How to Invest in Real Estate (In ANY MARKET) with Dave Meyer

Transcript:

I would describe the real estate market as well. I, I've called it in the past, the Great stall. I think we're in this very new era of real estate investing that's very different from the ones that we had in the 2010s where things were great. The sort of craziness that went on in COVID and I think it's different still from the flat, kind of bad years we've had the last.

Two or three years. I think we've sort of turned a corner here. Although the market is not great, not everything is perfect, we are heading in the right direction for the housing market. I think we're gonna see a period of low to no appreciation. And I know that is a, a controversial thing and some real estate investors might not like that, but I think that's the truth, the number one indicator of whether or not there could be a housing market crash and the data's sort of overwhelming in that area where.

People are paying their mortgages. Delinquencies are relatively low. They're lower than they were in 2019, the last quote unquote normal housing market we had. And so that's sort of what I try and understand is like that's my job is to figure out it is the job of a data analyst. What is the variable that really matters?

On this episode of the Personal Finance Podcast, we're gonna talk real estate investing in the markets with Dave Meyer. How do you actually feel about the real estate market right now? Are you excited? Are you nervous? Are you waiting for a crash? Are you convinced that we're headed for another boom? If you had a crystal ball, what would you predict that the market would do over the course of the next three years?

And so here's the truth. Most people aren't making decisions based on data. They're making decisions based on headlines, TikTok clips, or whatever your neighbor said at a barbecue. And to me that is super dangerous. And so today we're breaking down the real estate market the right way. We're gonna talk about what the data actually says.

We're gonna talk about what the indicators are showing, and we're gonna talk about which headlines are just noise in reality, whether waiting on the sidelines makes sense in 2026, we'll also go all the way back to the beginning. Because my guest, Dave Meyer started investing around 2010 coming out of one of the most chaotic housing markets in modern history, and we are going to unpack what made that deal work and whether it makes sense today.

Was it skill? Was it timing or was it something else entirely? Then we are zooming out what actually changes investors' behavior. What underwriting assumptions are people getting wrong right now, and what does a good deal even look like in today's market? 'cause that's the biggest question we get from a lot of you is what does a deal even look like right now?

It is so hard to find deals. How do I find a good deal and maybe the most important question of all. Should we be investing for cashflow or appreciation in this current market right now? So if you are thinking about buying, if you're thinking about selling, waiting, or pivoting, or just trying to design your portfolio more intentionally, this episode is gonna give you the framework to think clearly instead of emotionally.

So my guest today is Dave Meyer. Dave is the host of the BiggerPockets Real Estate Podcast, and Dave is one of the best minds when it comes to the macroeconomics of the real estate market. He has a background in data and gives updates on the housing and real estate market very frequently and is one of my favorite people to listen to when it comes to the market.

So I'm really excited for you to hear this. Because we're gonna dive into what is going on in the market right now, what we think could happen in the future. And in addition, talk about how you should think about real estate investing in 2026. So if that's something you're into, let's get into it. So Dave, welcome to the Personal Finance Podcast.

Thank you so much for having me. I'm, I'm really excited to be here. I am so excited to have you here because a BiggerPockets is one of the places that taught me the most when it came to real estate investing early on, and I remember listening every single day, and it was part of my journey when I wanted to learn more about real estate investing that it was just a huge, huge deal.

But now you guys have. Some amazing stuff that you do on the show, including giving monthly market updates. And I just listened to your last February market update, uh, recently here, and I love, I love listening to that every single month when you give those updates because you have such a good eye for macro trends when it comes to the real estate market.

The housing market, but even for real estate investors, it is such a powerful uptake. So I kind of wanna dive into just part of that upfront here. Right now. How do you feel about the real estate market right now in 2026? What do you feel is happening right now? 'cause I know a lot of people are asking questions and they come to me and say, Hey, is this a good time to invest?

Mm-hmm. Or is this a good time to buy a home? I feel as though I already missed the boat. So how do you kind of feel about the real estate market right now? I would describe the real estate market as well. I, I've called it in the past, the Great Stall. I think we're in this very new era of real estate investing that's very different from the ones that we had in the 2010s where things were great.

The sort of craziness that went on in COVID VID, and I think it's different still from. Flat kind of bad years. We've had the last two or three years, I think we've sort of turned a corner here. And although thing, although the market is not great, not everything is perfect, we are heading in the right direction for the housing market.

And for me, that really all comes down to affordability. The big issue with housing over the last couple of years is we went from COVID where we had one of the best periods of affordability ever in the housing market. Affordability is just this term we use in the housing market for how easily the average American can afford the average priced home.

And it was great during COVID and then when interest rates went up, it was terrible and got worse and worse and worse for three years. And now we've seen actually six, eight months in a row now. Affordability is improving, but it's slow. And I know that there's a lot of dramatic takes out there where people are like, oh, it's gonna crash.

That's the only way to get affordability back. I think the reality is a lot more boring. It's a lot slower. It's frustrating. I get it. But the way I believe the market is heading is we're gonna have pretty stagnant home prices for the next two or three years. We're probably gonna go down in real inflation adjusted terms, probably gonna get mortgage rates coming down a little bit, which is great.

But at the same time, wages are going up. And so when you combine all three of those things, you actually get a housing market that is improving in terms of affordability. We also have more inventory coming on the market, so there's better deal flow, more things to look at. And so, although. The benefits of real estate are less obvious than they were during COVID when everything was going crazy.

I actually think we're getting into a good time to start acquiring assets, and I think that is a, that is a great outlook for a lot of folks out there. 'cause you hear so much doom and gloom and people saying, Hey, I, I cannot find a property. I don't think the market's gonna go any direction. It's way too high.

And this is what I love about kind of your conversation is because you are looking at this in a, a very specific way and looking at the macro trends and you're able to see kind of where we. Are currently, yes, we've been stagnant for a little while now. But this is something I think that is really powerful for most people is you can always find opportunities to find deals in any given market.

