Dave:
What’s up everyone? We are here. We have reached the final full week of 2024, and I hope you’re all taking a little bit of time to enjoy yourself during this holiday season with your friends and family. It has been a crazy year in real estate and we could definitely say that for pretty much every year since at least 2022, but it is still true. And on today’s show, we’re going to recap some of the big investing trends and topics that we focused on in 2024 by replaying portions of this year’s most popular podcast episodes. These are the shows that you found the most useful when they aired, and I think all of the info and advice in them still completely resonates today and they may even spur some creative ideas for your investing heading into 2025. And just a quick piece of housekeeping before we move on, we’re going to have this show today and then over the next couple of weeks we are going to republish a few of our favorite episodes from other podcasts in the BiggerPockets network on this feed before we’re back with fresh new real estate podcast episodes starting January 1st.

Dave:
So for today though, I want you start by replaying some of BiggerPockets Real Estate’s episode 1000, which aired back on August 5th. Of course, reaching a thousand episodes was a huge milestone for the show, but it was also a really big milestone for me personally because that’s when I became the new full-time host. And for someone who has worked at BiggerPockets for a really long time, eight years, in fact, before I started hosting this show, I understand the huge power of this platform and the influence that it has within the BiggerPockets community and the entire real estate investing industry as a whole, and that is a big responsibility. It’s one I think about a lot and we titled episode 1000. Real Estate is Changing and so is BiggerPockets to reflect that big shift. Anyone who is big in the game for even a few years knows that the strategies that worked even in 2021 or in 2022, they just don’t really function the same way in this current market.

Dave:
And we’re going to have a lot more to say about this. I’ve been really thinking, strategizing, writing a lot over the last couple of weeks to prepare us all for 2025 and what comes next for today. I think the big picture conversation that I had with Scott Trench, BiggerPockets, CEO back in August about whether real estate even makes sense as an investment anymore still rings true. So let’s take a listen. To be honest, it’s pretty rough out there right now for real estate investors. It feels at least to me, more difficult than it has in the last couple of years. So I’m just going to ask you straight up point blank. Is real estate still a good idea?

Scott:
Yes, real estate is still a great idea if you meet certain criteria, if you have a very long-term outlook, if you’re going to be active, if you’re going to find ways to make things work, if you’re going to find opportunities in your local market, if you’re going to use different parts of the capital stack in the real estate business to drive returns. So look, real estate’s always been a scary prospect, right? The first or next investment is often an all in bet. And I remember when I was getting started in 2013, I bought my first place in 2014, but in 2013 was when I was doing a lot of the learning how we were about to see a bubble pop, right? The Denver Post has a headline from 2013 called Buyers Caught in a Price Squeeze. The Housing Market already shows signs of a new bubble was a headline from CNBC. We saw similar headlines from the New York Times and Fortune in 2014,

Dave:
And we’ve seen them every year

Scott:
Since, every year since I actually went back and chronicled all these in an article called, yes, I’m Afraid of a Real Estate Bubble, but I continue to invest. Anyways, here’s why on the BiggerPockets blog,

Dave:
Oh, maybe that should have been the title of this episode, but that’s a really good point. You started investing in 2014. Did it feel different to you when you were getting started than the market feels right now?

Scott:
It’s hard to tell, right? That’s so difficult being in this for 10 years trying to put myself in the shoes of someone new today. What does that look like? And the best maybe example to illustrate that is my first house hack, right? I bought a $240,000 duplex. I put 12% down or $12,000 down 5% down, and the mortgage payment including principal interest, taxes, insurance, and PMI mortgage insurance that comes along with a FHA loan with 5% down was 1550 and each side rented for 1100. And today, I don’t know if those numbers would work. I think that the pity payment would be closer to $3,600 and each side rents for $1,600 on that purchase if I were to sell it at market value today. So it is clearly different in some ways, but the feeling and the pity of your stomach that goes along with making this all in bet on real estate, which is almost always is for a first time investor, I think is the same as just the math and the numbers are different today.

Dave:
Well, I got to admit, I’ve been doing this for 15 years and I still get that pit in my stomach. Anytime I buy a property, I’m still very nervous about how it’s going to turn out. So at least for me, the sentiment is the same. But my question to you is has that relationship between real estate investing and financial independence sort of broken in today’s environment because prices are super high, mortgage payments are so high, and when you look at all the data, it shows that renting for a lot of people is actually cheaper and a better financial option than buying a house. So do you still think if you’re someone trying to pursue financial independence that real estate is the best option?

Scott:
Look, I think that house hacking is always a super powerful tool in any environment because yes, it’s cheaper to rent than buy in many markets around the country. In a few markets it may still be cheaper to rent than to house hack depending on how you’re house hacking, right? House hacking is a spectrum of opportunities, but I think that house hacking is a really powerful tool for a lot of folks. I think the problem that people are facing from a real estate investing perspective right now is the fact that because interest rates are so high, someone needs to get really creative about the approach that they’re going to take with real estate investing. They need to do a lot of work to add value, they need to find alternative ways to finance the asset or they need to make major sacrifices on the lifestyle front to get to the same results that I was able to get with a simple duplex purchase 10 years ago. And I think that’s fundamentally the challenge that people are struggling with right now, and I think yes, it is harder and it is less appealing to a lot of folks that are just getting started in their journey. We see that in the numbers right? There were 1.3 million investor transactions in 2021, there were 760,000 in 2023, and there are even fewer, I think it’s like four or 5% drop in investor activity in 2024 versus 2023.

Dave:
I do want to talk about experienced investors in a minute, but let’s just stick with this new investor idea for just one more question, Scott, if that’s the case, then who should be investing and getting started in this type of climate?

Scott:
The person who’s going to be successful in real estate long-term is going to be somebody who spends less than they earn, who’s capable of accumulating liquidity into their life, who is willing to defer gratification and move into a place that may be a sacrifice. Someone who’s maybe willing to rent by the room, someone who’s maybe willing to do the work to short-term rental a property, someone who’s willing to maybe self-manage on that property. These are all going to be key advantages for an investor going into a long-term journey with real estate, and that person has a great chance to get rewarded with the long-term appreciation, long-term rental growth, and maybe even some short-term cashflow if they’re able to find and utilize some of the creative strategies that the market is offering to investors right now.

