---
title: 'Watch This If You Want to Buy a Rental Property in 2026'
source: 'https://youtube.com/watch?v=iQavXUlj2H4'
video_id: 'iQavXUlj2H4'
date: 2026-07-01
duration_sec: 2699
---

# Watch This If You Want to Buy a Rental Property in 2026

> Source: [Watch This If You Want to Buy a Rental Property in 2026](https://youtube.com/watch?v=iQavXUlj2H4)

## Summary

This Bigger Pockets podcast episode provides a seven-step framework for first-time rental property investors to buy their first deal in 2026. Hosts Henry Washington and Dave Meyer share their personal experiences and strategies for setting goals, choosing a market, analyzing deals, and executing a purchase. The core message is that with dedication and the right approach, financial independence through real estate is achievable in under a decade.

### Key Points

- **Introduction to Rental Property Investing** [00:00] — Real estate is one of the best ways to build wealth, and rental properties are a great vehicle for new investors. The hosts aim to provide seven steps to find a first property in 2026.
- **Why Americans Should Invest in Real Estate** [01:39] — The traditional American dream of one job affording a comfortable life is no longer viable. Real estate offers a way to generate additional income and take control of one's financial future.
- **Financial Independence Timeline** [03:44] — By buying regular on-market deals, financial independence can be achieved in 8 to 12 years. With a more aggressive approach, it can be done in 5 to 7 years.
- **Step 1: Set Tangible Goals** [04:38] — Goals must be specific, including the amount of money you want to make and the time frame. Goals dictate the strategy, as different goals (e.g., making $200k in 90 days vs. long-term cash flow) require different approaches.
- **Step 2: Choose a Strategy and Market** [09:32] — After setting goals, decide on a strategy (e.g., buy and hold, flipping) and then pick a market that aligns with that strategy. Do not pick a market first; work backwards from your goals.
- **Step 3: Find a Deal and Talk to Lenders** [14:50] — Finding a deal is key, but new investors should also talk to multiple lenders to understand financing options (e.g., FHA, VA, 5% down loans). A specific 'buy box' (e.g., price, square footage, year built) helps narrow the search.
- **Step 4: Analyze Deals** [20:50] — Deal analysis is about math and assumptions. Key data points are After Repair Value (ARV) and renovation budgets. New investors should partner with a real estate agent and ask other investors for bids to build accurate assumptions.
- **Benchmark Returns** [26:04] — For flips, aim to net what you spend on renovation. For rentals, a 7-10% cash-on-cash return is good. A 15% total annualized return (cash flow + appreciation + amortization + tax benefits) is a strong target.
- **Step 5: Make Offers** [30:35] — Many investors fail because they don't make enough offers due to fear of rejection. Make 'disrespectful offers respectfully' by using a kind, low-pressure approach (e.g., a text message offer with a quick close and as-is condition).
- **Step 6: Execute and Stabilize** [35:39] — After closing, focus on executing the business plan (e.g., renovation, tenant screening). Document every step to create processes for future deals. The first 90 days are critical for getting your bearings and building a team.
- **Step 7: Evaluate and Iterate** [40:25] — After stabilizing the property, take stock of what worked and what didn't. Re-evaluate your goals and strategy. It's okay to change direction based on experience.

### Conclusion

The seven-step framework—goals, strategy/market, deal finding/lenders, analysis, offers, execution, and evaluation—provides a repeatable process for any investor. By following these steps and learning from experience, anyone can build a successful rental property portfolio.

## Transcript

If you want to buy a rental property in
2026, watch this video. Real estate is
arguably one of the best ways to build
wealth and financial freedom. And one of
the best investment vehicles for new
investors is rental properties. And you
don't have to be some huge investor
buying large multifamilies or big
apartment complexes. Rental property
investing is the average person's way to
build wealth. Whether you want to make
$50,000 a year or $500,000 a year, you
can do this. How do I know this? Because
I did it just 7 years ago. I owned no
assets. And now I own a portfolio of
over 100 rental properties. But here's
the problem. Most people have no idea
where to start. So that's why we've come
up with seven steps that you can use to
help you find your first property in
2026. Let's do this. This is exactly how
you go step by step from owning no
rentals to your first one.
What's going on everybody? Welcome to
the Bigger Pockets podcast. I am Henry
Washington and I used to have a
corporate W2, but now I own over a 100
cash flowing rental properties and that
allows me to invest in real estate
full-time.
>> And I'm Dave Meyer and I still work
full-time.
>> Well, I have a good job. I am the head
of real estate investing at Bigger
Pockets and I've been investing in
rental properties for more than 15
years. We obviously have different
approaches to real estate investing, but
maybe we should just take a minute and
talk about why we are doing this and why
our audience is probably sitting at home
thinking, "Yeah, maybe I should do this.
Maybe real estate." But like why what
are the two or three reasons you think
honestly I think most Americans should
be considering investing in real estate?
What are the reason top reasons for you?
>> I think what most Americans are facing
now is that the typical American dream
doesn't necessarily work anymore. It's
very very hard to have one job that pays
you enough to be able to afford a
comfortable life. I think you can afford
a life of some kind, but most people
typically want more. They want to be
able to take more vacations. They want
to be able to spend more time with their
family. And with how much life costs,
groceries cost, gas cost, mortgages
cost, I think Americans find themselves
in a position where they need a way to
generate some more income on top of
their day job. And that's the position I
found myself in. And that was seven
years ago.
>> Yeah, it's gotten a lot of it's gotten
harder.