Some markets you may have to work a lot harder than others. Yep. But you can always find those deals, and I think that is one of the most powerful messages that most people spend. So when we look at this. Not to be Robert Kiyosaki and try to say we know what's gonna happen in the next couple of years.

Right? Yeah, for sure. But if we pulled out a crystal ball and you were gonna just guess, you were gonna guess what was gonna happen over the course of the next couple of years with the real estate market, what would you think, or what would you say would happen just based on some of these macro trends that you're looking at?

I think we're gonna see a period of low to no appreciation. And I know that is a, a controversial thing and some real estate investors might not like that, but I think that's the truth. Uh, you, if you look historically, what I like to look at is something called real home prices. That's not the price you see on Zillow.

That's called nominal Home Prices. When it's not adjusted for inflation, when you pull out the inflation piece, you see that. Actually home prices kind of go up in stair steps. It's flat for six, seven years, then it'll go up a lot and it'll be flat and it'll go up a lot. I think we're in one of those flat periods.

It's actually been flat, uh, from, even though the price on Zillow goes up, we've actually been pretty flat for the last three, three years and I think we're probably in for three more years of that. And so, uh, that. Is I think a good opportunity. Stability provides a good opportunity for people to get into the real estate market, as you said, Andrew, like you can invest in any market.

You just have to take what the market's giving you. It's kind of like, you know, playing sports. You gotta take what the defense is giving you and what the. What the market is giving us right now is lower appreciation, but it's giving us better deal flow and better ability to negotiate. And so I think the people who are gonna succeed in this kind of era are the people who have the patience to sift through what's gonna be a lot of junk, not, they're not gonna be.

All good deals, but if you have the patience to sift through that and negotiate, we're seeing bigger and bigger discounts in the market. We're seeing better affordability. And so if you keep those things in mind, there are gonna be good deals to be had. I just recommend to people not counting on. Not, especially, not COVID level appreciation, but even, I don't even think we're gonna get sort of average level of, of appreciation for the next few years.

And that means more so just looking for cash flow, making sure, sure those properties are cash flowing when you're kind of running your numbers and, and kind of going through that process. 'cause overall, even in your report you were talking through how some people are seeing, you know, they're getting 10% in savings in some areas depending on kind of what's going on.

So I think that's really, really powerful. And I always found when I was in tough markets, I would just. Increase the volume of offers that I would make. I would tick off a lot of realtors and there would be a lot of other things that would happen, but I would just start to throw a lot more offers out where I realized, hey, in tougher markets, I'm gonna have to send a hundred, 150, 200 offers before I can actually get somebody to accept one of those offers.

And so you just have to shift your strategy or just be more strategic about how you go find deals. And that's a really, really important thing, uh, for a lot of people. A hundred percent. Sorry. Yeah, and I think that's overall just, just the way to think about it. And, and so you, the cool thing about your story is that you started during basically the great recession, you started to kind of, when deals were a completely different dynamic than where they are right now.

And I remember even during the Great recession, we would. The, oh my goodness, the, the short sale deals that were out there now, I remember houses in my area that probably cost, you know, $800,000 now or well under a hundred thousand dollars to buy a deal. And so that was a very different time than now. But can you kind of talk about that first market that you bought, your first investment in that first deal, and kind of how you thought about that deal.

Yeah. You know, it's a totally different market in terms of affordability, but I was talking to someone recently and explaining that there were similar dynamics when I bought in 2010. Everyone looks back and like, oh my God, I should have, I wish I bought in 2010. Which is true. You, I mean, has. You know, looking backwards.

That's true. But the market went down for three years after that. I bought my first deal and on paper I was either treading water or losing money. Right? The ma market didn't bottom till 2013. And so, uh, and, and it was a lot harder to get financing, and so the market was a little bit. Scary in my opinion from that, from, from those perspectives.

But the, the big difference was that cashflow was just much better. Like the, the Great Recession created this very unique opportunity where home prices went down about 20% rents, you know, give it, depending on the market, went down two to 8% max. And so you had this unique time. Price to rent ratios, which is a good proxy for how much cash flow you'll create.

They were better than they've been maybe ever. Right? And so that's, that's what was made it easy to get into that market because you could say, Hey, I don't know what's gonna happen with appreciation or the property values, but I could make a 10% cash on cash return for like any deal I bought off the market.

So that, that did make it easier. But I will say it was very hard to get a loan. Uh, and I'll say that you had to. Be a little brave. You had to have a little bit of vision to see what the upside was gonna be in the long run because we were in a declining market. If that first deal that you, you bought at that point in time where it was, you know, I know it was scary.

The financing thing was definitely a huge, huge deal for a lot of folks. They had to get over that hurdle and that was a tough hurdle to get over 'cause banks didn't wanna lend money. But if that first deal kind of landed in your lap again today, would you buy that property with what you know now and all the experience that you have now?

Or would you have a different criteria when you were looking at that property at t at 2010 prices? Would I buy it again? Ex? Yeah, exactly. Oh yeah, I mean, uh, it, that, that property went crazy. You know, it went three, you know, I bought it for four 60, went flat, a little bit negative for a couple years. I sold it in 2018 for almost 1.1 million.

So, yeah, I take that deal again. I don't think you find that kind of stuff in Denver anymore. I think the thing that I liked about Denver is it was this, it was a perfect time to invest there, not just from macro standpoint, but from a regional perspective. People were moving to Denver. There was a lot of excitement there.

Um, I would, I still think there are markets like that even, you know, the, the advice I've given about flat appreciation that's on a national level, but. Investing in small multifamily. I bought a fourplex in a market where there's a lot of jobs, there's a lot of domestic migration, there's a lot of wage growth, like all the fundamentals.

