BiggerPockets Real Estate Podcast - 3 Types of Rentals That STILL Make You Rich

Episode Date: December 31, 2025

These rental property deals are making us richer, even with high housing prices and interest rates. Everyone thinks it’s impossible to find cash-flowing rental properties in today’s housing market, but this is NOT the truth. We’re going to show you three real rental property deals we’re buying. All of these are being purchased in 2025—these are NOT cheap deals from 2020 with 3% - 4% interest rates. Each one will build major equity, cash flow, or both. Dave brought backup on this episode—the entire expert panel from the On the Market podcast—to share real deals they’re doing right now. We’ve got three to go through—a $55,000 heavy rehab rental property that will also serve as Henry’s own vacation home, a new build rental property at a super reasonable $214,000 price, and finally, a very creative (but somewhat costly) land-banking deal in Seattle, Washington. Each of these deals ranges in expertise needed. Some of the heavier rehab projects may require a few years of renovation experience, while Kathy’s new build deal is a profitable rental ANYONE can buy right now. Regardless of your experience, you can copy these strategies and get richer with these rentals!  In This Episode We Cover Three profitable real estate deals you can do RIGHT NOW How to buy a brand new rental property, with a low interest rate, for just around $200,000 How Henry is turning a $55,000 disaster house into a $265,000 top-tier rental  James’s super creative way to make $300,000 on land in high-demand areas  The best investment if you’ve got a busy job, a family to take care of, or just a hectic schedule  And So Much More! Check out more resources from this show on ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠BiggerPockets.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.biggerpockets.com/blog/real-estate-1220 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠[e-mail]⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, everyone. This is it. The last Bigger Pockets podcast episode of 2025. We released 153 episodes this year, and I hope you found them inspiring, educational, and entertaining. I know I had a great time making each and every one of them. We will have a new episode Friday to kick off 2026, and then the following week, we're going to do my state of real estate investing, which you're going to want to listen to. And we have a very fun, very exciting announcement. coming next week as well. To close out the year, we are republishing one of your favorite episodes of 2025. This is a conversation I had with Henry Washington, Kathy Fecky, and James Danard back in April about properties that we had each recently purchased. It was a lot of fun,

and I think it showed that you can make real estate investing work for you in almost any market at almost any price point. So enjoy it. Have a happy New Year, and thank you all for listening. Here's my conversation with Henry, Kathy, and James. Hey, everyone, I'm Dave Meyer, head of real estate investing at Bigger Pockets, where we teach you how to achieve financial freedom through real estate. And today on the podcast, I am joined by three expert investors who are my co-hosts on the on-the-market podcast, James Danard, Kathy Fecky, and Henry Washington. James, Kathy, and Henry are each going to tell us about an investment property that they've bought

within the last few months, with purchase prices ranging from 55 grand. sort of at the low end of the spectrum, all the way up to 600 grand at the high end of the spectrum. Well, thank you guys for being here. Kathy, great to see you. Great to see you. Can't wait to hear what these guys are up to now. Are you nervous? I mean, not that this is a competition, but we always make it wild. It's going to be a competition. It always is, even if it's unsaid. Okay. Well, you usually hang pretty well in these competitions, so we'll see. James, how you doing? I'm good, and it doesn't need to be said. It's always a good.

competition. Henry, good to see you, man. Hey, glad to be here. This is always a competition and I want to win this time. All right. Well, I'll give you guys a little bit of a spoiler because I've read a little bit about the deals. We know so far that Henry's house that he's bringing to trying to win, apparently, with a

house full of spiders when he closed, but it will be a part-time vacation home for his family. Kathy found an incredible upside opportunity in one of the U.S. largest and fastest growing cities. And James is getting super creative with a multi-part strategy to create profit. Other investors may have overlooked. So whether you're a new investor, you've been in real estate for a long time, today's show will have some great ideas to get the wheels turning on your own next property. Let's get into it.

