BiggerPockets Real Estate Podcast - 953: Is the 1% Rule Dead? + Why Building (NOT Buying) Could Make You More

Episode Date: May 14, 2024

Could building houses make you more money than buying existing ones? When should someone use the 1% rule in real estate, and when does this metric point to a cash flow disaster? What’s the best way to get more capital or funding for future real estate deals: get a HELOC on your primary residence or look for investor-only DSCR loans? We’re pulling some of the top questions from the BiggerPockets Forums and giving our answers on today’s show! Expert investors Dave Meyer, James Dainard, and Kathy Fettke from the BiggerPockets On the Market podcast are on today to answer YOUR real estate investing questions. First, we return to the age-old debate, “Does the 1% rule exist anymore?” With high home prices and lagging rent growth, this once foolproof metric could be an outdated calculation inexperienced real estate investors should avoid. Next, can you make more money building houses than flipping houses?  Are turnkey rentals the best “low headache” real estate investment? We’ll answer that and give our thoughts on when to use a HELOC (home equity line of credit) vs. a DSCR loan (debt service coverage ratio). Finally, for our out-of-state investors, we share the top metrics to look at BEFORE you invest in a new market.  Want to ask a real estate investing question? Post yours in the BiggerPockets Forums, and we might select it for our next show! In This Episode We Cover The 1% rule explained and when you should (and definitely shouldn’t) use it to decide on deals Building new construction vs. flipping houses, plus which could make you more in 2024 Turnkey real estate investing and whether the lost value-add potential is worth the passive income HELOCs (home equity lines of credit) vs. DSCR (debt service coverage ratio) loans Best tools to use and metrics to track when looking into out-of-state investing markets  And So Much More! (00:00) Intro (00:46) Is the 1% Rule Dead? (08:24) Building vs. Flipping Houses (14:30) Are Turnkey Rentals Worth It? (20:56) HELOCs vs. DSCR Loans (25:07) Local Market Metrics to Track (30:46) Ask Us Your Question! Check out more resources from this show on BiggerPockets.com and  https://www.biggerpockets.com/blog/real-estate-953 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

Should investors consider building a new home versus renovating an existing one? Does the 1% rule even exists anymore? What is the best way to fund a new investment? A DSCR loan or a HELOC? This and so much more on today's episode. Hey everyone, I'm your host, Dave Meyer, and with me are two very seasoned investors from the Bigger Pockets Universe, James Dainerd and Kathy Fekke. And today we're going to answer your listener questions.

Our team went through the Bigger Pockets Forum and pulled some of the most interesting, thought-provoking conversation starters. And James, Kathy, and I are going to dive into them and debate them today. And I think you're all going to learn a lot. So let's jump in. All right. So our first question from the community is, does the 1% rule exist anymore? Is this how I should still be thinking about my investments? Kathy, I already see you smirking.

So jump in on this one first. I want to say it's a bit of a unicorn. So you can definitely search for it. You might find it. It's harder. Three quarter percent rule is probably what you need to be focused on right now. Just last year, you know, we had our single family rental fund. We were buying in the North Texas area and we were almost every property we got was 1% because we got them so cheap.

But we were buying in that little window when people were really scared to do anything. So there was like zero competition. We were able to buy cheap, renovate cheap, and it came in at the 1%. Today, our plan was to refinance that whole fund, like a Burr fund, basically, and, you know, do it all over again, and we can't find it right now. So just that's one example. It could be because I've talked about that metro area far too much on the market. You gave away 1% rules to everyone else. Could be.

It was very generous of you. I guess I should just also clarify what the 1% rule. is to everyone. It's a metric called the rent to price ratio. Basically, you take one month of rent and divide it by the purchase price of the property. And the idea of the 1% rule is that if you do that calculation, one month rent divided by purchase price and the result is 1% or higher, then you're going to have a good cash flowing deal. And if it's lower than that, then it's not a good deal. That was the 1% rule. And I just want to clarify for everyone that that rule, this rule of thumb, it's not a rule.

