BiggerPockets Real Estate Podcast - How to Invest in Real Estate on a Middle-Class Salary ($70K or Less)

Episode Date: August 22, 2025

Do you make a middle-class income ($70,000 or less) per year and want to invest in real estate? This is how you do it.  You don’t need a six-figure salary to buy your first rental property and start building generational wealth and early retirement. Dave is a testament to this, buying his first rental with barely any money, zero experience, and working as a waiter. If you’ve got a stable salary and some savings, you’re already leagues ahead of him. Today, we’re showing you how to put that money to work. We used median income and savings data to create a complete middle-class investor plan to get you on the fastest (and safest) path to financial freedom. We’ll walk through three investing strategies anyone in the middle class can use to buy their first rental, define how much money you’ll need saved, what to do if you don’t have enough in the bank, and how to repeat the system to finally retire early with real estate.  Stop waiting, start wealth-building. This is how to escape the “middle-class trap” and move up the rungs to financial freedom even if you’re starting with a $70,000/year salary!  In This Episode We Cover: The three best real estate investments for a middle-class income earner The “middle-class trap” that most Americans are stuck in (how to escape) Pro tip: How to get more money for your first deal if you don’t have enough How to retire in just a decade with rental property investing (even starting from scratch) The one high-profit, low-money-down, tax-free strategy Dave is using right now! And So Much More! Check out more resources from this show on ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠BiggerPockets.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.biggerpockets.com/blog/real-estate-1164 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

This is how you buy a rental property with a middle-class income. Are you stuck in the middle-class trap? You got a good salary. You're saving where you can. No frivolous spending. But you just can't get ahead. Real estate investing is this unmatched tool for people in the middle-class to gain greater financial security, to take control of their financial futures, and to move towards

true financial independence. Today, I'm going to tell you the exact investing strategies that work in 2020. 25 on the middle class. Hey, everyone, welcome to the Bigger Pockets podcast. I'm Dave Meyer, and I'm so glad to have you here for today's episode. This one is going to be a good one. One of the fun parts of my job is that people send me a lot of questions about real estate, about the market, about my sandwich preferences, but one of the things I've been hearing

a lot about recently, whether in these exact words or something similar, is, can you get started in real estate investing from a relative? relatively normal financial background, like a classic, solidly middle class income and savings. Can you get into real estate given what are some real affordability challenges in the market today? And to me, it's not just can you, which you certainly can, but you absolutely should. I think real estate investing is an incredible tool, dare I say, the best tool to help ordinary Americans find a sense of financial security and success. Don't get me wrong. Being middle class is great. It is sort of by very definition where the average American is. Well, it used to be very comfortable to be middle class. You could

own a home. You could send kids to college. You could retire at a reasonable age. It certainly doesn't feel that way anymore. Even if you have a job that you like and a solid income, Some of those traditional elements of middle class life in America are just out of reach. Just as an example, Social Security, right? For generations, people have relied on this for retirement. Right now, projections show that Social Security is going to be depleted by 2034 without reform. So you can't really rely on this if you're in the middle class anymore. 401Ks are solid for people who have them, but only like 50% of Americans have access

to a 401k, and then obviously there are things like college and housing, which has gotten more and more unaffordable. You may have even heard of this situation described as the quote-unquote middle-class trap. The idea is that in the middle class, you learn to sort of live comfortably, as you should, but you don't have enough income, given how expensive things have gotten. You don't have enough income to save or invest aggressively enough to secure the financial stability that you want. Does that sound familiar to you? Because this is, I think, the most common

financial situation in America today. And there are tons of reasons for that. We're not going to get into the why today. Because this podcast and this episode in particular is for people who want to do something about it, who want to take action and put their financial futures into their own hands because by my math, the average middle class person can replace their income in eight to 15 years, depending on how aggressive you want to be about it. And that's incredible, right? That provides you a path out of that middle class trap and to the financial security. I think everyone wants and should be entitled to. So that's what we're getting into today in today's episode. So let's do it. All right. So for our discussion here of how to invest in real estate on a middle class salary,