I think those deals exist and I would still take them all day. Those are the kind of deals I'm still looking for. What are some of your favorite markets right now? Are there markets that are. Areas that you think could be very interesting for investors and are they something that you know and or are there metrics that you look at when you are trying to find a market that kind of works this way?

Yeah, absolutely. I was just in Bentonville, Arkansas. I, people don't know much about it. One of the coolest markets out there right now. It's where Walmart is headquartered a lot of. Economic growth there. A lot of job growth, population growth. Those are the kinds of things you look for. Yeah. If you wanna, you know, if you wanna just boil down market selection to like the easiest couple of things that you can look at, it's economic growth.

You know, the best predictors of wage gr of, of appreciation and rent growth is basically just wage growth and then total number of jobs in the area. And then you wanna, you know, that's, that's really important. Piece that everyone misses on picking markets is the supply side. Everyone looks at demand and they're like, okay, a lot of people are moving here, that's great, but if they're building too many houses or you know, sufficient housing prices could actually drop.

I think Austin, Texas is a perfect example of that. You see a lot of people moving there. Great jobs, great economy, Austin, right? But they have some of the. Best housing policy in the country, in my term, in in for building. And they have this huge glut of supply and we're seeing prices down 10, 15, 20% off peak, right?

And so you need to look at both of those things. You need to understand demand and understand supplies. So you look at a place like Bentonville. Great demand, but there's no huge developers building 500 unit buildings all over the place. They're building single family homes, which is fine. You see this in a lot of parts of the Sunbelt.

But I also think actually that some of the sleeper areas are in the Northeast and in the Midwest. They're much more affordable. They're still good markets there, but they have much more constricted. Supply growth, like a, a lot of these cities don't let people build. Like you look at New York, right, like that.

Well, housing super expensive because it's hard to build there, LA or San Francisco, like those kinds of places. Um, so I like places where the supply is not growing like crazy and it is at, you know. Sort of proportionate to the demand that's coming to the area. I think that's the main thing people should look for.

And those are so helpful. 'cause I think overall most people are trying to figure out, Hey, should I invest in my own market? Should I go outta state? And every single person who is a long time real estate investor that has come on this show, a lot of them are saying, Hey, right now we're investing outta state.

We're finding o some other markets that really, uh, make a lot of sense for us. And that is the big thing that we are, we are trying to do right now. So you mentioned earlier that. You know, look, when you become a real estate investor, really you have to kind of take what the defense is giving you. And a lot of times, market conditions have a big impact on kind of how we think about this stuff.

And I remember in the past, I am the person who, it takes me forever to kind of change the way I'm looking at my strategy because I wanna stick to my numbers. I don't want my numbers to change. Same. I gotta hit this number. So I am someone who, it took a long time to learn this. It was through this entire process that I really, really struggle with this at first.

And then over time I've kind of realized, hey, I gotta be. Adaptable when it comes to market conditions, but when did you first realize that market conditions could change everything? When was that timeframe where you realized maybe I need to kind of adjust or be a little bit more adaptable? I think it took me a long time.

'cause I, I started in 2010 and I didn't really start investing. A lot until like 2016 ish. You know, I was kind of doing it slowly. I was trying to build a career in tech. I started another business, so I was doing other stuff, and I think around 2018 was the first time I saw interest rates go up. We saw prices sort of flatten out.

No one remembers this now, but it was like the first time in. Since the great recession where the housing market started to lose some steam. Yep. And I actually saw it as this great thing because Denver had been growing like crazy. And then I went out and bought some deals under market under asking price for the first time again in a while.

And I was like, okay, maybe I need to to, to adjust because. Interest rates are going up, my cashflow is not as good. And so I need to start buying undervalue and being a little bit more disciplined about my acquisitions. But then I think in, in COVID is really when I, I dove deep, deep into this. I, I was a data analyst long before this, uh, um, but in COVID, I was like, I gotta understand the market and what's going on here and how this is all going to play out.

And now I basically readjust my own investing strategy annually. Sell everything and go buy new stuff. But I try and tweak the, the targets that I have and the strategies that I'll use. I'll just give you an example. In 2013, I just had this realization that I am not good at value add investing, and I think it's probably the most important skill to have as a real estate investor these days.

If you're not familiar, that's basically. It's kind of like flipping where you buy something that's not in great shape, you fix it up, you increase the value of that property. You could do that and flip it and sell it. But a lot of times, or what I like to do is just do that and then hold onto it. Right?

You've, you've made a property nicer, you rent it out for more. And in 2013 I was just like, I am not good at this. I need to get better. I've done it a million times, but I have friends who are amazing at this. And so I said, Hey, I'm gonna learn and adjust my strategy. And actually over the last couple of years have been.

A part of three different flips. Now, I had never flipped a house for the first 13 years as an investor. Not because I wanna be a flipper, but because I want to get these skills as an investor and sort of change my approach and how I think about it. And so that's what I've been focusing on. It's been a pretty, it's not a 180, but it's a pretty big difference from how I was buying properties 10 years ago.

I absolutely love that because part of the, the process that we even do here at the Personal Finance Podcast and Master Money is we have a lot of folks who are kind of part of our, our ecosystem here. And one of the things we do every year is we reevaluate our retirement plan and we kind of look through our retirement plans and say, Hey, our spending may have changed throughout the entire year.

And so we reevaluate on a yearly basis. Instead of what, like a lot of people do is they'll do it every 5, 10, 15 years. Oh no. And really when they wait too long, then it's too late. Where I love that you're doing the same thing, but when it comes to your investment. Philosophy, which is you're looking at this and saying, Hey, what is the market doing right now?

How has it shifted? And what are some of the skills that I need to acquire in order to be able to be adaptable? I think that's so powerful the way that you kind of go through that, because really I could see how much more beneficial that would be even for me in the past when I was investing Oh yeah, a lot more in real estate where I didn't become adaptable enough.

