Expert Investor Shares How He Made $100K with Just One Property

Summary

BiggerPockets Real Estate Podcast
Episode Title: Expert Investor Shares How He Made $100K with Just One Property
Host: Dave Meyer
Guest: David Leko
Release Date: November 25, 2024

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Introduction and Guest Background

In this enlightening episode of the BiggerPockets Real Estate Podcast, host Dave Meyer welcomes back David Leko, a seasoned real estate investor and CEO of Deal Machine. David previously appeared on episode 830 in October 2023, sharing his journey from a tech worker to amassing over $2 million in real estate assets using the BRRRR strategy (Buy, Renovate, Rent, Refinance, Repeat). David’s portfolio, primarily based in Indianapolis, has continued to grow, and he’s here to provide updates on his latest ventures and strategies moving into 2025.

Exploring the BRRRR Strategy in 2024

David begins by revisiting his initial success with the BRRRR method. He explains, “The primary method I used was the BRRRR method... buy, renovate, rent, refinance, repeat” (00:53). Drawing an analogy to Nike's business model, David likens real estate investment to purchasing rundown houses, revitalizing them, and significantly increasing their value through strategic renovations. This approach allowed him to recycle his down payments and grow his portfolio without requiring substantial initial capital.

Securing a $100K Profit from a Single Property

One of the episode's highlights is David’s detailed account of his most lucrative deal to date—earning $100,000 from a single property acquisition. This deal originated from a tax delinquent list in Indianapolis, where property owners who fail to pay their taxes face potential auctions. David recounts, “I actually pulled the tax delinquent list... bought five properties in Indianapolis” (02:32).

Identifying and Acquiring the Property

David describes how he identified his target property: “He bought it five years ago... it's so dilapidated, it is in terrible shape” (04:32). Recognizing the property's potential despite its poor condition, David offered $160,000 to the owner, who was eager to relinquish ownership due to the property's burdensome maintenance. The successful negotiation resulted in acquiring the property for $20,000 below the owed taxes, setting the stage for substantial profit.

Rehabilitation and Appraisal Challenges

The property required extensive renovations, including new drywall, roof repairs, and mold remediation, bringing the total investment to $285,000 (08:09). However, when David sought to refinance, the initial appraisal valued the property at only $325,000, which did not meet the BRRRR criteria. Realizing the appraisal was underestimated, David leveraged his expertise to communicate the property's improved condition effectively, leading to a revised appraisal of $425,000 (09:22). This adjustment allowed David to refinance at a 75% loan-to-value ratio, unlocking over $300,000 and securing a profit of approximately $100,000 after accounting for expenses (10:31).

Strategic Outreach and Deal Sourcing

David shares insights into his deal-sourcing strategy, emphasizing the importance of volume and persistence. Utilizing his platform, Deal Machine, which facilitates extensive outreach through automated dialing, David reveals that securing a single deal typically requires about 200 conversations or approximately 30 hours of calling (06:54). This data-driven approach underscores the necessity of consistent effort in uncovering profitable off-market opportunities.

Optimizing Property Management

Transitioning to property management, David discusses his decision to relocate to Austin while maintaining his Indianapolis portfolio. He emphasizes the significance of having an in-market assistant to manage day-to-day operations. “If your time's worth more than $15 an hour... finding somebody to do those tasks” (21:02). By delegating responsibilities such as property tours and contractor oversight to his assistant, David ensures his investments receive the necessary attention without compromising his personal time.

Growth Plans and Market Outlook for 2025

Looking ahead to 2025, David is committed to continuing his current strategies, focusing on high-end rentals within his established buy box in Indianapolis. He aims to acquire properties that rent for around $1,800, aligning with the 1% rule to maintain profitability (16:15). David also highlights the growing role of artificial intelligence in real estate investing. He envisions leveraging AI for lead generation and property analysis, enhancing his ability to identify and act on lucrative opportunities before the competition saturates the market (34:59).

David remains optimistic about the rental market, citing historical data indicating that rents have consistently increased over time. “The rent index in the U.S. ... have never gone down,” he asserts (32:27). This resilience reinforces his strategy of investing now rather than waiting for potentially unfavorable interest rates to decline.

