BiggerPockets’ Dave Meyer joins David Sidoni to bust myths about real estate, revealing strategies that make homeownership possible—even in expensive markets. Whether you’re feeling stuck in the rent cycle, overwhelmed by mortgage jargon, or just unsure if buying is for you, this episode breaks it all down with simple, data-driven insights.
Quote:
“If you buy one rental every three to four years, you can set yourself up for financial freedom—without needing a thousand doors.” – Dave Meyer
Highlights:
- What if you could buy a home with just 3.5% down? Dave Meyer explains how FHA loans and other financing options can help you skip the 20% myth.
- Is renting really better than buying? The truth about long-term wealth-building through real estate—and why time in the market beats timing the market.
- Could house hacking make homeownership affordable? Discover how living in a multi-unit or renting out a room can slash your mortgage payments.
- What’s the biggest mistake first-time buyers make? Hint: It’s not just about the down payment—it’s about understanding appreciation, cash flow, and tax benefits.
- Are you overestimating how many properties you need? Forget social media hype—owning just a few rentals can set you up for long-term financial success.
- Do real estate “gurus” get it wrong? Dave calls out common misconceptions (looking at you, Grant Cardone and Robert Kiyosaki).
- Is it too late to buy? Market cycles fluctuate, but historical data proves that real estate remains one of the most reliable ways to build wealth.
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Watch the episode here
Listen to the podcast here
Ep. 314 – Is Real Estate a Good Investment? – Dave Meyer, Bigger Pockets Interview
Are you looking for more insights on the big question, rent versus buy? We’re privileged to have one of the foremost leaders in the world of real estate, Dave Meyer, the voice of BiggerPockets, which has been one of the biggest and most respected real estate communities online for over twenty years. Helping millions of regular people, just like you. Discover the hidden and plain-sight secrets of building wealth through property ownership. He brings his expertise to the show and he’s going to enlighten us with some in-depth thoughts from a self-proclaimed data nerd. I love this guy. Let’s do it.
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I’m so excited because we’ve got a really exciting guest here. Those of you who have been crunching around online and going deep in the rabbit holes. I’m sure you’ve seen BiggerPockets. We got the man. This is Dave Meyer from BiggerPockets and he’s here to talk to us about all things real estate. Dave, an honor to have you on the show. Thanks for being here, buddy.
Thank you so much for having me. I’m excited to be here.
It’s such an exciting thing because I think that the first-time home buyer journey goes from, I’m adulting to, I’ve been paying rent for too long to I should start looking into this. Inevitably when they start looking into it, so many of them see real estate investing. Thankfully, you’re the biggest, most reputable, actually giving you real practical steps to help it, as opposed to so many of the other ones out there that are making big headlines because it’s sexy. For first-time home buyers, what would you tell anyone first starting to research and study real estate? What are the things you should be looking at and what are the most important aspects of understanding how the real estate market works just to get your feet in the water?
The Power Of Zooming Out: A Long-Term Perspective On Real Estate
There are so many elements when you’re first getting started to try and understand, but if it were for me, I would do the simplest thing. I tell people this all the time who are maybe a little hesitant or just unsure about getting into real estate, whether it’s as an investment or as a first-time home buyer, is just to go Google the median home price in the United States over time and just look at the trends there. I’m a millennial, and I think a lot of people in my generation remember what happened in 2008, and they have a lot of hesitancy or fear around the real estate market, and that’s totally understandable.
When you zoom out in real estate, the picture becomes quite clear that it’s a very stable asset class, that if you are in it for the long term, offers predictable great returns whether again, as an investor or as a primary home buyer. I think just getting that truth into your mind is a good place to start before you start figuring out exactly what tactics and approach you want to personally take to get into the market.
I figured you were going to give me the best answers of anybody I’ve ever talked to, but you’re right. I’m not saying you’re right. I’m saying, “Yes, Zoom out, historical perspective.”
Looking at the bigger perspective, just right now, 2025, there is a gigantic fear that’s happening. I love to zoom out and show people, this is 2008, this is 2011, and 2012 when I was telling everybody, “It’d be a great time to buy a condo, buy a college right now because they’re going to go up and no investors jumped in because they were scared.”