It's just a guideline, was created like 10 years ago, which was a very different real estate investing timeline. So I think that's what the user is asking, right? They're asking, should I still be using this rule of thumb from 10 years ago to make decisions about investing today? James, what do you think? Well, I mean, it's just an underwriting tool for yourself. You know, like I would never buy based on a simple 1% rule, but it's a way for us, you know, like as investors, we over inundated with properties, opinions, all these things are coming at us every which way. So it's a way to kind of look at a deal and go, okay, well, I can make 1% of the price and I need to explore this more. That's how I take it. People took this as gospel 10 years ago, though. It was like, did it hit the 1% or not? I have never really been concerned with it too much. But I do. love that people think that it doesn't work anymore. Or, you know, with rates as high as they are, the math doesn't quite work even at that with the high rates on your cash flow. But the good thing about it is rates will normalize and it will be a metric that you can use. And you can still get that.

You know, it's, I hear three quarter percent or you just can't get it anymore, but you can. You have to cut the deals up differently to get it to the end results. And one thing that really bucks me about the 1% rule. And ironically, I wrote about it in my book 10 years ago, like, got to get the 1%. and I had to update my book because people were freaking out that they weren't getting it. It's like, oh, shoot, no, no, no, it's, you can't really, it's harder today. But what people were overlooking is really the final number, right? That's all that matters is the numbers in your pro forma, because the 1% rule might work where the rents are coming in at 1% of the purchase price. But what if the expenses are really high? What if it's an old property?

it needs all this work? What if the taxes are high? There's so many factors that need to be calculated and put into the pro forma to really determine if it's a good property. That's just like you were saying, James, it's one way to just sort of glance at it or it used to be, but it doesn't matter as much as really in the end of the day what you're going to get from that property. Yeah, I like rent to price ratio. I think it's a good way to screen markets or screen neighborhoods just to understand, like, where's offering cash flow. But I think the more important thing here, too, is, like, looking at just a single metric, even if you got the 1% rule is not a good way.

It's not a proper way to underwrite a property. Like Kathy just said, a lot, you can find deals right now, I guarantee, on the MLS that have 1% rule. Those are probably not great investments in a lot of areas, right? Like, they're either super old. I found I ran the numbers on a deal this weekend. that was a 1.6. And I was like, oh, my God, it's unbelievable.

And my agent went there and he was like, run away from that property. It is terrible. Do not go anywhere close to it. So it's like, obviously, it is one input you should be looking at or should think about. But honestly, once you get your, you know, once you're looking at a deal and really are analyzing it, I don't even really think about the 1% rule after, once I've got it, like, in a calculator or a spreadsheet. I don't know about you guys.

It's just the next indicator. Should I spend more time on this? Time's money. Should I, well, it's more or just cut it loose, you know, but don't buy that way. Use performance. Use actual numbers. And check crime rates. Check the, because you will find 1% in like the C&D class neighborhoods for sure.

Yeah. Meaning areas that would be more difficult to manage over the long term. One thing I've noticed is that I've been able to get closer to 1% rule, but it's stabilized. Like not what you get off the market, like buy it. right there. But once you've put a little bit of money and effort into it to get rents up to market rate, I think it is actually not super hard to get close to 1%. Even for on market deals. Nice. There's always a way, Dave. I think what's frustrating there for people is like, there's no, like, do you guys have a rule of thumb? I think that's what's annoying. It's like,

it used to just be like, you could do this back of the envelope, pull out your iPhone, put in two numbers and like have a good, rough idea. But now it does seem like you have to sort of do at least a five to ten minute analysis, or initial run with rough estimates, to get a good idea if a deal works or not? Or do you have a quick way that you look at things these days? You know, we just use our performance and keep them simple. We don't like try to go down the, it's rabbit hole.

It's how much cash needs to be left in the property? What's our payment based on a rate that the mortgage professional gave us? And then what is it going to rent for? And we keep it very simple that way. and then we look at that cash on cash return. If we don't like it, then how do we get to a return that makes sense for us? But for all the investors out there, just build your team right. Like, if you have a really good property manager that you're working with,

you can hit them pretty regularly and get the rent payment or projected rent out of that property. Call your mortgage professional. I'm looking at a property. It's this price. What's my monthly payment? How much cash are I going to leave in? If you just send those messages out within six hours, you're going to have the information back to calculate it, look at this property.