Final Thoughts and Key Takeaways

David concludes with valuable advice for investors: maintain clear goals to ensure focused investment and consider integrating advanced technologies like AI to stay ahead in the competitive real estate landscape. His disciplined approach, combined with strategic delegation and continuous learning, exemplifies a successful path to building substantial wealth through real estate.

Notable Quotes:

• David Leko [00:53]: “The primary method I used was the BRRRR method... buy, renovate, rent, refinance, repeat.”

• David Leko [04:32]: “He bought it five years ago... it's so dilapidated, it is in terrible shape.”

• David Leko [09:22]: “It just went to show like, how much better communication from my end, like helped that deal work out.”

• David Leko [21:02]: “If your time's worth more than $15 an hour... finding somebody to do those tasks.”

• David Leko [32:27]: “The rent index in the U.S. ... have never gone down.”

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This episode offers a comprehensive look into effective real estate investment strategies, highlighting the importance of strategic deal sourcing, diligent property management, and embracing technological advancements. David Leko's success story serves as an inspiring blueprint for both novice and seasoned investors aiming to achieve financial freedom through real estate.

Transcript

[Dave Meyer]

You think brrrrs don't work anymore? How about making 100 grand on a single deal here in 2024? Hey everyone, it's Dave. And today I'm joined by David Leko. David is a real estate investor with a portfolio that he has had for a couple years but is still actively growing in Indianapolis. And he's also the CEO of Deal Machine. You may have heard him on our previous version of this episode. He was on episode 830 about a year ago, and today I'm looking forward to catching up with him and what he's been doing with his own personal portfolio because he sort of left us dangling a year ago with some big deals that he had in the works. So today he's going to update us on some of the things he's been doing and his plans for 2025. Let's jump into it. David, welcome back to the show. Thanks for joining us.

[David Leko]

Thanks, man. I was looking that episode 8:30 was October 12, 2023. Almost a little over a year ago, dude.

[Dave Meyer]

And look at us now. We're like in the thousands. We, we've been making a lot of podcasts, but we're excited to have you back because a lot has happened in the last year.

[David Leko]

I know. I was excited to tell you about some stuff on my end too, with real estate.

[Dave Meyer]

Well, before we jump back in, David was a guest on the show about a year ago, and for people who didn't listen to that, can you maybe just give us a brief intro?

[David Leko]

Yeah. So it was called, I believe, Burned Out Tech worker to over $2 million in real estate. The primary method I used was the Brrrr method. And bigger pockets pretty much invented that. But if nobody knows, it's, you know, buy, renovate, rent, refinance, repeat. Or how I like to describe it is like when Nike Shoes puts together materials and they buy it and then they sell it to you for like three times more than it costs them. It's kind of like what you're doing with a rundown house and you add a new drywall, new roof, etc. And now all of a sudden it's worth, you know, three times what you originally paid for it. So did that. So recycled the down payment. I wasn't rich by any means, but then I held those nine properties for like five years and they appreciated collectively $1 million. So that was in Indianapolis, where the average price of the house was probably 150. So it was pretty significant for me, somebody that was in my mid to late 20s when I got Started and then we kind of, to connect the dots, talked about one of the latest deals I had found. And I can now tell you the completion of that Bird deal and some big lessons that I learned along the way to the biggest deal that I've done for sure.

[Dave Meyer]

I know you do a lot of deals. You've been doing this for a while. And I think the big question me and our audience has is what deals are you doing today? And like, what's still working? Because obviously things have gotten harder. So it sounds like you just completed your. The biggest deal you've ever done.

[David Leko]

Yes, this. The biggest deal that I ever did so far was from a tax delinquent list in Indianapolis. I actually pulled the tax delinquent list and that data comes out almost like a year delayed from the county even because you have a while to pay your taxes.

[Dave Meyer]

And David, can you tell us what that is? Just for people who don't know what a tax.