Dave:
That’s a great point, and it’s not really that different. The profile of person who’s going to succeed in real estate is probably not changed, even though the tactics have, I mean, I personally lived in my friend’s grandma’s basement for three years after I bought my first property that was cheaper and I could rent out the units in the house that I had just bought. The house I had just bought would’ve been a much nicer place to live than my friend’s grandma’s basement, but I did it anyway. And so I think that just underscores the idea that even though in retrospect it was easier back then, it’s never been easy to go from someone who has never bought a property or who’s relatively young to having a hugely successful real estate portfolio. It’s always taken work, a bit of sacrifice and some creativity.

Scott:
Absolutely. Yeah. But the long-term math of again, three and a half, whatever you want to plug in for the long-term appreciation rate, long-term rental growth, those are the drivers. Those are the fundamental reasons why we invest in real estate as opposed to alternative asset classes. It is an inflation adjusted store of value and an inflation adjusted income stream that you’re getting with most types of residential real estate investing, and that’s why I do it. And that gets multiplied again by the leverage and then your creativity and the skills you bring to bear on the property, the sacrifices you’re willing to make to ensure that return and that profile remains unchanged. What you can’t do is you can’t put 25% down on a random property across the United States and expect blow out returns like we got over the last couple of years, right? Another big story in this whole journey is that of the average American home buyer. I just wrote an article on this the other day and it was like the average thing that happened in 2019 was somebody bought a house for $258,000. That’s a median home price in 2019.

Chad:
Yikes.

Scott:
Then by 2021, that thing goes to 3 97 in value and interest rates fall from 4% to 2.85%. So the median American who bought in 2019 saw their property go up if they bought it with an FHA loan, a 12 fold increase on their down payment in two years, and they refinanced at that point in time, pulled $52,000 out. Again, this is the median or average scenario here that’s going on and reduced their payment by a hundred bucks all in one stroke. That’s not going to happen. That’s the weirdest best return you’re ever going to see in really any type of asset class that has of any type of scale. I mean, it’s just an absolutely absurd situation. That’s not going to happen, but I am willing to bet on a three and a half ish, 4% long-term inflation rate and long-term in rents and prices on there, and all of my strategy really revolves around accessing that.

Dave:
For me, the big takeaway from that conversation with Scott was that real estate is still an incredible asset class, but to be successful in real estate, investors need to approach it in a way that is aligned with their own personal goals, and that means each person’s portfolio and strategy is going to be different. So much of the real estate content out there is all about growing your portfolio as big as possible as quickly as possible. People will tell you that’s how you can achieve financial freedom and maybe even quit your job tomorrow. But honestly, that is not how I invest, and I know from conversations with literally thousands of other investors, it’s not how the vast majority of you listening to this invest either. A lot of you may only have one or two properties, or maybe you’re looking for your first deal right now, and that is totally fine.

Dave:
You could still improve your finances and even change your life with a small and totally manageable real estate portfolio. That was the point I was hoping to make on episode 1004 back in August with Chad Carson. You might know Chad. Chad has been around the BiggerPockets world for a long time. He’s very active in the forums. He’s written a couple of books for BiggerPockets. So because I’ve known Chad for a long time or friends, this episode sort of became a little bit of a vent session about just some of the really bad advice we see other people giving about massive scale, but it also happens to be one of the more transparent conversations you’re ever going to hear about how to set realistic expectations as an investor and achieve financial freedom in the long run without buying into all the hype and taking unnecessary risk or devoting your entire life to buying deals and managing properties. So here’s me and Chad on episode 1004. One of the reasons I’m so excited to have you here today, Chad, is because you have what is, I don’t know if it’s unusual, but I’d say it’s at least a less talked about philosophy about real estate investing. So can you share your philosophy with us?

Chad:
Yeah. There was actually a book in BiggerPockets by that title, the Small and Mighty Investor is sort of the core philosophy and approach I had and and the idea is that you don’t need a thousand units, you don’t need 500 units. You don’t need to go big and kind of scale up all the way up the top of the ladder in order to have a lot of success in life, which is really what my experience has been that that’s what I was all about because I started on that ladder when I first, going back to the beginning, I was flipping houses. I was trying to get 50 houses a year that I flipped. I was trying to own hundreds and hundreds of apartment units and we were on that route until 2007 when the great recession hit, and there was a combination of things, but the short version of that story is my business partner and I kind of had a reflection moment, kind of had a moment where we’re like, what are we doing here?

Chad:
Why are we actually investing in real estate? And we both wrote a list down. My list included things like playing basketball in the middle of the day, traveling, living abroad. I just got married that year. If I had kids, I wanted to be present with them and kind of the light bulb moment for me was a lot of the goals I had were not things like thousand units or even a money goal. The goals I had were experiencing things in life, becoming a certain kind of person, having certain kind of relationships, and the money, the real estate was all a really good tool. It was a wonderful tool, but it wasn’t the main thing. And so the aha moment was like, we should probably reverse engineer this and start with the life you want to live and then build the simplest, smallest portfolio possible that could actually accomplish those life goals. I’m still an entrepreneur, but it’s kind of balancing that with some of those other dreams that I wrote on that piece of paper back in 2007.

Dave:
I love this philosophy because I totally agree. To me, real estate investing is a means to an end. It’s not. The point isn’t to be a real estate investor, the point is to invest in real estate so that you can do all the other things other than working that you really want to do. I never woke up one day and I was like, oh, what I really want to do is manage tenants on a day-to-day basis. I was like, no, I want to go skiing. I want to travel. I want to go to good restaurants. Those are the things that I personally enjoy doing and I think it’s so helpful to identify the reason why you’re doing things in the beginning. We talk about it a lot, identifying your why or setting your goals, but it seems to me that a lot of people skip that step and I’m curious if you’ve seen the same thing and if you have any advice to people who might be struggling with figuring out what their goals are at the outset of their investing journey or even if they’re active already.