You don't have to spend hours doing this. Just build the right team. They'll help you get it done. Yeah, and again, just depending on what you're trying to do, I really believe in equity growth models. So right now, I just want to make sure that the property does not have a lot of maintenance. So it's newer or completely renovated, that it's in a high growth area, meaning lots of population growth and job growth. And as long as my expenses are covered, I know that I'm going to make more money in the upside over time than I would in the cash flow. But it's got a break even. I'm not going to be feeding that property. All right. So we're out here casually debunking decade-old investing advice already. And there are more questions to come. After the break, we dig into the pros and cons of

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at biggerpockets.com slash dominion. That's biggerpockets.com slash dominion. Welcome back. everyone. I'm here with Kathy Fecki and James Dainerd, and we are answering your real estate investing questions. Let's jump back in. All right. Well, let's move on to our second question, which is, right now the median home price is the closest I have ever seen to the price to build new. Would you jump from renovating properties or flipping homes to building new right now? What is the hardest learning curve part? So there's actually two questions here that you two are perfect to answer for this. So let's start with you, James. Do you think it makes sense for people to move from flipping a renovation to ground up development? You know, it kind of depends.

Sometimes I see markets where I see what homes sell for a price per square foot brand new. And I'm like, how did they make any money building this? Yeah, I'm like, what are your build on? The answer is they didn't. Yeah, maybe they didn't at all. It's, and so it really just comes down to you, if you want to evaluate a property, it's what's your cost to build. Like in Seattle, we know it costs us $325 to $350 a square foot start to finish. That's permits, plans, build. If we can sell that for $650 a square foot, that's usually going to be a margin in there for us. And so it really comes down to what is the price per square foot to build?

What is your price per square foot for value? and then can you rent it for per square foot? And that will tell you whether it's the right choice or not. Because we renovate and build. And we go, whatever is highest and best use, I would say that it's not always the case with bill costs. And you can still renovate a property fairly cheap and be well under replacement costs.

Like if I can renovate a property for $100 a square foot and rebuild the whole thing, and I'm buying it for $250 a square foot, and it's worth six, I'm going to renovate that property. And so a lot of what that metrics come down to is your costs for construction per square foot, your Dispo, which is when you sell the property per square foot, and then you look at where the biggest margin is. Kathy, what do you think here? I mean, it's a great question, and it does depend on so many things, how much you're paying for the land

and, you know, how much work needs to be done on the renovation. I mean, it's too hard to answer, you know, generally. But I would say it's two different businesses. So anytime you shift gears and you try something new, you are starting over. And that's what a lot of people kind of forget. Obviously, there's a lot of things that overlap, but it is different. And one of the biggest mistakes I made is my second syndication I ever did back in 2010, we were able to overtake a subdivision of new homes that never had their final.

They weren't finished. But they went back to the bank. The first one of these I did, we rocked it. and our investors made a ton of money. The second one I thought would be just as easy, but it was in Oakland, California, and it was much, much more difficult. My partner on that one had been an amazing flipper,

but he had not built new homes, and he didn't understand the difference. And we ended up struggling because, again, a very different situation, because these weren't the homes that we built from ground up. They were halfway built when we got them. But he didn't understand the requirements of getting that certificate of occupancy.