[David Leko]

Oh, yeah. So if you guys have a house and you have a mortgage, that mortgage has your taxes for the properties escrowed that you owe every single year. And if you have rental properties, as I've gotten some more, sometimes you have the opportunity to not escrow those payments. So there's not an automatic payment happening. So people may forget to pay their taxes. And if they do, they show up on this list, they're tax delinquent, and then they auction off the right to buy that house at a discount. But if the owner pays their taxes, they can redeem that property back and that will not be sold from out from under them. So you always have to pay your property taxes, basically. Otherwise the government takes it away from you and lets somebody else buy it at an auction. So you could pull this list of people who have not paid their taxes. And the guy called, actually mailed, he was an orthodox. He is an orthodontist in Utah. He makes a lot of money, presumably in that job. And he was turned onto the idea of investing in real estate. He bought five properties in Indianapolis and had a contractor that had told him he'd partner on the deal with them, he'd make sure the houses get fixed up, et cetera. Not really sure what happened, but five years later I'm calling him. Cause he's tax delinquent. And this house has the hole in the roof. I mean, it is unlivable. It's so distraught, you know, it's just terrible shape.

[Dave Meyer]

Oh no.

[David Leko]

And he bought it five years ago. And I actually am now talking to him like, why are you tax Delinquent. What's going on? Can I help? And he said, they're just such a huge headache. He wants to get rid of it. And I just ran my numbers. He paid it 180. I offered him 160. I was like, it's just the best I could do in order to make the numbers work for me. So he actually sold it to me for 20 less, and he bought it five years ago.

[Dave Meyer]

Wow.

[David Leko]

And also he came and paid his back taxes, so. And as a thank you, he's like, oh, I've got more properties. So. And as a thank you, I was like, well, dude, let me line you up with my contractor directly and help him get some of those out from under you. So I didn't buy the rest from him. I think he. I know, at least did a couple deals with my contractor. So it was a great win. Win.

[Dave Meyer]

That's awesome, man. I love that you did that. Helped him out with the contractor, too. But I want to just ask a little bit more about the strategy, because this is pretty fascinating. So when you go after the tax delinquent, your. Your strategy, it sounds like, and correct me if I'm wrong, is not to buy it off the city. You just wanted to get a list of people who were in a position where they might be, you know, looking for someone to take a property off their hands. And then you went out and directly contacted someone and found what you were looking for. Essentially someone who was just fed up with this property.

[David Leko]

Correct.

[Dave Meyer]

Wanted someone just like you to make them an offer.

[David Leko]

Correct. I didn't go to the city. I didn't invest in the tax lien because it hadn't gotten to that point yet. But I wanted to get the list so I could get in front of those people who really may not even know they're on that list. But in this case, just had a headache property. So that's exactly what I did, is I got in front of them before that process happened.

[Dave Meyer]

It is kind of crazy, like you said earlier, who are the people who will sell at a discount? Because just like, the idea of having a property that's sitting there and rotting just gives me so much anxiety of this. Like, I would never. I could never imagine that. But clearly this happens to people. And it's not just people who are, you know, fallen hard times economically. It sounds like, you know, orthodontists, I think, make a lot of money.

[David Leko]

Yeah.

[Dave Meyer]

So it just sounds like there's just circumstances that arise where these types of deals are possible. I'm just curious, like, how many people like this do you have to call to find a deal? Like, what's the math look like in terms of outreach to success rate?

[David Leko]

Yes, well, in this case I mailed him, but I actually at Deal Machine. So I own. I started Deal Machine. It's a software marketing tool. We launched a dialer in July. People make half a million calls on it a month. And so I actually know the analytics because they use AI to determine what happened to this conversation, was it a hot lead, et cetera. So I can look at the details and tell you it takes about 200 conversations to get like one deal, basically. So conversations would be people that picked up and you spoke to more than just, hey, do you want to sell your property? No, buy. You know what I mean? So yeah, that's. Yeah. So that's. Those are the figures And I have 200 conversations. I think it's about 30 hours of calling.

[Dave Meyer]

Okay, dude, that I, I love this. Well, I'm just a data person, so I'm super excited.

[David Leko]

I know, it's really cool. Data.

[Dave Meyer]

Yeah. You hear about this, that off market deals, which is totally not my specialty. So I'm going to pepper you with questions about that later. But you always hear that it's just a numbers game. And I was always kind of curious what the numbers are. So now you hear it there first. About 30 hours to get the deal. So now we know some of the effort. Tell us what the payoff was. So you got this deal for it sounds like 160. What was the rehab plan?

[David Leko]

Yeah, so I figured it should be worth about 400, but it really needed everything because it actually was. Not to get too graphic, but I mean it looked like somebody there was like just nasty stuff smeared all over the wall. You can imagine what that might be. So basically like all the drywall, the entire attic because there was mold from the house, you know, having a hole in it, whole kitchen, whole roof, everything. So it ended up being 125.