>> I mean, I call me a skeptic, but I just
don't trust anyone else to take my
retirement or my financial future
seriously. Like, I don't think the
government's coming to help me. I don't
necessarily think any employer is going
to be around for me for the entirety of
my career. I have a great job, but I
don't not going to work for one company
for 45 years. You know, like you have to
I in my opinion since I graduated
college, I've always thought like how do
I do something entrepreneurial? Yeah.
>> So that I can take some control over my
own financial future. And to me, real
estate's the best thing to do. Like
there are plenty of other ways you can
use entrepreneurship, but like I'm not
that creative. I'm not gonna go like
start some business that's going to
change the world. I don't know how to
make an AI company, but I could run a
real estate business. Like, I could do
it. So could pretty much anyone.
>> Absolutely. And it's it's there's there
for me there's just safety in real
estate. And so being able to own
something that's a physical asset that
literally everyone needs. There's
comfort in that.
>> Yeah, absolutely. And this is possible.
I, you know, I always cite this stat.
It's a stat I made up, but it is why
it's why that's why I cite it so often
because the creator is just so smart.
No, I did the math because I think that
a lot of people love the idea of
financial freedom, but it feels so far
away. And I did the math and basically
no matter where you're starting from, if
you just buy regular onmarket deals, you
have to buy good deals, but if you buy
regular onmarket deals, you can get what
we're talking about financial
independence in 8 to 12 years. And if
you hustle like Henry hustles, you could
probably do it in 5 to seven. And so
that's what's so cool and inspiring
about real estate investing is even
though
>> things have gotten more expensive. Even
though mortgage rates are higher than
they were eight years ago, buying
onmarket average deals, if you just
dedicate yourself to learning this crap,
you can do it in under a decade, right?
>> Compare that to 45 years the average
career that someone works in a corporate
job. Like they're not even comparable.
So that's why I'm in real estate. It
sounds like we're the same reason. So
let's move on. Let's talk about how to
actually do it. We're going to walk you
through our seven steps to going from
where you are today, maybe not knowing
that much about real estate, never
having bought something before, to how
do you actually go out and buy that
first deal. What's step number one?
>> Step number one is to have some goals.
>> Yeah.
>> Look, people say it all the time. You
got to know where you're going to
understand what you want to do. But I
think in real estate, you get this
excitement when you learn about it
because you feel and see how powerful it
is and you start to see other people
doing it. And a lot of us who are action
takers just kind of go right and then we
figure it out later.
>> But in this business, understanding
exactly how much money are you trying to
make and at what time frame are you
trying to make it in will really help
set some guard rails for you so that you
don't spend a lot of time wasting time
doing things that aren't valuable to
you.
>> There's so many different tools you can
use, right? like there's there's
long-term rentals, there's flipping,
there's all these different things. If
you don't take a moment to figure out
where you want to go, you can very
easily choose the wrong tool. And that's
not necessarily, you know, a mistake
that you can't come back from, but it
does waste a lot of time.
>> There's an analogy I used in my book
where, you know, if someone walked up to
you and said like, "What's the best
car?"
>> What would you answer?
>> I don't know. What do you want to do
with it?
>> Exactly. Like, right. Are you trying to
race? cuz maybe you go buy a a supercar.
>> Are you trying to build something? Maybe
you want a truck. Do you have a family?
Maybe it's a minivan.
>> But unless you know what you're trying
to accomplish, what you're trying to do,
you might pick the wrong tool. And I
know it is fun to go out there and start
daydreaming. I got
I do it too. But I really recommend
everyone take a minute and set a goal.
That can mean a lot of different things.
And so for for you, what's
>> what does a good goal look like? What
are the kind of things you should be
thinking through?
>> Yeah, I think there needs to be some
level of tangibility, right? And that's
why I said it the way I said it earlier.
How much money are you trying to make
and in what time frame? Because your
goals are going to dictate the strategy
that you use because you could have an
aggressive goal of making $200,000 in
the next 90 days.
>> Yep.
>> Well, that's not going to be with rental
properties, right? Like your goals will
help to dictate your strategy. So, put
some tangible goals behind it. We're all
doing this for money of some kind. Some
of us need money now. Some of us need
money later. Some of us need money now
and later. Right. Right. But but but
everybody's in a different financial
place, right? And everybody has a
different financial problem to solve.
And so be tangible with it. What's the
amount of money that you're looking to
make in what time frame are you needing
to make it in? That's the easiest way to
start planning your goals.
>> So what's yours?
>> Yeah. So, my goals for uh money each
year is I want to generate somewhere
between $600,000 and a million dollars
in net profits from flips that I want to
use to help pay off current assets.
>> That's a lot.
>> Y
>> that's pretty good. And that's just you
or with a partner? That's just straight
up. Wow, that's incredible.
>> And but do you have a goal with your
your rental properties? Like you you use
that money to put back into your rental
properties. Do you have like a a number
of unit goal or cash flow goal long
term? The number of unit goal is more
measuring stick. The cash flow goal also
is. So right now I think we generate
somewhere around 30 or $40,000 a month
in cash flow, but I don't live off of it
and I don't plan to live off of it. What
the goal is is to pay off onethird of my
portfolio over the next 10 years. And if
I can pay off onethird of my portfolio
over the next 10 years, I'm going to
take a look at how much net cash flow
that gets me. And then I'll decide if I
need to pay off more or if I'm
comfortable. Like, can I live off of
this amount of money for the rest of my
life? Because one of the things people
don't talk about with real estate is
it's all an active business. Some
strategies more active than others. If
you want it to be more passive, you got
to get some unleveraged properties cuz
unleveraged properties are going to pay
you better than leveraged properties.