All right, Henry, I'm going to pick on you. You have to go first and share the deal that you're doing. Yeah, we've got a single family home that we purchased. It is coincidentally across the street from a lake. And it's arguably the second nastiest house I've ever bought. It was so riddled with brown recluse spiders and webs. You got me there. So first of all, when you walked in, you walk into a sunroom.

The sunroom literally three inches thick on the ground of just cigarette butts. Like this guy would just smoke his cigarettes and then throw his butts out in the sunroom. And then when you get into the house, like, I took one step in and I was like, no, I'm good. So you had to get like a stick of some kind and then you just had to like wave it around in front of you from all the cobwebs. Oh, it's like when they make cotton candy, you know, they take that little thing and roll it around. Yeah. It was literally just like a thick stick of cotton candy except spider webs.

And then the subfloors were so rotted away that like we just had to put two by fours down so that we have something sturdy to walk on because I thought I was just going to fall through the floor. You know what, though? I like that Henry said that this is the most realistic deal. Who wants to buy a house where you're going to fall down and get killed by spiders within the first 30 seconds? It's realistic, though, Henry. It is realistic because our listeners can afford it. We haven't talked to years yet. What did you like about it? I've heard some things that would turn me off, but what was attractive about this deal? I liked that it was across the street from the lake. I liked that I could buy it for $55,000, I think we paid for it. Oh, yeah. That's something alike. I mean, it needed more put into it than I paid for it. So we're putting 90 grand into it. But the ARV on the house is 265 conservatively, probably closer to 275, 285. And if we want to long-term rent it, we could easily get $1,800 a month, mostly because as we bought it, it was a three-bed, one-and-a-half bath.

But we were able to steal some room from a couple of closets, and we made it a full three-bed two-bath. So $1,800 a month long-term rent, but we're going to actually short-term rent it because it's across the street from the lake and I just want to be able to take my family there and do like lake stuff. I don't really know what lake stuff means because I'm not an outdoorsy person, but we're going to figure it out. You will find out soon. I got to ask you about this lake, though, because there's different, there's bougie lakes, there's redneck lakes and there's lakes you don't want to go near. What are we talking? I'm going to say one word and then you tell me what kind of lake it is, Arkansas. No, no. It is a pretty lake. There's actually a deck and pier that you can walk up to and like fish off of. They even have like a fishing house. So when it's cold outside and go inside the little house and fish down into the lake from the little house and there's a boat dock and all kinds of stuff. So it's actually, there's really nice lakes in this community. And so I like the price point. I like that I have multiple exit strategies. I can sell this one if I wanted to and make a pretty decent profit because like I said, ARV is pretty high. I could long term rent it for $1,800 a month and cash flow the property.

or I can short-term rent it, which is what we're going to do. And we're estimating to make about $3,000 a month on the short-term rent. But the real reason I want to short-term rent it is because I haven't been able to get my wife to agree to let me put a golf simulator in my personal home. But if it's for a short-term rental and it's going to bring us more income, I have gotten her agreed to let me put it in the short-term rental, which is only like a 20-minute drive from my house? It's basically like my own personal taco. Is Henry working on that house again? What could possibly be wrong with it now? Wait, I have to ask you about this because I was going to put one in my short-term rental

because I have this detached garage that I don't use for anything right now. But I was worried that people are going to break it because it's like you need a computer and a software. Like, are you worried about that at all? There's cases that you can get for your launch monitor that can secure your launch monitor to the ground so that no one can take it. And then you can also lock your computer up in a case so that no one. can take that just a key to entry case. So yeah. Maybe I have to come visit you in person and see how

you created this just so I can replicate it. If you want to come and do some market research, or I can come out there and consult and tell you exactly how to set all this up. That's right. Yeah, easy, easy, piece. But Henry, so you bought this house. It's got no floors. It's got lots of spiders. Like, what does the permitting take? Because for us, if we have to wait nine months for a permit, it can be all the profit in the deal. Yeah, no, that's a great question. And actually, the permitting process was really easy, actually. I just went to the permit office and told them what I was going to do. And then they made me draw it out for them.