[Dave Meyer]

Okay.

[David Leko]

So if you're doing the math, that means I'm all in 285. But you know, it was six months to even get that done. So that, that was quite a while. And then so you have holding costs generally if you're going to borrow $125,000, you might expect to pay like 6 to $12,000 for the privilege of borrowing that money for that amount of time.

[Dave Meyer]

So you're talking 300 grand. Ish. @ this point.

[David Leko]

Yeah, exactly. So, so then I go to do the appraisal because in the brrrr strategy. Now that you've got it all done, you want to refinance it. And the problem was it appraised at like 325, which is a problem because that's not a bird deal, that's like a retail deal. And I need to sell it quick before my holding costs start eating into profit and me going negative.

[Dave Meyer]

Yep.

[David Leko]

But I just knew that had to be wrong. The problem that I made a mistake was I didn't tell the appraiser what it looked like when I bought it for 160 because they'll look at the price. They're like, we just bought it for 166 months ago. No way it could be worth, you know, 400,000. How could that be possible? So I went ahead, got a new lender company. This time I gave them a pre appraisal report that showed them how much work I put into it since they see that transaction at 1:60 not too long ago. Then it appraised for 4:25, which is above where I even thought it would.

[Dave Meyer]

There you go, There you go.

[David Leko]

But yeah, I mean this, this was such a gift from Ryan Haywood, who's a buddy of mine. A and I put a gift together for you guys as well if you wanted on my Instagram, if you DM me, I'll give you a copy of this report. Just the keyword report is set up to send it to you guys, but it's a slideshow of what the house looked like before and after. The comps that I see are relevant, that they may or may not see, depending on how they're filtering their data. I mean, they're the expert. But it just went to show like, how much better communication from my end, like helped that deal work out.

[Dave Meyer]

That's super cool. It's so funny. You know, this happens all the time. This, you know, people look at what you paid for and they're like, no way it can be worth 400. But like, isn't that the appraiser's whole job to like not look at what you paid for it and just try and understand from comps what the intrinsic value is? But it happens. If you look at just behavioral economics, this happens in all parts of the world. People like look at this kind of stuff. But it's super cool that you figured out a way to be proactive about it because it's not like you were lying. You're just like, hey, look, this is what I did to it. And it helped reset the appraiser's mind. And that has real benefits.

[Henry Washington]

Right.

[Dave Meyer]

When you're refinancing, then you get to take out significantly more of your equity and it probably, I would imagine, improved your profit margin and your cash on cash return for that deal. Super cool.

[David Leko]

Yeah.

[Dave Meyer]

So what did the profit come out to be?

[David Leko]

Well, essentially, if it appraised for 425 and you get a loan at 75% loan to value, then that means you get back three. Over 300,000. Right. So I actually put about you know, 16,000 in my pocket, paid for the lender fees for, you know, doing that appraisal twice and the closing fees, et cetera. So about $100,000.

[Dave Meyer]

Wow. Okay. So you made 100 grand. That's awesome. Congratulations. Sounds like a killer deal.

[David Leko]

You hear about these big deals, but in India, like not a high priced market. So it's like harder to get a big deal like that.

[Dave Meyer]

Totally. Yeah. Like if you're doing something in Los Angeles, yeah, you hear about six figure flips, but that is, that is pretty, pretty rare. So let me ask you this, because now you're saying you put 30 hours of time into it essentially and you made a hundred grand, which is great. If in theory you bought this deal on market. Like first of all, can you buy a deal like this on market in indie?

[David Leko]

I haven't looked recently at all. I just don't think you could find a deal like this on market.

[Dave Meyer]

Yeah, yeah, that makes sense. Especially at that price point, even. Let's just say you bought it for 160. If it was on the market for 210, which isn't all that different, the profit margin would be half. It completely changes the deal. So I totally get why you would invest that time in those 30 hours to get that kind of deal. We have to take a break for some ads, but stick around because later in the show, David will share his advice for investors heading into Toys 2025.

[Henry Washington]

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[Dave Meyer]

Let's get back into my conversation with David Letko. So what kind of deals are you looking at today?