Chad:
Yeah, I think there’s two problems I’ve seen. I’ve had a lot of conversations with people. I think one of those is as we get to be adults, we get a little bit numbed by the process of being an adult. If you ask a 16-year-old or a 14-year-old, I have a 13-year-old and 11-year-old right now. If you ask them, they’re constantly being creative about like, oh, I could do this in my life, I could do this, I could do this. There’s just hundreds of ideas that would excite them, but then you talk to a 40-year-old or a 30 5-year-old, they’re like, I don’t even know what I would do if I had a lot of time. It’s kind of dormant, it’s down there, but it’s not like a realistic dream it, it’s not something practical. They’re like, Hey, if I gave you a 40 hours per week, a hundred percent free time, what would you do? And it’s kind of a blank stare a little bit, which is I think that’s part of the problem. I think it’s like a problem of imagination and rekindling that kind of excitement you had as a kid.

Dave:
You’ve hit something, Chad, that I really want talk about, which is a metric of success. You said ROI, easy metric of success. You also alluded to earlier that talking about door counts, number of units, it’s sort of this easy way to measure success if those aren’t the right ones, what is the right metric of success?

Chad:
Well, I mean you could start from there’s financial measures and there’s life measures. I’ll start with the financial cashflow is a nice one. I think cashflow gets a lot of, I know you’ve talked a lot about it on the show, on your shows. Ultimately you want to have enough cashflow to pay for your lifestyle. That is financial freedom still, but I think the big distinction that was helpful in my career was that that’s a measure when you get to a certain wealth point, when you get to a certain amount of equity, when you get to a certain amount of wealth, you then want to have the amount of cashflow to pay for your bills, to pay for your expenses, and so I think that keeping track of your net worth, keeping track of your cashflow, both super important as you grow, that’s important. The other measures though that I really took seriously starting in 2007 when I realized I didn’t have any free time when I was working 80 hours per week and I’m like, what’s the path I’m on here is actually measuring your time?

Chad:
How much time do you want in the end? Now I’m saying the end because anytime you start an entrepreneur venture, you have to invest a lot of time. There’s no getting around it. Real estate is a time event on the front end, but I think it’s beautiful because real estate on the backend can be semi-passive, it can be passive enough. You can hire property managers, you can buy properties that have really long-term tenants who manage themselves in many cases. And so I think time, if you’re not measuring time and how much time something spends takes then and you’re only measuring money, what’s the point? Time is how we measure our life. That’s what we spend doing stuff.

Dave:
Totally. I actually in my more recent book start with strategy. I talk about this because everyone talks about having a budget financially, you allocate X amount of dollars to your housing or to your car or to your gym or whatever it else, but when it comes to the very important and finite resource that we all have, which is time, people have no idea how they spend their time. It’s wild, and I introduced this idea, I started doing it myself not that long ago, probably like five years ago of a time budget, which is just like, I want to know where I’m spending my time and if it’s worthwhile, and that’s how I sort of came up with this idea of 20 hours a month on real estate because I sort of actually backed into it. It wasn’t the first thing I said. I wasn’t like, oh, I want to spend X amount of time on real estate and I have y amount of time left over for fun.

Dave:
I did it the exact opposite way. I was like, Hey, I work at BiggerPockets. It’s usually 50 or 60 hours a week. Again, I do that because I really like it and I’m willing to put in that amount of work. Then I spend x amount of time playing tennis and doing things with my wife and traveling, and what was left over at the end of the day was 20 hours a month for real estate. And I said, okay, that’s perfect. And so if you’re like Chad and I focused on time as sort of the goal that you’re trying to accomplish, I would highly recommend figuring out a way to just categorize it, put it in a spreadsheet, write it down on a piece of paper, just track yourself for a week or a month and see how you spend time. And I promise you, one, you’ll be able to find more time for real estate investing if you’re sort of in that scale up phase because I often hear the opposite that people don’t have enough time, but if you track yourself and see all the free time you have, you might find more time for real estate.

Dave:
And two, you might also just realize that you’re spending too much time work or too much time on real estate, but one way or another, you should know how you’re allocating time and make decisions from a place of knowledge instead of just feeling overwhelmed and you don’t have enough time for everything.

Chad:
I think that’s an amazing tool and I’ve tried to do that as well. And I would also add, when you start using time as your core measuring tool, you’ll also find that there’s all these decisions you make in your real estate investing business, and I’ll get real practical here. What type of property do I want to buy? Do I want to buy this? Let’s say we had property A, which has a lot of cashflow potential, maybe it has a lot of wealth building potential, but it’s like a major fixer upper property and you have to spend a ton of time managing this project, and it is probably going to be a little more management intensive on the backend, like maybe you’re buying a fixer upper or mobile home park. This could take a two or three year turnaround time, and then you have this other property, it’s like a single family house.

Chad:
It’s five or 10 years old. It’s relatively new, very low maintenance. It’s in a good location, it’s in the median price range. It’s not like a home run on the numbers, but this property is going to be, it is going to attract the tenant who can pay, well stay a long time. Those are not the same assets. One of them might do better financially. The first one maybe is a better financial deal in the long run, but if you are in a stage of your career where you have built enough wealth, where you start looking at time as a more important than just getting a higher return on investment, you might start choosing to own some of these higher quality, lower hassle properties that give you not only more time, but I didn’t mention this earlier, peace of mind as well, the hours. You’re not working on real estate if you only have constantly having problems or somebody, your property manager calling you all the time and always having hassles.

Chad:
That’s not what we’re going for here. We don’t have a lot of time. We want to have peace of mind, which means having lower risk, higher quality properties, and I’ve done both. I’ve owned the higher risk, higher time properties and the last 7, 8, 9 years of my career have been kind of pruning those off almost like a gardener kind of prs off the bad branches. We’ve been looking at our portfolio like this tree, this orchard, and then we prune off the stuff that’s less optimal from a time standpoint, less optimal financially, also less, more risky, the riskier properties, the riskier debt, we’ve reduced our debt and all of that is in the service of these different measurements that we’re talking about of time, of peace of mind, but also money as well. But you have to find sometimes there’s trade-offs between those things.

