Podcast Summary: Real Estate Rookie - Episode: “I’m Buying Land to Build Rentals…But Should I? (Rookie Reply)”

Release Date: July 18, 2025

Hosts: Ashley Kehr and Tony J. Robinson
Guest Mentioned: Katie Neeson (past guest)
Platform: BiggerPockets
Description: The Real Estate Rookie podcast serves as a personal trainer for aspiring real estate investors, offering detailed breakdowns of real-world deals, coaching sessions, and a supportive community. Hosts Ashley Kehr and Tony J. Robinson address beginner questions to help listeners embark on their journey toward financial freedom through real estate.

Introduction

Ashley Kehr and Tony J. Robinson kick off the episode by introducing the focus of today’s “Rookie Reply” segment: three pivotal decisions facing rookie real estate investors.

• Ashley Kehr [00:00]: Highlights the three main topics:

  1. Structuring a land development project.
  2. Investing in short-term rentals for personal enjoyment.
  3. Whether to cash out a retirement account to purchase the first property.

• Tony J. Robinson [00:18]: Emphasizes the importance of these questions in evaluating risk, return, and the utilization of existing funds.

1. Structuring a Land Development Project

Question from Alora [00:37]: Alora seeks advice on purchasing land with an abandoned home. She outlines two options:

• Option 1: Develop an eight-unit property, which promises better long-term returns but requires substantial capital.
• Option 2: Subdivide the land into three single-family lots, build on one, sell it, and use the proceeds to develop the remaining two lots. This option is more manageable financially but offers lower long-term gains.

Discussion:

• Tony [01:23]: References past podcast guest, Katie Neeson, who specializes in redeveloping lots with abandoned homes into multifamily properties. He probes Alora’s experience in development to assess her capability to handle an eight-unit project.

  “If the deal is good enough, go shop it around to folks and see who might be interested in doing it with you.” [01:50]

• Ashley [02:55]: Emphasizes the need to evaluate long-term financials and personal goals. She questions whether managing an eight-unit property aligns with Alora’s aspirations compared to owning a single-family home free and clear.

  “Do you want to manage an eight-unit property, do you want to have partners or vice versa?” [04:20]

• Tony [05:10]: Introduces the importance of local city preferences and potential incentives. Citing Katie Neeson’s experience, he suggests consulting with city officials to explore grants or tax abatements for larger developments.

  “Maybe they give you some kind of grant or tax abatement or whatever it may be if you go and build that unit out.” [05:40]

• Ashley [06:04]: Agrees with Tony, noting the value of engaging with town employees to understand available support, thereby enhancing the viability of larger projects.

  “Katie has made those deals work because she is going to the town and seeing what they want instead of her telling them this is what I’m gonna do.” [06:30]

Conclusion: Alora should assess her development experience, financial capacity, and personal management preferences. Exploring partnerships and local incentives can make the eight-unit project feasible if it aligns with her long-term investment goals.

2. Investing in Short-Term Rentals vs. Single/Multi-Family Homes

Question from Sean [08:43]: Sean is remodeling his primary residence to rent it out and is contemplating whether to invest in:

• Single-family homes.
• Multi-family homes.
• Short-term rentals in the Ozarks that he can enjoy personally.

Discussion:

• Ashley [08:43]: Outlines the financing implications of each option, such as living in one unit of a multifamily property or renting out rooms in a single-family home. She raises concerns about mortgage stipulations related to short-term rentals for primary residences.

  “Do you want to put in that much work to actually do that? Do you want to learn everything that goes into developing a multifamily property?” [11:00]

• Tony [10:21]: Admits to limited personal experience with short-term rentals as primary residences but suggests consulting with loan officers regarding any mortgage restrictions. He introduces alternative financing options like the 10% down second home loan.

  “If you do go to the short term rental route, there's the 10% down second home loan which is still an option.” [10:50]

• Ashley [11:03]: Encourages Sean to consider both financial and emotional factors, such as cash flow and personal lifestyle preferences. She advises running detailed numbers for each investment type and evaluating long-term implications.

  “This definitely has an emotional play to it. Do you have a preference like if it's a single family home and you're going to live there, you know, and house hack the rooms or something like that.” [11:20]

• Tony [12:52]: Reinforces that the decision should align with Sean’s personal goals and preferences. He suggests that Sean doesn’t have to choose exclusively between options and can diversify his investments over time.