And if I have more unlevered properties,
then I don't have to flip as many
houses. And because flipping houses is
all of the active
>> Yeah. Exactly. And this is a perfect
goal. Like your real goal is to own
unlevered properties. You're using
flipping as a strategy to get there
quickly. And this is exactly why you
need to set your goals first. Because if
you just said, "Hey, I want to flip that
you might make a ton of money." It
sounds like you do make a ton of money,
but like it's not, you know, you're
doing that with a different goal in
mind. And so you have to cater and
adjust your flipping strategy to pursue
that bigger goal. And I think that's a
really important thing that's sort of
like keeping you on track.
>> And also let you know how much of it you
have to do.
>> Right. Exactly. Like you can scale it
down in the future.
>> Like do I need to do five flips or do I
need to do 25 flips? That's going to
depend on the amount of money you want
to make and what market you're in
>> because as we saw recently, somebody in
a market is flipping one house and
making what I make dang near in a year
doing 10 to 15 It's crazy. Yeah,
absolutely.
>> So, yes, those are my goals. Everybody's
goals are going to be a little
different, but after goals, in my
opinion, comes strategy. So, I know you
literally wrote a book about strategy.
So, how do you feel about that?
>> Well, I I think that's right. And I I
think that honestly this is all
strategy. I think goals are important
part of your strategy, but I think when
we in real estate when we call talk
about quote unquote strategy, we're
talking about like the types of deals
that you want to do.
>> And I do think that's the appropriate
next step. My goal is pretty similar.
Like I want unlevered rental properties
to pay for my entire lifestyle and then
some within 15 years. And I, you know, I
can pay for my lifestyle with real
estate now, but I don't. And I have I'm
sort of more in a growth mode. So over
the next 15 years, I want to transition
to more passive. I've been doing that
for already for 5 years now. And how do
I do that with less and less debt, which
to me means less and less risk. So then
I work backwards from there. Like what
kind of deals do I need to do? Do I need
to flip houses? No. You know, like for
me, that's not like it's something I
might do opportunistically because it's
fun and I'm in this industry, but like I
don't need to do that. Do I need to do
mid-term rentals? No. Do I need to do
short-term rentals? No. I could, but to
me, given my goal, my strategy first and
foremost is how do I buy a great asset
at a great location that I'm going to be
proud to own for the next 30 years.
That's like the number one thing I look
at. And then from there, I'm like, "All
right, is that a short-term rental? Is
that a mid-term rental? Is that a burr?
Is that a long term?" You know, like
that to me is more of like a management
choice. That's like a business plan
choice.
>> To me, it's like I want something that I
can own for a really long time, which is
a very different strategy than buying
stuff, renovating it, and flipping it.
And so, like, that's why we probably
have different short-term strategies.
But for me, it all starts with that
goal. And I sort of like work backwards.
And that's why my strategies right now
are buying long-term properties.
>> Maybe I switch up how I manage those
rentals over the next 30 years, but I
want the great asset and the great
location that I'm going to hold on to
for a long time.
>> Yeah. And I think that that's a
brilliant way to look at it because if
you're looking at it from assets you
want to hold forever, you may actually
do more than one strategy with a
particular asset. Sure. Like for
example, I have a rental property that
was a long-term rental, but in this
particular city, in this particular
area, midterm rentals do really well.
So, I converted it and it's doing
excellent right now. Will it do
excellent forever as a mid-term rental?
Probably not. Totally. We may have to
put it back.
>> That's what I People sometimes say, "Oh,
are you a short-term rental investor?
Are you a midterm rental investor?" I'm
like, "I'm a buy and hold. I'm buying."
>> Yeah. That's what I do. I want to buy
stuff for the long term and hold on to
it. whatever helps me hold on to it, I
will do. Like, you know, whatever is a
good business decision at that time, I
will do that. That's to me
>> the number one thing. And once you have
that, once you say like, okay, I'm a buy
and hold investor, then you can go out
and start picking your markets cuz like
I'm in an interesting position, right? I
live in Seattle. Yeah.
>> Very expensive market. It's not a good
buy and hold market. It's not. That's
why I invest out of state. I didn't pick
the market first. I said, "Here's my
goal. Here's my strategy. Now, I got to
go find a market that I can successfully
do that in, cuz Seattle ain't it."
>> Preach.
>> Preach. I don't know how many times
people ask me, "What's the best market
to buy property in?" I'm like, "I have
no idea for you."
>> Exactly.
>> No idea what you want to do, what your
goals are. Like, that's truly the way
you should be looking at picking
markets. And I feel like people pick
markets because they think a either
it'll be easier to find a deal or more
affordable to pay for a deal. But you
should really pick your market based on
your goals and your strategy in that
order.
>> In that order I really hands down how
>> some people live like you live in a good
market where you can kind of do a little
bit of everything which is nice but
that's not true everywhere especially in
expensive markets. So it's very
difficult to do it. So if you want to be
a buy and hold investor
>> you could e you can be creative more
creative than I care to be because it
takes a lot of work and I have a
full-time job. So I'm not going to go
out and do student housing for example
or like rent by the room. They're just
not going to do that. Yeah. It's more
work to go find a market. I travel
there. I go look at deals. Like I would
rather do that because it's just more
aligned with my goal. It's more aligned
with my strategy of buying great assets
and holding on to them. And and that's
how I pick that market.
>> Perfect. So those are our first two
steps. Number one, pick your goal.
Number two is strategy and market, which
we're kind of combining because I do
think it makes sense to do those. Next,
we have step three, which I think we
might disagree about this one. I think
we're going to disagree about which one
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We both agree that goals come first,
then come strategy/market. What do you
do as third?
>> Find a deal.