Dave:
That was me with Chad Carson on BiggerPockets Real Estate episode 1004. After the break, I’m going to play another clip from an investor who I think is totally living the sentiment and the approach that Chad and I discussed in the previous clip. We’ll be right back. Thanks for sticking with us. Next up, we are going to hear a few minutes of a conversation I had back in September with an investor named Mike Baum. Mike is truly one of the most prolific posters in the BiggerPockets forums. He’s done this 10 literally tens of thousands of times, and as a result, he has helped hundreds and maybe thousands of investors along the way. He is a super savvy guy about all sorts of different real estate topics, but the interesting thing is that Mike only owns one property besides his primary residence. It’s a short-term rental in Idaho that he bought back in 2017 and has managed since a disability forced him to retire from a successful tech career.

Dave:
Now, if you know Mike, and you’ll hear in this episode, you can see that Mike clearly has the know-how and the financial ability to buy more properties if he wanted to, but despite analyzing deals almost every single day, he’s consistently chosen not to grow his portfolio, and I think this is a really interesting topic that we don’t talk about very much in this industry. Having the discipline to only pull the trigger if a deal is exactly right for you and your financial situation and your lifestyle, I think is pretty admirable. So take a listen to this. It’s me and Mike Baum talking about the courage to turn down deals on episode 1024. Has it been hard, Mike, to be patient? So much has gone on in the last couple of years. What is it like to take the patient approach?

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

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

Chad:
Well, I would have to say that it’s easier for me being someone who is older than, I mean most of the investors that come in that are asking questions, they’re in their twenties, twenties and early thirties, husband and wife or a single person trying to get started. They liked the idea of short-term rentals and when I was younger, I was probably way more aggressive than I would be now, we have to plan for retirement. We can’t be, you have that looming over your head the entire time. Do I sit there and I just take $200,000 and put it down on black? Because sometimes you feel like that’s what you’re doing. You’re putting it all on black

Chad:
Hoping that it’s going to pay out in the end. Now, it’s not like that, but every real estate deal is a bit of a gamble. You can plan and you can get processed, you can do all kinds of things and you could still lose and nobody wants to lose. We saw a lot of that in the last few years. I think things have evened out now. So experience and just life experience in general and seeing things come and go and come go and your life isn’t worse because you didn’t jump on this or you didn’t jump on that. I mean, I don’t spend a lot of time kicking myself in the butt for not buying Apple at $25,

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

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

Dave:
Oh, really? Why is that?

Chad:
Well, because there are better options to build a base off of.

Chad:
There was one young guy, he’s 19, he’s in the military, he’s going to be able to take advantage of VA loans and he wants to get into short-term rentals once he gets out in about three years. And I told him, what you should really do is take advantage of the VA loan, or for those who don’t have access to VA loan would be FHA low down 3% down loans, buy a duplex, buy a triplex, buy a fourplex, right? You buy something like that, you live in one and you have three renters. You do some minor rehab, you do it after a year, you have to live in the place for a year. Then you basically exit the place, rent that last unit, and then do it all over again. You have to convert that one FHA loan to a conventional, you refinance. Then you move over here and you do it again, and then you do it again and maybe one more time.

Chad:
And now you’ve got duplexes, triplexes, and fourplexes, all of them producing all of them, income producing for you maybe 10, 15, 20% at this point. After doing it for a few years, maybe you have one that’s paid off. You have all these assets that form this really, really nice piece of bedrock that you can build the rest. So if you’re young, you don’t have kids, you can move every couple of years or every other year or whatever without dragging a whole family and changing school districts and blah, blah, blah, blah, blah. Then that’s what I would do. And then once you do four or five years of that, then you can start looking at some other things.

Dave:
You’re speaking my language. That’s sort of what I did is just started with long-term rentals and over time I’ve branched out and I started investing in syndications. I do some private lending. Now you do some different stuff, but I feel comfortable taking risk because I have a solid portfolio of low risk, high performing assets. And not all of them were amazing when I first bought them, but I bought 10, 15 years ago, and that’s the beauty of real estate is over time you hold onto these things they perform. Yep. I hope these last three clips that we’ve shared with you from Scott, Chad, and Mike provided a little bit of a mindset reset and hopefully some inspiration as we head into 2025, but of course, that’s only one part of what we talk about on this podcast. We also talk a lot about strategy and tactics, and next up we’re going to share a more tactical conversation from episode 1028 back in October when Ashley Care and I talked about how we’d start in real estate if we had $50,000 to invest.

Dave:
If you don’t know Ashley, she is the co-host of our sister podcast real Estate Rookie, and so she gets this type of question about how to start all the time. It’s also one I hear all the time, and I think it’s a great topic to discuss and debate with someone like Ashley, and I think that even though affordability, let’s face it, it’s very low right now. There are still a lot of viable strategies for anyone who has $50,000 to invest. So let’s jump right to Ashley’s first idea about how she’d get started with no further caveats and delays. Ashley, what would you recommend?

Ashley:
So my first recommendation would be to add value to a property you already currently own. So this may be your primary residence. So my suggestion would be to take that money into either turn a garage into a unit, your basement, into an apartment long-term or short-term rental. These could be, or even midterm rental. You have some little extra land build, a little cabin rented out as a short-term rental. We recently had a guest on the Real estate rookie podcast that bought an RV and parked it in his driveway and rented out the RV as a short-term rental.

Dave:
Oh, wow.

Ashley:
Yeah. So I would look at if you have the opportunity to actually take that money and invest it into a property that you already own, especially if it’s your primary residence, because you’re going to be adding value to that property, it’s going to appreciate over time and when you sell that property, if you live there to out of the last five years, that’s tax free income that you can get

Dave:
Tax free baby.

Ashley:
And then also with having it as a rental, it can offset your cost of living for paying your mortgage and things like that. So that would be the first thing that I would do as to use that money to invest into the current property you already have because you’re not going to pay attorney fees, title fees or whatever, and not have to do all the work that goes into purchasing a brand new property. Plus you’re going to have less overhead because you’re still mowing the same grass. You’re not going to have another property or you’re going to have to mow the grass at. So that would be my biggest thing. And my parents actually built a in-law suite on their house, and I just texted my mom before this episode and asked her how much did it cost? And she said a little over 50,000.

