A (2:50)

It's totally relative. Right. To the market. You know, if you're in Detroit or Cleveland, like you can buy a decent home for under 100k. If you're just buying it because that's some arbitrary number that you've picked out, then in a more expensive area, you're probably not going to get a lot of value.

B (3:07)

So it's not about the price because I've bought some great homes sub 100k, it's more about what's the age of the home and how much maintenance has been done on the big ticket items. I had one house that was sub 100k that I sold. And one of the problems was that the foundation was so not great. We even went in, we fixed the foundation, but the home was so old you can't air quotes fix the foundation. You can stabilize the house, but it still felt like you were walking through a fun house and there was no fixing that. Yeah, right. And so I did sell that one to get out. Cause it just makes it hard to rent. People don't. Even though you tell them, hey, this, it's not going anywhere. It's still a scary, weird feeling to have that kind of a problem. So it's not the price point that you should watch out for. It's what's the condition. Yeah. And are you underwriting for the things that you'll need to spend in the future?

A (4:05)

Yeah, I guess. To me it just comes down to this. Sounds overly simple, but it's just like, do the numbers make sense? Right. You could buy a $70,000 property and if it's. You have 100k renovation budget and that thing is going to rent for 2,500 bucks a month, or you can sell it for 250, then, yeah, go do it. You know, it like, it really just comes down to the math. I don't think there's some arbitrary line in the sand where like properties over this amount are good and properties under this are good. Because where you are in the world totally depends. Like if you're in New York City or where I live in Washington, like, you're just never going to find a property for 100 grand. They just don't exist.

B (4:49)

Parking spots cost more than that.

A (4:51)

Exactly. So you're just never going to find that. Where Ashley Care lives in Buffalo, like you probably could find good deals for $100,000. I actually, we've had a couple of guests on the show recently from Detroit and I was talking to an agent there looking at deals. They're good deals, they actually make sense. And so I think it really doesn't come down to 100k. There is a whole other question here though, which is sort of my problem with Detroit is like, is it enough to scale? Is it enough for me to like take on a unit and the work that goes into that in order to make 75 or 100 bucks a month, Even if my cash on cash return is great, like I could have a cash on cash return of 9 or 10%, but. But like, do I really want to scale that way? I think that is actually a good question. I don't know about you.

B (5:38)

Like my last three rental property purchases all bought under 100k, but they're not sub 100k properties, right?

A (5:46)

Right, exactly.

B (5:47)

I'm under contract right now for 80 grand. I'm going to spend 60 on the Renault arv is 250.

A (5:53)

Boom.

B (5:53)

Right. Like that's great.

A (5:55)

Do that all day. Why wouldn't you do that?

B (5:57)

I have another one. I literally paid 102,000 for it. It needs a 60k Renault ARVs 275. Right. So I'm buying properties worth well over 100k. I'm just getting them for 100k, less than 100k. And I think that that's the right move. Yeah.

A (6:13)

And that's just value. That's just a good way to do it. So, yeah, I think, you know, 100k, not an arbitrary line. I think it really depends what you're going to do the property and you understand it. I'll also just say that when I look for rental properties these days in the Midwest, I target 100k a unit, not necessarily for a single family home, because those are harder. And per my point about scaling, if I'm going to buy properties at this point in my career, I'd rather get four of those all at once, have one roof. One thing to think about, one thing to manage, because then it actually achieves a meaningful amount of cash flow for me at this point in my life. So I don't have any problem with that at all. All right. One last thought on this too though. There is a common error that real estate investors make, especially newer investors, which is totally Fine, it happens a lot. But people just buy properties because they're cheap. That I don't recommend. Like, I, I think if that's the question here is like you're just buying it because it's the cheapest deal and that's what you can afford. No, I would not do that. It really comes down to what Henry said about your goals, to the numbers that you run and see if this has a profitable rate of return. To me, that's, that's what it comes down to. But you should not just buy properties because they're cheap. They are cheap for a reason. And unless you have a way to fix that, the problems that exist with that property, you are just going to be in for a lot of headache and a lot of stress.

B (7:35)

Agreed. And stop picking markets because you think it's a cheap market. Pick a market based on if you can hit your financial goals.

A (7:41)

All right, thank you to Eric Estrada. Not of Chips fame, apparently. Maybe it is. Eric, let us know if you were the star of Chips. We would love to know. Thank you for that question. That's a great question. We have more great questions coming from our community right after this quick break. Running your real estate business doesn't have to feel like juggling five different tools. With Resimpli, you can pull motivated seller lists. You can skip trace them instantly for free and reach out with calls or texts, all from one streamlined platform. And the real magic, AI agents that answer inbound calls. They follow up with prospects and even grade your conversations so you know where you stand. That means less time on busywork and more time closing deals. Start your free trial and lock in 50% off your first month at resimpli.com biggerpockets that's R E S I M P L I.com biggerpockets okay, we're going.