I want to start with a high-level overview of the opportunity in front of you and some of the realistic challenges for people in the middle class, what they're going to face, and we'll, of course, talk about how to get around those challenges. In the U.S., the actual middle, the median U.S. household income is about $70,000 per year. And on a 70K salary, when you look at the average taxes, that's about $55,000 or about $4,200 a month in take-home pay after tax income. The median savings for this group in the United States is $40,000. And so as we go through our examples today and I talk about specific strategies,

types of properties you might want to buy, I am going to be using the exact middle of America, $70,000 a year, $40,000 in savings. So that's the middle for income. But what about the middle for the market? Because right now in the housing market, the median home price is $430,000. So while $70,000 is a good income, trying to buy a house at $430,000 with $70,000 in income is hard. There's something called the price to income ratio. Basically just compares how much the average prices compared to the average income.

And right now, it's over 600. So six X, right? It will take six years, essentially, of your income. If you invested every dollar of your pre-tax income into a home, it would take you. you six years to buy that outright. It's just a helpful measurement of affordability. No one actually takes 100% of their income and invests all of it for six years. It's just a way of measuring how affordable homes are relative to incomes. And so right now it's a six. And if you want to buy property, the lower the better. And so I just want to give you some historical context. In the

1950s, for example, this ratio, that's now 6.1, it used to be 2.2.2. So basically, if you, two times your salary, 2.2 times your salary, botcha house. In the 60s, it was about the same. 70s it was about the same. So for 30 years, it was basically two years of your salary. That was a much easier time to buy a home. In the 80s, it went up to 3.6%, 90s, 4.1%. Stayed the same in the 2000s.

2010s, it was 4.5. And in the 2020s, we're at 6.1%. So this is what I mean when I say that being middle class has changed. You used to be able to afford a home two or three times easier than you could today. It's now 50% harder to afford a home than it was just 20 years ago. But today's going to show you how to get around this. I just want to acknowledge this because I think a lot of people who are middle class want to get into real estate, but they look at these prices and they say, I can't do this.

Well, the pricing and the affordability challenge is real. You're not wrong about that, but you can get around it, which is what we're going to show you. just wanted to call that out. Okay, so next up, what I want to do is a little math. I'm just going to talk about, you know, what the average American has in terms of savings and income and the exact types of properties that you can and should buy. But we've got to take a quick break. Stay with us. We'll be right back. 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

held 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 NREG.com slash BP pod.

That's N-R-E-I-G.com slash B-Pod. If the new year means getting rentals back in order, listings are a good place to start. Avail. Part ofrealtor.com makes it simple to list a rental for free and get it in front of millions of renters. One listing, one click, posted across 24 top rental sites. A Vail even helps generate listing titles and descriptions to save time.

More visibility means fewer days sitting vacant and getting your property rented quickly. It's a fast, free way to find renters without the usual hassle. Get started at Avail.co.com slash bigger pockets. That's A-V-A-I-L-C-O-Bigger pockets. A lot of property managers think their job is answering tenant emails and coordinating repairs. That's not the job. The job of a property manager is protecting and growing your operating income and earning your trust while they do it. And that comes down to three numbers, occupancy, delinquency, and net promoter score. If those numbers slip, your income slips and your trust slips too. And most PMs don't hold themselves to performance standards. They focus on activity, not outcomes. Mind is different. They obsess over the metrics that

actually grow your cash flow. Go to mine.co slash show me to see how mine performs and get a month of management for free. Because if you're going to hire a property manager, hire one that manages your investment like an investment. We all joke that rentals are passive, but if you're spending nights matching receipts or guessing what a property earned last month, that's not passive at all. Baselain fixes that part of landlording, the financial chaos. Their banking and AI bookkeeping system automatically tags every transaction, updates cash flow insights in real time, and builds the reports you need for tax season. You can even automate transfers and move money around without paying wire fees. It's just cleaner. Sign up at baselane.com slash BP and get a $100 bonus.