[David Leko]

So I'm currently looking at deals that are like a little bit less than that. My perfect buy box in Indianapolis is like a high end rental. I notice in Indy you can't really get something to rent for over 2500 bucks. The low end, I mean you could go below a thousand. But my perfect, I think price point for that market is it rents for about 1800 bucks.

[Dave Meyer]

Okay.

[David Leko]

And because of the 1% rule, it'd be worth about 180. So that I'd like to be all in 135, 140. And again, the best way to do that is like how Nike makes shoes. You get raw materials, you put them together and you create value. So I just, I want to get the benefit of doing that so I can grow the portfolio with the burst strategy, recycle the down payment, recycle the money to grow infinitely, so to say. And I've never done a build from scratch, but that seems like a lot more work than to just find something really run down and then fix it up.

[Dave Meyer]

That's funny you say that because I hear conflicting opinions about that all the time. Some people say actually new construction is easier because you can follow a blueprint, you know, and you could get something. But it sounds like you've taken the approach where you've sort of tried to, I guess you would say, templatize like the rehabs that you're doing.

[David Leko]

Yeah, like a 1500 square foot ranch, three bedroom, two bath with a yard. Attracts a tenant that's got a pet that doesn't want to live in an apartment, but hasn't quite been ready to go buy their house yet. That, that just seems like my client. It's my bread and butter.

[Dave Meyer]

Yeah.

[David Leko]

And I've done multiple houses that were in the same neighborhood. So when they say blueprint, I think they, instead of the document, I think they just meant they build the same thing every time.

[Dave Meyer]

Yeah. Business plan wise, like you're doing just the same thing over and over.

[David Leko]

Right. So that's what clicked when you said that. But I've just noticed that as well. Or I'd say like I like to buy cookie cutter houses. I want the houses that look similar to the ones I've already done.

[Dave Meyer]

Oh, that's super cool. So that's your buy Box. And you've been doing this for a while. Is that always been your buy box, or has it taken you some time to figure out exactly what you want?

[David Leko]

Wasn't always my buy box, but I just realized if I go too expensive, they're harder to rent. And then the first house I ever did, you won't even believe it, because it was a $4,000 house. 600 square feet. Four. And they get this. They fit two beds and two baths in this house. And I just knew it would work because There was a 2020 plan for the city that had four areas of development in Indianapolis. One was called 16 Tech, and it's come to fruition today. It's great. I look like a genius, but I just knew. I was like, if they're building all this infrastructure around the university, it's a research park, etc. And it looks terrible now. The school's, like, kind of nearby, and I see those apartments are pretty expensive, you know, like 1300 bucks for 600 square feet. So that's why I figured I could charge for this house that I bought for 4,000, and I fix it up for 65. I mean, it needed new everything, but it's tiny, so it's like, it's not that expensive to fix everything. And so that. That's turned out, that was my first deal. So you could see really wide. Really wide array of homes at first.

[Dave Meyer]

Oh, that's. That's awesome. But I feel like once you find that sweet spot, it really makes things a lot easier. Even if the houses physically don't look the same, you just develop this sort of intuitive sense of, like, what things are supposed to cost. You can start walking into a house, you're like, okay, this is going to work. Or this is at least worthy of consideration because you've done it so many times. How many of these buy box deals have you done at this point?

[David Leko]

So I've done, like, own currently 19 properties. I would say 18 of those are the buy box. Well, 17. There's a couple that just are outliers, but the rest all fit in similar to that.

[Dave Meyer]

Awesome, man. Congrats. Well, I wanted to ask how it's been for you moving to Austin, because I would imagine the business changes a little bit. The portfolio, what you're doing changes when you move from being physically in the market, you're investing into doing it from a couple thousand miles away.

[David Leko]

Yes. I don't recommend people start out of market, but I felt like, because I already started, I already have knowledge of the market. I have Knowledge of the contractors. If I were to ever sell my portfolio, it'd be convenient that they're all in one place. If I ever wanted to hire a new person to help manage or anything that if I want to see all my properties on one sweeping trip, having them all in one place just seems simple to me. So I chose to keep doing deals at seven deals the past year in Indianapolis from Austin. So at the level that I'm at now, big fan of the concept buy back your time. It's been a popular book by Dan Martell. He's been a mentor of mine. I did private coaching with him before he wrote the book, actually.

[Dave Meyer]

Cool.