>> Find a deal. So, you would just go out I
I don't necessarily disagree about that,
but I'll offer a counter opinion, but
you go first and just share finding a
deal. Yeah, I I think finding a deal is
the key to being able to make money. I
also think finding a deal makes all the
other subsequent steps easier to you.
Like if you're going to find a
contractor, it's hard to talk to
contractors about hypothetical deals,
right? They don't want to talk to you
about it.
>> So pointless,
>> right? Right. And then also, it's easier
to find money for deals the better your
deal is.
>> And so being able to go out and find a
deal. So I guess within making a deal is
your third step. Do you like you create
a buy box?
>> Yes.
>> Okay. So yeah, you take that market, you
take the strategy and you get how
specific on your buy box.
>> For me, it's square footage wise. If
it's a single family home, I don't want
anything over like 2,800 ft². So I want
less than 2,800 ft². I want it built
after. I think we just changed the buy
box filter. Anything built before 1960,
we don't want. Now, you could live in a
place that's a big city and you only
want to buy in little pockets of the
area and so you have to know what zip
code you want to buy in. You could live
in a place where there's tons of old
properties and so you don't have a
choice. You have to buy something older.
So, you have you've got to get real
specific depending on your market. I
just happen to live in a market where I
can have a broad buy box.
>> Yeah. I recommend for new people to be
as specific as you can.
>> Yeah,
>> it's can be overwhelming all the options
that are out there. And so if you're
new, figure out a price point that you
can afford that is reasonable.
>> Figure out what kind of asset. For me
personally, single family, small, multi,
I'm like, whatever, whatever the numbers
work on. Yeah.
>> Trying to figure out what type of
condition that you want. Class A, class
B, class C, kind of neighborhood. The
more specific you can be, the better the
decision-m process is going to be.
Because if you're new, you can do it.
But if you're analyzing a hundred deals,
200 deals, looking at every deal because
your buy box is so wide, it can be
really overwhelming. And so trying to
just be like, "This is what I'm going to
do first. I want to, you know, something
that's manageable." A 31 that's under
this price point. It's got an attached
garage. That's my buy box. That's great
because you can really hone in and
practice your skill set. So I don't
disagree that going out and finding a
deal makes things better. I do think
just for new people, one step you can
consider putting before the the deal and
the buy box is talking to a lender
>> because I see so many new people get
stuck at this. They're being like, I
can't afford it. I'm like, do you know
that? Do you actually know that? because
there are 5% down loans, there are VA
loans, there are owner occupied loans,
there are FHA loans, there are all sorts
of things. There are there are
government programs, state and city
sponsored programs that help you with
your down payment or your closing cost.
And if you're feeling stuck, please just
go talk to a lender. Like, if you feel
good about your buy box, go do what
Henry said. But if you're feeling stuck,
just talk to a lender. They're it's
their job to help you understand what
you can afford and they will give you a
number that you could go put into your
buy box that that you could say I can
actually afford this. So it's just one
thing we don't really disagree but
that's something I think you can
consider doing first.
>> It's interesting because I think we're
trying to solve the same problem for
people a different way. Like both of us
want you to go take the action. Yeah.
>> Right. And you're saying going and
talking to a lender will like truly let
you know what you can go by and stop
guessing at it. Yeah. Or making
assumptions for people. And what I'm
saying is finding a deal will motivate
you to go find the money. And so what
I'd say to your plan is talk to multiple
lenders
>> for sure
>> because sometimes a lender will tell you
no or tell you they can't do something
and it's based on their limited
information about the products that they
offer
>> or their bank or their bank. And there's
a million other banks out there that
have a million other products to offer
you. And so talk to multiple banks and
get a consensus from them. Uh and that
will truly help you understand what you
can and can't go do. I
>> I am so guilty of this. I have been
interested for the last like 6 months or
so of buying like a multif family. Not
huge, but like 12, 15, 20, something
like that.
>> But if you listen to my like other buy
box shows where I get into detail about
what I'm looking to buy, like I really
liked fixed rate debt. I don't like
commercial loans.
>> So, for a little while, I was like, "Oh,
I'm not going to buy multif family cuz I
need a commercial. Like, I don't want I
want an adjustable rate mortgage." And
like a couple weeks ago, I was like, I
haven't even talked to a lender. There
are fixed rate commercials. I know there
are. But I just like in my own head was
just like, "Oh, I don't want to get a
commercial loan." And I was just being
lazy. And I was like, "Now, just go call
them." I'm like, "Of course there are
fix commercial debt. Not that hard to
find." I was just being lazy about it.
Now, by doing that, I'm like, "Okay, now
I can make a buy box because I know
what's possible. I know what the rates
are going to be. I like I know what the
rate premium is going to be because a
fixed a fixed rate commercial loan is
going to be higher than an adjustable
rate. So, I can bake that into my
underwriting. And now I feel better
about my buy box."
>> And if you follow these steps in the
order we're giving them to you,
>> you will learn so much by talking to
lenders because you'll be able to sit
down and say, "These are my goals. This
is the strategy I'm looking to employ,
right? And here's the buy box that I'm
looking for for deals. And they may have
options for you for loan products that
are new or we don't even know exist yet
or like you had no clue exist yet. But
but these especially like community
banks like their job is to help
investors in their market figure out how
to get deals done with them. And so they
may be able to piece together a strategy
for you that you didn't know as an
option.
>> Absolutely.
>> If you've got all these things lined out
for them.
>> All right. So we agree to disagree, but
it sounds like we agree essentially.
do this in the same week. You can do it
all.
>> You can get to this.
>> Yeah, you need to talk to lenders. You
need to find a deal. It's all of this
will be of benefit to you, especially if
you've done the first two steps like we
outlined. And so, moving on to the
fourth step, which is to analyze some
deals. And uh I don't know if you know
this about this guy, but he loves
analyzing deals.
