BiggerPockets Real Estate Podcast
Episode: April 2025 “Upside” Update: Making a BIG Change to My Portfolio (Cashing Out)
Release Date: April 2, 2025

Introduction to the Upside Era

In this episode, Dave Meyer, Head of Real Estate at BiggerPockets, delves into his strategic pivot within the "Upside Era" of real estate investing. Building on his previous discussions from January 6, 2025 (Show 1066), Dave outlines how the current economic volatility across various asset classes has presented unique opportunities in real estate.

• Key Insight: Dave emphasizes the transition from the Goldilocks Era (2013-2022)—a period characterized by favorable real estate conditions such as low-interest rates and rising rents—to the current Upside Era, which demands more creativity and foresight in investment strategies.

  "Now, as we turn the page and go into 2025, I think we are entering a totally new era for real estate investing. And it's what I call the upside era."
  (00:00)

Understanding the Upside Era Framework

Dave breaks down his Upside Era framework, focusing on identifying deals that are currently profitable and have substantial growth potential. The framework prioritizes:

1. Breaking Even: Ensuring properties can cover all expenses within the first year.
2. Identifying Multiple Upsides: Each deal should have at least two to three growth drivers, such as zoning upgrades or infrastructure developments, to enhance returns over time.

• Notable Quote on Deal Selection:

  "If you can find a deal that is break even and then you have two, three, maybe even four of these sort of little bets that you are placing on your property, if one or two of those bets come true, then you're going to take this from an average real estate deal to a great real estate deal over the course of several years."
  (03:45)

Personal Portfolio Adjustment: Selling Equities

In a significant personal update, Dave announces his decision to sell 25% of his equities portfolio, translating to approximately 8-10% of his entire net worth. This move underscores his confidence in real estate over the stock market's current trajectory.

• Rationale Behind Selling Stocks:

  "When you look at some of the most fundamental ways of valuing the stock market and projecting its performance forward, what you see is that stocks are very, very expensive."
  (13:20)

  Dave references metrics like the Buffett Rule and PE ratios, indicating that historically high valuations often precede prolonged underperformance in the stock market.

Reallocating Funds: Strategies for the Upside Era

Dave outlines his strategy for the proceeds from his stock sales:

1. Money Market Allocation:

   • Amount: 50% of the sold equities.
   • Purpose: To earn a 4.5% return while maintaining high liquidity for upcoming real estate opportunities.

   "I can earn 4.5% on my money right now. And I like that for two reasons. First is that it is highly liquid."
   (18:00)

2. Mortgage Reduction:

   • Amount: 50% of the sold equities.
   • Purpose: To pay down the mortgage on his live-in flip, effectively earning a 6.5% return by reducing living expenses and minimizing mortgage interest.

   "For every single dollar that I pay into my mortgage and I don't leverage because I would be taking out a mortgage at, let's say, 6.5%, I am basically earning a 6.5% return on that investment."
   (19:30)

Evaluating Risk-Adjusted Returns

A central theme of Dave’s update is the concept of risk-adjusted returns, which balances potential gains against the inherent risks of an investment.

• Defining Risk-Adjusted Returns:

  "Risk adjusted return, it basically means you can't just look at the upside potential of every single deal. You also have to look at how risky that particular asset is."
  (22:10)

• Application in Current Strategy:

  Dave contrasts the perceived stability and necessity of real estate against the volatility of the stock market, advocating for a diversified approach that aligns with his long-term financial goals.

Aligning Investments with Personal Goals

Dave emphasizes the importance of aligning investment decisions with personal financial objectives and risk tolerance.

1. Assessing Personal Goals:

   • Active vs. Passive Investing:
     Depending on one's desire to manage investments actively, strategies can differ significantly. Dave’s approach is hands-on, seeking out and managing real estate opportunities meticulously.

   "If you're more the type of person who's like, set it and forget it, I just want to buy index funds. That's absolutely what you should be doing."
   (25:00)

2. Making Informed Reallocations:

   • Strategic Movements:
     Decisions to sell or buy assets should be driven by a well-thought-out plan rather than reactive measures based on market fluctuations.

   "But if you do think market conditions are sort of ripening for better deals to be out there, I'm basically going to split the money that I pulled out of the stock market into two different things."
   (19:00)

Final Recommendations and Conclusions

Concluding the episode, Dave offers actionable advice for listeners navigating the Upside Era:

1. Evaluate Risk-Adjusted Returns Across Asset Classes:
   Assess each investment opportunity not just on potential returns but also on the risks involved.

2. Consider Personal Financial Goals:
   Ensure that investment strategies align with long-term objectives and personal circumstances.

3. Have a Clear Plan:
   Avoid impulsive decisions by having a strategic plan for reallocating investments, ensuring that actions taken are deliberate and supportive of financial growth.

• Closing Thought:

  "You have to have a plan for your money. So my three pieces of advice as we head into Q2 in this upside area are again, one, evaluate different asset classes for risk adjusted returns... the second step is your goals... and then the third is to really just gut check yourself and make sure that if you are going to make a move... make sure that you're actually going to follow through on it."
  (28:30)

Dave wraps up by inviting listeners to share their strategies and experiences, fostering a community of informed and proactive real estate investors.

Conclusion

Dave Meyer’s April 2025 episode provides a comprehensive update on navigating the current real estate landscape amidst economic uncertainties. By sharing his personal portfolio adjustments and strategic insights, Dave offers valuable guidance for investors seeking stability and growth in the Upside Era. The emphasis on risk-adjusted returns, strategic reallocation, and alignment with personal financial goals underscores a thoughtful approach to real estate investing in volatile times.