With that in mind, there’s so much fear happening in 2025. I get so many people that reach out as looking for first-time home buyers, any guidance. Many people are feeling priced out, especially in what they call the HCOL, which is a new term on Reddit for High Cost Of Living, which I love.
I’m familiar, yes. I figured you would. I hang out there.
Which is, it’s a great place, but I go to the first-time home buyer subreddit and I just sit there, I want to cry. The advice that people are giving each other. I would love for you to give, a lot of people say, “I cannot afford a place here in Chicago. I’m just going to buy a hundred thousand dollar investment someplace else in another part of the country first before I buy my first home.” How do you feel about people doing that in this high-rate economy or high-rent economy that we’re living in?
House Hacking: A Hybrid Approach For First-Time Homebuyers
I think it can make sense depending on what your personal goals are. This is a blanket statement about real estate. One of the amazing parts about this asset class is it’s really customizable. You can turn it into whatever you want. If you want to build a portfolio, I think that there is a fair argument to make that buying a rental property, probably in the Midwest that offers some modest cash flow and could appreciate over 10 to 15 years is great.
If that’s what you’re trying to do. I also think that buying a primary residence is a solid financial decision. It depends. It’s probably not going to be the best return on investment of your entire life, but it provides, in my opinion, a very strong, stable base for your financial life that you can hold onto for as long as you want to. Different people have different goals. Some people want a high flying and want to build that portfolio.
Buying a primary residence is a solid financial decision.
There’s the whole fire movement I’m sure you’re familiar with. You want to retire early. Buying rentals might make more sense. If you have a family and you want to just like build like a strong base and foundation financially, buying a primary home is probably the better choice. There’s a third option that we can get into, which at BiggerPockets we coined the term house hacking, which is like a hybrid of buying your first home and renting property which is a great strategy in those high-cost-of-living places as well. I’m happy to talk about that approach too, if you want to.
House hacking is a gigantic topic here at the show. One of our very first interviews with a reader who got connected with what we call the unicorn realtors, they actually qualified on their own, didn’t even need to get a co-signer, but still decided as a young couple. They were young, didn’t have a family yet, and they just had their buddy move in. Perfect. Expand on house hacking. This would be great information for our folks.
House hacking is an owner-occupied investing strategy, which is exactly what it says. It’s a property that is both your primary residence and an investment property. There are essentially two different avenues that you can take to house hack. The first is to buy a multi-unit property and typically that would be still a residential property, which is defined as four units or fewer. You buy a duplex, you buy a triplex, you buy a quadplex, you live in one unit and you rent out the others. That’s one avenue.
Personally, one of the ways I got started as a real estate investor. There’s also more, I guess it tends to skew for the younger readers, but people buy a single-family home and live in one bedroom and find roommates. That’s a totally good approach too. Both of those are ways to become an investor and lower your cost of living. The reason it’s so beneficial is, I guess there are a couple of reasons. The first is that you get access to residential financing. Normally, if you’re just buying a rental property that you don’t live in, you typically have to put 25% down, your interest rate’s going to be a little bit higher.
If you buy a primary residence, you can qualify for an FHA loan, which usually has a half-point lower interest rate. You can put sometimes as low as three and a half percent down. There are 201 free loans, if you’re a veteran, you can do this. Use a VA loan, there’s just much more flexibility on the loan side, which is just super beneficial. The second thing is that as an investor, like when I go out these days, at this point in my career, when I go and buy a rental property, it has to cashflow. I need it to generate a certain amount of cash every month to make it worth the risk and my time.
As a house hack, all you needed to do is to reduce your cost of living to make it an effective financial decision. Even if you are still paying $500 a month, let’s say, for your mortgage, that’s probably less than what your rent was, especially if you’re in a high-cost-of-living area. Plus, in addition to those savings, you get the tax benefits of home ownership, which are very significant. You also get the potential for appreciation. You could do renovations and increase the value of your home. You’re getting all the benefits of an investment and a primary residence in one.