C (8:38)

To shift gears for a minute to cover something important, especially for new landlords. The shows often talk about getting stuck doing everything ourselves and the cost of sweat equity. The key question is simple. Is my time better spent elsewhere? I use a tool that cuts down on a lot of landlord hassles. And the wild part is it's just $12 a month. It handles rental screenings, rent collection, maintenance requests, and accounting all in one platform via a mobile app or desktop. It saves me time in tenant communication and keeps me organized for tax season. It's called RentReady and you can sign up for a six month plan for just $1 with promo code BP2025PRO. Users get it for free because we believe in it. Just sign in through your Pro account to get started. RentReady helps ensure on time rent with auto rem, keeps communication professional and lets you post listings to multiple sites. Check it out@rentready.com BiggerPockets that's rent R E D I.com BiggerPockets for decades, real.

A (9:32)

Estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time consuming and expensive. But imagine if real estate investing was suddenly easy. All the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Fundrise Flagship Fund. Now you can invest in a $1.1 billion portfolio of real estate starting with as little as 10 bucks. The portfolio features 4700 single family rental homes spread across the booming Sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities. Thanks to the e commerce wave, the Flagship Fund is one of the largest of its kind. It's well diversified and it's managed by a team of professionals and it's now available to you. Visit fundrise.com bpmarket to explore the fund's full portfolio. Check out historical returns get and start investing in just minutes. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the Fund's prospectus@fundrise.com Flagship this is a paid advertisement. Do you want to invest in cash flowing rentals but don't have the time to manage the properties? Is your local market too competitive or expensive to invest in? Rent to Retirement offers new construction turnkey investment properties that you can buy with as little as 5% down and rates as low as 3.99%. Their team handles everything from financing, management, insurance and more, so you can live where you want and invest in the markets that offer the best returns. Rent to Retirement has the best reputation in the industry, with more five star reviews than any other company on the BiggerPockets website. To learn more, visit biggerpockets.com retirement or just text REI 233777 to start investing in the best markets. Today, most investors spend more time chasing deals than reviewing their insurance. But a quick coverage check can be fast, easy and one of the smartest ways to protect and even improve your property's cash flow. As the months get colder, frozen pipes, icy walkways and seasonal wear and tear can increase the likelihood of claims. And traditional insurance companies aren't always built to handle these claims quickly or smoothly. That's why more Real estate investors Are Turning to Steadily, they focus exclusively on landlords. Whether it's a single family rental, a BRRR Builders risk policy, or midterm holiday guests, you get fast quotes, flexible coverage and protection for property damage, liability and even loss of rental income. Now is the perfect time to review your rates and coverage. Get a quote in minutes@biggerpockets.com landlord insurance steadily landlord Insurance designed for the modern Investor welcome Back to the BiggerPockets podcast. Henry and I are here answering questions. We had a great question about purchasing inexpensive properties before the break. Now Deborah from Colorado Springs has a moral dilemma for us. She wrote, some people say flipping distressed properties off the MLS pushes prices higher and makes it harder for first time home buyers to compete. They say investors are scooping up homes that should have gone to families, then relisting them at a premium after cosmetic rehabs. On the other side, many investors insist flipping off the MLS is just a smart business. The investor takes on the risk, puts in capital for repairs, boosts neighborhood values, and provides a product that buyers want. Some call it market manipulation, others call it entrepreneurship. Do you think this is hurting affordability or adding value to communities? There's a lot in there. That's a very good, thoughtful question here from Deborah. Henry, you want to start?

B (13:06)