>> I do it for fun.
>> I do, too. I'm I'm deal.
It's funny though because like you offer
on way more than I do, but like I'll
know I'm not going to offer on them and
I'll just say
>> throw in the numbers anyway.
>> But yeah, I think this is this is where
you go from research to action, right?
Like this is where you're filtering,
you're doing your buy box. You come up
with these great ideas, but ultimately
real estate is really it's just math and
execution. And this is the math part
where you just say, is this a good deal
or not? And I know that sounds
intimidating, but it really isn't that
hard. It's really doing a little bit of
research. The hard part is your
assumptions, right? Like that like
>> the math, the formulas are super easy,
right? It's, you know, you figure out
your cash flow and you divide it by how
much money you invested. That's a cash
on cash return. Like that's easy. But
>> your assumptions like how much rent you
can collect, the ARV of a property, what
your expenses are going to be, that is
hard. I I think that's a skill that
takes a little bit of time to get good
at. I think I've gotten good at it, but
how do you how do you get good at that?
>> Well, I'd say for people starting out,
you you've kind of hit the nail on the
head. The two things you need to have a
handle on are after repair value,
>> which is just what you can sell it for
once you've renovated it.
>> Once it's fixed up, what will that
property trade for? You have to
understand what that number is for your
assets. But for a new person, that can
be very intimidating because the access
to the data that you need to accurately
get this information is behind the door
that only real estate agents have the
key for.
>> And comping is kind of an
>> comp Yeah. And comping without access to
that information can be extremely
challenging and overwhelming. So, it is
a skill that you have to learn. And we
don't have time to tell you exactly how
to go do all that here, but so typically
when you're new, the best way to get
that information is to partner up with a
real estate agent who can help you run
that analysis.
>> Uh, so understanding ARVs, that's the
most important data point you need to
get a grasp on when you're going to be
investing. The second data point that's
important and hard for new investors is
renovation budgets.
>> Yes,
>> not everybody who is investing in real
estate has a construction background. I
know I do. I still struggle with
>> and this was extremely overwhelming for
me when learning to run the numbers.
There are several things that you can do
to get familiar with it, but it's just
something that's going to take time and
experience.
>> I I think that I'm not good at
construction. I've done plenty of it,
but some people have a feel for it.
They're like, "Oh, you know, like I know
how much this is going to cost like
Yeah, exactly. It's like, oh, this, you
know, like James Standard, our friend,
you probably you have a good feel for
it. I do not. But I think the best thing
I've learned is just to ask other
investors. That is the number one
easiest thing because yeah, you can go
ask a contractor, but they're building
in profit and they're going to try and
not all of them, but many of them are
just trying to maximize their own
profit.
>> I think talking to another investor like
if I go to another market, I'm like,
"What does a bathroom cost you?" You
know, like what does a kitchen cost you?
That is the most valuable thing that you
can do to get those assumptions right
because
>> like Henry said, ARV expenses, those are
tough. rent you can usually figure I
don't think rent estimates are that hard
but if you can nail those two things
it's really going to help you a lot in
your deal analysis and that's just like
why you have a community right like
that's why you have wigger pockets
that's why you go on and talk to people
and BPCON whatever it is like these are
the relationships that really help you
get around these assumptions because
they'll know they've done it
>> and I think one pro tip to doing just
that is talking to other investors and
learning about renovation budgets is ask
other seasoned investors if they'll send
you bids from contractors that they
didn't hire.
>> Y
>> because you'll learn a ton by reading a
bid for a project renovation. You'll
learn about what it costs to paint a
house of a certain square footage.
You'll learn about what it costs to lay
flooring in certain rooms of certain
types. You'll learn about
>> scope of work reading your scope of
works. Like just having access to those
as data and you can start to build your
own spreadsheet based on a cost per
square foot model just by looking at
other people's bids.
>> Yeah. I mean, yesterday Henry and I were
tooling around Seattle. We went and
someone we were talking to this guy. He
was like, "You want me to send you my
spec sheet?" We were like, "Yeah,
great." So now we can see what he's
paying for cabinets, for tile, and for
all these different things. And that
just helps you orient yourself. And and
I think that's really the hard part of
deal analysis is people
>> hear this word analysis and they think
it's like math and you're like, you
know, Goodwill hunting up on the board.
It's like you just go to Bigger Pockets,
just put in the calculator. That part is
easy. Like just go use the calculator.
But you got to know what to plug in.
>> Yeah. He needs to know to plug in.
That's the hard part.
>> The other hard part, I think, is knowing
what's a good deal. Cuz once it spits
out a number, is that good or not? Like
I think that's another sticking point
for a lot of people is like you see
like, let me just throw out a number for
you. You see 5% cash on cash return.
What do you think for a rental property?
>> Not a good deal.
>> Not a good deal.
>> I'd probably take 5%. In the right in
the right market,
>> in the right market, in the right
situation,
>> I would take it. Yeah. Exactly. So, I
think that's what people struggle with
when they're new is like, is this a good
deal? So, what do you have like some
benchmark returns that you use either
for flips or rental properties?
>> Yeah, so for flips, I try to keep it
super simple. I've talked about this
before. I want to net make what I spend
on a renovation. That lets me know that
my risk and reward is in line,
>> right? So, I don't want to do a $200,000
renovation and make a $30,000 profit.
