← BiggerPockets Real Estate Podcast
BiggerPockets Real Estate Podcast
How to Start Investing in Real Estate (From Scratch!) in 2025
00:43:55
Loading summary
Transcript69 lines
- [00:00]
Dave Meyer
This is how I would start building a real estate portfolio from scratch right now, in 2025. No matter what you may be hearing about the housing market right now, it's almost always better to start buying real estate now than wait for some better opportunity that may never arrive. So if you're totally new to this real estate game, or even if you've invested before and are thinking about buying again, here's exactly how I'd recommend doing it. Hey, everyone. I'm Dave Meyer. I've been buying rental properties for 15 years, and on this podcast, I help you achieve financial freedom through real estate. Today, we're going to answer a very simple question. How do you start investing in real estate right now? In some ways, the answer never changes. There are some steps every new investor has to take, no matter what's going on, and some strategies that just pretty much always work. But right now is also a very different time in the real estate market than if you were to have started investing three years or five years ago or even 10 years ago. So today I am joined by Henry Washington, and we're going to provide some tips you absolutely need to keep in mind to ensure you're getting great value and mitigating risk as you start a portfolio today. Henry, thanks for joining us.
- [01:23]
Henry Washington
Hey, thanks for having me, Dave. I'm excited. I love talking about this topic.
- [01:27]
Dave Meyer
Okay, so, Henry, I guess before I ask you how to start with, we should probably zoom out and say if you should start. It's pretty confusing world economy out there. You know, you talk to a lot of new investors, like, do you still advise them to get started now?
- [01:43]
Henry Washington
Absolutely. I think real estate's always going to have a way to pay you. You as an investor, it's your job to figure out if those ways make sense for you right now, if you're financially ready and able to take advantage of the ways the market's willing to pay you right now. Like, if it fits your financial goals. You need to first understand what your goals are from a financial perspective, and then you need to look at the broader market and then look at your specific real estate market and figure out if there's a way for real estate to help you get to your goals right now. Like, I think it's pretty generic and irresponsible just to say, yeah, you can invest right now. It'll be perfect for you. Like, everybody's in a different spot financially, but in general, you can invest and make money right now. And if you can find a way to do that, I think you're Going to look like a genius in 10 years when things change.
- [02:40]
Dave Meyer
So we've sort of talked about this. I was going to ask you what to do first, but I think sort of an analysis of the goals sounds like what you would recommend. Or is there a different thing people should do first?
- [02:49]
Henry Washington
Now more so than ever is the time where you need to have a strategy and then figure out where and how you can implement that strategy. Because if you started buying in 2020, then it didn't matter what you bought, it going to go up in value. The market was going to pay you regardless of your strategy. And that isn't the case anymore. You can go out, do a deal and lose a bunch of money if you do a bad deal. And so if you don't know where to start, like having a strategy that gives you a blueprint to help you get started is big because like I said, everybody's different. You may be ready financially, but the strategy you're thinking about may not make sense for the market you live in. Right. You're not going to acquire a bunch of cash flowing assets in la. You're going to have to get creative, creative to get cash flow in a market like Los Angeles. So knowing what your strategy is will then help you determine where you should invest and how you should invest. So I think definitely education, strategy execution.
- [03:48]
Dave Meyer
Yeah, that education piece is really important too because to pick a strategy you need to know something. You have to have a baseline understanding of all of the different ways that you can pursue real estate investing. And for me, I'm not trying to hawk my book right now, but like the way I think about the strategy is like, it's not just like I want to buy rentals, short term rentals, midterm rentals, that's almost like a secondary thing. The most important strategic element to me is like, do you want to go slow and steady? Do you want to go fast and furious? What is it that you're trying to accomplish right now? And if you can answer that, then all that other stuff flows into it pretty easily. Like slow and steady. You can buy cash flowing assets right now, you can buy burrs right now that are going to be solid deals today that are going to do great over the long run. Like that's really easy. You just told me some of your people you work with and mentor are flipping houses successfully. That's just a totally different business. So if you're trying to start right now, don't do the scattershot approach. And I know it's hard because you probably See, on social media, you hear people on this podcast who are doing cool stuff, all sorts of very profitable cool stuff. Not everything is for everyone. It's one of the hardest things about real estate, I think, to not get that, you know, shiny object syndrome and to really be disciplined. But that's the thing in 2025 is discipline, focus, and just honing in on one thing that you could do really well. It's going to work. Like, you can do that, no doubt, but, like, the scattershot thing is not going to work.
