Real Estate Rookie Podcast: Episode Summary Title: Home Prices Are Dropping: How to Find Great Deals in YOUR Market (Rookie Reply)
Host(s): Ashley Kehr and Tony J. Robinson
Release Date: May 16, 2025

Introduction to Market Dynamics

Timestamp: [00:00 - 02:08]

Ashley Kehr and Tony J. Robinson kick off the episode by addressing common dilemmas faced by real estate investors, particularly when conventional strategies clash with real-world challenges. The hosts set the stage for an in-depth exploration of declining real estate prices and their implications for both buyers and sellers.

Understanding Price Reductions in Real Estate Markets

Timestamp: [02:08 - 07:36]

Ken's Question: Impact of Price Reductions in Various Markets

Ken, a member of the BiggerPockets forums, poses a critical question about the significance of price reductions in real estate listings. He provides data highlighting that cities like Phoenix, Arizona, Tampa, and Jackson Ford, Florida, have high percentages (27-32%) of listings with price cuts.

Tony's Insights: Tony emphasizes that price reductions are highly market-specific. He notes that while some areas like Phoenix are experiencing significant drops, others like Buffalo are maintaining strong pricing with low days on market:

"Price reductions are very specific to certain markets. Right. Like, while we're seeing Phoenix with 32% of its listings seeing price reductions... Buffalo was still seeing, like, strong pricing. Right. You're not seeing as many price reductions."
— Tony J. Robinson [01:56]

He further explains that longer days on market typically indicate that sellers are compelled to lower prices due to decreased demand and increased supply.

Ashley’s Analysis: Ashley refers to discussions in the BiggerPockets forums where members debate the validity of the data, questioning the magnitude of the price reductions and the necessity of additional context. She highlights the importance of understanding whether reductions are substantial or minor tweaks to listings.

Actionable Advice: Tony advises buyers to leverage the current market conditions by making more aggressive offers and negotiating better terms. For sellers, he suggests evaluating their break-even points and considering alternative exit strategies if the market is unfavorable.

Navigating Overextended Investments: A Couple's Dilemma

Timestamp: [07:36 - 26:20]

Lauren Taylor's Situation: Managing Two Underperforming Properties

Lauren and her partner find themselves in a precarious situation after purchasing two homes above their budget. They own a profitable rental property purchased in 2021 and a more expensive primary residence bought in 2023. Their combined mortgage payments are straining their finances despite their substantial annual income.

Key Details:

• Rental Property: Purchased for $390,000, mortgage payment of $1,500, rented for $1,875.
• Primary Residence: Purchased for $550,000 with a mortgage payment of $3,900, located in a desirable but competitive neighborhood.
• Income: Combined salaries of approximately $170,000 per year.
• Challenges: High mortgage payments with limited growth potential in their current jobs.

Tony's Evaluation: Tony breaks down the couple's situation by highlighting their strong income and profitable rental but notes the undue financial strain caused by the high mortgage on the primary residence. He underscores that even optimistic rental income projections may not sufficiently cover the mortgage, urging reconsideration of their options.

"They, they, they, they have a good amount of take home pay... but the mortgage payment is a lot. It's kind of stretching them a little bit thin."
— Tony J. Robinson [16:02]

Options Discussed:

1. Rent Out the Primary Residence: Moving to a cheaper rental while renting out the larger home on Airbnb to offset the mortgage.
2. House Hacking: Maximizing rental income by renting out individual rooms in the primary residence to subsidize mortgage payments.
3. Alternative Income Strategies: Exploring additional income sources, such as renting out a camper or adjusting career paths to increase earnings.

Ashley’s Strategy: Ashley suggests enhancing rental income through house hacking, such as renting out multiple rooms or even the camper, to better cover mortgage expenses. She also recommends evaluating the long-term financial implications of each option to balance emotional attachment to the home with financial stability.