The last thing I’ll say is I understand, your audience here, David, is mostly people who are getting their first home. If you buy your first home and you get the bug and you like it, it’s a great training ground for real estate investing. You learn a lot. If you want to go on to buy 2 or 3 rentals over the course of your life, you’ll be very confident in your ability to do that. There are more, but I think those three are just super compelling reasons why people, especially in high-cost-of-living areas should consider house hacking.
I’ve been listening to your show and several others. I went back to one to last summer. The gentleman’s name was Colby and you interviewed him and he was a teacher.
Colby Gordon, I think his last name was.
Boise, Idaho, $17 a year. His wife was freaking out when he decided, in phase two when he decided he was going to do it. It turned out to be great because she was the practical one and he was the one that had a little bit more of a risk taking. That was a small part of the interview, but let’s just say it resonated.
I think that struck a chord with some people. What I enjoyed about that was it wasn’t necessarily a long-term goal. He originally got the idea from Carleton Sheets, which I laughed at because you’re younger than me, so you don’t remember it, but I got the Carlton Sheets.
I have interviewed enough people to know who Carlton Sheets is because a lot of people cite him when they talk about why they got into real estate.
Dude, it was pre-internet, pre anything and if you couldn’t sleep, Carleton Sheets was in your face.
He didn’t have the intention of going out. A lot of the times like this whole house hacking, if you get into the formula of it, the actual algorithm of what you’re doing, a big thing that I’m telling my folks because it’s so difficult to purchase a home in the current affordability is that a lot of times, looking at it as a rent replacement strategy and understanding the full math of it.
If you’re renting for an average of $2,100 a month in areas where homes are averaged $427,000, if you’re only “cash flowing,” because let’s say your new mortgage is $800 more than your rent and your roommate’s only going to pay you $700, you’re only at $100 loss and you’re not flowing yet but $2,100 a month is now going into that asset. As Colby did, I think he said, you interviewed him last summer, he still has that piece and he started before the crash.
How One Rental Property Can Make A Significant Impact
I bet he does. He should and it’s probably close to paid off now. At that point, 20 or 30 years from now, especially if you choose to make a couple of additional payments, then you’re getting a couple thousand dollars a month in revenue just by owning one rental. I think that’s a whole other topic, but people really overestimate how many rentals you need to make a significant impact on your life. You hear these people on social media being like, “You need a thousand rentals, and it’s all nonsense.”
The most successful investors I know own a dozen, or two dozen rentals, and they just pay them off, and they do great. Again, it’s not for everyone, but for people who buy their first home and enjoy home ownership, and like the idea of real estate, your first home is a great way to get into real estate. I actually, I’ve been harping on this for months now that I’m sure David, you see this stuff, but people like Grant Cardone and Robert Kiyosaki go out there and say that your primary residence is not an investment. It boils my blood. It’s just such nonsense. They’re smart people.
Your first home is a great way to get into real estate.
They have other good opinions, but that one it’s just crazy. House hacking is a great investment. Buying a primary residence can be a great investment if you do it smart. I’m doing a live-in flip right now, which is a whole other way to use your primary residence as an investment. There are just so many ways that it’s a good financial decision. Is it like going and buying something that you cannot afford a good decision? Of course not, but let’s make the assumption that most people are going to buy, are going to be rational, and buy a wise home. That to me is a no-brainer if you’re looking to buy it first off.
There’s a whole bunch of regular people out there that need to use their homes or can use their homes like you’re talking about. What we do is focus much more on the planning aspect that the real estate industry has completely dropped the ball. Just like you’re talking about Grant and all these other people talking about you need to have this giant portfolio wonder why because you buy more courses from them? Anyway, I won’t get into that. Expand on that statement because someone like that, if he’s scrolling online, he’s seeing someone telling him he’s got to do twelve. Expand on one property or one and another can still be a great way to live a very comfortable life.