Baselane is a financial technology company and not a bank. Banking services provided by Threadbank. Member FDIC. Welcome back to the Bigger Pockets podcast. I'm here talking about how you can invest and get started in real estate with a middle class salary. We're going to do some quick bath and talk about the exact kinds of properties that you should be targeting, the price points you should be looking at. We're going to get into the steps that you should take to go buy your first property. But first, we do need to set some expectations. I said in the beginning that you can escape the middle class trap. You can replace your income in 8 to 15 years, all of which is true and amazing. But your first deal, it's not going to be a home run. I'm just going to tell you

that right now. If you're starting with $40,000 in savings, your goal needs to be to get into the game, to grow your equity, to learn what you can about real estate investing so you can start compounding your gains and keep growing. With that, let's talk about some math. If you got $40,000 saved, how do you get started in this high price environment? I'm going to give you three strategies to consider, and then we'll talk steps that you should take to actually execute on these. Our options are traditional, and I'll actually, I'm probably going to give you like a little secondary option off of traditional, so it's like three point five different strides to consider. So two different types of traditional house hacking and then the live

and flip. These are all strategies if you're middle class you can go out and achieve today. Let's start first with house hacking because I know we talk about a lot on the show, but I genuinely believe that this is the best way to escape the middle class trap. I think it's the best way for people to get started in real estate. So I'm going to keep talking about it. House hacking is an owner-occupied rental property strategy where you buy a ideally a duplex, a three unit or a four unit, you live in one unit, and then you rent out the other ones. You can also do it where if you're younger, don't have a family, people will consider this option.

It's a great option. It actually has great rates of return. You buy a single family home. You live in one bedroom and then you have roommates. That's another option for this. The reason this works so well is because if you owner occupy, it opens up this whole other world of financing and benefits to real estate that you don't get if you're just buying a traditional rental property.

So if you house hack or the live and flip, like we're going to talk about, these owner-occupied strategies allow you to put as little as 3.5% down. And if you are starting with $40,000, being able to put down less is going to help you a lot. Because if you're putting 20 or 25% down, you're going to be limited to properties that are relatively inexpensive in this market, like $150,000, which you can do. fine. You absolutely can. We'll talk about that in a minute, but that is limiting. If you put, let's say, 5% down, you can buy something up to $640,000, which really is a much better situation

if you're trying to get into real estate. So I'll just explain that math for a second here. You're starting with $40,000, and I should mention, I'm going to assume that this $40,000 is money that you want to invest in real estate. I hope that you, and you should, have some sort of emergency fund on top of that. Do not invest every dollar of your savings into real estate. If you, you should have six months of expenses set aside that's just like budgeting 101. But I'm going to assume that you have 40,000 bucks that you want to invest in real estate. You're going to have to set aside some of that. So just remember that you can't put all of that into your down payment. I estimate you need about $7,500 for clothes and costs. That's basically the cost of acquiring the property.

and you have to have some money set aside for what are called cash reserves. So when you go and buy a rental property, you need a couple thousand bucks in case on day one something breaks. That is unlikely to happen, but it is the wise, conservative, low risk approach to real estate investing is, hey, things go wrong with rental properties sometimes. That's okay as long as you're prepared for it. So just prepare for it and put a couple bucks, not a couple bucks, a couple thousand bucks aside to be able to do that.

So if you're going to do that, which you must. That leaves you with $32,500 that you can invest into real estate. If you put 5% down, that puts your budget at $640,000. So if you're going to house hack, that gives you $640,000 that you are going to be able to put towards, I think in almost any market in the country, $640,000 can at least buy you a duplex, if not a four unit. Now, I'm stopping at four units because in real estate, they have decided that anything that is four units or fewer, That's a residential property. Anything that's five units or above, that's commercial.