I think that was my biggest downfall. Um, and biggest. Mistake, obviously we did, we did a lot of really cool deals and, and that worked out really well. But my biggest downfall was I just didn't adapt. Like I wanted to stick within my numbers and my numbers were the Bible for me, and that was the way I kind of looked at this.

So I love that thought process. 'cause I think that is really, really important for most investors to, to understand. Yeah. Is you need to kind of go out back, self evaluate and look at this. How do you I I think, yeah, sorry. Go ahead. I think, you know, the, the thing as an investor is to. Set this long-term goal, at least in my opinion, you know, 10, 20 years down the line, set a goal and try and keep that as consistent as possible.

It will change a little bit, but if you can keep that somewhat similar, like to me, I like the, I'm 38. I like the idea of being like completely financially independent by 45. Right? That, that's sort of my goal. How I go about that has to change. Like I told you before that the, we started recording. I'm thinking about buying a service business.

You know, I've gotten into private money lending, which is kind of tangential to real estate investing because things have just totally changed. And I know that sounds intimidating and I agree. I did the same thing, Andrew, for like 10 years. I was just kind of like stubbornly doing the same thing, but I think.

In time. It's fun, you know, like it, I, I think it, it keeps you on your toes. You get to meet new people, you get to try new stuff. And, and it's kind of one of the, in my opinion, the joys of being an investor is just like problem solving and trying new things. And it is a little scary, but also it, it makes, you know, I think it keeps things fresh.

Exactly. And I agree. I think that's one of the areas too, where you can become. More successful. You can test out more deals during certain markets when you're doing that, and I agree with you kind of sticking with your, your initial plan and the, the way that you're kind of structuring this and the way that you're thinking about this and then kind of just becoming and adding some of those little things in there in between, I think it'd be really, really helpful, uh, overall.

So. How do you separate when it comes to a lot of data that gets thrown out there all the time, you see all this, this housing data that comes out and a lot of people will kind of stick to different metrics mm-hmm. And kind of utilize that as, Hey, this is not a good market because of this, or this is not a good market because of that.

How do you, when you look at the market, how do you sep separate signal from noise? Or are there some key metrics that you're really, really focusing in on, uh, that most people maybe miss. Yeah, I think there, there are a lot of things, the, the key metrics, if you're looking at the long-term picture of the housing market, you need to be looking at supply and demand dynamics and demographics.

I know those are like boring things people love to point to, like, oh, this market's tanking, or the, you know, this thing, mortgage rates really is demographics. Tell us a lot about the housing market. The reason prices have been going up over the last couple years, despite. Higher rates since 2022 is 'cause millennials are reaching their peak home buying age.

We have this pending transfer from boomers to uh, to millennials, right, where they own a lot of real estate. So those things that really matter. And then what I was explaining before, people really underestimate what's going on with the supply side. They just look at demand and where people are moving and they don't think about how much supply there is.

That's economics 1 0 1. But I think in today's day and age. I don't know how old you are, Andrew. I am 38, so I graduated college right after the great financial crisis, and I think a lot of people, millennials, gen Z, we have a lot of what I would call housing market trauma. People are like, remember 2008, pretty hard and think that.

That could happen again. And I would never say that it can't happen again. Anything is possible, but I think there are, you know, I've spent a lot of my time professionally over the last couple years, is just trying to understand how that happened and what makes a crash, what could make that happen again.

And I could just tell you right now that like the variables that go into that. Aren't there? I, well, the, the, you asked about metrics that I really look at. I look at Homeowner Health, are people paying their mortgages? That is probably the number one indicator of whether or not there could be a housing market crash, and the data's sort of overwhelming in that.

In that area where people are paying their mortgages, delinquencies are relatively low, they're lower than they were in 2019, the last quote unquote normal housing market we had. And so that's sort of what I try and understand is like that's my job is to figure out it is the job of a data analyst. What is the variable that really matters?

And to me, when we talk about a housing crash, 'cause that's the question everyone has. Homeowner delinquencies, mortgage delinquencies is the variable that matters and it's in good shape. So like those are the kinds of things I try and do. And with markets. I told you, I think jobs and wage growth, like those are the things that really matter.

And although those other variables play minor roles, I, for me, it's really trying to distill the one or two thing matter. You know, getting clear on the question you wanna answer, and then figuring out the one or two variables that are driving it. I love that. I think that is one of those areas too, where people know which, which metrics to actually focus on and not just listen to the headlines or whatever else is going on that, that is super helpful.

And mortgage delinquencies, that's a huge one for sure. I love when you talk through that, typically on your report. Uh, yeah. Every month when you go through that, I, that's a huge, huge deal. And one thing I'm always listening for, which I think is very powerful. Now I see a lot of people, and this is something I get all the time from people on which investing strategies should they choose.

So one big thing that I always think back on was like during COVID, a lot of people got into Airbnb investing and there was a lot of people kind of having conversations about that. Or you can see there are times when people are wholesaling or wanting to flip more when, you know, HGTV back in the day had all the flipping shows, like they would have people be interested in that.

And there's all these trending ways to invest in real estate. But if somebody is trying to decide, and they are newer to this and they're trying to decide, Hey, which direction should I. I go with or which direction, uh, should I take for my personal lifestyle? How do you tell them to choose? Because I think you and I are both, for the most part, buy and hold investors.

I've done flips and, and things like that in the past. Uh, but how do they kind of choose for their own lifestyle, especially if they're trying to pursue financial freedom? I think that's the big key overall. Yeah, I have a, I have a framework I use for this. I, I basically believe if you wanna be in real estate investing, you, most people, their goal is financial independence, right?

They want to get passive income long term. But to achieve that, you need. Some sort of active income, right? Like you need money. If you're gonna go buy rental properties, you need some money to go buy those properties with, right? And so I think their question most people get hung up on is like, do I wanna be a buy and hold investor?