It’s really all about time. I think that the real benefit of real estate is if you’re trying to get rich quickly, you probably need twenty rentals in five years if you want to retire. If you’re just trying to build a comfortable life over 10, 15, or 20 years, then buying one rental every 3 or 4 years can be remarkably effective particularly if you take the cashflow that you start to generate over time and just reinvest it into your portfolio and don’t use it for your lifestyle for that first 10 or15 years. That’s basically what I’ve done.
What countless other investors I know have done as well. There are a few reasons for this. One is, going back to my first piece of advice, is just like looking at the median home price. Just like any market, there are cycles and there are times when home prices go flat. If you Zoom out and you own properties for 10, 15, or 20 years, there’s never been a time in the United States where you wouldn’t make money on that. The second thing is the amazing part of residential real estate in the United States is that the debt is fixed.
Dave Ramsey, his opinions about debt, I disagree with them. The great thing about residential debt is that you get to lock in this price, your mortgage payment, if you want to keep it for 30 years can stay the same. Rents go up 4% or 5% every single year. That might not sound like a lot. In the first year, even if you’re earning $1,000, and then you’re earning a little more, fifteen years from now, instead of earning $1,000 a year, you’re going to be earning $20,000 a year. That’s not an exaggeration. I have properties that I bought that I was living in that didn’t cashflow.
Fast forward, I bought this property I’m thinking of eleven years ago. It makes $30,000 a year after all expenses, all repairs, everything. It just waited. I didn’t do anything. I didn’t do any major renovations. The value has gone up, which is great, but I’m not even talking about that. I’m just talking about the cashflow that this one property will generate for me. If I did that five times, that’s $150,000 a year.
Everyone will be able to buy at different cadences but that is true without me even paying off those mortgages. If I wanted to pay off the mortgages, I would probably be burning it would take me some time because I have to save up some money. If I wanted to do that, I could maybe be making $300,000 a year off 5 or 6 properties. It really is just a matter of waiting and what you want to do and your priorities. For me, real estate is a patience game. You wait, if you do this, methodically over 10, 15, 20 years. You’re going to get wealthy. It’s pretty reliable.
The Five-Year Rule: Balancing Action With Research In Real Estate
On the show, I always talk to people, it’s not trying to time the market, it’s your time in the market, stealing that from whoever said it first.
We all steal that, of course.
What do you say to your people, because it’s the same philosophy, everything that you just spoke about, the basis is but you have to start. We don’t want people to jump into something blind. We don’t want people to gamble. How do you communicate to people when the difference between taking action and doing your research and over-researching before you take action? That starting point, you only get it once and that’s what makes you the most money.
This is not surprising. I’m a data person. My answer to people is always to just do the math. It’s not that hard. There are calculators, you can go Google right now, BiggerPockets, we have some, but like literally if you just Google like buy versus rent calculator. You’ll see that it’s a function of time. I just did this for myself actually, because I’ve moved quite a few times in the last couple of years, and I’ve been renting since 2020. I lived abroad, and I didn’t know how long I was going to stay, and then I just moved back to the United States, and I’m doing this live-in flip, but I was debating whether I should rent or buy, so I’ve done this math quite a few times recently.
For me, it usually comes out to about five years as a break even. It’s basically, if you plan to stay in your home for five years or longer, it’s usually beneficial to buy a home. For every year after that, it just becomes gravy. If you’re going to stay for 9 years, 10 years for sure. That’s how I recommend people look at this. It’s that it’s not, you bought at the exact right time. I just lived in this house for five years. The reason for that, you’ve probably talked about this on the show many times, but real estate is one of the considerations, it’s not all rainbows and butterflies, there are downsides. One of the downsides is that there are significant transaction costs in real estate.
Even though probably your property value most likely will be flat or go up in any given year. When you go to sell it can cost anywhere between 6% to 10% of the purchase price to sell the property. You need to wait like five years for the property to appreciate, to pay down your mortgage a little bit, to overcome those transaction costs. That’s the main reason you need to stay in your house. Again, that’s just a function of time. If you start the clock now, regardless of market cycles it’s probably going to be about four or five years. If you buy and the market goes down, that stinks. No one wants that. It happens.