  “Maybe the first deal is a short term rental in the Ozarks, and then maybe your next deal is a single family home or the small multifamily.” [13:10]

Conclusion: Sean should evaluate both the financial returns and personal satisfaction each investment type offers. By running comprehensive financial analyses and considering personal lifestyle choices, he can determine the best path forward. Diversifying investment strategies over time is also a viable approach.

3. Cashing Out a 401(k) to Purchase First Property

Question from Jared [17:45]: Jared has $28,000 in savings and a 401(k) worth $40,000. He considers:

• Using $28,000 from savings.
• Cashing out $40,000 from his 401(k), which after penalties would leave him with approximately $28,000.
• His plan is to rebuild the 401(k) through property cash flow and savings.

Discussion:

• Tony [17:45]: Suggests that Jared should prioritize saving more capital instead of cashing out the 401(k), as a withdrawal might not significantly impact the investment capability.

  “Maybe let's just wait and pause.” [18:15]

• Ashley [19:24]: Advocates for not touching the 401(k) due to penalties and the benefits of letting it grow. She proposes alternative strategies:

  1. Taking a Loan Against the 401(k): Borrowing up to 50% of the balance without incurring taxes or penalties.

     “The interest you're paying is just going back to you.” [19:50]

  2. Rolling Over to a Self-Directed IRA: Allows investment flexibility, such as partnering in syndications without directly funding deals.

     “I used equity trust, which is a great partner of BiggerPockets.” [21:10]

  3. Comparing Investment Returns: Analyzing the 401(k)'s performance versus potential real estate returns to make an informed decision.

     “Compare what would be your return on investment in the stock market or if you put that money into a property.” [22:00]

• Tony [23:32]: Highlights the variety of financing options beyond the 20% down payment Jared assumes is necessary, such as:

  • House hacking with FHA loans (3.5% down).

  • VA loans (0% down for veterans).

  • Investor loans with lower down payments.

    “You have to think a little bit more creatively with your solutions.” [24:00]

    “If you could only tap into the 28k, what options would we have?” [24:10]

Conclusion: Rather than cashing out his 401(k), Jared should explore alternative financing methods and investment strategies that do not jeopardize his retirement savings. Utilizing a 401(k) loan or rolling over to a self-directed IRA, combined with creative financing options, can provide the necessary capital without incurring significant penalties or taxes.

Conclusion

Ashley [25:44]: Emphasizes the importance of personalized decision-making based on individual financial situations, timelines, and risk tolerance.

“There's no one size fits all answer. It's about being honest with yourself about your financial situation, your timeline, and how much you're willing to stretch.” [25:50]

Tony [23:32]: Reinforces that real estate investing offers diverse pathways and encourages investors to think creatively beyond conventional methods.

“What we’re doing is figuring out how to make your money work harder, what kind of property fits your goals, and how much risk you’re actually willing to take.” [24:30]

Ashley [25:44]: Wraps up the episode, thanking listeners and inviting them to join future episodes.

“Thank you guys so much for joining us for this episode of Rookie Reply. I'm Ashley, he's Tony, and we'll see you guys next time.” [25:50]

Key Takeaways:

• Land Development: Assess development experience, financial capacity, and explore partnerships and local incentives.
• Short-Term Rentals vs. Traditional Rentals: Balance financial returns with personal lifestyle preferences and consider flexible investment strategies.
• Retirement Funds: Avoid cashing out retirement accounts; explore loans or self-directed options and leverage creative financing methods.

Notable Quotes:

• “If the deal is good enough, go shop it around to folks and see who might be interested in doing it with you.” – Tony J. Robinson [01:50]
• “Do you want to manage an eight-unit property, do you want to have partners or vice versa?” – Ashley Kehr [04:20]
• “Maybe the first deal is a short term rental in the Ozarks, and then maybe your next deal is a single family home or the small multifamily.” – Tony J. Robinson [13:10]
• “There's no one size fits all answer. It's about being honest with yourself about your financial situation, your timeline, and how much you're willing to stretch.” – Ashley Kehr [25:50]

This episode of Real Estate Rookie delves into critical decision-making processes for new investors, offering practical advice and encouraging a thoughtful approach to building a real estate portfolio. By addressing real questions from listeners, Ashley and Tony provide actionable insights tailored to varying investment goals and circumstances.