Do I wanna buy rental properties or do I wanna be a flipper? I don't think that's the right question. I think almost everyone should be buying rental property. It's like, I know that's kind of my thing. I'm totally biased, but I do just believe strongly that if you're trying to secure a long-term wealth building, asset rental properties are the way to do it.

And I, I don't really care. And people argue with me about this. I don't really care if you short-term rental it, midterm rental, it long-term rental, it, buy a great asset in a great location, manage it. However is optimal for that location for you, but buy great assets. Like that's the winning recipe for long-term wealth and real estate.

What, how you get your active income is a totally different question because, and, and you have a choice. Do you wanna. Stay at a W2 job, or you can use real estate to earn that active income through flipping, through wholesaling. But make no mistake, those are jobs. Those are jobs that you are taking on in real estate.

And so if you want a job in real estate, fine, go do that. Like if you love the idea of flipping, if you're a contractor and you want more money to uh, to buy rental properties, go flip. That's a great option for you. But. Personally, I chose not to do that. I recognized I, you know, I have a master's degree in data analytics and I was like, you know, I could earn more money just working a W2 job and I'm gonna put that towards my rental property portfolio.

So I think it's really comes down. So I, I guess I'd summarize by saying everyone should buy rental properties if you're in it for the long run. And then figure out what you enjoy and how you can maximize your income. Because I don't think people talk about that much, but rental buying, rental properties is expensive.

So how can you maximize your current income in a way that you enjoy? If that's real estate, great, but if it's not, it doesn't really matter. You can do it other ways. I love that, and I think the way that you. Position that is absolutely perfect, where it's investing is more so kind of buying and holding those rental properties, uh, for the long term.

And if you have a long term plan, you can kinda look at it that way. Whereas flipping and wholesaling, that is a job. I mean, you're hustling, you're doing all these different things, and that is more so for your active income. So I love that process. If you wanna do both, you absolutely can, but I think they, and they can coincide together very well.

Totally. Uh, but I think that is, that is a great way to look at this, uh, for most people out there. So. We talked a little bit at the beginning about, you know, the direction of the market and how, you know, you're saying, you know, appreciation is something that just has slowed down over the course of the last couple of years and it's something we are still at a stagnant point.

There are people out there that I know that have had conversations, you know, where they invest solely for appreciation, and then there are people out there that invest solely for cash flow. What would you say to the folks that are investing for appreciation and, and. Is that a mistake? Is that something they should not be looking at?

Should they be running the numbers to cashflow? What do you, what do you say for people on appreciation versus cashflow? I love this debate, by the way. It's, it never ends in real estate investors. It doesn't. It's probably the most common debate that we have. I will say that in today's market, I would not invest for appreciation alone.

I, I don't think that makes sense. There are gonna be markets that appreciate, we could see runaway appreciation if there's a big inflationary event or you know, some black swan thing that happens. I just don't think it's the wise thing to do because if you look. It suggests that we're probably going to have a flat market at best for the last couple of years, and I don't think it makes sense as an investor in general too.

Put your assets into something that you have no control over. Right? Like I, I, you know, this modern, what we call quote unquote real estate investing isn't investing. It is entrepreneurship. Yeah. You are buying a, a, you are creating a small business. Right. And as a small business owner, I don't want to buy into something that is quite expensive that I don't have control over.

I think the benefit, the reason I like real estate over the stock market is that I have some control. And so to me. Market appreciation, these macro forces that push housing prices up or down is out of our control. And I don't think it's in our fa it's, you know, things could change, but I don't think the way it looks right now, it's going in our favor.

And so I would only, and what I talk about on the BiggerPockets podcast all the time, is I would not buy a deal that does not at least break even cash flow right now. Now how much cash flow you need and how much appreciation you need. I see that as sort of this swinging scale, whereas if there's a deal that I is a great location, their jobs are coming, you know, there's infrastructure being built, I'll take a two or 3% cash on cash return.

I know people think I'm crazy about that, but I'll take a small cash on cash return. 'cause there's huge upside in appreciation now. If you get a two or 3% cash on cash return, you add that to your loan pay down and your tax benefits, you're still beating the stock market. So I like that you know that people think that's too low, a cash on cash return, but I'm talking for like a premium, premium asset.

For most deals that I look at, where it's like a good location, it's in the path to progress, then you need a six or 7% cash on cash return, but. Some deals, maybe you, it's in a, you know, it's not in a growing area, then you need a 10 or 12% cash on cash return. So the way I like to look at it is the total overall return that you're getting.

I want it to be 12% or better. That is my personal benchmark, and some people have it higher, but to me, 12% beats the stock market by enough that it justifies my investment of time. The stock market depends on who you ask, eight to 9% average per year. So I can't do nine because real estate takes time. It's stock market's way easier.

So to justify my time, I need my total return to be 12%, ideally like 15 or more. Um, because that, you know, it doesn't sound like that big of a difference, but I'm sure everyone who listens to a personal finance podcast knows that if you compound that over 20 years. The difference between eight and 12% is very, very dramatic.

And so like that's personally how I think about them. But I am personally pretty open to where on the spectrum the deal falls. I just try and maximize my total return. And I'm right with you on there. And that is my biggest thing when it comes to making sure when you look at real estate investing, that it is outperforming something like the s and p 500, for example.

Because I think overall the SP 500 is very passive, whereas real estate, like you said, is a business. Yeah. And I almost wish the, the term was reframed from investing to business. 'cause I think that's really what it is. And a lot of folks, if this is your first entry level or foray into business, it could feel a little stressful when you get started.

Or it could feel, you know, when you have to go find a tenant or if a tenant doesn't pay you one month or if you don't have systems in place and operating, proceed. Majors that help you run the property, uh, much more efficiently. This could be stressful at the, the first couple of times, but it is a great foray into business.

'cause I think it's just such a powerful, uh, way for people to, to learn. And it's one of the, the ways that I learned where I give, learn how to deal with people and negotiate. There's just so much cool stuff, uh, that happens there. So. If you were looking today and you were, you were starting out, you know, you're looking at for that cash on cash return, that 12% cash on cash return.