I bought my first deal in 2010 and everyone’s like, “That was so lucky.” It was like, “My property value went down for two years until the market bottomed.” People tend to forget that part. If that happens to you, it stinks, but like then your break-even is probably 6 years or 7 years. It’s still a relatively cost-efficient thing to do unless you plan to move every couple of years. I think that’s how I would recommend people look into it.
The other option though, I should mention, because I am a real estate investor, is the way to get around that is if you live in a property for three years and you want to move, hold onto it as a rental and then buy another one if you have the capital to do that. A lot of times you can refinance, take some money out, or get a new FHA loan. There’s a lot of ways to do that. That’s another way that people, if you’re not ready to sell, you haven’t held onto it long enough, or you just like the idea of owning rental properties, you could just do it again.
If you live in a property for three years and you want to move, hold on to it as a rental and then buy another one.
The Importance Of Understanding The Home Buying Process
There’s a reason the real estate industry isn’t selling this because they know a first-time homebuyer is going to leave in 6 or 7 years. When they do, it’s a sell and a buy. That’s two deals for the broker. If you teach them to keep that first home, it’s only one. There’s a thousand little secrets I’ve uncovered.
I never thought about that. That’s so true.
I’m not even going to get into the fact that 71% of real estate agents didn’t sell a home last year, yet they still continue to build the model of bringing in anybody and play the numbers game instead of actually training the agents to do the job. Who do they send them to? The first-time home buyers. See why I started my podcast?
Yes, I do. Thank you for doing the work.
With that and understanding that you have a fixed property and seeing all the different directions that you can go when your rent isn’t increasing. Last year, the average age went to 38 for first-time home buyers.
It’s insane.
I’m just thinking about, “How much money would they have saved with ten years of renting?” Now, all the math that you’re talking about, I think is such a gigantic thing that people need to see. If someone is a first-time home buyer and they’re doing the research, what part of the research of just buying their first home do you think translates into them potentially thinking about being an investor?
You’re basically asking, “What should they do upfront when they’re buying their first property that might help them see the big picture about investing in real estate long-term?
I’m asking them what parts of buying a home of the process do they not even realize they’re understanding how they could potentially buy in the future as an investor.
Investing, it’s really not that hard. That’s the great thing. Honestly, the challenge is mental more than it is logistics or tactics or anything like that. Much of the fear I think people have is around the transaction process, which is like, “How do I get a lender? How do I find a title company? How do I find an agent?” Those types of things. That’s not any different from being an investor to being buying your primary residence. The thing that you need to learn as an investor, that’s like a secondary thing is the rent side.
How much being able to underwrite rent and expenses accurately is a big part of the game for investors. Just when you’re analyzing a deal, someone might tell you, “You can rent it for $1200, someone might tell you $1500, that’s a pretty big difference when it comes to your return.” Some people are very rosy and optimistic about what their expenses are going to be. “I tend to skew on the other side. I’m extremely pessimistic about everything breaking.” I’m an optimistic person, but as an investor, I prefer to just choose everything that goes wrong.
I think as a homeowner, you start to learn those things. I think everyone, as a homeowner, starts to see the things that break and how often they do. This is just part of being a homeowner. How much time does it take to maintain the lawn or change out the air filters every month? Those are the types of things that you have to scale as an investor that you can learn by being a first-time home buyer and see if you like it. For me, a lot of people are always like, “I don’t want to be an investor, all the work, maintenance.”
I don’t mind it, I’ve never minded it. I did maintenance on all of my own properties for ten years, and I’m not a very handy person. I like it, and I think a lot of people do take satisfaction and pride in home ownership, and I think that’s something you can apply to your investing, which is cool. I think those are the two things. The only other piece is tenant relationships. That’s the thing you don’t get exposure to as a first-time home buyer but honestly is not that hard. At BiggerPockets, we have a ton of free resources that you can use to learn how to do this.