That's way too much risk and not enough
reward. That's a quick and dirty way for
me to know if what I'm paying for the
property is worth the effort that I'm
putting into it. uh from a flip
perspective, on the rental property
perspective, I still use to this day the
Bigger Pockets calculator. And what what
I'm trying to get to on my rental
properties is I want them to cash flow
positive or break even depending on the
neighborhood that they're in. So, I'm
okay buying a break even property. If
it's in an up and cominging area, I'm
going to get the appreciation debt
payown, tax benefits, but I'm in a
different place, I think. But for for
most people, like if you can get
somewhere between 7 and 10% cash on cash
return for a rental property, you're
probably doing very well.
>> Yeah, that's that's good in in today's
market. I agree with you. I
>> will take anything down to even like a
3% cash on cash return if it's in a
great neighborhood that I know it's
going to be growing. Again, my strategy
long term. I'm not thinking like this is
why your goals are so important because
if your money later Yeah, exactly. If my
goal was I want to retire in 5 years, I
would be only doing 10 12% cash on cash
returns deals, no problem.
>> I'm like, hey, if I'm buying a property
that's in great shape in a great
location, the cash flow's probably not
going to be amazing this year, but it's
still going to be great shape from 10
years. Like, it's going to be in a good
property, location's still good, the
condition of the home is still good, and
rents have gone up and my debt is fixed,
then I'm getting my cash flow. So, I'm
willing to do that. My the way the
number I use is I want my total return.
So I add up my cash on cash return,
>> my appreciation, my amortization, my tax
benefits, and any value ad I do. And I
want that to be a 15% annualized return.
Yeah,
>> that's a little less than double what
the stock market averagees. And to me,
that's worth my time because I don't put
as much time into real estate investing
as you do, but you know, I still spend
20 hours a month on my real estate
portfolio. You know, that's more than
stock investing. I want to get paid for
that. That's an incredible return at
15%. Just so everyone knows, there's a
little rule of thumb here. Your money
will double every 5 years.
>> For those of you who are still around in
this episode, that was your reward for
it. That's a phenomenal calculation to
be able to run that most anybody can use
and do immediately. So, congratulations
for sticking around. Thanks. That's why
he is the co-host of the Bigger Puckets
podcast.
>> Yes, it's true. But if you think about
this for a minute, my goal is 15 years.
>> 15% your money doubles in five years.
Then it doubles again. So you're at 4x
and then it doubles again. So you're at
8x. So by doing 15% which is very
achievable. This is not crazy numbers.
This is these are deals that I can do
without
>> worry, you know, like I can do this
>> things that you can find on the market.
>> Things on the market.
>> I can 8x my money in the next 15 years.
Think about that. And it's an
unbelievable value proposition. And so
that's how I think about it. And the 3%
cash on cash return, honestly, it's not
because the cash, it's like that just
gives me the cushion. I'm very
conservative of my expenses, but it
gives me even a little more cushion to
make sure that like
>> I have a bad year, you know, I can pay
for these kinds of things without coming
out of pocket.
>> Yeah. I think that's the thing people
need to understand when we're talking
about net returns is both you and I
underwrite extremely conservatively.
extremely like the scenario in which
that my properties perform like I
underwrite them is probably pretty low.
They probably all perform better than I
underwrite them.
>> Oh, all of mine do. That's my goal.
That's why I do that. That's 100%. Yeah.
I I someone sent me a deal. I was
showing you this the other day in
Detroit.
>> They did this the the agent sent me
really good rent comps, all these
things. I was like, "It's going to be
24,400. I'm underwriting." I'm like,
"2100?" You know, like I just
immediately discount all of it. Yes. Not
because they're wrong, but because I
want to see the worst case scenario. I
want to see the worst case scenario and
then it works. I'm like, great. All
upside
>> 100%.
>> Yeah. All right. So, now we've given you
some benchmarks and some rules of thumb
at how to identify what's a good deal,
but then you got to go you got to go get
it. I feel like this is an underrated
part of real estate investing
>> and in the market today is more
important than ever. So,
>> absolutely
>> take us to school. I feel like this is
where people are falling short right now
because it's not that people don't have
enough leads for deals, it's that people
aren't making enough offers on the leads
that they have. And I think this all
like I think this all boils down to
psychology. I think people are just
scared of rejection and so they don't
make enough offers%
>> and because we know as investors that
our offer especially if you're making
offers on onmarket deals that the offer
that we need to make for the deal to
pencil based on the analysis that we
just talked about how you need to run.
We know that that offer is going to be
substantially less than what people are
asking for. They're going to be
disappointed. And so we make again we
make decisions for other people. We go
ah I'm not going to offer on this deal.
They want 300,000. I can only offer them
125. So, we go, there's no way they're
going to take that. And we don't offer.
And what we have to do is get our
personal feelings out of the equation.
And we have to learn how to make
uncomfortable offers. Or, as I like to
put it, we have to learn how to make
disrespectful offers respectfully.
There's a way to make your offer on your
property in a way that shouldn't put
somebody else off. Now, we can't control
how somebody else reacts to our offer,
but we can do it in a way where it makes
sense. So, like I made 12 offers on
onmarket deals last week. Here's how we
did it. We did verbal offers. And the
verbal was just a text message. And we
created a text message script that was
kind. And my agent sent this to the
agents listing the properties. And it
said, "Hey, I have an investor client.
He would like to make an offer on 123
Main Street. It is going to be lower
than what you're expecting, but what we
can offer you is we can close it in 7 to
14 days. He won't ask your client to fix
a single thing. We'll take it in asis
condition and we will make this a very
seamless and easy process for you
>> and then we say what the number is going
to be.
>> Out of those 12 people, two of them
replied with counter offers and one of
them said, "Hey, my client actually owes
XYZ on this property, so we couldn't
take that offer. Could they come up to
this?" I couldn't. So, we said, "No,
thank you." The other one was listed for
200. We offered 125. They came back at
150. I said, "Let me go see it." I ended
up offering 135 and they took it. Right.