Where or where would you start? Would you kind of look out of state if you're looking in your local area, like for example? Yeah, I am here in Florida and you know, I've been. Looking at real estate investments again, so I'm looking out of state, kind of across the country and kind of looking in some of those areas.

If you were in a more expensive area where you couldn't find deals in your local area, what would a good deal look like? And would you look outta state if you were new or was this something that you would go local if you're new, and then go outta state later on? Great question. Uh, I'll just say that I do both.

You know, I, I live in a very expensive market and I can't buy rental properties where I live, so I do invest out of state. Um, and so I, I, I like that. I'll just say that I think the number one thing people really need to understand is their own. Personal goals and, and sort of work back from, from there. I know people get frustrated where you, when experts answer with it depends, but it really does depend and I really recommend people spend an hour just trying to figure out, ask yourself a couple of questions like.

Are, do you need to see this thing in person? Do you, will you be comfortable with buying an asset that you can't go see? Maybe you go see it once or twice a year. If the answer is no, you're not comfortable with that, that's okay. Like you just need to recognize that for a lot of people it's not. If you can get comfortable with that, I re I would recommend you do not because buy and hold investing is necessarily better.

I actually think if you do, it's long distance investing. Excuse me. I actually think long distance investing forces you to learn a lot of skills that you might not learn if you're just investing in your own backyard, like how to build a business. To your point, Andrew, for the first 10 years I was investing in Denver, I learned a lot about property maintenance.

But I was never gonna be a a handyman. Right? I actually moved to Europe in 2020. My wife got her job transferred to Amsterdam, so we moved to Amsterdam for five years. That's when I learned to be a good real estate investor because I was forced to manage a property from a distance. I was forced to learn how to work with property managers, learn how to work with contractors in a much more sophisticated way.

And I actually think that that has. Really opened up a lot of new skills for me and a lot of new deal flow. So I'll, I'll just say that. The next thing I would look for if you're, whether you're buying locally or you're buying remote, I have some criteria that I look for. So again, 12% total return. Doesn't need to be cashflow, but just total overall return.

And then the number one thing you want in your first deal is don't lose. Like that is the most important thing for your first one is you don't need to hit a home run. Get on base, learn. Hopefully make some money, like you should make some money. That is definitely an important part of this. So for me, some general criteria, this isn't true for everyone, but some things that I would look for is look for a property that was built in the 1960s or newer.

Oh, I have spent way too much of my life trying to renovate properties built in the 1910s. I don't know if you have that in Florida, but in the Midwest, in Denver. We got a lot of Victorian houses. We do. And they're Ns, it's not fun. Yeah. Yeah. It's, you can make a ton of money on it, but it's a more of an advanced thing, I think, for people.

Buy something with modern plumbing. Buy something with modern electricity. Do not buy anything that has structural issues. So if there's a foundation problem, I wouldn't even buy anything for your first deal that has structural improvement. So don't change the layout. Don't move walls. Don't pop the top.

Just buy something where you can add a little bit of value. Cosmetically. Now it's very hard to find deals where you could just go out, buy them, and they're gonna cash flow right away. So go find something. It needs a cosmetic fix by cosmetic. That means, again, no structural changes. You're repairing in place, so you need new floors, you need paint.

Maybe you need kitchen cabinets. Maybe you need, you know, some new lighting, something like that. That's the best way to learn. You're gonna be build equity in your deal. You're probably gonna be able to rent it out for better, and you're not taking on unnecessary risk. Real estate is expensive, but. The biggest risk comes from biting off more than you can chew.

People think though the market's gonna crash like that is probably not going to happen, especially if you buy a good deal. The biggest risk is. You know, operationally if you take on something you can't handle. And so for the first deal, whether it's long distance or in your backyard, just find an easy deal.

It might not be the sexiest thing in the world, but it will give you the confidence to go do better deals in the future. Exactly, and I think that's the biggest key is the, for example, my first deal ever was we had no structural issues, but we had shaggy carpet, we had purple walls. We had bathrooms with pink tile, which I think is coming back now.

Did it smell? There's Yeah, exactly. All that stuff. I mean, it was just all that stuff and it felt almost daunting. The first stuff I remember looking at this like. There's a lot of different things that, that feels like that needs to be done in here. And now it was like the, the most simple remodel ever.

'cause it was all cosmetic. There was no big issues whatsoever. Then you realize as time goes on, oh, replacing like a, an AC unit isn't a big deal. Replacing a roof isn't a big deal. You make a phone call, get some quotes, and they just come and do it. And there's just things like that that aren't a huge deal.

But once you get into some structural stuff, it's some plumbing, you know, some big, bigger ticket items. That's where it gets a little more daunting, especially for new investors. But once you know kind of how this stuff goes and you can get through those stressful parts. That is where you'll see this isn't as difficult as it may seem.

A lot of times you are, unless you're doing a lot of the work yourself, uh, for most of the time as an investor. Typically we'll recommend, hey, you gotta make sure you have systems in place so you're not doing the work yourself. So you can kind of focus your time and energy on finding more deals. Uh, but that is kind of the, the way to think about this as for a lot of new investors out there.

I agree. Um, overall, so you mentioned you are looking at potentially financial freedom by the time you turn age 45 and for a lot of folks Yeah. Out there, I think. Thinking about this is really, really important to kind of reverse engineering the way that you're gonna design your portfolio for a lot of folks, you can go about there and you can figure out, Hey, how much do I spend every single month?

And you figure out, hey, this is my burn rate. Maybe it's five 10, whatever you, however much you spend every single month. And you can reverse engineer and figure out how many properties do I need cash flowing at X amount of dollars in order to become financially free? Did you do a similar exercise like that and have you seen people kind of.