It’s just if you’re good at maintaining any type of relationship, if you’ve been in a customer service type position before, or any career or job where you interact with people, it’s not that bad. I find that people assume that the tenant-landlord relationship needs to be, or is inherently adversarial and that’s just not the experience I’ve ever had. I have good relationships with pretty much every single tenant I’ve ever had. I just think people work that part up in their minds that it’s going to be worse than it actually is.
I couldn’t agree more. That makes perfect sense. Random, what were you doing in Europe? What took you out of the country, man?
I always wanted to, I studied for a year in college abroad and I really enjoyed it and my wife also wanted to do that and then randomly in 2019 her company, she was working for a startup. She was an early employee at a tech company in Denver and they got bought by Booking.com, which is a Dutch company. Did not know that until they bought my wife’s company and they transferred her to Amsterdam. Luckily, BiggerPockets said that was okay. We lived there for five years in Europe. It was incredible. One of the coolest, best experiences of my life. Don’t regret it for a minute but just moved back just for a lot of reasons, but we had a fun experience. Whole other topic, but definitely highly recommend it for people who have the opportunity to do it.
That’s incredible. What crazy timing. It was 2019, the world exploded. Now suddenly you have this new information because people were so concerned about remotely doing potentially investing because it’s out of state and whatever. Here you are going, “I did it across an ocean.”
That’s true. I moved to Amsterdam. It was like December 30th, 2019. Six weeks later, COVID hit Europe because if you all recall, it hit Europe before the United States. We started having lockdowns, I think around the same time, but six weeks later, we’re already talking about COVID. It was an eye-opening experience for me because one, I was already in the process of having to learn to be a homeowner and a landlord remotely.
It was doing that on steroids because the whole world was shut down. It was harder to get people to do anything and people were free or full. There were all these rules about rent increases and moratoriums. For one of the first times in recent memory, real estate was really on people’s minds. It was a good time for me, the right place, the right time, where I was learning something and able to teach something that became really in demand.
The BiggerPockets Advantage: Free Resources And Investor-Friendly Agents
Before we turned on the microphones, I asked Dave if I could do these gotcha questions. I always want to ask every real estate guru. If you’re such a real estate guru and you’re working for a company that sells coaching and professional programs to help people do it, why aren’t you just investing and not selling this to other people?
A couple of things. I don’t consider myself a real estate guru. I have a real estate investor and a real estate educator, but I don’t sell any personal coaching or courses or anything. I work for BiggerPockets. BiggerPockets does have paid memberships, but we take great pride in the fact that our memberships are about $350 a year, as opposed to a lot of “gurus” who sell courses that are $5 or $10 or $15,000 a year for the very same information.
BiggerPockets always has made our education mostly free. You buy books, but we charge for tools and that stuff and in-person events. That cost a lot of money. We charge for that stuff and stand by its value. The other thing is like, I never wanted to be a full-time real estate investor. That was never my goal. I got into real estate as a side hustle because I wanted to be in tech and I needed cash. I graduated college in 2009, and it was hard to find a good job, and it was easy to find real estate deals.
I did a real estate deal with three partners, and I was managing the property myself to make an extra $200 a month and I turned out to like it. I went back to grad school even after I became a real estate investor for data analytics and data science. I just have professional interests personally beyond real estate. Working at BiggerPockets for me is the perfect hybrid where I get to work in tech and I get to work in real estate. I love it. I do invest in real estate. I do deals all the time. It’s not like I’m just teaching this stuff. I live it every day but I also have a cool job where I get to talk about it.
I preface that as a gotcha question. Everything you said about BiggerPocket, I 1000% agree. If someone were to come to me and ask me the question that I asked you, I would defend BiggerPockets and say, “Go look at everyone else who’s charging X, Y, and Z, and look at the free information, and look at the longevity that you guys have had in the marketplace.” BiggerPockets has been around before you started investing and I think they started right when I started real estate.
2004, it’s 21 years.
I started a couple of years later. That’s a wonderful thing. It’s so interesting. You’re a practical person, you’re a tech person, degrees in that, yet here you come around to this educator. I think that speaks to the fact that the tech and the analytics and the data are a really important part of this thing that a lot of people just equate with put in the grind and do the hustle and you’re much more about the practicality of it.