- [05:25]
Henry Washington
There is somebody executing a strategy that you want to do very well in all areas of the country. But is it the right thing for you? Only you can figure that out. And so a lot of people listening to this who are looking to get started probably have a million questions. And I guarantee you some of those questions are, should I flip or should I buy rentals? Or should I invest in my home market? Or should I look somewhere else where maybe deals look like they're more profitable? Like, all of these things are questions new at investors have. But if you really do take the time to figure out, what is your strategy? What is it you're trying to accomplish in terms of a monetary goal? Like you said, if you're looking to go fast and use leverage to acquire cash flow, that should guide you to a market where that works for you. Right. And so you won't have to answer the question, should I invest in my backyard or should I go somewhere else. You've picked a strategy and now you can look in your backyard and say, can I do my strategy here? And if the answer is no, well, then there you've answered your question. You need to look somewhere else.
- [06:24]
Dave Meyer
Exactly. All right, we got to take a quick break, but we'll be back with more tips on how to start investing in 2025. Right after this, you became a real estate investor to reach financial freedom, not become a 247 emergency hotline for your weekend guests who can't figure out how to use the coffee maker or lock the front door. If you're burnt out on short term rentals and want to earn more than long term rentals, Furnished Finder is your solution. Furnished Finder connects you with professionals looking for furnished stays of 30 days or more. Think business travelers, relocating families, traveling medical professionals, home insurance claims. People who see your property as a place to rest, not throw a party. No endless turnovers, no stress over seasonal vacancies, no booking fees or commissions for just $179 per year. Access reliable tenants, generate consistent rental income and keep all of it. Head to furnishedfinder.com with code BP15 for $15 off your first listing. I used to think I could booby trap my house like some scene from Home Alone, but it turns out setting up swinging paint cans can be pretty messy. And so I personally turn to a much better solution. SimpliSafe. I use it because it doesn't just react after something happens, it helps stop bad stuff before it even starts. And that's what makes it different and way easier than installing a zipline to my treehouse. SimpliSafe's new Active Guard Outdoor Protection uses smart cameras and live agents who watch over your property in real time. So if someone's creeping around, they can talk to them, shine lights on them, and they can even call the cops if needed. It's like having a professional bouncer for your house minus the velvet rope. There are no contracts, no hidden fees, and setup is super simple. Plus, CNET just named it the best home security system of 2025. And I get why. It gives me real peace of mind every single night. Right now you can get 50% off your new SimpliSafe system with professional monitoring and your first month free at simplisafe.com pockets@simplisafe.com pockets there's no safe like SimpliSafe. 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 best US Markets. And best of all, they do all the heavy lifting for you. With over 255 star ratings on bigger pockets, 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 3377 biggerpockets.com retirement to start investing in top cash flow markets today. 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 bigger pockets, 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 233777 or visit biggerpockets.com retirement to start investing in top cash flow markets today. Welcome Back to the BiggerPockets podcast. I'm here with Henry Washington talking about how to start investing here in 2025. So again, it's going to depend on the individual and the location. But what are the things you see working most commonly right now for most people?
- [10:09]
Henry Washington
They're not sitting on a giant bucket of money. And so I would say you want to limit your risk when you're just getting started. Because when you're just getting started, what you're really doing is you're learning a lot. And so I would say you want to start small and you want to start with something that you can pivot in the event something goes wrong. So outside of house hacking, which we can about later on in the show, because I think that's a great strategy to get started, but we've kind of beat that to death across multiple shows.
- [10:36]
Dave Meyer
Can't have a getting started show without some mention of house hacking. We will not make the whole show.