Dave:
And

Ashley:
This was with putting a basement in. So the full foundation, this was having a living room, a bedroom, and then a bathroom and a little kitchenette added on to their house. So you could definitely just do little studio apartment and rent that out for less than 50,000.

Dave:
This is so smart. I love this. There’s so many good reasons, but I hadn’t really thought of it, and I’ll explain the numbers to one of my ideas, but if you’re buying a new property of 50 K, at least 10% of that is going to closing costs appraisal, title of inspection, 5K maybe. I mean, you can maybe get it a little less than that, but roughly it’s probably going to be five grand. And so that’s not an investment. Those are just transaction costs you’re basically throwing out

Ashley:
Plus the time of acquiring that deal.

Dave:
That’s so true.

Ashley:
I mean, you will have time into managing the construction of your property too that will go into there, but the acquisition of the deal plus learning the new property as to, okay, where’s the water meter and plus the repairs and maintenance of this unknown property that you’re getting, even if you have an inspection, it still takes time to learn the ins and outs of what works, what doesn’t work within a property where this is going to be brand new, built into your property too, your capital expenses, your repairs and maintenance should be way lower than going in and buying another property. It isn’t brand new.

Dave:
Wow, this is a great idea and the tax benefits are so good. That’s so true. Just so you all know, if you invest in any property that’s not your primary residence and you add value, whether it’s a bur or a flip, you can make tons of money. But when you go and sell those properties, it is one of the less tax advantaged elements of real estate. So for example, if you flip a house and you drive up the value and say you have a $50,000 profit, you’re going to pay depending on how long you own it, but you’re probably going to pay ordinary income, so your full tax rate on that income. Whereas if you do the same exact project on your primary residence, as Ashley said, as long as you’ve lived there for two out of the last five years, that’s tax free money that you can go and you don’t even need a 10 31.

Dave:
You could take it and do whatever you want with that money. So that is an incredibly good option for people. And I also like this even more because this is sort of going with the trends. I feel like it’s sort of taking what the market’s giving you, because a lot of municipalities right now because of the housing shortage in the US are making this type of work a lot easier. It is becoming easier almost across the whole country to build adu, whether attached or detached to ADUs. They’re expanding permits, expanding density, and municipalities want you to do this, whereas 10 years ago you would get fought, I think in a lot of cities, if you are saying, I’m going to turn my basement into another unit, not anymore. People are looking for creative ways to add units. And so this is sort of going with the times and doing something that is being encouraged in most communities.

Dave:
I have some options for you. I came up with just two different scenarios that are really available to people who might not own their primary residence. I think Ashley’s idea is great, but obviously you have to own something to be able to do that. So I wanted to just first talk about whether it’s feasible to just straight up buy a rental property with 50 grand and I ran some numbers and here’s how it came out. If you had $50,000, like I said, I’m going to estimate five grand will go to closing costs, and then I think you need to have $5,000 in cash reserves. Is that about what you would allocate, Ashley?

Ashley:
Well, I would do six months reserves as a rookie, six months reserves for your mortgage, your insurance, and your property taxes for those three expenses. So whatever that amount ends up being for six months, that would be, but probably around 5,000.

Dave:
Yeah, that’s a better answer. Yeah. So five, six. So I just took 10 K off the top, which is always difficult. I think when people have saved up an amount of money and they’re like, I’m going to go buy real estate with 50 K. Unfortunately, there are these other things that you have to do. So that would give me $40,000. Now, I was assuming you weren’t house hacking, and that means that you’re going to put probably 25% down because if you’re an investor and you’re not living in the property, usually that’s what banks require is a 25% down payment, which leaves you with $160,000 as your purchase price. So that is still absolutely possible, but the list of places that you’re going to be able to buy a solid property goes down a lot. But this is a good option for people if you’re willing to be a long distance investor and you’re looking to one of, let’s say there’s probably a couple dozen markets in the country where this is possible.

Dave:
Actually a couple in your neck of the woods, Ashley Syracuse for example, super popular place to invest. Now there’s a micron factory going in there. I looked around and I found a property in Syracuse that looked pretty nice. I was a pretty impressed by it. Three bed, two bath, 1500 square feet probably needs a little bit of work, but that was 1 35, for example, with a projected rent of 1500. So it meets the 1% rule. I think there’s other places to do it like in Huntsville, Alabama, Pittsburgh, Pennsylvania, Oklahoma City. So if you have 50 grand, you absolutely can just straight up buy a rental property and that’s probably a pretty good idea. What do you make of that approach,

Ashley:
Ashley? Yeah, one a hundred percent. I think one little twist I would do on that is actually go to do a flip first, but purchase a property that could be converted into a rental if the flip doesn’t sell. So you’re going to buy this property knowing that you could either flip it or you could rent it out. So if the market changes, your flip doesn’t sell, you have that security knowing that you can cashflow off of turning that property into a rental. So that also means that you have the ability to get financing. So maybe you’re getting hard money or you’re actually doing a conventional loan to buy that flip, but you’re going to have to bake into your numbers that you’re paying closing costs. And if you do go and refinance, that’s closing costs twice. But if that’s the only way to get the deal done and you will make money off of it when you run your numbers, your refinance, then it’s still a good deal. Just like people get caught up, I’m not paying a hard money lender, 12% a bank would give me 7%. Well, if you can only get the 12% and you still make money, that’s more money than not making any money at all.

Dave:
Yes, exactly.

Ashley:
So that’s what I would do is I would take that money and I would talk to hard money lenders. We just had a guest on the show that he was first time went and got a hard money lender, no problem. They funded part of his purchase price and I think it was all of his rehab. So there’s definitely lenders out there. Were looking for a private money lender, and then I would purchase a flip and then I would have a safety plan in place to refinance that property and turn it into a rental if the flip did not sell. But if the flip sells, then that gives you your $50,000 back plus hopefully a little more capital from the profit, and you keep building that to dump into buying rentals then.