Do that and just systematically work their way to getting enough cashflow where they don't have to work anymore, or how do you think about that? Yeah, I, I think that's a very good framework. I, I sort of do it a little bit differently. Um, but I, I think the, the. Framework in general is probably the same. So for me, you need a certain amount of money every single month, right?

And so I, I've actually built this in my book. I, you know, I come out and put together a budget. Then what most people forget is to adjust for inflation. I know I'm a nerd and think about this, but you're spending power halves every 30 years, and I'm 38, and I don't want my spending power to be halved when I'm 68, right?

And so I, I need to adjust for that. And so I, you know. I will be honest, I live in an expensive market and I'm an entrepreneur because I want a comfortable lifestyle. I don't spend money like crazy. I drive a 20-year-old car. But I, you know, for me the number's something like $25,000 a month. You know, I wanna be making 300 grand a year.

Um, something like that. Right. When I do that is not go out and figure out how many cash flowing deals I want. What I try and do is think I know that in pretty much any market condition, I can probably get a 6% cap rate, right? That a 6% cash on cash return. And so then I think how much. Equity do I need to get, because for $300,000 a year, I'm gonna just do the math right now, right?

It's $300,000. If you divide that by 0.06, a 6% cash on cash return, that means that I need $5 million in equity into my real estate deals. And the reason I do this is because, I don't know if you feel this way, Andrew, but like buying rental properties. Just for cashflow to try and maximize cashflow early in your career is a slow grind.

Yep. Like if you're getting three, 400 bucks a month, it's gonna take a long time to get to 25 grand a month. Right? It's still hard and still takes work to build equity, but that's really what buys you cashflow. In the future, I need equity to go buy these cash flowing deals, and so that mindset has put me over the last 10 or so years into.

How do I build equity quickly that pushes me more towards Burr types of projects. That allows me to, I, I do some syndication investing where we're doing heavy rehabs on big multifamily projects. Um, I, I think about that because I know. That if I concentrate on big, getting those big chunks, 50 grand at a time, a hundred grand at a time on a deal, that's gonna get me to that 5 million in equity.

Once you got 5 million in equity, you could just go buy everything cash. Then it becomes super easy, right? Like then you have so many options and so I know it's sort of counterintuitive, but I actually think more about the equity number I need long term. Then I need the cash flow. I am fortunate. I'm at this place in my career where I've hit my equity number.

Now my properties aren't producing the cashflow that I want them to, and that's okay because I bought them for different reasons. And so, you know, over the next, I don't know if it'll take seven years, but next couple of years, I'm taking that equity and repositioning it now into sort of like the end stage of my portfolio, right?

I've sort of been in this growth mode, now I'm in the end stage, and so, but it, it becomes. Uh, it's so much easier when you have equity instead of just having 10 cash flow properties that kind of, you know, limits your, your ability. I love that thought process because that will allow you to kind of work through different investing strategies and it'll allow you to think through it in a very different way.

And then if you realize one strategy is the one that you absolutely love, you can redeploy that capital where that equity. Into that specific strategy, just like kind of what you're doing, it sounds like. And I think that is a very powerful way to look at this and I haven't heard anybody talk about it that way.

So I think that's very, very cool. Um, the way you have that structured. So this is one of those things that has been absolutely awesome. I'm gonna ask you some rapid fire questions that we ask, uh, a lot of different times 'cause I think there's, uh, a lot of cool answers we can do from this. So yeah, let's do it.

So what is your best personal finance tip that you have put in? Practice? Practice in the last year? This is so embarrassing. As a professional investor, I made my first budget ever this year. I had never done it. And I've always talked about how he is never gonna do it. And you know, I moved from Europe, which is lower cost of living to Seattle area, which is very expensive.

And I was like, man, I gotta get this under control. So I use the Monarch app. I, I'm not a paid sponsor, but I love it. I'm like obsessed with it now. Um, so. I just love the idea of, you know, tracking my spending. I know that's like 1 0 1 and I'm, it took me 18 years of being a personal finance person to do that.

But, uh, can't recommend it highly enough. A hundred percent. They're a sponsor of this, uh, show actually. Oh, good. Perfect. It's one that, um, that we all use too, and it's, it's just absolutely fantastic. There's something, so I'm the type of person who kind of goes through seasons when it comes to budgeting and a lot of times what Monarch has done, which is kind of cool, is.

Since they just kind of automate the process for you. I do something called, we call it the five minutes drill, where every single day we tell people, Hey, just take five minutes a day. Go in there, just categorize your transactions and you're done. You, you're like on top of it. And it takes literally less than 60 seconds now, like if you with on, 'cause all the AI tools that they have.

But that is, that is hilarious that, that it's your first, uh, foray into it. But that's awesome. I mean that's the, that's the big key 'cause it shows you can build wealth without having to budget, but also once you get on top of it, it's kind of reduces stress and anxiety and those kinds of things as well.

I mean, I, I'm just this personality for like 15 years, I just had a single track mind about financial freedom. So for me, like I didn't even need to budget. I was just like, every spare dollar I have, I'm gonna invest. You know, I was just like, but now I've achieved a level of success. I'm married, you know, and, you know, wanna enjoy some of my lifestyle, but for me I need to like do that comfortably and not make sure that I'm not spending more than I should and I'm still investing and all that.

And it's been super helpful to me. Um, and. Again, I just, I think it's kind of fun to just like see where things go, see how your spending power, you know, patterns change over time and just, um, being, you know, awareness is just one of the, you know, the most important thing with your, with your spending power once you know what's happening.

It's, I find it easy to change your behavior, but you, I found I was super surprised by certain categories and I, I think, uh, it's helped me sort of. Focus on what's important to me. That's amazing. I, I love it. And it allows you to just kind of figure out and kind of intentionally spend your dollars instead of just kind of on frivolous thing, which I think is awesome.