[David Leko]

And one of the concepts is, if your time's worth more than $15 an hour, $20 an hour, then you can continue to grow your business by finding somebody to do those tasks that you pay that much, you know. And so one of the first hires that I think anyone should do is an assistant. It was very weird at first, but we have a system now where she does help with the rental properties in minimal ways. We use, like, these, like, show mojo lockboxes to have people send us their credit card and id, and then they automatically get access to go tour the house themselves. So my assistant is not, like, going to the house every time somebody needs a tour. She just puts the lockbox on. Does that make sense?

[Dave Meyer]

Yeah. Yeah, for sure. And so she's an indie.

[David Leko]

She's an indie. I'd hired her before I moved to Austin, which has worked out great. So we do that, and people apply on Zillow, so I could look at those at my desk in Austin if I wanted to. But she does that as well, and she knows my criteria. And then also, if the contractor does work, he's trustworthy. Been working with him for two years. But sometimes if there's a miscommunication, having a second set of eyes just reveals that. Right. And then you can fix it so she'll go in, check that out. If he's done work, be my eyes and ears, you know, for checking on that. So you. What is that phrase? You people respect what you inspect, you know, so all's good. It's just good to have that layer in general with anything. If you're. If you're having somebody do work, you know, for you and with you, that's pretty cool.

[Dave Meyer]

I like that. I. The idea of having an assistant in market is great. Obviously, that's not going to work for everyone, but if you can figure out a way to make that work, that that makes, like, A lot of sense. And I think I would encourage people to think outside the box here. It doesn't necessarily even need to be a full time employee. Do you have a friend, do you have a family member who wants to make some extra money, get cut in on a deal? Like, you could probably find a way to make it work. But just having someone you trust does seem like a difference maker.

[David Leko]

So you typically pay a property manager the first month's rent and then a percentage of ongoing rent. So if you're a property manager and you want to go full time in Indianapolis, the first month's rent would be like 1500 bucks. So if you want to make $50,000 a year as a property manager, you need about 40 properties. So your best bet's going to be find somebody with a portfolio of 40 properties and you can just manage all of them. And once you do that, if somebody has 1, 2, 3 rentals, you're not going to give those as much attention, even if you have the best intentions, because you know that all your bread comes from those 40 properties in the portfolio. And then also the number one predictor of the return on investment from a rental portfolio is vacancy. And then like the number one reason why people don't want to live in their property anymore is because of bad management. Like just delayed responses. We know, we know what that looks like. So that's why I chose not to hire a third party property manager. Because I just felt like the incentives, if I were the property manager wouldn't make me focus on these, these onesie 2Z properties. So I chose to do it myself. I also believe you should do things and learn how to do things yourself before you hire someone else to do it. That way, you know, later, if they're doing a good job or not. We hire, you know, at my companies, not to add capacity, but to remove things from my plate. So basically everything in my company I've done at one point and then once I know how to do it, I've got the process written down how to do it. I can hire somebody, come in, take that off my plate. Which frees me up to do something else of higher value, you know, something new, something growth oriented. So that's how I've, you know, landed on the way I property manage. And she is a full time person for me, but the property management's like 10, 20% of what she does.

[Dave Meyer]

Yeah.

[David Leko]

And I always figured If I hit 25 properties at my price point, that could pay for a full time person that gives that, that really great care and also less than the traditional property management fee structure. So that's my end goal to get there maybe next year.

[Dave Meyer]

Nice.

[David Leko]

2025.

[Dave Meyer]

Yeah, it sounds like if you did seven this year, do seven next year. And I do want to ask you about your plan for 2025, so hold that thought. But I did just want to underscore, yeah, I think this idea about property management and incentive alignment, you know, like you said, it's not like they're bad people or they're doing something wrong. Like anyone in their position would do this. You would pay the most attention to your biggest client. Every business does this and there's nothing wrong with that. And I think at least something I've experienced is it changes too. Like sometimes when people are a new property manager will be super hungry and if you have 10 units with them, you're the biggest client and then all of a sudden they go out and good for them, they land a 50 unit client and all of a sudden you're not that important to them anymore. And so that's, I think, why in this industry, at least in my experience, when you do have a property manager, as I do, you sort of have to cycle through them sometimes and make sure that you're at the same stage of your journey, let's say, and you're sort of like working towards similar goals at that time. All right, time for a break.