Dave:
Okay, so I think this is a good plan, but what price point do you look at with a flip? So if you had 50 grand, are you then looking for a property that’s like 80 or something and then you’re going to put 20 grand into it, something like that?

Ashley:
No, because you can get a hard money lender to lend you, let’s say conservatively, you’re putting 30% down of the purchase price. You’re getting the rehab covered private money lender too, which you have to work your magic to find private money lenders. That’s not as easy, but I would look into doing a light cosmetic flip unless you have rehab experience, not going in and doing a full gut rehab, but doing a light cosmetic flip, you’re going to have to work hard to find that deal buying that property under market value already.

Chad:
So

Ashley:
You’ll have to door knock, you’ll have to cold call, you’ll have to get pocket list things from agents and network that way, but I just did one. And it’s definitely possible to find those deals to actually make a flip happen.

Dave:
Well, there you go. Even in today’s market, you can start a real estate investing portfolio. You can do this by improving your primary. You can buy a rental, you can flip a house. All of that is feasible if you have $50,000 or more in startup capital. And towards the end of that episode, Ashley and I actually moved on to talking a little bit about house hacking and I shared an idea for how to make your first deal even better than any of the ones you just listened to. So make sure to check out the rest of that episode. Again, it was episode 10 28 to hear all that additional advice. We do have to take another break, but when we come back, I’m going to play another episode that featured me and Ashley along with Henry Washington talking about the best markets for new investors to consider. So stick around.

Dave:
Alright, we’re back in August. Ashley Kehr, Henry Washington and I tackled a crucial topic for new investors where to invest. If you live in a market that’s really expensive or maybe you’re just open to moving based on your investments in those scenarios, you can cast a really wide net across basically the whole country and look at data on which cities have the right fundamentals to help meet your personal goals. So that’s what Henry Ashley and I did on this episode, putting ourselves in the shoes of a hypothetical new investor, starting with 35 grand. I think the really fun thing about this episode isn’t so much about what specific markets we landed on or starting with some $35,000 in particular, but instead being able to hear the thought process that goes into analyzing a market and all the factors like average income, average home price, and employment rates that we all take into consideration. So I hope that’s helpful to anyone out there listening to this, who’s looking at markets right now. Here’s a few minutes of BPRE, episode 1007 before you tell us what your market is. When you think about doing market research, particularly in this scenario, again, you have 35,000 saved up, you are currently renting, you’re willing to move. What were the things that first came to your head about how you would pick a market?

Tony:
So for me, when I’m thinking about picking a market, I am very concerned with the economy and population growth because I don’t ever want to put my money someplace where that town is trending downward. In other words, slowly dying over time because just because getting your numbers you want today doesn’t mean you’ll be able to get the same numbers down the road. And so I was concerned with what’s the economy there? What companies are making up the economy, what’s their plan for the future? Are they growing and expanding their infrastructure in these cities or are they reducing it and jobs moving somewhere else? And then what’s the population growth? I want steady population growth year over year that tells me that people are moving to work for these companies and they’re staying and more people are coming in than there are leaving those things tell me that this could be a good place to invest your money.

Tony:
And then on top of that, what I like to look for is, is it affordable for people? So are people making enough money in that market to afford to live there? And then what are the rents? Because if the home prices are affordable, but the rents are super low, then it’s still doesn’t make for a great place for you to invest as a buy and hold investor. And just like Ashley, I want to analyze a market based on long-term rental, and the reason I want to do it based on long-term rental is because that’s your parachute, and if you can do long-term rental, then perhaps you can do short-term rental and perhaps you can do midterm rental. And so I was also looking for a place that would allow me to do those other exit strategies, but if I had to pivot and not use those strategies, could I just stick a tenant in a property and have it make money? And then how easy is it going to be for me to find properties to buy? So those are some of the things that I look at.

Dave:
All right, well now I’m on the exit my seat. What did you pick?

Tony:
So you know what? Full transparency going into this. Before I even looked through your dataset, I had Alabama in my head because I’ve got students who invest in Alabama and they’re talking to me about it all the time and I’m like, ah, it’s hard for me not to just want to pivot and go buy somewhere else, but it seems to be a place where there is still affordability, where you could get great rents and there’s great jobs. And so Alabama was in my mind, and then as I started to dig through the data and filter some of those things that I was just talking about, Tuscaloosa, Alabama really came to the top of the list

Dave:
For me. I thought you were going to say Huntsville, that’s a very popular pace, but Tuscaloosa always comes up on these lists. That’s where the University of Alabama is, right?

Tony:
Yep. That’s where the University of Alabama is. Correct.

Ashley:
So you even have student housing as an option

Tony:
Too. That’s exactly right. So what I liked about this market in terms of the economy is there’s a huge Mercedes-Benz plant there that’s been there for a while, and they’re investing more money into growing and expanding this Mercedes-Benz plant. There is also a company steel manufacturing company called, I think it’s called Near Core Steel in Tuscaloosa. They’re spending 280 million expanding their operations in Tuscaloosa, Alabama. Right now, obviously you have the University of Alabama as a huge employer there, but you also have the healthcare system that’s a huge employer there. If you look at Tuscaloosa, Alabama over the last, so it’s seen an average of about 16.8% in home appreciation over the last five years, and you have amazing price points and rent. So average or median home price, 220,000, median rent, 1500. So that tells me that I can probably get on the MLS and find a property that makes sense. And so I did, I looked on the MLS and within five minutes found a quadplex listed for $335,000.

Dave:
Wow.