So you don't get the benefits of being able to put 5% down or lower rates. If you do four or fewer, you're going to get these lower down payment options. And you're also going to get preferential rates because people who live in these properties get better rates than I get as a real estate investor if I were to go by a, you know, a similar duplex, threeplex, four unit. So that's what's so great about this. It's going to give you tons of options. Now, what you're looking for in a house hack is not necessarily amazing cash flow. If you can find that, that's great. But your goal with you, you know, if you're middle class, you were trying to just get in the game.

Remember, you just want to hit a double on this one. All you got to do is find something that is going to significantly lower your cost of living. So just as an example, let's just say you can find a four unit for 640 and you can break even cash flow. Like, you're not losing money. You're not coming out of pocket to live. live in, you're basically living for free, right? That's break-even cash flow in a house act. If you were previously paying the median rent in the United States, which is $1,800 a month,

that means that you're essentially saving or earning $1,800 a month because you're not paying to live. And that, if you extrapolate that out to an entire year, that's like $21,000, $22,000 that you have just earned. That's not cash flow technically, but in some ways it's even better because it's actually $22,000 in post-tax money that you're saving, which is worth even more. So if you did that, just think about the math here, right? If you were able to save $24,000 on this deal, then in a year, you might be able to put 5% down and buy a $300,000 or $400,000 house. Or you could wait two years and you'll have $48,000 saved up and you can do the exact same

thing again. And this idea of stringing together house hacks where you go for. from one to the next is like truly if I could recommend one strategy for you to do. This is the one. Do this. Like if you want to know the fastest way to replace your income in real estate, be starting from middle class salary. This is it.

Start with a house hack. Go to another house hack as soon as you can. There are so many examples in the bigger pockets of community. So many people I've interviewed on this podcast who have done this time and time and time again. If you want to check out one episode, there's one that comes to mind is Connor Anderson, episode 1078. he's done this for years. It's a perfect example of how you can really accelerate your financial freedom and gain financial

security in a short period of time just by doing this strategy alone. Last thing I want to mention about house hacking before we move on is some people say you don't want to share walls or you don't want to live next to your tenants. I'm sorry, but like it's really not that bad. I have done this. I have done house hacking. I lived in the smallest unit in a threeplex for years next to my tenant. And honestly, it was fine.

It was great. It totally transformed my entire life. I was living for free. It allowed me to save up money to buy more investments. It really was no different than owning a rental property or living in an apartment, both things that I've also done. This is the best way to start building wealth and get into real estate if you are middle class. And honestly, if you want to escape the middle class trap, you're going to have to do something.

Like, it's not just going to be all easy. You're going to have to work for it a little bit. And the idea of like working for it being living next to your tenant, that is not a lot of work. That is super easy. So like if you really just want the fastest path, do this one. All right. But there are some people who are going to want to do a more traditional route. So we're going to go into our second strategy, which is just buying a traditional rental property, long-term rental property.

You can choose to rent this out long term. I should mention you could also maybe find a short-term rental. But I think you're going to have a hard time getting into short-term rentals with the price. point that you're going to buy at. Because if you're going to go buy a rental property that you're not going to live in, you're going to have to put 25% down. So not everyone knows that when they first get started. 20% downs for homeowners. For investors, it's 25% down. And so if you figure that out, remember, you have 32,500 that goes to your down payment. That's 40,000 minus your closing costs and your cash reserves. That gives you, if you're going to put 25% down, a budget of $162,000. Now, that might not

sound like a lot and it's going to be challenging in these markets, but you can absolutely find deals at that price point. It's not going to be available in every market, right? You're going to have to probably be in a Midwest market or parts of the southeast where prices are still at this level. You can do it in Detroit. You can do it in Cleveland. Those are both very popular investing markets. You can do it in Toledo or Akron or Cincinnati. You can do it in Albany, Georgia, all of Western New York, which are really hot markets. You can do it in Westford. Virginia or Louisiana, there are absolutely places you can do it. But unless you live in one of those places, you may need to do it out of state, which is something I do as well, is not as hard as it sounds.