- [10:40]
Henry Washington
About that, but we will mention it, we'll mention it. But let's put it aside for now. Without house hacking, if you were going to get started, I think you should start with a single family home or a duplex, something that's on a small scale. Because worst case scenario, if you screw that up, you'll have multiple exits, you can rent it out and maybe you'll be able to break even. If you can't rent it out, you should be able to sell it and somebody will want to buy that product from you. Or if you get stuck having to hold on to it, like the expenses that come along with you owning that single family home, if things go wrong, they're not going to be as catastrophic as if you buy a multifamily and things start to go wrong. Right? It's not going to, it's not going to put you into bankruptcy or it shouldn't. So I would look at starting with something like a single family or a small multi family that you can buy, add value to and either rent it out or sell it and Then I would make sure that that single family or small multifamily would appeal to somebody in the first time home buyer class, because that's where the most buyers are. And so that way if you get into it and you decide, hey, this isn't for me or I bought a bad deal, you can probably get out from underneath it and either lose a little bit of money or break even. Or if you were planning to flip it, maybe you can pivot and put a tenant in it and still break even. Like you're leveraging your risk, like people aren't. You're not going to die if you, if you do a bad single family.
- [12:06]
Dave Meyer
Yeah, exactly.
- [12:07]
Henry Washington
And in this market you're going to make mistakes. And so let's limit those mistakes. Let's start with a single family or a small duplex or, or a duplex. And let's bump our head on a deal that if we have to pivot, we're going to be okay.
- [12:21]
Dave Meyer
Totally. This is probably just good advice for investing in anything right now. Generally speaking, when there is as much uncertainty as there is in the market right now, my philosophy is like, I'd rather miss on a huge upswing than expose myself to downside risk. That's just the way I think about it. And I know other people think about that differently and like the FOMO of missing out on like some amazing deal is too much for them to handle. I'm sort of the opposite. Like I could live with not the optimal perfect returns.
- [12:55]
Henry Washington
Can you give us an example of like what that kind of looks like? What do you mean by that?
- [12:58]
Dave Meyer
Okay, so here's a good example. You could buy a highly distressed asset right now, right? Even if it's a single family or a duplex, right. You could buy something that has, I'll use an extreme example, structural issues, right? Like, you know, it's got a foundation problem or there's some lean on it, you know, there's like something hairy about it.
- [13:17]
Henry Washington
Right.
- [13:18]
Dave Meyer
The upside on those deals can be huge, right, because you're buying them at a fraction of what the actual value probably is. But you have to go through the headache of doing it. And let's just say that gets us a, I don't know, 20% per year for five years. I'd rather right now take one that I know is going to get me 10% a year right now, Like I know it for sure. Very little risk. The only risk in that deal is opportunity risk. Like I might not get 20%, but for me in 2025, like that's how I think about investing because I just. There's just so much crazy stuff going on. It's very hard to get a read. But there are so many ways to invest in real estate where it's like, just take the layup, like, and I'm just going to take the layup. You know, I don't need something extra risky, at least for me.
- [14:02]
Henry Washington
I agree with you. I think, I mean, I'm doing that within my own portfolio. Where previously I might be willing to buy a luxury flip project because I can get it, you know, for 350,000, put 150,000 in it and sell it for, you know, 650, 700, 750,000. Like those projects exist here. Right. And the upside's massive. I'm probably going to pass on that deal now and stick to projects where I'm in that first time home buyer and I'm doing cosmetic rehabs because I know those are going to sell. I am so confident and I may only make 20, 30, 40 grand on that flip versus 200 grand on the luxury flip, but I'm gonna take these small base hits. Cause in the event something goes wrong, I can pivot and I can rent that thing if I need to. If you can't execute on your luxury flip, even though the upside's big, you're sitting on huge holding costs for long periods of time and your profit gets eaten away. You can't throw a tenant in it, you can't make it a short term rental out here in cash flow. So you're kind of just screwed. So I get what you're saying.
- [15:06]
Dave Meyer
Absolutely, yeah. And I think this is sort of my advice, especially for new people. If you don't make the optimal amount of money on that first deal, that is a very small problem relative to losing it on the first deal. Right, right. So the whole thing is just to make sure that you learn as much as possible, preserve capital and earn a solid return. If you can do that and get to your second deal, you're going to be successful like that. That is probably 70% of like your success over time as an investor is like getting from 0 to 1 and then 1 to 2.
- [15:40]
Henry Washington
Absolutely. And especially now. And if you can do it in this market, you're going to be knocking it out of the park as the market starts to shift at some point more into the favor of an investor.