Tony:
And it’s turnkey. It does not need a renovation, and you can probably rent each unit out for about a thousand dollars a month. So just off the top, you bring in about $4,000 a month. They’re asking 3 35. It’s been listed for 56 days and they’re already doing a price reduction. So that tells me that I can probably offer less than that. Walk into a turnkey property that’s making you money and gives you some equity on day one. You just can’t find deals like that in a lot of markets. And so I think what this mix of metrics, you have a pretty good and safe market that you can invest in. I also like it because it has similar dynamics to where I live, being Fayetteville, Arkansas, being a college town that has some similar dynamics, and so there’s a level of comfortability and familiarity there for me as well, but also super great unemployment, 2.4%. So it’s wow, pretty good market. Yeah,

Dave:
I’m happy about this. I feel like we’ve all taken a slightly different approach to this. My number one thing that I was thinking about is where I could actually get a great job relative to how expensive the market was, and I wonder if this is because I work full-time. You both are full-time real estate investors. So my brain went to where do I get a great W2 job that my salary is going to go a really long way. And so in order to do that, I cheated and added a new column to the data set and made my own metric because I’m such a nerd, I basically figured out I divided the median sale price by the median wage to just basically see how many years of salary would it take to buy the average home. Then I started looking at a lot of the other stuff you both talked about, the rent to price ratio, unemployment rates, job growth, population growth, and what I picked was Oklahoma City, Oklahoma.

Dave:
I had never considered this market very seriously before, but the job growth is crazy. It’s growing at nearly 3% a year, which I know that in a vacuum probably doesn’t sound like a lot. It’s a lot. The unemployment rate is like 3.4% for reference, the national average is 4.3%. So it’s really good population is growing and in this metric I made up the price to wage ratio. It came out at 5.4. So that basically means if you use no leverage, it would take you five full years of salary to afford a home. Cities like Seattle and Los Angeles are like 20 to one. So it just shows that if you are going to be like me and work full time, your ability to buy property quickly is going to be much better in these cities that have this ratio of better pay to the price of the average home. So what do you guys think of my metric that I made up here and my choice?

Ashley:
Yeah, I think that’s very valuable to look at for sure.

Tony:
I think you’re a cheater, but you’re a data nerd, so I can’t blame you. I can’t blame you.

Dave:
You guys on your podcast, you both are always talking about use your superpower, do what you’re good at, which is true. I’m just doing what I’m good at, which is making Excel documents. I’m sorry,

Ashley:
But we do want everything to be fair. So just if you could add this column into every other market

Dave:
Besides

Ashley:
Just your own, then

Dave:
I will make sure to do that. Before we put this up,

Tony:
First and foremost, I want to say everybody please go look at this data set because one of the questions I receive a lot from people is how do I analyze a market or what market should I be looking at? And Dave is literally put a ton of great information that people struggle to go out and find of their own all in one place for you. And so just download the spreadsheet and look at it. You will learn something and it won’t take a ton of time. Secondly, Oklahoma City is such a sleeper market. I think people forget that Oklahoma City is a thing, but they’ve got a great economy. There are great jobs. There’s sports in Oklahoma City. I mean, you can get a great home in a suburb of Oklahoma City and your money can go a long way. What people don’t know about Oklahoma City, there’s a ton of tech jobs. So a lot of people are moving to Oklahoma City to work in the tech industry as it’s growing. Also, if you like Sonic, that’s where they’re headquartered. So you can probably get you a slushy or something. Maybe a happy hour is a little cheaper there for Sonic, but

Dave:
That’s perfectly valid.

Tony:
Yes, it’s a pretty big metro area, and so I think you get kind some big city dynamics in, but not really the big metroplex feel. But your money does go a long way because look at that. I mean 238,000

Chad:
For

Tony:
The median home price, but you can make 150, $175,000 tech salary. That’s a long way to stretch your money.

Dave:
That’s what I’m talking about. And to Henry’s point, we do have the dataset that allows you to go really deep into market research. If you are new to this and just want sort of the beginner version, you could go to biggerpockets.com/markets. We have tons of free data there as well. If you want to hear more about great markets, including Ashley’s favorite market for new investors right now, make sure to check out the rest of episode 1007. And also if you want to get the dataset that we were all working off in that episode for our research, you can grab that completely for free. You could just go to biggerpockets.com/where to start and download it for free there. So far today we’ve recapped some philosophy and have also talked about some of the tactics that have worked so far in 2024. But there’s one more piece of the puzzle that we need to recap.

Dave:
I like to think of current events and market trends as sort of the third thing that investors need to keep their eye on to make good investing decisions. And I know that macroeconomic trends, like where interest rates are going can be a little dense, but they’re also super important. They play a huge role in home prices, rents, and ultimately the performance of your portfolio. I think it’s important to talk about them and I try my best to distill them down into digestible takeaways anytime that there is major news that you need to know about. Of course, we can’t talk about major news or current events from this past year without mentioning the presidential election. There’s a lot of evidence to suggest that many Americans held off on making home buying decisions in the months leading up to the election. And since the election, it seems like that trend has reversed.

Dave:
On top of that, the policies that president elect Donald Trump chooses to enact during his administration will have really wide reaching effects on the economy and the housing market. So we’ll be tracking all that in the year to come. But I want to play my take on what’s likely to happen in Trump’s second administration. And we released this back on the BiggerPockets YouTube channel right after the election last month when we released this, it was just a video that was exclusive to the BiggerPockets YouTube channel. So if you want this type of analysis, especially as we head into 2025, make sure to subscribe to our YouTube channel at youtube.com/biggerpockets. We recently released a bunch of YouTube exclusive videos there, like my forecast from mortgage rates, home prices, rents, and a lot more. Alright, here’s my thoughts on what Trump’s election means for the housing market. Housing supply was a bigger issue throughout this 2024 campaign than any presidential election that I can remember.

Dave:
And now that Donald Trump has been declared the winner by the major media outlets, I want to recap what housing policies he’s endorsed and what impact they’ll have on the economy as a whole and on housing issues like supply and affordability. And as a reminder, we really don’t do politics on this show, but high level government policy is a reality we have to account for as investors. So that’s what we’re going to be talking about today. On his official campaign website, president-elect Trump says he intends to quote, help new home buyers. Republicans will reduce mortgage rates by slashing inflation, open limited portions of federal lands to allow for new home construction, promote home ownership through tax incentives and support for first time home buyers, and cut unnecessarily regulation that raise housing costs. And as is typical at this point in the election or political cycle, we know some of these Trump ideas, but until he is actually back in office and inaugurated, we won’t know the specifics of these policies.