We have other podcast episodes that talk about how to actually do that tactically. Not as hard as it sounds. It is definitely an option. Now, what you want to look for in one of these deals is you still want to find a great asset and you want it. It has to be cash flow positive. Like at a minimum, it's got to be break-even cash flow. And I know there are some influencers out there who say to invest for appreciation, I don't buy it. I'm just going to tell you, I don't believe in that. I think appreciation is a cherry on top. But if you're just going to buy something that is not cash flowing and saying like, oh, prices will probably go up over time just based on macroeconomic forces, that's not investing. That is speculating and you should not be doing that. That's my opinion.

Other people might disagree, but I don't think you should be doing that. So look for deals that have at these break-even cash flow and are still really good assets. Because if you're getting in the game, you want to find something that's going to be relatively low maintenance and where you're going to be able to attract good tenants. Because remember, the goal of deal one is to just learn, to get in the game, to hit a double. If you buy something that's maybe even a 10% cash on cash return,

it's just fantastic, but it's not in a good area. It has a lot of deferred maintenance. It's going to be a pain in your butt. You may not want to keep going. And so that kind of defeats the purpose of your first goal. I prefer instead find something that's offering at least break even. You know, I'd shoot for three to five percent cash on cash return in a good asset in one of these markets. You want to be in a good neighborhood, in an up and coming neighborhood.

Look for one of those. Again, it's going to have to be in a specific market, but you absolutely can do it if you want to go with this approach. I'm going to offer sort of I told you there are three routes, traditional's one, but I gave you option 2.5 here, which is to partner to buy your trade. traditional route. Basically, find someone else in your life that is going, that is willing to and wants to invest in real estate, but they don't want to do all the work. So you're going to be the person who goes out and does the work and actually buys the property, runs it, executes it, analyzes the deal, does the stuff. They are going to be just a financial partner. Because you don't

need to be able to, you know, borrow a ton of money or partner for huge capital to get this. If you could borrow another 20 to 40 grand, that's going to open. up like a lot new markets. It's going to open up a lot of new strategies that you can use, like value add opportunities that are really going to help you. Now, I know some people shy away from this. They don't want to borrow money. They don't want to partner. I got to tell you something. Every real estate investor does this. Almost every single real estate investor I know partners. I had three partners on my first deal. I've partnered on a lot of other deals. The biggest investors I know. The most successful ones still partner on some deals. A lot of beginner investors,

partner on deals. This is something that a lot of people do. Real estate is a cash-intensive business. You need money. And pooling your money with other people is a great way to get started. And so if you have 40 grand saved, you can do it on your own. But if you had 80 grand, it will allow you to buy better assets. And it's going to, again, open up value add. And this is, I really think a good option. Because if you have your 32, 500 that I was talking, about before and you can buy that asset for 150 grand. That's great. But what you really want is another 20 or 30 grand probably to fix it up and make it really nice. To make it worth 250, to make the rents really good. That way you can flip it or ideally you burr it, right? Then you go and do the burr

strategy where you buy something for 150, put another 30 grand into it, make it nicer. Maybe it's worth 200, 220 after you do that renovation. You rent it out, you refinance it, you pull some of that equity out. You can either pay off your partner if they want out or you could just take that money and go into your next deal. So these are two options for you if you don't want to do the house hack option, which I get. Some people don't. So this is another great way to get started if you're in the middle class. Third option I'm going to give you is going back to a different owner-occupied strategy. But rather than the house hack where you're buying multiple units and becoming a landlord, this one is the live-in flip. This is basically where you go