I think there's probably two sides to this coin, right? I think that there are people who buy properties, slap lipstick on it, and then price it high and try to sell it. And there was a time in 2021-2023 ish where those things actually sold. But in the real estate market that we're in now, it is extremely difficult for people to do that. Yeah, those properties don't sell because there are more listings, there are more opportunities for people to buy. Buyers have more power in this market to ask for things, to ask for things to be fixed. And so that strategy or that philosophy doesn't work in all real estate markets. But I think from a general perspective, a healthy real estate market needs investors to add good inventory back to the market. As an example, if I'm buying a property on the mls, I'm typically buying properties that have been sitting on the MLS for a substantial period of time. Like I'm specifically looking for properties that have been on the market well over the average days on market. And then I'm making offers to buy those at a discount so that I can rehab them and sell them. And so is it taking an opportunity from a home buyer? I don't see it as that because it's Been sitting there for months. Somebody had the opportunity to buy it. And I think there needs to be some education for home buyers to do what we are doing. I think the reason investors like myself are able to go in and snag some of these deals is because the traditional home buyer doesn't go and make an offer at 100k less than what's listed. Either they don't know they can do that or their agent doesn't want to do that, but they can do exactly what I'm doing. Right, but they don't. So the property sits, the investor capitalizes on the opportunity, renovates the property and sells it. Now, I think there's a second tier to this question which is offering the properties back to the community, right? And I think what happens is neighborhoods get gentrified because people go buy distressed properties even off the mls, they fix them up and then they sell them at these outrageously high price points. I don't know that you can do that now. And what I like to focus on and what I think more investors should focus on is revitalization over gentrification. Right? So how do you buy a property at a price point that allows you to fix it up and sell it back to the community at a price point that they can afford? And that's a decision that the investor has to make and you got to be able to buy it at a price point that allows you to do that.

A (15:49)

I personally agree with you about the mls. Like if people put something out onto the mls, they are asking for bids and they get to choose whatever they want. And if they want to sell it to a homeowner, they can do that. So I think that, you know, there are always trade offs with these kinds of things, like are you going to ask a home seller to make less money? Maybe you believe in that. But I think for me personally, if you're putting something out on the open market, then you're entitled to choose who you want to sell it to and who has the highest bid. And, and a lot of times when you have distressed homes, ordinary homeowners don't want to buy it. When I go around with James, James Danard here in Seattle and look at the properties like no one's buying those properties, like even if they're on the mls, like homeowners don't want to buy them a lot of the time, and then I do agree with what Deborah said here, is that if the investor is going to take on that risk and put into the work, they are entitled to a profit I personally believe that.

B (16:46)

Yeah.

A (16:47)

Now I agree. I don't believe in price gouging or creating a situation where it's making, you know, entire neighborhoods entirely unaffordable. But what you have to ask is, in sort of a free market economy like we live in, where is the demand? And oftentimes the demand from the homeowner is for a fixed up house. And if, you know, if the seller has the capacity to fix it up and sell it, they have the option to do it. If not, they're essentially hiring a flipper to go out and create a new product that is of higher demand in that market. And if there was no demand for that higher price thing, flippers would not be doing it. So I understand that investors do play a role in the market that some people don't like. But I think when you think about it holistically, from the seller's perspective, from the buyer's perspective, flippers do play a role that is currently in the way the housing market works today needed to provide the housing that we need in the US 100%. Let's move on to our next question, which is from Abdul in New Jersey who wants to know if it's worth it to use a higher down payment. He said, I've been running numbers and come to the conclusion that with a conventional loan in today's market, it's better to put 40% down and self manage to generate cash flow. Does anyone else run into this situation? Yes, absolutely. Yes. I think that is always the case regardless of market conditions. The more money you put down, the better your cash flow flow is going to be. Now that is in absolute terms, right? The total number of dollars that you take in is always going to be better the less debt you have because you are not paying the bank interest. And I personally think that Putting more than 20, 25% down is a perfectly good strategy depending on what you're trying to accomplish. If you are looking for cash flow, yes, do that. That is why my personal goal, and I think Henry, you're similar, is like in 10, 15 years I hope to have no debt. Like I want to just owe my properties free and clear. Because that's the timeline in my head where I'm thinking, I just want cash flow. I don't care if my total return 10 years from now is optimized. I want to cover all of my living expenses and then some and just to chill and not worry about things. So it really comes down to you. I think when people use debt, it's often to scale or For a short hold period. Like if you're going to do a brrrr, probably want to put less down because then you can use more of your capital to renovate the property before you refinance. But if you are concerned about cash flow. Yeah, I think putting more down does make sense if you have the capital.

B (19:24)

Agreed. I just did a whole exercise yesterday with my portfolio spreadsheet where I highlighted the properties that are lifetime keepers for me and then I highlighted the properties that are. I'd keep them, but I'd also sell them if it made sense. And then I how I did the properties, that's like I'm going to sell these. And then I did an exercise on, all right, if I sold these at market value, how much cash would I get? Which one would I pay off first? And then basically starting the debt snowball to paying off my properties, right?

A (19:57)

Yes.

B (19:58)

Each one that becomes more cash flow positive because it doesn't have debt, produces more cash flow. You take that additional cash flow, use it to start paying down the next one, yada, yada, yada. So like I just did this exercise, so absolutely paying down less is just accelerating you getting to where you want to be in the future anyway, which is having a paid off asset 100%.