[Henry Washington]

Back with more of the BiggerPockets Real.

[Dave Meyer]

Estate podcast in a few minutes.

[Henry Washington]

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[Henry Washington]

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[Dave Meyer]

This.

[Henry Washington]

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[Dave Meyer]

Thanks for sticking with us. Here's more for me and David. What is the plan for 2025 for you?

[David Leko]

So in 2025 I'm going to just keep doing what's working?

[Dave Meyer]

Why not?

[David Leko]

A lot of people wonder, should I keep buying properties right now or should I wait until the interest rates come down? I was reminded when I was just starting out, I worked for an entrepreneur and his main business was something else. I worked for that company. But he had five rental properties and he's a big reason why I even got into real estate. He's like, well, if you manage these well. And his goal was to retire by 40 if you manage these well, the stock market goes up and down. But these rentals will always cash flow every single month if you manage them well. And so that was a really compelling reason for me to get into real estate. But I took a look at what was on the market. Nothing would cash flow. I took a look at what he bought. I was like, well, if I bought these eight years ago, I'd be in great shape like you are. So you're so lucky that you were interested eight years ago. Yeah, and I had to pause. You know, this year I've been posting and social media has been a big passion of mine to learn the skill of important skill for me. Business wise. People reached out to me recently and they were like, oh well, eight years ago this would have been so easy. And I was like, dude, I said the same thing when I started eight years ago to my boss who started eight years before me. And so I had to share that. And I was like, listen, the reason is if you look at the Federal Reserve of St. Louis, they publish these graphs and it's the rent index in the U.S. and the House Price Index in the U.S. they have 70 years of history that they've tracked these indexes and the rent one has never gone down. It's literally never gone down, not even in 2008, I was like, specifically, it's like, what happened in 2008, it didn't go down. It like stayed the same for like a year and then kept going up. And then the prices, there's like maybe a one or two year period here and there where it dipped down, but overall, it's the same trend. It's like, it's like almost exponential.

[Dave Meyer]

Yeah.

[David Leko]

And so that would be why I tell people that you should not wait for the interest rates. You should find the good deals that make sense now and then just refinance later if you absolutely need to. But I've found several 1% rule deals and bird deals this year, so you could find a deal in any market. You know, it's kind of like, okay, that, that, that orthodontist who had a rundown house, you know, did, did he need to sell because the interest rates were high right now? No, he. He bought those in cash. You know, it's like, it really had nothing to do with that. So there's always situations like that that we can help out as investors and make some money at.

[Dave Meyer]

Totally. Yeah, that, that makes, that makes a lot of sense. And yeah, I mean, we'll talk about this in another episode, but yeah, we don't even know how much interest rates are going to come down. You know, like, everyone's acting.

[David Leko]

You never do that. Maybe they never will.

[Dave Meyer]

Yeah, yeah, exactly. It's just. You're just hoping and guessing. And something you said before, I think is so true. Like, oh, eight years is too long. Five, ten years is too long. Like, I don't know about for you, man, but it's gone fast for me. Like, I remember I bought my first deal 15 years ago, and I remember thinking, oh, man, it's going to take a long time to build the portfolio. And like, in a blink of an eye, you're there, you know, like, and if you just keep working at it and do it in a sort of disciplined way, it's really not that long. It's. It's a heck of a lot shorter than working at a corporation for 40 years, I'll tell you that.

[David Leko]

Yeah. Also, there's another thing that I don't talk about very much because I wonder if people are the same, but if I'm constantly setting a goal to get these rental properties done, if I have money that I'm going to deploy and use that for marketing, use that for buying the property, et cetera, it's like, if I don't have that goal, the money goes elsewhere. It doesn't get saved, you know, it just like gets elsewhere. I don't know where it goes, but I spend it, you know, is kind of what I'm saying. So that's just not even an ROI thing. It's just like, man, having the goal is just like a great reason not to waste money.

[Dave Meyer]

Yeah, it's true. Yeah. You always know, like if you have an extra dollar or you get a bonus from work or whatever it is, you know, you, you're putting it towards something rather than, I don't know, I'm probably the same way. You just kind of like invent something you want or need if you have some like money burning a hole in your pocket. So, David, this has been awesome. Congrats on your success. I love the update. We are wrapping up the year here, 2024 and you obviously know a lot about the real estate market. Curious if you have any thoughts or things that you're looking out for in the next year in the real estate, residential real estate market that you think our audience should know.