Like all from just sending
>> Yeah.
>> a text message or a verbal offer.
>> And most people would have said they're
listed at 200. They're not going to take
your $125,000 offer. That's not for me
to decide.
>> We just figured out a way to do it
respectfully. I think we just have to
get comfortable being a little
uncomfortable.
>> Absolutely.
>> And so if you're new,
>> it's a conversation between you and your
agent about what's a way that we can do
this that makes sense. Right. That
worked for my agent. My agent said,
"Look, I don't want to write up all
those offers to them just get rejected.
That's a lot of my time." I said,
"That's fair. So, what's a way that we
could do it that would take less time?"
And that's how we ended up with the text
message rule offer.
>> Yeah. I think it just goes back to what
we always talk about, just having real
estate being mutually beneficial. I
think some people might say, "Hey,
you're you're offering them less, like
you're trying to screw them over." But I
I don't see it at all that way. When
someone lists something on the market,
they say, "Here's what works for me."
>> Yeah. And by you reacting to that,
you're saying, "That doesn't work for
me. Here's what would work for me.
>> Does that still work for you?" And they
have an option to say yes or no. That's
the whole point of a market is for
people to have these conversations. And
so, not on every deal, but on some
deals, there's going to be a number that
works for both of you, and that's what
you're searching for, right? There are
sometimes they're going to say no.
That's fine. That's okay.
>> There's sometimes they're gonna say yes,
and that's even better because
apparently you've solved you have met
their conditions. I I think I told you
the other day I was working on one of my
first flips. I took an under offer under
asking offer still hit my target, you
know, like still buy for me. So, it's
just up to you to have that conversation
and to initiate it.
>> It's the seller's decision whether
they're willing to take that offer or
not. And when you're making offers on
the market, the only way to figure out
if a seller is willing to take less is
to offer less. Like that's you because
there's intermediaries in between you
and the seller. It's not like where
you're making offers offmarket where you
have more information and you can you
can do that. And if you're making offers
offmarket, you still have to be able to
do the same thing. You have to be able
to make an offer to people at what may
be lower than they're expecting. I do
this all the time, but I do it very
respectfully in offmarket deals. And I
have a whole framework for doing that,
which we can go into in another episode.
But the point I'm trying to make with
this step of making offers is you've got
to get comfortable with a little
uncomfortability and figure out a way to
make the offer that makes sense to you
and not be so concerned
>> with how it might be interpreted by the
person receiving the offer because at
the end of the day, they don't have to
sell you anything. It's a business
decision. It's up to them. You're not
taking advantage of them. And the same
people mad about you making lower offers
than what people are asking on the
market are the same people that are like
lowballing people on Facebook
Marketplace for stuff. So like it
doesn't matter. No one's saying the
same. Like you're you're willing to do
it in other areas. You can do it here.
>> Yes, you can.
>> All right. So we've got the goals, we've
got the strategy, we've got the market,
we've got the money, we've looked for
the deal, we've analyzed it, and now
we've made an offer.
>> What the heck do you do next? Sign the
piece of paper, Chris. Close. Sign the
piece of paper, right? I mean, no, you
got to close. I'm not gonna get into
that here. It's pretty easy. They're
gonna sign someone, an escro agent who's
going to figure this out for you. You're
going to figure out how to close. That's
not bad.
>> But then, I think your first like 90
days are pretty important as a real
estate investor. Like, how are you going
to maximize and execute your business
plan? I think that's really what you
need to focus on next. Because when you
go out and buy your deal, when you
create your buy box, you should have a
plan. Like, you don't just buy and then
you're like, "What now?" Right? If
you're going to do a short-term rental,
you got to jump into furnishing that
thing right away. You need to figure out
your management strategy. You need to
put your your property in place. You're
going to do a burr. Hopefully, during
the closing period, you were already
getting bids. You were figuring out your
scope of work. Now, it's time for you to
go execute. I think this is a time where
you don't think about your next deal at
all. Yes. At least in the beginning,
right? Yeah,
>> you do not think about your next deal.
Don't think about your taxes. Don't
think about I mean honestly I this is
bad advice, but like I wouldn't even
think about like doing, you know,
setting up the perfect systems. I would
just say like go and do the most
important thing you could possibly do.
If you're doing a renovation, nail the
renovation if you need to. If you have a
stabilized property, screen your tenants
well and find a great tenant who's going
to be happy in your home. Go do that. to
figure out the number one most important
thing and do it the second you sign that
piece of paper.
>> Absolutely. I I I couldn't agree more.
Execution and timing is everything when
you are operating a real estate business
cuz literal time is money because if
it's a rental property, the longer it's
not rented, the more it's costing you.
If it's a flip, the longer you're
holding it, the more it's costing you.
So, you do you have to figure out what
is the immediate next step that I need
to do? And you've got to go execute
against that step. I would say the thing
that I would encourage you to do is to
document as much as possible about what
you are executing when you're getting
started.
>> I wish I had
>> I wish I had done the same thing because
>> because then I just made it up again the
next idea
>> because you end up repeating things that
are that are not beneficial to you.
We're all going to end up wasting a lot
of time doing things that aren't that
important in your first deal. You're
going to do things that you hate doing
that you're going to wish you had
documented so you have a process for
bringing in somebody else to do it next
time. Just you know how many times I
waited until closing day to get
insurance on a property and like because
I just
>> I always forget to transfer the
utilities. That's I always forget.
>> So if you write these things down the
next time you're doing a deal, you'll be
able to be a little more proactive and
save yourself a lot of time and effort.