- [15:49]
Dave Meyer
All right, I want to talk to you a little bit more about tactics because you are way better than me at this stuff. How do you go about finding a Good deal in a different market than we've seen in the last five years. Like a. It used to be super hard to even go view a property, have time to make a decision on it. Things are changing in most markets right now. So how, how do you think people should think about going about identifying a deal?
- [16:15]
Henry Washington
I think people who have been in this space for a few years at least probably need to adjust their expectations because there's still a divide between what buyers think the market is doing and what sellers think the market is doing. So sellers are still wanting prices that maybe aren't relevant yet in a lot of cases. And so if you've been in the game for a while, I think you need to adjust your expectations, meaning you can still get deals at prices that you want, but the amount of offers that you have to make in order to get a deal has increased than it was a few years ago. So if you're used to making 10 offers and getting two yeses, that's probably not the case anymore. You may have to make 20 to 30 offers to get two yeses. So volume has increased. And if you're new and you haven't been in the game, that's good because you're now setting your, your baseline with what the market conditions are now. But it also should give you an idea of how much time or effort it's going to take you to get a deal. And so as you're picking your strategy, you just need to understand, like what's the volume of offers I need to make and then how much time or money is it going to cost me to make those offers? Now there are some factors because of this market that are playing in investors favors and that is that there's an increase in inventory, which means there's more opportunities to buy properties. There's more sellers that want to sell and less buyers that want to buy those properties on the open market. And so there's opportunities for new investors to go out there and make offers on properties that are on the market. And there's a higher likelihood of finding a deal on the market now than there was a year or two ago because of the inventory increase. If somebody's listing their property they want to sell, and you as an investor can now go out and say, well, I, I want to make offers and I want to make offers at less than what is being asked, or maybe I want to offer it what's being asked, but get some contingencies or things that you want the seller to go ahead and pay for. And so that again, does it mean you're going to get a steal of a deal right off the bat on the mls? No, but there's opportunity for you to go out there and make offers on deals on the market, which hasn't always been as prevalent in the past.
- [18:28]
Dave Meyer
Totally. I don't think we're like going back to this era where everything's going to sell under asking, actually. We're just seeing like a total split in the market where some things are just sitting and some things are selling for over asking.
- [18:42]
Henry Washington
Like, it's so weird.
- [18:43]
Dave Meyer
It's so weird. It's a lot about marketing right now. It's, I think, a lot about the seller's mindset when they go into this, if they're going to try and stick to stubbornly something or they price it aggressively. And I, when I talk to agents who list properties, they're saying the same exact thing. Like the stuff that sell like is good is going quick, but there's also just things that either the selling listing agent messes up or the seller is too aggressive and it winds up getting, getting a little stale. And real estate investors, we kind of like stale. Stale's good. Like I'll take stale. And so I think it's a good time if you're, if you're willing to be diligent. Like if you're going to hunt. Like there is absolutely good stuff right now. I think it's really important to be patient in this kind of market because a buyer's market, it has risk, but the benefit is you can be patient and you need to be patient and you need to work down negotiations and sellers. Like that's the way you win in this kind of market.
- [19:46]
Henry Washington
Absolutely.
- [19:47]
Dave Meyer
So tell me a little bit about that, Henry. Like when you're making offers on market, what if a seller says no and it sits on the market? How do you like actually go about doing this? Like, when do you go back, how often, how do you follow up? How do you try and use your leverage in a, you know, respectful. Good way to build a relationship?
- [20:05]
Henry Washington
Yeah. So what we're doing currently is I have an email drip campaign essentially set up through my real estate agent, which is set based on my buy box. And that buy box will say, I'm looking for homes in these parts of town with these features, you know, three beds, two baths, whatever that is for you. Right. And then the trigger, if they're in my buy box and once they hit 45 days on market, then they get into my email drip campaign. And so we then literally, I literally have a formula that we run to make an offer on all of these properties. So my agent will just do the formula and say, okay, this is the price we would offer on this and he submits those offers. Right. And so I'll just get, you know, offers in my email box and then I'll sign those offers and we'll send them out. So we're making these offers pretty much cold. Once they get on our email list, from there, the sellers either are going to decline that offer or they're going to counter that offer. They're going to accept that offer. The majority of them get declined. But as long as it's still within my criteria, it's going to stay on my list. And so every week thereafter, my agent can then follow up and say, hey, we made an offer on X, Y, Z. So you haven't had an offer yet. Don't forget my seller is willing to offer xyz. Right. Or if you want to counter our offer, we can talk about it. So it's just following up every week with the properties that are still on that list that haven't sold yet and hoping you get a conversation with somebody. I mean, that's all shopping for deals is, whether you're looking on the market or off the market. It's you trying to get on the phone or to have a conversation with a seller about selling their property. That's all that's happening. So it's just a follow up every week as long as they're on that email campaign.