A (20:18)

One of the things I'm thinking about doing, I was looking at this is putting more money down on a rental property, but putting it on a 15 year note. Yes, that. So it doesn't actually improve your cash flow really because you're on a 15 year note but you're paying way less total interest. And I want cash flow, but I'm not living off my cash flow. So it's not important to me. What's important to me is like, I know 15 years sounds like a long time, I've already been doing this for 15 years, so I don't feel like it sounds that long to me. In 15 years I'll be 53 and I'll own these properties free and clear. That's retirement, you know, like that's, that's a great retirement that I can look forward to. So I, I think that's another good sort of caveat to this. You could do it with a 30 year too. But if you're not as concerned about cash flow, putting a little bit more down on the 15 year note will ensure that you're at least positive cash flow so you can carry the property and you'll pay less lifetime interest, which is always good. All right, let's take a quick break, but when we come back, Henry I have one that is going to boil your blood. So if you want to hear Henry cook a little bit, stick around. We'll be right back.

C (21:22)

The rise of the tech savvy investor is here. You don't need a huge team or tons of overhead to manage rental properties, just the right tools. So I want to tell you about how I use Rent Ready to get ahead. For landlords who treat their time like capital and recognize the cost of sweat equity. This tool gives you everything you need to scale rent collection, tenant screening, maintenance, accounting so that you're organized come tax season and you can run numbers in preparation for future deals and more all in one platform via a mobile app or desktop. Modern landlords don't just own property, they optimize it. Rent Ready will keep you organized, running leaner and ready to grow. Start with RentReady. Visit rentready.com biggerpockets that's rentredi.com biggerpockets and use code BP2025 to get RentReady's six month plan for a dollar.

A (22:08)

For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time consuming and expensive. But imagine if real estate investing was suddenly easy. All the benefits of owning real tangible assets without the complexity and expense. That's the power of the Fundrise Flagship Fund. Now you can invest in a $1.1 billion portfolio of real estate starting with as little as 10 bucks. The portfolio features 4700 single family rental homes spread across the booming Sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities. Thanks to the E commerce wave, the Flagship Fund is one of the largest of its kind. It's well diversified and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com bpmarket to explore the fund's full portfolio, check out historical returns and start investing in just minutes. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the prospectus@fundrise.com flagship this is a paid advertisement. Want to invest in real estate but don't have the time or know the best local markets? Rent to Retirement has got you covered. Here's the deal. They've helped thousands of investors just like you find turnkey homes across the best US Markets. And best of all, they do all the heavy lifting for you. With over 255 star ratings on BiggerPockets, rent to retirement experts help you build strategies to retire early through real estate. And right now, Rent to Retirement offers some amazing incentives on turnkey new construction properties. Just for example, you can get up to 30% off new build prices or you can get 0% down loan options or interest rates available as low as 3.99%. So don't miss out. These deals will not last. Text REI to 33777 or visit biggerpockets.com retirement to start investing in top cash flow markets today. If you own a short term rental, here's something worth knowing. Not all landlord policies are built for your type of property. And with holiday bookings, chilly weather and higher guest turnover, having the right More important than ever. Steadily offers insurance designed specifically for short term rentals covering property damage, liability, lost rental income and even unexpected issues like bed bugs. Steadily works exclusively with real estate investors so they understand the details that make short term rentals unique and they build coverage to match it. A quick review of your rates and coverage every year can help you protect your property and your cash flow. Get a quote in minutes@biggerpockets.com landlordinsurance steadily rental property Insurance for the Modern Investor. Welcome Back to the BiggerPockets podcast. Henry and I are here answering real live questions from the BiggerPockets community. I got a good one for you. I don't really have much to say about this, but our question, last one comes from Roberto in Houston and Roberto asks what are your frustrations with hard money lenders? What are the things you would change about the hard money lending process? I can just see Henry breathing to try and not start yelling right now. But let's hear it Henry. This is your venting session. Just get it all out.

B (25:18)

Boy. Boy oh boy, oh man. Hard money lending. My biggest pet peeve with lenders is that a lot of lenders approach lending to investors on real estate deals and is if they are doing the investor a favor and the investor needs to bend to their will because they are the ones that have the money and that is the absolute backwards way to look at it. 100%. Investors hear me loud and clear. You are the prize. You are the prize. Lenders do not have a business if investors don't have deals for them to lend on. They are the service based business providing you the service. You do not work for your hard money lender. Your hard money lender works for you. Stop bending over backwards for these lenders and going to them with your little hat in your hand. And sir, I would, I would love for you if you would give me some dollars so that I can go and purchase my real estate deal.

A (26:27)

Please, may I have some more, please?