I have always been, that there are a lot of other great real estate educators out there. Don’t get me wrong. A lot of them focus more on motivation or lifestyle and don’t get me like mindset and motivation. All that stuff is super important. It’s just not me. I am a self-motivated person. I’ve never really needed the like, wake up early and go to the gym thing. I don’t know, I’m lucky in that regard. To me, it’s just a math problem. It’s like, I’m such a nerd, but it makes sense to me. People always say, on YouTube or whatever, they’re like, “Of course, you’re promoting real estate, you work for BiggerPockets.”
That’s true. I also wouldn’t work for BiggerPockets and I wouldn’t invest in real estate if I thought there was a better asset class. I’d just invest in stocks if I thought it was better. I don’t love real estate so much that I would deliberately lose money off it. That argument just doesn’t make sense. I will keep investing in real estate for as long as I think it’s a good asset. I do think it’s a good asset, so I’m going to keep doing it.
There’s Carleton Sheets way where you knock on the door and try to assume somebody’s mortgage, and then there’s a new way that we have to do now. With BiggerPockets, you have a platform where you can get a lot of information for free. You also have a platform where you can do a really high return on investment and be a part of the professional program. I did talk to you earlier, and I just wanted to clarify this.
You do have agents on your website that are featured for people who are looking for local real estate agents. Those agents are another profit stream in some way for BiggerPockets in that it’s the agents who make the commitment to pay to have the relationship with you guys. You guys will let them know, here are people who want to work, who are using the education we’ve given them and they want to now get after it and you connect those people.
That’s right.
Fantastic.
We really focus on investor-friendly agents. What BiggerPockets is all about is working with agents who invest themselves or who have spent time educating themselves about the fundamentals of buying investments because as we’ve talked about, it’s different for everyone. Some people don’t care if their first time home, their primary residence is a good investment. Some people fall in the middle. A lot of people fall in the middle. They want it to be their primary residence and a good investment. Some people are just like, “Just give me the best ROI.” Our BiggerPockets is more on the ROI side of things. We find agents who understand that mentality and help people find deals based on that mentality.
Which helps. Part of the reason why I started this whole how to buy a home platform was because not only is the bar too low to give yourself a license in places. You have people that unfortunately just aren’t trained well enough because the business doesn’t do that for them but then you also have people that are specialized. There are some people that might be heavy with investors which is interesting because it can actually translate to first-time homebuyers. If your first-time homebuyer is someone who’s like, “I’m good to do the work.”
That’s such an easy correlation there, but understanding the niche of the person that you work with can be a very important and terrible segue here, but I just wanted to say, “I think one of the biggest pieces of this, that BiggerPockets can really open.” The very first thing you said was, “Go look at median home price to get the perspective.” You’ve brought such a perspective to house hacking. I think that can be such, there’s so much fear right now. I think house hacking can be simple because people look at the rent versus buy and think, that doesn’t make sense. It’s $800 more than my rent. There’s so much more math than that.
Unfortunately, it’s not that easy, but go on.
I wish it was. With the house hacking, as the people are moving forward and they’re getting in, they have the fear that’s holding them back and we’ve discussed the time is best for them to start. What are the things that you think people should be looking at with the house hacking? You mentioned all the things, but is there a math side of it that will help them get over the fear?
The Upside Framework: Identifying Opportunities To Maximize Your Investment
I think the math side is just looking at your current expenditures and then figuring out at the end of the day, if you own a property, how much you would generate or how negative your property would be. It’s not as simple as David said, that’s just comparing those two things. I think a couple of things you should be looking at are one, rent growth over time, because it might be an okay deal today, but it will get better. That’s the cool part about real estate is that, like I said, your debt and your biggest expense stay fixed.
Your rents go up, so your revenue increases, so your profit increases typically every year. It’s great. The second thing is the tax advantages of real estate ownership is something I think that a lot of people miss. I certainly missed it for the first few years of being a real estate investor. I didn’t even really think about it because I had no money and so it wasn’t like a big deal, but if you buy a house hack, your interest on your mortgage is tax deductible. That can be thousands of dollars a year that you may not see in that calculation of comparing your rent to your mortgage payment.