- [21:50]
Dave Meyer
All right, I want to talk about who you need involved to get started right now, but we do need to take another quick break. We'll get to that right after this. Long term rentals give you stability, but cash flow is disappearing. It's time to boost your returns without giving up peace of mind. Furnished Finder connects you with monthly tenants, traveling professionals, relocating families, remote workers, people who stay long, pay reliably and respect your space. You get more income and total control with no booking fees, just better returns. For $179 a year. Head to furnished finder.com and use code BP15 to save $15 on your first listing. 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 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 Bigger Pockets website. To learn more, visit biggerpockets.com retirement or just text REI 233777 to start investing in the best markets today. 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. If you own a short term rental, here's something worth knowing. Not all landlord insurance policies are built for your kind of property, but that's where Steadily comes in. Steadily offers insurance designed specifically for short term rentals. They cover things like property damage, liability, loss of rental income and even unexpected issues like bed bugs. Steadily only works with real estate investors so they understand the details that make short term rentals unique and they've built coverages specifically for short term rentals. One investor pro tip I always like to give out is to review your rates and coverages every single year. So go get a quote in minutes@biggerpockets.com landlord insurance today steadily Rental Property Insurance for the modern Investor welcome Back to the BiggerPockets podcast here with Henry Washington talking about how you can go get started investing right now in in 2025. We've already talked about strategy, about deal finding. I sort of skipped over the like who you need part because you mentioned your real estate agent. So let's just talk about team and order of operations. This is a question I get so much like who do you talk to first? You find a deal, you find an agent. Do you talk to a lender? How do you approach it?
- [25:11]
Henry Washington
You know it's interesting. Before I answer the question, I'd love for everybody listening, if you're listening on YouTube or anywhere where you can actually go and leave a comment. Leave a comment and let me know who you think should be the first person you put on your team. Because this Answer varies so much from people. Even experienced investors will answer the question differently.
- [25:30]
Dave Meyer
I've changed my opinion about this recently. I'm guessing you're going to say agent.
- [25:35]
Henry Washington
Yes, I'm going to say agent.
- [25:36]
Dave Meyer
Okay.
- [25:36]
Henry Washington
Okay.
- [25:36]
Dave Meyer
All right.
- [25:37]
Henry Washington
And so I would say for most people who are going to be getting into this business, who you're just looking to do a few deals over the course of a year or two, an investor friendly agent is probably the most important person on your team. Now, if you're somebody who's looking to build this house flipping empire and you're going to be trying to flip, you know, 100 houses a year nationwide, right, like these people who are starting these companies, then an investor friendly agent's not the first person you need on your team. You probably need someone to help you with acquisitions and that's a whole different, like off market. Yeah, yeah, but, but if you're just the normal person like me who just does this business, only wants to do some, some deals in your own backyard or just a few deals for yourself, then an investor friendly agent, if you are not already licensed, is your most important person on your team. And the reason I say that is because the most important data point that you need for your deal is your after repair value. It's the, the price or value of that home after it's fixed up. You've got to be able to comp properties accurately, and you've always needed to be able to comp properties accurately. But the market is less forgiving now and that number is, is more dynamic now than it's ever been. You can buy a property now with an ARV of 320. And in six months, once you're done with the rehab, that could have come down 20 grand. Right. You just, it's, it's dynamic now. And so you want to make sure that you are either great at comping or that you have somebody on your team who's really good at comping because you're making your offer based off of this arv and if you overpay and then the market shifts downward, you could be in a bad situation.
- [27:15]
Dave Meyer
That's a bad spot.
- [27:16]
Henry Washington
So having that person on your team who has access to the mls, who can help you comp your properties and not just having access makes them good at comping. They also need to be, they need to understand how to comp properties. Not every agent's good at comping properties.