And I did. And then you pay for the permit and they issue it to you pretty much on the spot. As long as you're not asking to do something that doesn't conform to their normal standard. So I'm wanting to build a deck over the driveway of this property because the elevation is so steep that I don't want anybody to park at the top of the driveway. And so I actually want to build a deck over the steepest part, but the rules in this community say that every house has to have either a carport or a garage. And so when I asked them to do that, they said I'd have to come to the meeting and present and get approval. And then they'd give me a permit. So as long as what you're asking for is within their normal standards, you can get a permit pretty quick.

If it's not, then you've got to go present. And how did you finance this, Henry? because I imagine this deal you could not get a conventional loan on. So how do you make this one work? No, this was similar to a hard money loan. I financed almost 100%. I think I had to put about $5,000 down at a mile money, but they financed the majority of the purchase and all of the renovation.

And then once we finish the renovation, we will refinance it out into a 30-year fixed on a DSCR. So you financed your own golf simulator, just to be clear. Yeah, for business purposes, yes. Yes, of course. Purely business. I will get no personal joy out of this. And how long are you expecting this renovation to take sounds pretty serious? By the time we're done, it'll be about five months. Yeah, it seems pretty reasonable. So as you said, this is the most relatable deal. Is this a deal you think, you know, an average real estate investor could find and pull off? Absolutely. I think there are markets like this all over the country where you can buy houses for a reasonable price point and you can figure out a way to monetize them. I'm not saying it's easy. I am saying it's repeatable. Well, what's hard about it? Tell me. It looks easy because I just get to get on here and talk about the deal that I have. But what we don't hear me talking about

is how long or how much marketing I had to do in order to find an opportunity like this. There's a level of consistently looking for opportunities and then when we find one we're able to capitalize on it. So it's not like I just found this one property sitting out there. Nobody wanted and bought it. It took a lot of legwork on the front end to find this opportunity. I mean, I love this deal. When the rehab's bigger than the purchase price, it typically means you're making money. Yeah, you're making some money on this thing. You better be making some money. But you still have to control those costs, right? And I think you have to be careful about buying the cheapest thing because the cost can't explode. Like, I mean, what do you think for somebody that was like brand new? What's their rehab number going to be? You could easily run this about 125 to 150. It's not just controlling your costs. It's also not over-renovating. But I have this contractor doing like four. jobs for me right now. And so he's able to source materials all at the same time. And I'm able to get a discounted rate because we're doing so many jobs with this one contractor. So. But even you said 125, right? So Henry just as a reminder, he said his renovation cost him 90. So even if you went up to

125, which is like a 30, 35 percent increase over what Henry's paying, you're still into this deal for 180 and the ARV is 265. It's still a good deal. It's a stupid deal. Yeah, right. You could mess it up left and right. Exactly. So like, yes, there are inevitably efficiencies that come with doing the volume of deals, Henry Doe, having a business for several years, being great at building these relationships, that definitely helps. But even if you're starting, there's so much cushion in a deal like this that it gives you a lot of flexibility and allows for some of those inefficiencies that just exist for anyone when they're first getting started. Absolutely. All right. Well, that is Henry's deal. We are going to take a quick break. But when we come back, we're going to hear

about Kathy's new property, and we'll see if it's as relatable as Henry's deal that's filled with spiders and has no floors. We'll be right back. Running your real estate business doesn't have to feel like juggling five different tools. With Reis simply, you can pull motivated seller list. You can skip trace them instantly for free and reach out with calls or texts all from one streamlined platform. And the real magic AI agents that answer inbound calls. They follow up with prospects and even grade your conversations so you know where you stand. That means less time on busy work and more time closing deals. Start your free trial and lock in 50% off your first month at re-simpley.com slash bigger pockets. That's R-E-S-I-P-L-I-com

slash Bigger Pockets. The Cash Flow Road Show is back. Me, Henry, and other Bigger Pockets personalities are coming to the Texas area from January 13th to We're going to be in Dallas. We're going to be in Austin. We're going to Houston and we have a whole slate of events. We're definitely going to have meetups. We're doing our first ever live podcast recording of the Bigger Pockets podcast. And we're also doing our first ever one-day workshop where Henry and I and other experts are going to be giving you hands-on advice on your personalized strategy. So if you want to join us, which I hope you will, go to biggerpockets.com slash Texas. You can get all the information and tickets there.