an existing home already has it. A new one doesn't. And, you know, the city has to approve it before you could do anything with that property. Yeah, there's a big learning curve in there. It's funny. People think it's the same business. You're buying something. You're putting together a plan, and then you're either selling it or renting it, right? And a lot of it comes down to the heavy construction plan. But they have to be structured completely differently. You know, with the biggest thing you want to look out for with new construction is your timelines. Yes. With a renovated property, or a property you can renovate, it's a structure that was there,

and then you're working on inside those walls a lot of times. And so you're not building something new, so you can get permits a lot quicker. That's a good transition to the second part of this question, which is like, what is the biggest learning curve? Like if someone wanted to do this and take this on, like, where would you focus your energy to educate yourself on making the switch? The biggest learning curve in that transition is really the financing. cost and how you structure that initial close. Like with a flip, we will buy a property and we can give a seller an offer and close in two weeks and we know we can get a permit within four to eight weeks, renovate it and nine,

sell it and we can do it in a certain time period. With new construction, it depends on what you're building. It can take a substantially longer time frame once you close that property to when you can start on that. And that's what actually is the biggest learning curve for a lot of investors is they weren't anticipating that cash flow suck for a year before they can start. And properties that you can do in nine months turn into two years. And that's okay. But you need to make sure that you have the liquidity there to cover. And you have to also make sure that the return's worth it. Like I don't want to be in a

deal for two years if I'm only making 10% more. And that's a huge mistake. Because people rush for the bigger profit when many times the annualized return is a lot less. Yeah. And, and, And finally, like, we are in new home construction, but we're doing lots of them, you know, subdivisions to just sort of do one-offs and you're just trying to make a profit on that one property. It's going to be a lot harder. You don't have the economies of scale. I will say, though, building a house is way more efficient than renovating house because renovators, you can make your plan and then you open the walls and you're going, oh, no, I got termites in the wall. I got rot. I got a body, whatever it is, right?

Inside the walls will tell you a different story. With new construction, you have a plan set. You can get quotes. They're different professionals. They're different trades. The build is actually a lot easier. You get a lot more logic because you're dealing with different professional trades too. So you can negotiate more.

You can have business to business conversations with flip contractors you can't. So it's not that it's worse or harder. It's just you have to structure your deal right. And so it is a good business because you can scale. and it's a lot more organized. Awesome. Moving on to our third question, which says, if I want a low headache investment,

such as a turnkey property, is this still a good investment? Am I missing out on potential upside if there isn't any opportunity for value at? So two questions here. First one is, is it still a good investment? I'll just take this one.

To me, that's a big case of it depends on what you're looking, for because some people are looking for really easy investments and some aren't. But to answer the second question, are you missing out a potential upside? If isn't opportunity value add? I think so, right? Like, that is part of the tradeoff. Like, you're either taking something easy and accepting relatively lower returns or you're taking on a project and you're going to get rewarded for that. But at least in my mind, you never get it all. You never get something easy and maximum upside. But what do you guys saying, Kathy. Oh, my gosh. Yeah, you nailed it. I mean, you know, I've been in the turnkey business for

20 years. This is our jam. This is what we do. And there's a need for it. You just nailed it. It's a tradeoff. You're either pushing the easy button or you're not. So you can buy a new car or you could buy an old car and fix it up. You know, if you've got those skills and that ability, maybe you will do that. But I'm not going to do that. I'm going to buy a new car, right? So there's many, many people and the people that, you know, we represent at real wealth and have for years, they aren't in a position where they can do it themselves. And a lot of people haven't understood that. Not everybody has the skills, the ability, or the desire to buy an old property and fix it. You know, we've got, you know, we work with professional athletes. What about them? What about people in the tech industry that work 80 hours a week?

What about doctors, dentists? My dad was a dentist. He, believe me, He would have screwed it up if he tried to do a renovation while his expertise was fixing teeth, not houses. So there are people who have more time than money, and therefore, they don't have the option of turnkey. Now, that's just, it's off the table. They have to do the thing that costs less, and they have an abundance of time, so it works. But you've got someone who's spent eight to ten years on a profession and is doing well in it, and that's their thing. They don't have time, but they have money. and turnkeys what just makes sense.

Or you can be James and have no time and money, but still voluntarily just do value add projects. I love the equity use. I will take everyone's leftovers and turn it into a gourmet meal. I am the person that still buys used cars. I don't like painful price. James, have you ever bought a turnkey property in your life? Yes.

Well, I still painted it, though. Does that count? That counts. That counts. I think just paint is pretty much as turnkey as it gets. Yes, it was a luxury vacation rental. It's the only short-term rental I've ever done. And it was turnkey.