- [27:28]
Dave Meyer
That's a very good point.
- [27:29]
Henry Washington
And so I think that that's probably the most important person on your team. Everybody else. If you don't get the best, you still might be okay. Like if you don't find the best title agent, you can still get your deal closed. If you don't find the best contractor, you can probably still get your property renovated. It may cost you a little more.
- [27:46]
Dave Meyer
Yeah, you're probably right. For the long term.
- [27:48]
Henry Washington
Yes, for the long term.
- [27:49]
Dave Meyer
Okay. I wonder if getting a property manager for a buy and hold investor. Property manager, good one. You want to get a good one. But I'm going to change my answer again for how I feel about this and just going to be total cop out. Just hedge. But like, if you can identify what your biggest problem or your biggest hurdle is, go after that. Because I used to say agent all the time because people want to look at deals. Then I started feeling like that maybe that doesn't help because you're just looking at deals and you're not actually moving forward to like executing on those deals.
- [28:25]
Henry Washington
Yeah.
- [28:26]
Dave Meyer
And a lot of people I think get really hung up on like, I can't afford real estate and then they go and talk to a lender and they're like, oh, wait, actually I can.
- [28:34]
Henry Washington
Yeah.
- [28:36]
Dave Meyer
That happens. I mean, I talk to people like that every single week. And I think so that's why I started recommending lenders. But I think it's just different for different people. Some people get hung up on the money, some people get hung up on the deal. So just try and think about mentally what is preventing you from buying a deal. Is it finance? Is it the numbers? Because if it's the numbers and you don't think you find a good deal, go talk to a good agent. A good agent will help you maybe confirm that you're right, that there are no good deals, or they will show you where to find deals or what neighborhoods or what asset class or what price point to be looking at to find those good deals. But I'd also say just do both. This is, I'm talking like maybe an hour of your time, like two hours of your time. You can do both. We have tools on biggerpockets that will match you with agents and lenders. Get on the phone with them, talk to them for 30 minutes each, and you'll, you will learn more in that one hour than you will in years of just like sort of being in your own head about whether to do this or not. So I highly recommend just doing both of these things. That was a total cop out. But that's, that's the case.
- [29:46]
Henry Washington
I'll allow it.
- [29:47]
Dave Meyer
So I think this has all been really good advice. I want to sort of get a little bit more nitty gritty, though. Like, are there any, like, specific things you look for in deals right now, like property characteristics, price points, or like just any little hacks that people getting started in 2025 should be thinking about?
- [30:06]
Henry Washington
Yeah. So if you're looking off market, or even if you want to look on market, what you need to do is to limit your competition. Right. So there are lots of investors out there and people are looking. But I always say the easier it is to find a deal, the less likely that that deal is actually going to be a deal. Because the easier it is, the more investor eyeballs have probably been on it. Which means it's either going to get purchased fast or it's going to get bid up to a price point that makes it more expensive. So if you can find a way to look for deals that is maybe off the beaten path or requires a little more work than others are willing to put in, then you limit the amount of competition that's out there. And if you're new, you don't want to compete with people who have been doing this for years and have big marketing budgets and know exactly what to say to sellers and know how to negotiate, and it's just going to put you at a disadvantage.
- [30:59]
Dave Meyer
That's right.