You know, your house gets bored when you leave. I can't actually prove that, but it probably misses out on the action, the footsteps, the late-night fridge raids. Yeah, when you're gone, your place is basically on unpaid leave. It's sitting there in the dark thinking, I could be contributing right now. Your side room wants a side hustle. Even your Wi-Fi is like, we could be networking. You're on vacation, spending money like it's a sport, while your staircase at home is fully

capable of sending your income upwards. Here's the twist. You can go on a trip and actually earn money. Airbnb makes that possible with the co-host network. If you're away for a while or have a secondary property, you can hire a vetted local co-host with real hosting experience to handle it all. A co-host can handle guest communications, it can manage reservations and keep things running smoothly so you don't have to check your phone between beach days. That means less stress and more time enjoying your trip. You can relax, knowing guests are taken care of, and your place is in good hands. You travel, your house works. Everyone wins. If you're ready to host, but could use some help, find a co-host at Airbnb.com slash host. Most investors spend all their time talking about their high

level returns. But that's not the number that actually matters. What actually matters is what you keep after taxes, and that's where multifamily real estate quietly stands out. With built-in advantages like depreciation, the right deals can generate steady cash flow while reducing the tax drag. Bam Capital structures its multifamily investments around those fundamentals, pairing tax efficiency with disciplined operators and a long-term approach. This isn't about chasing hype or guessing market timing. It's about building durable, tax-aware wealth over time. Learn more at biggerpockets.com slash bam.

Most investors spend more time chasing deals than reviewing their insurance. But a quick coverage check can be fast, easy, and one of these smartest ways to protect and even improve your property's cash flow. As the months get colder, frozen pipes, icy walkways, and seasonal wear and tear can increase the likelihood of claims. And traditional insurance companies aren't always built to handle these claims quickly or smoothly. That's why more real estate investors are turning to steadily. They focus exclusively on landlords, whether it's a single-family rental, a burr builder's risk policy, or midterm holiday guests. You get fast quotes, flexible coverage, and protection for property damage, liability, and even loss of rental income. Now is the perfect time to review your rates and coverage.

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Sign up at baselane.com slash BP and get a $100 bonus. Base lane is a financial technology company and not a bank. Banking services provided by Threadbank, member FDICC. Welcome back to the Bigger Pockets podcast. I'm here with Kathy Fecky, James Dietard, and Henry Washington, talking about deals that we are all working on right now. we heard about Henry's frightening deal with a lot of upside. Kathy, tell us about something you're working on.

Well, this is a classic Kathy deal, and it is quite opposite from Henry's, and probably James as well. Shouldn't be any spiders in this one. But actually, it is me helping my daughter get her first investment property, because, first of all, I don't know about my youngest yet, but my oldest, Karina, listens to me. And she bought a house instead of a car right out of college. Because she didn't get a car, her debt to income ratios were better. She was driving an old car.

She didn't need a new one. And that house helped her buy a house in Southern California. And just recently, the bank contacted her and said, we can give you an equity line. All you have to do is just sign. And she called me, he's like, Mom, what do I do? And I said, honey, you buy an investment property. That's what you do. And it's a pretty substantial equity line that they're giving her.