It was dialed. But I liked it because I bought it below replacement cost. So I still feel like you can get a good deal. And I think you guys both nailed it. It's like, if you don't want the headache, don't buy a value at. It is a headache. And there's a purpose to it. You know, I always like to explore when I'm meeting with any new client

or as I'm talking to people, or as I'm looking at my own portfolio as well, there is benefit to buying turnkey because you hit cash flow day one. With value ad, you have a cash suck for six to 12 months. And so you have to work that all in. And sometimes I see people jumping over hoops to do this value ad. But I'm like, wait, for your return, if you would just got your rent for a year, you actually would have made more money. Oh, my goodness.

And it's a get the money working, but use it correctly. Again, I will always renovate and do a property, but it's not for everybody. If you can't execute the plan, too, you might as well buy that turnkey because, I mean, you're getting assets that are warrantied. They're well taken care of. Your deferred maintenance costs is going to be less. There's huge benefit, especially if you don't have the time. Yeah, I mean, this just all comes back to what your personal strategy is and what you're

looking for in your investing. I tend to, even though I talk about real estate investing all day, I skew on the more passive less headache side of the investing spectrum because I work full-time. I live overseas. I invest in multiple out-of-state markets. And that's just my prerogative. You know, James is a full-time real estate investor. And so he has plenty of time. He has a big team, like Kathy said, to go in and do these things. So it really just comes down to what you want. And I think this is the main lesson here, at least to me, is like there are tradeoffs with everything. If you could, in theory, go out and buy a turnkey property that had the same upside as a value ad situation,

literally everyone would buy that. That would be the only real estate strategy. And so you have to think about what tradeoffs you're willing to accept. What are you willing to give up? Are you going to give up some time? Are you going to give up a little bit of upside? That's your job as an investor is to figure that out for yourself. Yeah, and there is one little tip and like thing that has worked on newer built properties I've seen.

is if you want to get some equity, you want a little bit of value add. Value add means you're creating a spread and an equity margin. Sometimes it's not about the construction plan. It's the financing plan. And some of these builders have been running out of liquidity a little bit, and they're willing to sell you the property at a discount just by bridging them the cash. Now you're talking Kathy's language. And so, you know, if you can pick up 10% equity in your cash flowing right away,

that could be a much bigger home run than a burr property. Well, and also think of it this way. Like, if you're working really hard, I have, I have a close friend who's been flying out from California to St. Louis because you can flip and, and make things work there. But the time, the effort, the cost of going there, the airplane, the hotel, like all these fees to make, let's say, $30,000 to $50,000 in an upside. Well, in the time that that took six months, let's say, you know, I just bought a brand new property. and within that six months, it went up 50 grand. And I didn't do anything. So anyway, it's just, you just got to look at the numbers in the end.

Okay, we have to take one more quick break, but stick around. When we come back, we will have a great question about how and when to use Helox and DSCR loans. There are two kinds of real estate investors, those who have reviewed their insurance, and those who think that they have. Most don't realize their coverage wasn't built for how they actually invest. Vacancy periods, rehabs, short-term rentals, or LLC, properties. These gaps surface only when filing claims. That's why investors work with NREG. They specialize exclusively in real estate investors, understanding portfolios, risk at scale, and cash flow protection.

One claim can erase years of returns. If you own a rental property, don't assume you're covered. Have NREG review your insurance with someone who gets investing at NRE.com slash BP pod. That's N-R-E-I-G.com slash B-P pod. 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. Hit to Costsegregationguise.com slash BP to get a free proposal and see your potential tax savings. You just realized your business needed to hire someone yesterday.