At the end of the day, think about it at the end of the year, how much spending power you’re going to have in one scenario or another. I think those are two things. The other thing I would consider when you’re doing this analysis, one is appreciation. People in the real estate investing community debate how much you should count on appreciation. For me, I put about 2% a year. That’s lower than the pace of inflation. That’s lower than the long-term historical average because I’m conservative.
They go up. Prices go up. That’s just how they work. Saying there’s going to be no appreciation is a little ridiculous, in my opinion. That’s one thing. The last thing, if you want to get advanced about it is something that we call value add which is basically being able to improve the property. If you’re handy, this is a great thing to do. Even if you’re not, finding and looking for properties that have this ability to increase value, whether that’s through some easy strategies like paint and a cosmetic renovation, learning the math behind that can be encouraging because it’s a great way to make money in real estate.
You can go all the way up to a more complex renovation, which is adding a unit, a very popular thing right now with ADUs or Accessory Dwelling Units. They’re like mother-in-law suites, some people call them carriage houses, that thing. If you learn the math behind those things, you’ll start to see that even your basic vanilla house hack is good. If you want to get into it, you can turn it great with a lot of these other strategies and approaches that you don’t have to do instantly. You could wait five years and do them, but thinking about the different ways that you can maximize and optimize your asset, I think, is an encouraging thing.
I have this framework that I use on my podcast called The Upside, where it’s like, buy a deal that’s good today. Identify when you’re buying the deal, 3 or 4 different bets that could turn it from a good deal to an excellent deal. That could be adding units and renovating. That could be buying in a popular area. That could be doing an owner-occupied strategy. There are all these different bets you can make to take real estate from a solid deal to an amazing deal. That’s true with owner-occupied strategies.
Taking Control Of Your Housing And Financial Future
I think it can be such a perfect funnel. For those of you reading, this is intriguing to you, this is the way it’s going to work. You start with us, you come in, and we’re huge proponents of the ADU. You get an ADU and then we are finally over to BiggerPockets and then you become an investor and you use that first home as that stability. It’s crazy. Many people tell me the one thing they want in their life is or in their living situation, these early late 20s, and early 30s people call them, it’s control. That’s the word I hear all the time. They’re not talking about they wish they could paint their walls, but they cannot because they’re a renter. They’re talking about their rent, they cannot control the hike next year or the apartment or the home being sold out from underneath them.
Honestly, it’s something I think about myself. I just moved to a very high-cost-of-living area. It’s on paper cheaper to rent here than to buy, but I am in my late 30s and I just don’t want to move that much anymore. I’m going to make the decision to buy a single-family home. That doesn’t mean it’s a bad financial decision. Is it a perfectly optimized decision? No. Being an investment property, you should buy for the best ROI, I believe. Primary residence, it’s a mix. We talked about that spectrum, it’s a mixture of where do you fall on the spectrum of ROI versus personal life.
It’s your life, you spend so much of your time at home. I work from home. I spend most of my day here, and so I just want a place that I own and because of that, we didn’t get that much into it, David. I am a nerd and I needed to find a way to make money off of my primary residence. I’m doing what’s called a live-in flip, which is an amazing strategy for first-time home buyers. If you want to renovate your home, you can get into it, but the tax benefits are huge. It’s a cool thing that you can do as well.
I have in Southern California worked with a lot of contractors who every time I would call them every couple of years, they’d be in a new place because they did two years for the capital gains tax and then they’d move. It’s a fantastic strategy.
It is. It does work well. It’s my first time doing it though, so I’ll let how it goes.
Exciting. As you could discover, here we are gabbing away. Get two real estate nerds in front of microphones and we could go forever. I appreciate it. It’s so exciting. Glad that you guys found us and I’m so glad to introduce our folks to these multiple facets of taking control over your life. Thank you, Dave, for being here. It was great having you on the show. Thanks, buddy.
Thank you, David, for having me. I appreciate it.
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