So it's scary. She's very busy, busy professional. She's got her own business. and she lives in Southern California. So to find what Henry just described in her neighborhood would be about a million dollars for, you know, for that. So I wanted to show her how I've been investing and how we've been teaching people invest who don't live in areas where it makes more sense to do the types of things that Henry's doing and James, you know, is doing. So how do you have a full-time job, two young kids, try to take care of your life, your home, all the things, and try to buy an old house and fix it up? it's really hard. So an alternative is to buy a new house that doesn't need any work and that still

cash flows and is in a growth area where you today can negotiate to have the rate bought down. So, you know, Dallas has been hitting the news a lot as an area where prices are going down or there's just a lot of inventory. But they're not really talking about the outskirts. And if you go to North Dallas, it's a very different story, very low inventory versus higher inventory, places like the McKinney area and even further north where you can still get tremendous deals and they still cash flow and it's still in the path of progress. And it's all the things I love for buy and hold investing for busy professionals who just aren't in a situation to buy a spider house. You know, it's just not going to work for them. So this deal is in an area in North Dallas, kind of near McKinney, there's so much development coming in in this area.

The purchase price is $214,000 for brand new. That's really good. Wow. Crazy. Yes. The median price in that area is almost double that. $395,000. So getting it well under median price, I love that.

It's a three-bedroom, two and a half bath. We're negotiating the interest rate down. We're trying to get it under 6% by negotiating with the builder. And the rent looks to be around $1,825. So again, not the numbers you're going to see with Henry, but also that's really hard to do when you live in Southern California. You're not going to find a $50,000 house. be able to put 100,000 into it, make it work. So again, this particular area has,

days on market is 65, months of inventory 3.9. So kind of normalizing, not what you hear in the news, which is a flood of inventory in Dallas. You have to know that for the Kay Schiller Index and a lot of these areas where they mention cities, they're not always talking about the metro area. And the metro area is very different than the city itself. Cities operate very differently than suburbs. So you've just got to know your suburb really well and know where the growth is headed. Because if we want something that cash flows, if we want something more affordable, so do businesses. Businesses want to get out of expensive areas and into more affordable areas where they can get the land for cheaper, where they can pay their employees a little bit less than they might have to in a city.

So you've got to always be looking at where our business is moving and where is housing needed as a result of that. So I'm super proud of her. She's going to be able to pull this deal off. It's her first investment. And I like it so much, I'm going to get one too. Oh, wow. Just double-dipping. I love that.

Yeah, you know it. You know what I love about this deal right now, though? You're catching the builders in the middle. Yeah. You know, right now it's a little bit harder to sell inventory. So they're now selling to you at a discount. You're able to negotiate the rate buy down, which is a benefit to you. Essentially, you're getting the property for cheaper by getting that rate buy down.

And also, we have tariffs coming. it supposedly is going to raise construction costs 10 to 15% and you're locking in on today's bill cost where the builder is also working with you to get the ambulatory off. And that's what we're always chasing as investors. What's in the middle of no man's land? And that's how you can kind of crush that deal. When you can get that rate negotiated down and you're buying below replacement costs,

because if construction costs is up 10, 15% in 12 months, you're buying below replacement cost. And that's what I really do love about that deal. It's the right price is the right afford. and it should naturally go up in value just by the bill cost alone. There's a couple of things I love about this deal. First of all, brand new construction home in an area of the country that is going to continue to grow.

There's a lot of land mass in Texas. They're not just going to stop growing, right? So $214,000 for a purchase price for a brand new home. Yeah. Like the home's not going to go down in value. Like even in the short term, if it does, over the long term, this property is going to appreciate. And I know there's people looking at listening to this and looking at the numbers and going,

oh, $214,000, only $1825 in rent. But you have to consider that this property is brand new construction, which means you are not going to have the maintenance expenses and the capital expenses, maybe that like I am going to have with my property. That's a much older property, right? And so that is going to help you with the cash flow in the short term. and in the long term, you're going to have equity and appreciation plus the tax benefits on a property like this.

This is almost a no-brainer if you're a strategy. I get $214,000, 1825 rent in a market that's going to appreciate. Sometimes where you find new construction at these price points, you're probably not going to get the growth or the appreciation over time. So I think being able to buy something like this at that price point near a metro area like Dallas is pretty amazing. And then like you said, just not to get nickel and dimed. It's like buying a new car versus an old car.