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These are both acronyms. Heloc stands for home equity line of credit, which is basically when you borrow against the equity that you have in your primary residence versus a DSCR, which is a debt service coverage ratio loan, which is a type of loan that allows you to use the fundamentals of your deal to have a loan underwritten rather than your personal creditworthiness. And so these are both good or common real estate loan tactics. And so the question is, I'm interested in pulling money out of an investment property through a HELOC, but it seems like many banks aren't offering this anymore. If I can't get a HELOC, do you think that a DSCR would be good? Can I do this for a house hack? Okay, a couple

things here. First and foremost, a HELOC specifically, that terminology is for your primary residence or for your home. So what this user is talking about is an investment. property line of credit. So it does, it says it does seem like many banks aren't offering this anymore. And I think that is generally true. That is not a super common line of credit, at least in my experience. Do you, do you see that often, Kathy? I think they're pretty hard to get. And either way, the helox are, even on your primary, are really costly. They're like 9 to 10 percent right now. We have one, but we just kind of use it as reserves or like a quick kind of in and out type thing. We need the money for something, but we're going to get it back soon.

Just recently quoted at our real wealth lender just said his DSCR loans are in the mid-sevins. So between the two, you know, the HELOC is going to be more expensive. And, you know, some people use it for the down payment. Like I said, for like quick deals to be able to get in and out. But I don't know. What are your thoughts, James? You know, to get the loans, primary residences are a lot easier to do it than investment. Investment was you were able to get them fairly easily three years ago.

Now you have to go to like a portfolio lender in a local bank to really look at tapping your investment properties. HILOCs are, they're a function of growing. Access to capital is just a function of growth. If the helox 10%, well, that's just the cost of the deal. Does the deal make sense with the money that you can access right now? The one thing I always try to look out for, though, like even on my own primary, you know, as real estate investing, this business can get risky. and I always like to cautious people, don't pull up HELOCs to just go keep buying properties unless you really have a clear plan and purpose. Because your primary residence, you do not, I mean, that's something you want to live in for a while.

It's where you're going to protect yourself. Don't over leverage that. And use the money wisely. Like a DSCR loan, if it's 10%, get a high return. Make sure you can pay that back off. And they both have a purpose. I kind of feel like they have a different purpose, though. the HELOC is going to be more of a bridge item for you to get yourself in and out of a deal or to get you in.

DSCR is, that's going to be how you're going to finance your deal for the next, you know, one to five years and run your cash flow analysis with that. And so they do have a different purpose. If I was looking at between the two, I would, you know, if I had a 3% homeowner rate and now I'm looking at a 7% DSCR loan, that's a big spread. you're taking out because with the DSCR, you're losing your access to that cheap loan. And so you just want to run, is it worth it? If I'm going to take out money and borrow it for more, is my return a lot greater than what your interest rate is? If it's not, maybe don't, you know, leave that cheap money alone.

Yeah, absolutely. And this person on the Bigger Pockets Forum is asking, you know, can I do this for a house hack? And I think one of the benefits of a house hack is that you can use owner-occupant residential financing. So in an ideal house hack, you're probably not using either of these options using a HELOC or a DSCR, and you're instead taking out a conforming loan where you're going to get better terms and a better interest rate. Good point. All right. Let's move on to our fifth and final question today, which is what tools and resources do you use to track population and job growth for potential out-of-state investments in the U.S.? What metrics do you value most?

Kathy, I'll ask you, because James, you even invest out of state? You're just a Seattle, dude. You don't know the answer. I'm a short-term guy, but after our evictions talk, I need to start exploring out of state. Yeah, James and I, just before this, we were recording an episode for on the market about squatters' rights. And we heard a lot about Seattle's challenges. But back to this question, Kathy, what tools do you use to track metrics for your out-of-state markets that you invest in and you help your clients with. Yeah, I mean, census data is pretty easy to obtain city data.com. I found it

be pretty useful. Our team just did something cool at Real Wealth. They took the census data of where the fastest growing markets were population-wise, and then the median home price and median rents in those areas to determine which areas still had the right rent, you know, to price ratios like we were talking about earlier and also have growth because I love cash flow, but I like equity, even better. So I want to be in those growth areas. So, you know, the census data has worked for us. It's also kind of fun every year. U-Haul comes out with a list of where their trucks are going and where people are moving. And while it's not science, it's kind of interesting. Like, oh, Southeast, guess what? That's where people are moving still. And where are they leaving?