Dave:
That said, I think there are three big policies that Trump has talked a lot about during the campaign, which have the biggest potential influence on the economy should they go into effect. And those three things are tariffs, tax cuts, and interest rates. And I’ll touch on each of those starting with tariffs. Trump has proposed a 60% tariff on goods imported from China and a 20% tariff on goods imported from all other countries. In September, we had an economist, Joel Naroff on our sister show on the market, and I asked him just a little bit about how tariffs were, because I’ve never really seen them in my lifetime, and how they would affect prices for American consumers. Here’s what he said.

Joel:
Tariffs are essentially fees placed on imported goods paid by the importers. That’s something that has to be understood before a few import from China, a car where he wants to put, for example, a hundred percent tariff on it, the importer has to come up with the money equal to the cost of the car. Using that as an example.

Dave:
So if a car costs, let’s, in this example, if a car costs $20,000, an a hundred percent tariff would mean that the car company has to pay $20,000 just to get it into the United States so that they could sell it for $20,000. Is that right?

Joel:
That’s the simplest way of describing it, yes.

Dave:
Yeah, I got to keep this one simple.

Joel:
Who actually pays? It depends upon the size of the tariff and the kind of good and so on. It’s the demand curve situation. But for the most part, significant portions of the tariffs typically get passed through because the producer, if they have to pay the tariff, then that cuts into their margin. So if you’re talking about 25% that wipes out their margin, let alone a hundred percent, if you’re talking about the importer, then they have to pass that along to the retailer who has to pass that along to the consumer. So under those circumstances, typically what happens is a significant portion, if not most, if all depending on the good winds up being paid by the consumer. And that’s how a tariff works, and that’s why economists make the argument that tariffs essentially raise prices to the households. That’s where it winds up in.

Dave:
If former President Trump is considering this, what is he hoping to achieve?

Joel:
Well, I think his goal is to price out foreign goods from US markets, and therefore those goods would have to be made up by either domestic production or production in other countries. So we have nafta, we have Mexico and Canada. Production could be shifted there, not necessarily to the us, but I think the concept is to protect US producers. So by having competitors be priced out of the marketplace itself and therefore expand production in the us, that’s ultimately the goal.

Dave:
The corollary to Trump’s tariff proposal is that he claims it would create enough revenue for the federal government to eliminate the individual income tax income taxes currently bring in nearly half of the government’s entire revenue. So this would be just an enormous, massive change to our financial system, our revenue collection system. That’s really sort of impossible to fully analyze the implications of this until a firm proposal is put forth. But obviously it’s a policy we’ll all be focused on closely should Trump choose to move ahead with it and we’ll report back on it once we know more. There’s also the issue of sun setting. The tax cuts from Trump’s previous 2017 Tax Cuts and Jobs Act, that legislation from a couple of years ago reduced the top individual tax rate from almost 40% down to 37% and without a new tax bill, those cuts would phase out in 2025 and we’d see our taxes go back up to pre 2017 rates. And Trump has said repeatedly that he intends to and wants to extend those 2017 cuts. And when Joel was on OTM back in September, I asked him about this also about the potential impact of a rollback on home buyers.

Joel:
The upper income households are going to be able to afford the highest price housing out there, whether the tax rate is higher or where it is right now, the rise in the taxes are not going to change housing demand as far as that income group is concerned. And the key to this, which people aren’t focusing on, but they have to, is those kinds of taxes were sunsetted in the bill that was passed in 2017. So we’re going to be facing that issue in 2025 because at the end of 2025, a lot of those tax reductions disappear and it’s going to create the need to have another major tax bill because I don’t think anybody wants to go back all the way to where we were pre 2017.

Dave:
So Trump has repeatedly stated he intends to extend the tax cuts from 2017, but over the course of his campaign, he’s also talked about a couple of different tax proposals that I’ll just mention here. He mentioned eliminating the cap on state and local tax deductions, which is currently limited to $10,000, and he has proposed lowering corporate tax rates below their current flat rate of 21%. He’s also proposed no taxes on tips or overtime. So those are what he’s talked about in terms of taxes. The third big economic pillar to watch with Trump is interest rates. Trump repeatedly said during the campaign that the Fed was adjusting their rates for political reasons. The Fed members are appointed by the president. Actually, Jerome Powell, the current Fed chairman, was appointed by Trump in his first term. But Fed governors and chairman are almost impossible to remove from their position, which gives them a degree of political independence once in office.

Dave:
However, there is one federal governor whose term will expire next year and fed chair Jerome Powell’s term expires in 2026. So Trump will have more options to replace them with people whose economic policy views align with his own. So I think the big takeaways from Trump’s stated policies is uncertainty, right? That’s somewhat normal, at least in recent history at this point in the political cycle. He’s proposed things like huge tariffs and massive tax cuts that would be unusual or unprecedented throughout America’s history. And sort of just difficult at this point to predict the downstream effects on the housing market at this point, because they’d very widely, depending on how these policies are actually implemented, Congress will certainly have a say on that. So we don’t want to make predictions without knowing the specifics. We also don’t yet know if the Fed was planning to continue its current trajectory during a Trump term.

Dave:
Most people expect the Fed to decrease rates mildly over the next year, but it’s possible Trump could influence the Fed to change course. So at this point we have some idea of what will happen, but personally, I think it’s wise to be in more of a wait and see mode in terms of the economy and the housing market. If some of these policies pass, it will have big implications on the economy, but without knowing the specifics, I just don’t think it’s appropriate to speculate. Instead, I’d keep an eye on these three policies as Trump is inaugurated in January and sets off his agenda in the months that follow. Okay, well that wraps up our 2024 BiggerPockets Real Estate podcast recap show. Thank you all so much for listening to this episode and for listening to the podcast the entire year. If you found this episode helpful or really any of our podcasts helpful over this past year, make sure you’re subscribed and also tell a few friends who you think would benefit about the show. Happy Holidays, and we hope that over the next couple of weeks you enjoy a few of our favorite episodes of the other podcasts in the BiggerPockets Network. And again, we will see you back in January with fresh new episodes. See you then.