- [30:59]
Henry Washington
And so learn a lot about deal finding and then try to pick some sort of strategy that requires a little more effort than normal. Here's a couple examples. Probate leads. A lot of investors don't like working probate leads because probates can be painful. There might be multiple family members who have to agree to sell this property for whatever price you're going to offer. And it might take a long time. So more of a pain in the butt kind of a lead, which means less people chase them, which may be a benefit for you. And you can pull a probate list fairly easily in most states. Or think about. Well, most people understand that investors like myself send direct mail. Right. And when you send direct mail, you're reaching out to a list of people and saying, hey, I might be interested in buying your house. Well, every time you send direct mail, you're always going to end up with a percentage of your list that comes back as return to sender. So the owner of that property didn't actually receive that piece of mail. It went out, it was undeliverable. It got sent back to you. Every single investor who sends mail has a list of, of return to senders. Because what we do Typically is we go back into our CRM and we mark all those and get them off of our list so we don't waste money sending mail to people who aren't getting them again. And so if you're a new investor, you could go talk to people like myself and say, hey, could I pay you a hundred bucks for you to give me your return to sender list? And you could take that return to sender list and you can do the manual work of searching for the owner of that property and finding the right address. Or you can pay somebody like on fiverr or upwork to go do this work for you. You pay them $4 an hour for a couple of days worth of work and they'll manually go do all that work for you and then return you a list with deliverable addresses to the right owner. And now you might be calling or sending mail to somebody who's never received a piece of mail to buy their property. And so you've limited your competition by doing the extra work that a lot of people won't do. I guess this is a long winded way of saying like, if you can think more niche about how to get in contact with sellers. So if you're going to do this on the market, you can still think niche, but you have less indicators in order to help you do that. Typically the indicator is going to be long days on market or expired listings. But you can take those expired listings and long days on market and then search through the metadata for keywords that might indicate some levels of distress. And that may help you narrow down your list to people who may be more likely to want to accept an offer at lower than what they were asking for. It takes extra work and it's a pain in the butt. But that's why it helps you in this market.
- [33:45]
Dave Meyer
I think it's such a good point. Yeah, for, for new investors. Like people I guess think not to find a niche because they're like, I don't know enough. But I actually, I think you're right. Like limiting the competition makes a lot of sense. I've selected markets even because I want to be a big fish in a small pond. I would rather be in an area even if the fundamentals are they're still good. I would never invest in a market as bad fundamentals. But like, you know, I, I use Charlotte as an example. Everyone wants to invest in Charlotte because it's awesome. But like hedge funds are investing in Charlotte. People who have lived there for 30 years and who have invested there for 30 years are investing. There's there. So one of the things I've tried to use as my advantage is going in a market where I have less competition. And I think Henry's right. If even within a market, pick a niche that has less competition, find something that's going to allow you to have some advantage over the thousands of other people who are looking to buy real estate deals. You know, like, there are a lot of people who want to invest in real estate. That doesn't mean you can't. We see on bigger pockets, tens of thousands of people all the time doing this successfully. But it's because they know exactly what they want to buy. And a lot of times it's because they are willing to do a little bit more work that's going to get you a better return. You can still go buy, you know, a plain sort of boring duplex. In a lot of markets, you're just going to get a lower return because there's more competition. That's just how investments work. They're efficient markets. The more demand there is, the lower the return that there's going to be. So you find something that's less demand that you are interested in, you're gonna get at least the better potential for return. So I like that a lot. The other thing I would add, just as a tip for this kind of market is, in my experience, the last couple of months and from talking to tons of people, things that are at or below the median home price are selling pretty quickly still. Like, that is still doing well. So if you're, especially if you're flipping or if you're just trying to find something that has low risk of price declines, the median price for your area below your is probably a pretty safe bet. Like, those kinds of properties, we do have an affordability challenge in this country in almost every market. And so if you're buying below the median home price, there's going to be demand for that property, both in terms of purchase and also in terms of rent. I think that's another thing people overlook is like, if you find a rental property that the average person in your market can easily afford and it's a great property, you're not going to have vacancy. And vacancy is the killer of all deals. So you need to, like, that's a great thing that you can do in today's market is like, find that price point where, like, you know that no matter what happens with the economy, people are going to want this apartment to live here. Or you could resell them. That's another thing that can work, work really well right now.
- [36:38]
Henry Washington
And one more real quick tip for those looking on the mls. Most of the deals that you buy on the MLS you're going to pay a higher price point for than if you just go direct to seller, right? So giving yourself the opportunity to make the current home that you're making an offer on more valuable than it already is without spending a ton of money can help you make offers that might make sense to that seller. Look for homes that have bigger square footage than the bedroom and bathroom count would make you feel like it should have. In other words, if you see a two bed, one bath, 2,000 square foot house, to me that says there's a lot of square footage in this house that I can use to turn into more bedrooms and more bathrooms. And if you turn them into more bedrooms and more bathrooms, then you increase the value of the property. Or look for properties where there are rooms that are not heated and cooled but are under the current roof. Meaning you don't have to do a build out addition to add square footage. So if there's a sunroom, that could be a great way for you to add 2, 300 square feet by making that sunroom heated and cooled square footage. And now you've increased the ARV of that property. Garages that you can convert into living space. We just did this. We just bought a house house that was a three bed, one bath and we turned it into a four bed, two bath by converting the garage. And that added about 300 square feet to the house, which allowed us to sell it for 240 instead of 220, which we underwrote it at. So that way you can then go and make an offer around what the current value of the home is and then add square footage which increases your arv and then you can turn a profit that way.