Well, California is always on the last, is number 50 on the U-Haul list of where people are going. Yeah, right now it is for sure. Yeah. Yeah, I think, You know, population is not something that changes all that often. You get data once a year. Usually it's the census. It's the most reliable as the most consistent methodology. And so that's what I use personally. I'll just give you a trick, though.

I think there's actually a better metric to track. If you can find it, then track population, something called household formation, which is basically it takes into account population growth, but it also takes into account demand for housing. So basically household formulating is if someone moves to the area, but also, for example, if there were two roommates who are living together and then they decide to both go out and get their own apartment, that would create another household in that area. And it would create one more demand for a housing unit in that market. And so if you can find that data, you can't for all sort of many markets. A lot of some of it's paid like I use co-star for that, which is a paid solution.

But if you can find that, that's a really good one. And then in terms of job growth, there are tons of great ways to track job growth. Again, the Bureau of Labor Statistics, they actually put out data for most metro areas in the United States monthly. And so that's a really good, reliable place to do it. And then there are like private payroll companies like ADP that put that out. But I find that if. If you're just trying to get like broad strokes, try to understand like the general dynamics

of the market, government data is pretty easy. And there are aggregator websites like Fred or Y charts that you can just access that for free. But the second question here, part of this is what metrics do you value the most, Kathy? So what are you looking for other than population growth? You know, city data is kind of cool in that you can hone in on a certain part of a metro, A big mistake people make is they'll say Dallas, for example. Dallas is a great market, but Dallas is huge. So which part?

And there are definitely parts of Dallas that are not growing at all. There are definitely parts of Dallas that are just too expensive. So you need to be able to hone in on the metro areas and not just the big city. So city data, you can go in, pick the area that you really want to focus on, and it will tell you wage growth. I think that's really interesting. it will tell you crime rates like I talked about earlier. You could find that 1% rural house or an affordable house and only to find out that you'll never be able to keep it rented because no one wants to live there.

So I've just found a lot of value from that. And quite honestly, the easiest way without having to be a data nerd is just to talk to my property manager. I'll just talk to the property manager and say, what do you think of this area? Does it rent? They're like, oh, yeah, we're getting calls for it all the time. or no, absolutely not, we will not manage that area. They're going to give you the information you need as a landlord. It's so true.

Yeah, just picking up the phone and talking to people is very useful. But I totally agree. I think job growth, population growth, these are just underlying mechanics that you just want to understand, like, is it a place that people want to live? Is it a place that people want to move? Because that's going to help your long-term dynamics. I also just like generally, this is what is a data scientist, we would call unstructured data, so it's not neat. But I personally just love like subscribing to the local newspaper or the local chamber of commerce and just like reading what's going on because they'll also tell you what businesses are laying people off, what businesses are hiring.

And you start to just get a sense of what is going on in individual markets. and those are, you know, unstructured data points that can really help make a decision about, you know, is this market worth my time? Is it somewhere that I want to invest? All right. So those are our five questions that we have today. If you all are sitting there listening and thinking, I have questions that I, too, would like answered by this esteemed panel, you can do that. Just go to biggerpockets.com slash forums. Write your questions out there, and you will probably get some expert advice from the people in the bigger pockets community.

but we might also select your question for a future show where Kathy, James and myself will answer it for you. Kathy and James, thank you so much for hanging out and answering these questions with me. I love this format. I think it's great. It's like I used to do live radio and we could get live questions. It's different on these podcasts, so it almost feels almost live. I'm glad it's not live. I don't want people to know how many times I screw up every time I host a podcast.

Yeah, and everybody should submit their questions. I mean, I know I learned a lot of hard lessons when I got started in this business because there wasn't all the tech and the information here. And I definitely wish I could have asked a lot more. It would have saved me thousands of dollars. Yeah, absolutely. Well, if you like Kathy, like this format, please let us know. We would appreciate that by in the reviews, either on Apple, Spotify, or YouTube,

or let us know on the Bigger Pockets platform that you like this episode. We'd really appreciate it. Kathy and James, thank you for Bigger Pockets. I'm Dave Meyer, and thank you all for listening. 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 Meyer.

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