Like just learn from our mistakes. Just
literally every step you do, write it
down. And then that way you at least
have an order of all the things that you
did and you can start to eliminate some
of those steps or pre-plan some of those
steps.
>> Totally. Yeah.
>> Yeah. I I think you know executees the
right word. I think the other way this
word gets used in different contexts in
real estate, but the it's just like
stabilize. Get in there and like own it,
right? Like you you have your bills set
up, you have your tenants in place. Like
that's what you need to focus on. I feel
like when you arrive in a new place on
vacation, you like go get your bearings,
figure out where you're going to sleep,
you put your bag down, you kind of like
own the whole, you know, like you feel
comfortable, then you can start making
decisions. I feel like that's kind of
what you need to do in those first 90
days is just like get your bearings,
check everything out, make sure you feel
comfortable, then you can go into the
optimization, then you can start doing
sort of like the asset management piece
of it. But you got to just get in there
and take control essentially. Uh, and
also I would be figuring out who's going
to be on your team for the long term
because you're going to start executing
and that's not all going to be you.
You're going to have contractors, you're
going to have uh subcontractors, you're
going to have property managers. There's
all these people you're going to have to
engage with. Like, keep track of who you
like working with and who you don't like
working with because honing that team in
is going to help you be more efficient
as you're going forward as well. These
are all things that I probably should
have did a better job of when I first
got started
>> because all we're trying to do when you
get that first deal done is exactly what
we're saying, like keep your head above
water. Yeah.
>> So, just take some time and document
this process and document who you're
working with and whether you enjoyed
working with them or not cuz it's going
to like your team
>> is everything as you continue to execute
going forward. And the best operators I
know have great contractor and business
relationships who now basically do all
these steps for them without them having
to spend a lot of time operating these
deals.
>> Sure.
>> All right, let's move on to step number
seven, which is after you've executed,
stabilized, gotten that property, you
figure out what's next, right? I feel
like that's kind of like you take stock
of what you did, right? This is where
all those notes we just told you to take
come in handy because you're going to
want to go do more deals, right? That's
probably going to be in your goals that
you've set up in the beginning, but
>> now you've got some experience
>> and now you've learned something.
>> And what you may have learned could be
that you need to relook at your goals.
You may hated what you just did. Yes.
>> Right. Uh like my goals for when I first
got started were far and away different
than what they ended up being after I
got a few deals under my belt. You're
just going to learn a lot about what you
planned on executing and what you
actually executed against. And you're
either going to get better and more
efficient at the thing you currently
executed against. Or it is okay to go
back to your goals and say, "Nope, it's
not this. It's that I have to try
something different. This is not it
didn't turn out like I wanted it to turn
out. I didn't enjoy it at all." Right?
That is okay. re-evaluate your goals and
then decide, do I continue to execute on
what I just did and do it better or do I
need to start start fresh? And that's
okay.
>> Yeah. I think whether it's your goals,
your strategy, your market that changes,
it's okay.
>> But figure that at the end. I don't
think you should be tinkering in it.
Like for me, I did a short-term rental.
I didn't really like it to be honest.
I'm okay. I would do it again, but it's
not like, oh, I'm going to go out and do
a lot of those. I do strategies right
now. I literally never heard of when I
started investing. I I didn't even know
it was a thing. You add that in once you
sort of take stock, you know, I lend. I
never thought I would do something like
that. I never thought I had the capacity
to do something like that. So, I think
it's just really important to say like
here's what you're good at. Here's what
you like. For me, I like rental
properties. I don't mind property
management. I like interacting with
people. I'm totally fine with that. But
I don't like doing offmarket deal
finding. It's not something I like
doing. So, I'm not going to do it,
right? And so, I'll build my portfolio,
go into my next one. Think about that.
You're probably the opposite. You love
dealing, but there's probably
that's what you got to do.
>> Well, I'm doing this entire process
right now, but with new construction,
I'm building my first ground up new
construction. And right and so, I am
literally documenting the entire process
>> because if I decide this is something I
want to grow and scale and do, I want to
get better at it, especially this
pre-construction phase, which has been a
nightmare for me.
at
the end
of these. Was it fun? Was it profitable?
Was it worth all the time and the and
the and the effort? These are question.
These questions I don't have answers to
yet,
>> but as part of this exercise, that's
exactly what I'm going to do when I'm
done.
>> All right. Seven steps.
>> Seven steps.
>> Let's see if I can remember them.
>> What do we got? We got goals. Then we
had strategy slmarket. Then we had deals
slash talking to a lender,
>> analysis, offers, execution, and then
>> evaluation.
>> Evaluation. Y
>> that's all it is. I mean, it is a lot of
work. It's work. You got to go out and
do something. You're not going to No
one's going to hand this to you. You got
to go absolutely and do it. But these
are steps that everyone can follow.
That's what I follow in every single
deal. It's not like it really even
changes. You still just do the same
thing even if you've done one of these
or you've done a hundred of these.
>> Yeah. And it starts to just work on
autopilot as you build more systems and
a team and have more processes. It gets
easier. I know that sounds overwhelming
when you first get started, but a lot of
this stuff we do in our SL. I mean, I I
analyze deals for fun. Like I said, I
made 12 offers last week. Yeah. Yeah. Is
all of this gets better the more
experience that you have. But I think
this framework is absolutely a framework
that you can follow and land a deal.
Well, thank you so much for joining us
on the Bigger Pockets podcast. I hope
that these steps and this framework is
valuable to you. This is truly the
things that Dave and I are doing every
day in our portfolio. As always, leave
us your questions down below or let us
know what framework you follow when you
are doing deals in your market. We would
love to learn more about that. Thank you
so much for watching. We'll see you on
the next episode.
>> Go set your goals.
Heat
up