You're going to get a better deal on the old car, but you might have to more fix it costs, right, than a new car, hopefully. Yeah, and lower vacancy, right? Like, I think like when you go into these communities where it's more family oriented, you might have longer term tenants too. I mean, this makes a lot of sense to me. You know, Kathy, this might be a more relatable deal. It was.

I think, you know, for an average investor who, especially who lives in a high price market, like this is a good option. Henry, your deal has a lot of juice in it to borrow James's term. But, you know, it's a little bit more work and it's going to be a little bit harder to do. So I think you might be competing here on relatability, Kathy. All right. All right. Well, thank you for sharing with us. Kathy sounds like a really good deal.

Good example of something that you can buy anywhere in the country if you, you know, have the capital to afford something like that. All right. We're going to take a quick break, but we'll be right back. Did you know your house? That's bored when you leave. I can't actually prove that, but it probably misses out on the action. The footsteps, the late-night fridge raids.

Yeah, when you're gone, your place is basically on unpaid leave. It's sitting there in the dark thinking, I could be contributing right now. Your side room wants a side hustle. Even your Wi-Fi is like, we could be networking. You're on vacation, spending money like it's a sport, while your staircase at home is fully capable of sending your income up Here's the twist. You can go on a trip and actually earn money. Airbnb makes that possible with the co-host network. If you're away for a while or have a secondary property, you can hire a vetted

local co-host with real hosting experience to handle it all. A co-host can handle guest communications. It can manage reservations and keep things running smoothly so you don't have to check your phone between beach days. That means less stress and more time enjoying your trip. You can relax, knowing guests are taken care of and your place is in good hands. You travel, your house works. Everyone wins. If you're ready to host but could use some help, find a co-host at Airbnb.com slash host. Here's the truth about passive investing. If the strategy isn't right on day one, the returns won't save it. Multi-family real estate offers structural advantages. Many investors are overlooking, including depreciation that can help offset taxable income while cash flow continues.

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Tax season reminder for all the real estate investors listening. If you own rental properties, short-term rentals, commercial buildings, basically anything that's not your primary residence, you need to know about cost segregation. It's an IRS compliance strategy that lets you accelerate depreciation on your properties, which means you're paying less in taxes this year and keeping more cash in your pocket for your next deal. Cost segregation guys is the go-to firm, having done over 12,000 of these studies with $500 million in total depreciation identified. Head to costsegregation guys.com slash BP to get a free proposal and see your potential tax savings. Welcome back to the Bigger Pockets podcast. I'm here with James Danard, Kathy Fecky, Henry Washington, talking about deals. everyone is working on right now.

We've heard about Henry's Spider House, Kathy's new construction deal outside of Dallas. James, I'm guessing yours is probably worth more than both of theirs combined. What are we talking about here? Yeah, my earnest money was double Henry's purchase rights on this one. He's like, that's pretty cute, 55 grand, 214.

Yeah, that's great. No, you know, and it doesn't matter the size of the deal. It's, you've got to play with the cards you get dealt, right, and we're in Seattle is expensive. I would love to buy myself a $55,000 lake house. And Henry, I did just get a wakeboard boat, so maybe we head out that way. My deal, though, for the market we're in, we have to get pretty creative to come up with cash flow and build out your rental portfolio.

Things are expensive. And the reason I love my deal is because they only make so much land, and I'm getting the land for almost free on this one and how we're setting up. I love that. You know, what we have is I found a property, which is the, up into 55,000 in Arkansas. I found a two-bedroom one-bath property in the central district of Seattle. So this is an expensive neighborhood. It's constantly growing on a 4,000 square foot lot. And we paid 600 grand for this property. And 600 grand in Seattle is cheap. So the reason I love

this deal is there's potential in the backyard. It sits on a two-sided street. There's access on the back. And the front house is on the front of the lot. We can renovate that house and put in about 120,000, 125,000, and that house will be able to be sold for about 900,000. In addition to, this property is zoned LR3, low-rise residential to where we can build a row house in the back. And I can build a 2,100 to 2,200 square foot house in the backyard and subdivide it off and sell that property for about $1.2 million. So the plan on this is we're going to renovate the house, put $125,000 in. We're going to sell it for $899,000, which is then going to give us the back lot on that property.

