordable prices and the highest campus-driven revenue potential, which worked best with STRs located close to the campus.

The top five markets were:

• South Bend, Indiana (University of Notre Dame)
• Lansing/East Lansing, Michigan (Michigan State University)
• Syracuse, New York (Syracuse University)
• Columbia, South Carolina (University of South Carolina)
• Champaign/Urbana, Illinois (University of Illinois/Urbana-Champaign)

Final Thoughts

One of the main advantages of investing in college rentals is that students often pay by the room, which turbocharges rental income on yearly leases. It can also mean headaches in chasing up rents. 

From past experience, I’ve found that there are usually decent tenants who pay on time and bad eggs who are irresponsible, entitled, and think they are doing you a favor by renting your apartment. That’s where a good property manager and parental guarantees come in handy. Liability clauses and strict house rules regarding rent collection should also be in the lease and equally enforced, as should the high security deposits that will be forfeited for damage or eviction. As a landlord, you need to bring the pain; otherwise, your rental will turn into a scene from Neighbors or Animal House.

That said, when handled correctly in a high-demand area, student housing can be the gift that keeps on giving. As a fellow investor once told me when I bought my first student rental near a highly respected university, “This place isn’t going anywhere.”

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Back off, HOAs: There’s a new sheriff in town. That appears to be the message from Georgia lawmakers who have just passed new legislation that limits HOAs’ ability to tack on costly fees and fines to homeowners with impunity.

SB 406 creates an administrative process to settle disputes between homeowners and homeowners associations and, in doing so, could save landlords in the state thousands of dollars, boosting cash flow. Should other states follow the same playbook, it could be a game-changer for investors tired of seeing profits slashed by escalating, unexpected HOA costs.

While most investors focus solely on cap rates based on standard cash flow metrics—rents minus expenses such as mortgage payments, taxes, insurance, utilities, and repairs—they often overlook HOA fees. These have been rising quickly across the country, particularly in Florida, in the wake of the Surfside condo collapse.

What Georgia’s New HOA Bill Does

Branded the “Georgia Property Owners’ Bill of Rights Act,” Bill 406 creates a formal state oversight of homeowners associations for the first time in the state’s history, according to Realtor.com. Prior to the bill, HOAs operated under their own rules, generally in an ad hoc manner.

Under the bill, every HOA must register annually with the Secretary of State, pay a fee, and disclose key governance and financial information or risk losing the ability to levy fines, place liens, or foreclose on homes in communities. The bill, which garnered support from both parties, comes in the wake of property owner complaints about HOAs’ “aggressive” tactics, including the threat of fines and legal action over relatively minor disputes.

Sen. Donzella James, a co-sponsor of the bill, was reported as saying by Realtor.com:

“For years, I have been a strong advocate for homeowners, and I have heard countless cases of people being taken advantage of by predatory associations. This legislation represents a meaningful step forward in protecting homeowners by promoting transparency and fairness. It helps ensure that no Georgian is subjected to unjust fees, fines, or the threat of foreclosure without proper oversight and due process.”

If an HOA fails to register with the state, it will be barred from collecting fines, issuing liens, or initiating foreclosure actions, giving owners state-level recourse instead of having to spend money on a private attorney.

“This bill will create regulation, oversight, and enforcement and also requires that HOA boards have members who live in the communities, making sure that boards are not just run by one or two people,” South Fulton City Councilwoman Linda Pritchett told WAGA-TV.

HOA Fees: A Cash Flow Killer

Noted investor and real estate guru Ken McElroy brought up the issue of HOA fees and their impact on landlords’ cash flow in a December newsletter, writing:

“Every dollar that goes into HOA dues is a dollar that does not reach your bottom line. In many markets, rents are flattening, but HOA dues are still rising. That mismatch shrinks margins. A $5,000 or $10,000 special assessment can wipe out a full year of profits. Buyers avoid properties with unstable or rapidly rising HOA dues. High fees push down resale value. This is why analyzing an HOA is almost as important as analyzing the property itself.”

One component of Bill 406 is that HOAs must meet higher minimums for unpaid dues and provide better notice before pursuing legal action, reducing the risk that a landlord’s rental property ends up in default over a contested fine or short-term hardship, making it easier to underwrite HOA-related risks in their proformas rather than treating association enforcement as a wild card, wiping out months of cash flow or years of equity gains.

Adopting an HOA Oversight Policy Nationwide Could be an Investment Game Changer

HOA fees apply to many condos, townhomes, and single-family homes. Their relevance to the American housing landscape has been growing. According to the Wall Street Journal, citing the U.S. Census Bureau, 81% of new single-family homes sold in 2023 were in an HOA, compared to 73% a decade earlier. 

A Realtor.com Homeowners Associations report finds that 1 in 3 single-family homes (33.4%) have HOAs, and more than 4 out of 5 (84.8%) of condos and townhomes do.

Georgia did not act in isolation. Across the country, there is a growing national backlash against HOAs. An industry review of 2026 legislative activity notes that 46 states will meet in session this year, and many are considering bills that either curb HOA powers, increase transparency, or create pathways to dissolve HOAs altogether, which would dramatically alter the investment feasibility of many buildings.

Tapping Into the National Affordability Zeitgeist

With housing affordability a central topic in the national cost-of-living debate, particularly for single-family homes, it’s hardly surprising that exorbitant, unregulated HOA fees have come under the microscope as property owners try to hold on to their homes.

The same issue applies to landlords, who supply essential accommodation to tenants while often struggling to eke out any profit amid rising expenses. Landlords, not tenants, are responsible for HOA fees, and higher fees translate into higher rents and further put pressure on cost-burdened renters.

The only respite for landlords is that HOA fees are tax-deductible and can be itemized on IRS Schedule E, along with other rental-related expenses.

“When you’re paying $500 or more a month, that’s a really big deal, especially when you consider how tight many Americans’ budgets are,” LendingTree chief consumer finance analyst Matt Schul told Realtor.com. “That’s money that can’t go to other financial priorities, such as building an emergency fund, paying down high-interest debt, or saving for retirement.”

Final Thoughts

For investors, HOAs can be a gift and a curse. By taking care of landscaping, snow removal, and other essential duties, they can maintain the aesthetic charm of a housing community and make it an attractive proposition for renters, while helping landlords maintain a passive involvement.

However, that concept only works when the fees are modest and not much higher than what a landlord would pay if they had to outsource upkeep to private companies. When costs are unpredictable and egregious, seriously handicapping cash flow, checks and balances need to be in place, as is happening in Georgia. Hopefully, other states will follow.