[David Leko]

Yeah, I would look for opportunities to use AI in your investing. So for those that do like direct to seller marketing, which I know a portion of the bigger pockets audience definitely does, look for ways to use that in your actual like lead generation. And I know we're working on something now where, you know, it can analyze the satellite and the street view to determine what houses have mature trees, what houses are on corner lots, what which houses look run down, etc. So like those would be things that if you jump on board earlier, you'll have more of the effectiveness before everyone then eventually is forced to do it and then everyone's doing it so it's not as effective anymore. Does that make sense?

[Dave Meyer]

Oh, totally, yeah. I mean, it's just the adoption curve, right? I mean like you said, it's the markets become efficient over time and you know, if you do what everyone else does, you're just going to get average returns. Like if you're the average marketer, you are going to get average returns. If you do more than the average marketer or you do something before the average marketer, that's when you get inefficiencies in a positive way. You get advantages over the market because you have found something that no one else has figured out yet and that's really where you need to be.

[David Leko]

Yeah. And other than that, also in 2025, I think the rents will still go up and I think the price of homes will still go up. I'm pretty confident on the rent since I've never seen that graph go down. But even if I'm wrong that if there's a price dip, it's going to come back. Right. Those dips only seem to last like two, three years max. And I know in Austin it's gone down here a little bit, cooled off, but I mean, what do you think about that? The short term prices that we'll see in 2025?

[Dave Meyer]

Yeah. You know, I'm sort of like you. I invest for the long term. I mean, I invest in some flips and stuff, but that's not my bread and butter.

[David Leko]

Yeah.

[Dave Meyer]

And so to me, when I get nervous, I look at those graphs that you're talking about, like charts of the median home price of the US that go up over time. I think one of the interesting things about 2025 in general is that we've seen some of the markets that are the slowest right now have the strongest long term fundamentals. Like Austin's a perfect example of that. I think you look at markets like some of the places in North Carolina or Tampa or Phoenix, a lot of these markets, great job growth, great economic growth, great population growth, but they're slow down probably because they just grew too fast over the last couple of years. Does that mean they're bad markets? No, it means you should be careful when you buy there right now because you don't want to, you know, catch the falling knife, so to speak. But like to me that means there's probably going to be opportunities in those markets in the next couple of years. But curious what you think. Have you actually invested at all in Austin?

[David Leko]

No, I just see properties and prices and people moving to Austin like crazy, which pushes that price up and up and up. Right. Because everyone wants to come in with a high tech salary and buy a house. So that's, that's, I agree with you. Maybe a little retraction seems like, oh, in the short term, why is this happening? But really, you just gained 50% value of your house the last two years. Right. So there's like a retraction of 25%. You're still good overall. But if you time it wrong, if you're in a short term scenario where you're trying to do a flip, that's when it could be dangerous. But dude, Indianapolis, a lot of Midwest markets, they're just kind of like a bond. They just kind of always ticking up is from what I've seen, didn't take big hits in 2008. So do all my investing there.

[Dave Meyer]

Yeah, I mean, I love the Midwest. I think it's got legs. It's, it's not as sexy as some of these places, but if you're Sounds like both of us trying to build this out for, you know, a long career, there's a good combination of growth and affordability there that I really like.

[David Leko]

Agreed. It's not pure cash flow and it's not pure appreciation, but it's like right in the middle.

[Dave Meyer]

Yeah.

[David Leko]

So you get the cash flow, hold the house pays for itself, then you get the appreciation too.

[Dave Meyer]

Yeah, the hybrid's where it's at, at least for me. Well, David, thank you so much for joining us. This has been a lot of fun. Thank you for sharing the update on your successful berth. Congrats again and for sharing your thoughts on the market and some of these tips you have for finding off market deals. Appreciate it. If you want to learn more about David, his company and what he's up to, we'll of course put links to his social media website and all that in the show notes. Thanks again for being here.

[David Leko]

Thanks Dave. Great host.

[Dave Meyer]

Oh, thank you. And thank you all so much for listening. We'll see you next time for the BiggerPockets podcast. Thank you all for listening to the.

[Henry Washington]

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, 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.