There's going to be about $35,000 in profit after we flip the house. So we're going to get our backyard for $35,000 cash to us. And we're able to build that house out at a cost of about $700 to $720,000 to build a house that's worth $1.2.2. million. That property then has now created over $350 to $400,000 in equity, but it's not going to pay for itself. I'm going to have to write a check to either pay for it or leave some money in. And so that's why I love this deal. It takes a long time to build these things out so I can start collecting rent, start putting renters in, and I can 1031 exchange this in one year. And so I'm going to flip off the front house, get the lot for essentially free in the back, build a house for $720,000, sell it for

1.2, create $300,000 in equity and profit. And then I'm going to take that $300,000. I'm going to go buy a 4plex with no money out of my own pocket. And so the reason I do love this deal is you have to look at creative ways in expensive markets, whether you're in L.A., Chicago, Miami, New York. The numbers don't pencil if you want to buy a rental. Yeah. And so for us, it's a lot of work. This is going to take us about 12 to 15 months. But in two years, I'm going to be able to get into a fourplex with no money out of my own pocket. And that's how you start creating the wealth. And that's how we built out our whole portfolio. Again, I would much rather buy a deal like Henry. If I had those in my backyard, I would buy them. But in my neighborhood, I got to cut off my backyard to make any kind of

money on this. This is how you do it in a high price market. In California, you can do things like that with ADUs. They're such a push. The California legislation is all about building these ADUs in the back an increasing value. And I love what you said. You can have income coming in while you're working through the permitting process and so forth. You still can rent the main house and then, you know, be able to build and improve the back part. I love it. We're always looking for deals like this. So you're still able to sell these properties, one for 950 and another one for, what, 1.2, even though they don't have the yards anymore. Yeah. And so we've deducted that value down. So $8.99, if I build it in the back, if I actually don't build anything,

the back, the property could be worth up to $9.99. But that comes down to the plan. So as I was permitting and start working on permitting that back unit, you want to make sure that you're not putting too many negative factors on that house. So things that we planned out is as we did our design, we made sure that this house still had a little bit of backyard as a front yard, but we also got parking on it. And that was key to make the numbers work. If we couldn't have got parking, that house could go down to about $799,000 in value. And so these deals, they get a little complex, have to look at all the comps and what the impacts are. And they take a little bit of time to work through. And that's why it's really important to work with the right professionals that can give

you the right values. Because if we don't have that parking stall, instead of making money on it, I'm actually going to be paying $100,000 to $150,000 for the deal. And so it's all about that plan and how you lay it out. And just because you can build it in the back doesn't mean you should either. And so you want to work with an architect, an engineer, a surveyor, and to figure out exactly what you can do. This is not guessing. This is all done. in our feasibility when we bought the property. And the reason I love this deal is for some reason, if bill costs shoot up 30% because of tariffs in the next six to nine months and my numbers change, I can still pivot my deal and sell the house for in the 900s, high 900s and still make a profit

and just cancel it. And the only risk I'm taking is the waste of plans. James, I'm curious, like how many different ways did you look at making this deal work before you settled on this particular strategy. I looked at this deal five or six times. I said no the first three times. And then I just kept coming back to it because it was affordable. And I'm going, okay, you know, I love a no man's land deal when everyone doesn't want it. It's like, well, how can we make this work? And so I probably looked at this six different times over a 45 day period. And even when I locked it up, I was like, man, this might not work. And then finally, after talking to my survey or an architect, we came up with the right plan. Yeah, I mean, I think that shows like, you know, getting