- [38:25]
Dave Meyer
Honestly, Henry, can't believe it. We got through. We've been recording for like 45 minutes. We haven't even talked about house hacking as a way to get started. I think this is our record.
- [38:33]
Henry Washington
That's our normal copy for a bigger pockets podcast.
- [38:35]
Dave Meyer
Because house hacking does rock. It's such a good idea. So I guess give me one minute on house hacking as a, as a potential idea to get started maybe. You don't think so? We did. We just never got to it organically. But like, what do you got?
- [38:48]
Henry Washington
It's the best idea to get started. I mean it's, it just feels like a cop out answer because we talk about it all the time, but we talk about it all the time because it works and it's good. Right. So being able to buy a property, use a low down payment loan like an FHA because you're going to live in it or like a conventional loan and you can put three and a half to 5% down and then you can live in the property and rent out the other unit or other units and those units produce enough income to help you cover those. The mortgage or the majority of the mortgage. Freeing up cash for you to save up to invest. It gives you an idea of if this is even something that's for you because you're taking much lower risk by house hacking than you are by going out and spending 20% to go and buy a rental property that you may hate owning.
- [39:39]
Dave Meyer
Right, so yeah, exactly.
- [39:40]
Henry Washington
It's extremely low risk. There's great loan products out there to help you. You get into these things. Even if you need to do renovations, there's products for that too that still require you not to have much money down. And that's what we said at the beginning of the episode. Right? Like if you can get into this game and buy a low risk investment that still potentially is going to produce income for you, that that's the way you should think about this first.
- [40:02]
Dave Meyer
Absolutely. If you want more information about house hacking, it just makes sense. We talk about a lot on the show. You can check out other episodes or everything on bigger pockets. Pockets.com I've also just become an official shill for Live in Flips, even though I haven't even completed one yet. But I ran the numbers on one and man, it's a good idea if you want to get started and you are willing to do a live and flip. The potential financial returns on the live and flip are huge and it's tax free. So it's, it's a great other option. So let's just bucket it by saying owner occupied strategies still rock. Don't overthink it. If you're just like, should I do one of these two and you're on the fence, it's probably a good idea for you. That's a really good way to do it. We spent a lot of time talking about tactics, but man, that's a great strategy.
- [40:47]
Henry Washington
I love it. And don't pigeonhole yourself into like buying a duplex and renting one unit out. You can do a Live in Flip. You can rent out one of the rooms in your house. On Airbnb you can rent out a pool. And on apps like swimply you can rent out garage.
- [41:03]
Dave Meyer
Yes, that's A fun one word to.
- [41:04]
Henry Washington
Say you can rent out garage space and let other people use your garage as their storage. Like, there's tons of ways to monetize your. Your personal residence.
- [41:12]
Dave Meyer
All right, well, Henry, thank you so much. And thank you all so much for listening. Hopefully you're all seeing that. Yeah, we're acknowledging everyone that there are challenges in this market. But I would challenge you all to say, what else are you going to do with your time and money? And if there is a better way to use your time and money to advance your financial future, go do it. Go do that. Don't invest in real estate. Like, just go do that. I still believe real estate is the best way for most people. Not everyone, but for the majority of people, I still think it's the best way to pursue financial freedom. That's why I get on the show and ramble about it five days a week. But if you find something else that works for you, go for it. But I really encourage you not to get caught up in the hype about is it good? Is it bad? The question is, today and always is, is this the best thing for me and my time and my money? And if the answer is yes, hopefully the stuff Henry and I provided to you and shared with you today are avenues you can pursue to use real estate in that effort. So, Henry, thanks for being here, man.
- [42:13]
Henry Washington
Thanks for having me, Dave. Appreciate it.
- [42:15]
Dave Meyer
And thank you all so much for listening to this episode of the Biggerpockets Podcast. We'll see you 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 Kay, 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. Results BiggerPockets, LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.