"What if they converted the garage into a unit? What if they built an ADU on the property?"
— Ashley Kehr [26:20]

Emotional Considerations: Both hosts emphasize the importance of weighing emotional attachment to the property against the financial burden. They encourage the couple to assess their long-term goals and determine whether selling one or both properties would lead to greater financial peace and freedom.

Dealing with Knob and Tube Wiring in Investment Properties

Timestamp: [30:01 - 41:02]

Kyler Tarr's Concern: Purchasing a Property with Knob and Tube Wiring

Kyler seeks advice on purchasing an investment property in Ohio built in 1959, which features knob and tube (K&T) wiring. Despite obtaining a quote for repairs, insurance challenges and potential costs make him hesitant to proceed.

Key Points:

• Inspection Findings: Presence of K&T wiring, which poses fire hazards.
• Insurance Issues: Most insurers refuse coverage for properties with K&T wiring, and premiums are significantly higher where coverage is available.
• Cost Implications: Potential costs for wiring replacement range from $10,000 to $30,000.
• Seller Negotiations: Concern that requesting concessions from the seller may not be successful.

Ashley’s Experience: Ashley shares her experience of purchasing a four-unit property with K&T wiring, which required complete rewiring. She explains that while the process can be costly, it is manageable with proper planning and contractor selection.

"It really depends on the property and like how clean the wiring is... if you're going through a house where the electrical is just so messed up, like it may be worth it to take down and see what kind of electrical hazards are behind the wall, redo it."
— Ashley Kehr [33:13]

Tony's Perspective: Tony discusses the importance of verifying the quality of electrical repairs and ensuring that any rewiring is up to code through proper permitting and inspections. He highlights the need for thorough vetting of contractors to prevent inheriting more significant issues post-purchase.

Actionable Steps:

1. Obtain Detailed Estimates: Engage trusted contractors to provide accurate cost assessments for rewiring.
2. Negotiate with Sellers: Request financial concessions or seller-initiated repairs to mitigate unexpected expenses.
3. Permitting and Inspections: Ensure all electrical work is permitted and inspected to guarantee safety and insurance compliance.
4. Expand Buy Box Criteria: Utilize BiggerPockets’ buy box checklist to include preferences or exclusions for properties with specific electrical issues.

"As an investor, you have the option of asking the seller to fix whatever issues you've identified or you have the ability to price reduction credit some sort of financial concession from the seller..."
— Tony J. Robinson [36:39]

Conclusion: Both hosts agree that while K&T wiring presents challenges, it is not an insurmountable obstacle with the right approach. Proper planning, budgeting for repairs, and strategic negotiations can enable investors to navigate such issues effectively.

Closing Remarks

The episode concludes with Ashley and Tony encouraging listeners to engage with the BiggerPockets community, subscribe to their YouTube channel, and utilize available resources like the buy box checklist to enhance their real estate investment strategies.

Notable Quotes:

• "Price reductions are very specific to certain markets..." — Tony J. Robinson [01:56]
• "If I'm in a market where I am seeing... I think I have a little bit more leverage than I would have otherwise..." — Tony J. Robinson [05:55]
• "Any business that wants to, that is having some kind of pain point, one of their options is how do we make this more successful..." — Ashley Kehr [10:04]
• "They have a profitable three bedroom... but the mortgage payment is a lot. It's kind of stretching them a little bit thin." — Tony J. Robinson [16:02]
• "What if they converted the garage into a unit? What if they built an ADU on the property?" — Ashley Kehr [26:20]
• "As an investor, you have the option of asking the seller to fix whatever issues you've identified..." — Tony J. Robinson [36:39]

This episode of Real Estate Rookie provides invaluable insights into navigating fluctuating real estate markets, managing overextended investments, and addressing critical property issues like obsolete wiring systems. Whether you're a seasoned investor or a newcomer, Ashley and Tony offer practical advice to help you build and sustain your real estate portfolio effectively.