creative in not just expensive markets, but just in the kind of housing market where we're in where there's not that much inventory. Like, this is something that a lot of people probably had a chance to buy, right? But because you were disciplined about it and got creative with it, you were the one who figured out through that hard work that you did, how to make this, what other people couldn't make pencil into a really profitable deal for yourself. Yeah, it's all about the plan that you're putting on things. And if you look at a straight over tackle a lot of times, it won't pencil because

everybody's looking at it straight over tackle so they're rushing in on that deal. I like the ones where it doesn't make sense straight over tackle and you got to get a little creative and that's how you can create big pops. Like even on this deal, I might keep it as a rental, but I still might tweak it at the end because I can 1031 that front house. And for some reason, if bill costs go up, I know I can sell that lot in the back for 15 to 20% of value. So that tells me that lot's worth 150 to 200 grand and I can combine it.

1030 wind it out that way too. And so there's multiple different options in so where I'm not going to get stuck having to build the house if I don't want to. Awesome. Well, this sounds like another great deal, James. Thank you so much. And I know the prices may seem like out there, but a lot of the lessons that James is talking about on how to approach this kind of challenge, I think is applicable to really any market. So thanks so much for bringing it to us. All right, well, thank you all so much for bring these deals. Since we tend to always just make these things competitive for absolutely no reason, I think we often vote for one deal that we would do, you can't vote for yourself. So James, what's your vote? Well, even if I could vote for myself, I'd pick Henry's deal all day long. I love

a massive fixer, cheap, high equity growth, straight over tackle rental. I'm jealous. That is my kind of deal. I like it. All right, Kathy, what's yours? So I would pick James because I love, opportunities like that where you have multiple exits. 600,000 might sound high to some people, but I know that is a good deal. And then all the options that you could do with it. And then I would just want to borrow, you know, James and his team for just a year or so. And I'll take that deal. Yes.

Okay. So you're not buying just the property. You're buying the whole operation. I like that. All right. What's yours? Well, even though Kathy's hating on my deal, I would buy hers. Oh, okay. I have to be the tiebreaker now. But tell us why, Henry. I just think those numbers are pretty

amazing for a new construction. And we have to remember that real estate is a long-term wealth game. And the more that I am into this space and the more that I'm looking at my rental portfolio, I'm most excited when I look at the newer properties that I've bought in the past couple of years. I've bought a few new construction rental properties. Those are the legacy properties. Those are the ones that you're going to be able to hand off to your kids and they'll still be in pretty decent shape. Versus if I bought a 50-year-old property and then I'm handing that one off to my kids, right? There's a lot of problems that could come with those. Here you deal with this.

Right. Right. So the idea of being able to buy something brand new at that low of a price point and knowing that appreciation is going to go up, rents are going to go up over time. We didn't talk about that with Kathy's deal, but that's another upside to hers. It's 1850 a month now. Yeah. Yeah.

But if you're going to be. to get appreciation over time and rent growth over time, that gap of wealth just continues to get bigger. I think that's a great option for people who probably have 15 to 20 percent sitting on the sidelines that they'd be willing to throw in a deal. Well, I get to be the tiebreaker now. This is fun. You all voted for each other.

Oh, boy. And normally, I think I would actually pick your deal, Kathy, because those are the type of, like, more passive long-term deals I like. But Henry got me a golf simulator. You're throwing a golf simulator on any deal. I'm taking it. So I'm picking Henry. All right. Well, thank you guys so much. This was a lot of fun, Henry, James, Kathy. We appreciate

you being here. And hopefully we'll have you guys back on again soon. And thank you all so much for listening to this episode of the Bigger Pockets Podcast. We'll see you next time. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave buyer. The show is produced by E&K. Copywriting is by Calicoe Content. And editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.com. The content of this podcast is for informational purposes only. All host and

participant opinions are their own. Investment in any asset, real estate included involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damage arising from a reliance on information presented in this podcast.