So what is the best book that you have read over the course of the last year? Okay. I read a lot. I'm a big reader, but I read a lot of fiction these days. Okay. Um, I, I go through periods. Um, so I, I'm reading a great book called Lonesome Dove. It's like a western, uh, won the Pulitzer Prize like in the eighties.

Great fiction book, but my favorite. Personal finance book recently, um, you've probably talked about it, is the Psychology of Money, Morgan Housel. Absolutely. Yeah. Um, yeah, great book. I think it's the one I recommend the most to people. I just think if you, so much of economics, they call it a dismal science for a reason, right?

It's psychology so much is about fear and risk tolerance and comfort with, uh, different decision making. And I think that book really just gives people a good framework from which to start a personal finance journey. Agreed, and we always say it's 90% your psychology and it's 10% kind of what your head knowledge is when it comes to personal finance, and I think that's a hundred percent, yeah, that's what that thing lays out, which I think is absolutely perfect.

What is the number one thing that you think you can change with your finances long term? Like what would be the number one thing that you would do going forward? Uh, for myself. For yourself? Yes. Uh, I think the biggest change I would personally make is trying to reduce my overall debt. I know that's surprising as a real estate investor, but I'm at a place where.

I'm fortunate. I've, I, you know, I, I think of real estate investing in these three phases, and I borrow this, I don't know if you got know a guy named Chad Carson. Coach Carson? Yes. He's been on the show. Yeah. I love Chad. He's the best. Yep. Uh, he has this framework that I'm stealing and I'm, well, I'm attributing to him, but I love to use is, he says there's three phases of real estate investing.

It's growth, or it's starting out just getting that base hit that I was talking about. Then you have this growth stage where for me, you focus on that equity, right? You build that up and then you get to the quote unquote harvest stage, which is where you have enough equity and now you get to enjoy the fruits of your labor.

And for me, as I just sort of like reflect on my personal goals, I just would love to have. A bunch of free and clear rental properties. That's sort of where I'm going, not because it's the fastest way to grow, but I think it's really important as an investor and impersonal finance. So like know when you've had enough, like you don't need to grow for the sake of growing.

I think I'm close to my goals and I need to get to a point where I just don't want risk. Um, and so I want to remove debt. Focus on cash flow. Uh, and I think that will get me to that sort of like what I would call financial freedom for me, where I just have less overall risk and, and more of just a stable set of assets that are helping me, you know, covering my living expenses.

It's funny 'cause I am, uh, we're, I'm 37, so we're similar ages now. Okay. Yeah. It's one of those things that I have. Looked at a ton over the course of the last, just couple of years is reducing my overall risk and just kind of getting rid of debt. And I even hold a little more cash than I should a lot of times.

And it's one of those areas where just, it's just, it's a stage of life I'm in where I wanna be. Like I've done, you know, as much as I, I wanted to do. And I think, um, that is one of those areas where as you get older, I think you just kind of see that, um, and try to, especially when you kind of hit some of your enough numbers and, and look at that stuff.

So I think that's really, really powerful. Exactly. You have to take risk when you're growing. Yeah, like I think that's why it's important to think of it in these stages because if you don't take risk in that growth stage, you're never gonna get these targets like you. What level of risk you're comfortable with depends on person to person, but you have to take some level of risk.

And I'm not saying I'm taking no risk, but I just think, you know, for me, I take some risk in syndications. I take some risks in the stock market for me. The value of real estate is low risk. Yeah. So I'm like, how do I just, that's my bread and butter. I almost think of them like bonds, right? Like, they're just gonna give me that seven, 8% every year.

I don't have to worry about 'em. So I, I think it really is a, a question of, you know, knowing your own goals, knowing yourself, and then. Figuring out, you know, where are you in your life and, you know, sort of like readjusting your portfolio accordingly. 100%. And, and I, I think it just, it's so cool to kind of see that life cycle and where you're kind of reaping the benefits of, hey, you're, you're, you're in that growth stage and then all of a sudden you're kind of reaping the benefits at the end there.

Um, the last one is, and this is my favorite one, what does wealth mean to you? For me, wealth is time freedom. I'm sure you hear that a lot, uh, on the show when you ask people a question. But I never got into investing. I never started a business thinking about buying stuff. It's never really crossed my mind.

The things that I dreamed about is traveling. That's like one of my big passions. Uh, I'm a big like outdoor sports person, and so I want. It's time for that. I wanna ski, I wanna hike, I wanna go travel with my wife. I wanna see my family. Um, and. I always just wanted to do that in a way that wasn't compromising my financial future because I, when I got outta college, I kind of saw my friends diverging in two ways.

So a lot of them went into like, I'm gonna make as much money as possible. Some of them are like, I'm gonna enjoy my life, and I don't think there's a wrong answer. And I was like, how do I split the middle? How do I really enjoy my life? But also get wealthy. And to me that metric is like always been quality of life.

Like how do I ensure I have quality of life without, you know, ma, while I make sure I have a comfortable place for my family to live while, you know, while I'm not worried about healthcare or what, anything like that. And, um, yeah, I think it's the most rewarding thing on Earth is having that flexibility and it, it means everything to me.

Uh, I don't think money. Buys happiness. I think it buys a lot of convenience and flexibility, which is really valuable to me. And so, um, I, uh, that's what it means to me. I love that and I love that answer. And it's, it's the tool that helps you get there, which I think is the, the big, the biggest key overall.

Well, Dave, thank you so much for coming on the show. Can you tell everybody where they can find out more about you, the podcast, the book, and everything else? Uh, they can always find me on biggerpockets.com. I have two books, uh, start with Strategy and Real Estate by the Numbers, or you can find me on Instagram where I'm at the data deli.

Awesome. That is fantastic. Well, thank you so much for coming on. We're gonna have to bring you back more often so we can talk about markets and metrics and, and what's going on with the market at that given time. So thank you so much. Absolutely. Thanks so much. Have a great day.