B (26:29)

That would be very kind of you. Absolutely not. You are the price, you are taking the risk. You are bringing the thing. If you don't have the thing, they don't have a business. So stop treating them like they are the king. You are the king.

A (26:46)

What about new investors, though?

B (26:48)

What about people who are doing absolutely the same? You are the thing that they need.

A (26:55)

But couldn't you say like a new investor doesn't have capital, needs them too?

B (26:58)

Everybody needs. Most people need capital for their deals. But lenders are a dime a dozen, literally hundreds and thousands of them. If the one that you're talking to doesn't want to work with you in the way that you need to be worked with, go find another one. Now. Some investors can waste a lender's time by not knowing what they're looking for, not knowing what they're needing, buying bad deals, yada, yada, yada, that happens. I understand. So what are the things that I would change about the hard money lending process? Well, I would say that lenders need to act like they're in the customer service business because that's what they're in. They are in the customer service business. You're providing a service. And if you want to grow and scale your business, you need to provide a service that benefits the investor. And a lot of the times in the hard money lending space, the things that the hurdles that the investor needs to jump through can be very time consuming and difficult. And when you're a new investor and you need money, you are much more willing to jump through those hoops. In other words, if you're a new investor and your hard money lender says every time you need to take a draw, I need you to go out there, take pictures, send me an email with all the things that were done. I need to have the list of the things. I need to see your scope of work. I need to compare it to the scope of work. I need to look at the pictures. And then once I do that, two weeks later, I'll give you a draw. When you're new, you'll probably jump through those hoops, but as you grow and scale, you don't have the time to do that. You're not going to spend your time doing that and instead you're going to find a lender who's going to have a much easier draw process for you. And what happens is these hard money lenders, they want to grow in scale. But they put these investors through all these hoops, and then as these investors get more experienced, they move on from these hard money lenders. And it's hard for them to keep getting business because they're not growing with their target audience. I think that there needs to be some sort of a middle ground or some sort of tiered approach where it says, based on your level of experience, these are the things that I need you to do. You're new, you have more hurdles to jump through. As you have more experience, there's less hurdles to jump through. Right? As you're in this upper echelon where you're doing huge volume, then those controls get even less. Because what you've done is as you've increased your level of experience, you've proven yourself, you've proven that you can buy good deals, you've proven that you can evaluate the deals, you've proven that you can turn the deals over and you can make the money. And as you're going to do that, you're going to need less roadblocks in your way. And instead, what hard money lenders do is they just have their process because they're protecting their money. And I think they do need to protect their money. But I think you have to set your business up in a way where your investors can grow with you so that you're able to continue to service people where they are. And a lot of hard money lenders don't do that. Which means that as investors grow, they stop using those lenders and they go look for more private lenders or people who can be more flexible.

A (29:45)

So why do you think they are so rigid?

B (29:47)

Because it's money. Right? They're rigid because it's money and they don't want to lose their money and they don't want to get stuck working with a bad operator who then makes poor decisions, and then they end up getting swindled out of their money. But they also have to take some accountability for being a good underwriter themselves. Right? Because essentially what you should be doing as a hard money lender is saying, I'm only going to lend on assets where I feel like they're getting the asset at a reasonable price point so that if they suck, I get the asset back and I can go dispose of that asset, even if I dispose of it at a discount and I still end up making money. In other words, if I buy a property for $150,000, but the ARV is $400,000, if I suck, I underperform and they take the asset back. What if they just go sell it for 350,000 or 300,000 to another investor? They would make way more money doing that than they would on the interest on the loan. But instead a lot of hard money lenders don't quite know how to underwrite deals and so they try to compensate for them taking on risk by putting all these controls in place for the investor and that makes it difficult for the investor to operate.

A (31:00)

All right, well, I really have nothing to add to that. I just wanted to let you go off on your soapbox. So thank you. That's what we got for you guys today. Hope you all appreciate appreciated some of these questions and our answers here. And as a reminder, as always, if you want your question answered either by us or by the hundreds of thousands, millions of members of the BiggerPockets community, go to biggerpockets.com forums and you can ask your questions there entirely for free and get our community's feedback on the questions that you have as a real estate investors. It's an unbelievable resource. Go check it out. Thank you all so much for listening. Henry Also, thank you for being here. Thank you. We'll see you all next time. Thank you all for listening to the BiggerPockets Real Estate Podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify or any other podcast platform. Our new episodes come out Monday, Wednesday and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K, Copywriting is by Calico, content and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com. the content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk, so use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose and remember past performance is not indicative of future results. BiggerPockets LLC disclaims all liability for direct, indirect, consequential or other damages arising from a reliance on information presented in this podcast.