out and buy a property and you fix it up, you make it worth more, and then you go and sell it, right? It's like flipping houses, but you're flipping the house that you're actually living. This is not for everyone because you're going to be living in a construction zone, but it is a super powerful way to make money. I'll just give you a couple examples. I would recommend if you're going to go with this approach, starting with 40 grand. You put like, I'd say 5% down, put 5% down, use 10 grand, essentially, of your money to buy something. that is livable. Because remember, you're putting 5% down and if you have 10k, that means you could go out and buy something for $200,000. In a lot of markets, you can do this. Not in every

market. So in some markets, you might need to be used 20 grand, for example, of your 32 and you have to go up to $400,000. You want to find something that is relatively inexpensive in your market. Like you can't be going out and buying a median priced home in your market. So even if you live a market where the average price is like 400, go look for something that's like 200 or 220. Like it's going to need some work. But I think the key here is that it needs to be livable because if you want to go out and apply for a conventional mortgage where you can put 5% down, it can't be so distressed that there's safety issues.

Like if you do that, you're going to have to go get hard money. That's super expensive. It's not going to work on a $40,000 loan. I know a lot of influencers tell you to go to that. I would not do that. What I would do if I were you, find a property that is livable so you can get that really beneficial financing. That is what's so good about the live and flip.

That's the best part of the live and flip is that you can go and get 5% down. So go use 10K, 15K, put 5% down, get that loan that is really valuable. Go move into this property and then use the remainder of your money to renovate. And the cool thing about the live and flip is even if you put $20,000 down, you buy something for 400,000, you only have 17K that you, to renovate, that should hopefully go pretty far. 17K, if you're living in it, that should help you. The cool thing about a live-in flip is you can't, you don't need to flip it quickly. Normal fix and flip, you're trying to flip this house in three months, six months, nine months.

But to get the full benefit of a live-in flip, which is a tax situation, I'll explain in a minute, if you live in that property for two years, you get the, all the gains, all the money you earn is tax-free. and so you want to live there for two years. And so that gives you two years to complete your renovations. So you have that $17.5, $20,000 to put towards renovations, which should get you a lot of the way there. But even if it doesn't get you all the way there,

what it allows you to do is as you just earn normal money, get your paycheck, maybe you earn $500, your savings rate is $1,000 a month. You can take that income that you have regularly. Remember, you still need to have that emergency savings fund. But if you're earning more and saving more than you're spending, You can just put that into the renovation over the course of two years. You don't even have to start your renovation right away.

You can just save up more money for the first year, then do all of it with $30,000 once you've saved up some money. Then you go after two years, you sell it for more than you put into it. So let's say you bought it for $200, you put $35,000 into it. Now it's worth $320, $3.10, whatever. You go and sell it. You're going to have $100,000 or so that you can go put towards your next property. now you can go out and buy a traditional rental property for 25% down. You could do a house hack.

You could do another live and flip. This is what I'm trying to share with you is that if you go in and just get your first deal right, doesn't need to be a grand slam. But like this living flip, is it the best most comfortable way to live for two years? No. I'm doing it right now, though. People still do this. Like real experience investors do this all the time.

But it's not the most comfortable thing to do. But also being stuck in the middle class trap is not a comfortable thing to do. So just is it worth two years of your life to try and get ahead and be able to build a portfolio from here for the next eight to 15 years? And then you're going to be out of the situation in a low risk, reliable, proven way. I think it's totally worth it. So these are your options. You can do a house hacker, live and flip. Those are the two owner occupied strategy where you actually live there.

Or you go the traditional route where you can either use your own savings and target a low cost property or try and partner to get a more average price property. any of these will work. These are all options for the middle class that will help you get started in real estate and will set the foundation for building your portfolio. We've got to take one more quick break, but when we come back, I'll share the steps that you should be taking

to actually execute on these strategies. Stick with us. 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-held 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 BP pod. When I bought my first rental, I thought collecting rent would be the hard part. Nope. The admin crushed me. Every night was receipts, tax forms, and checking who was late on rent.

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is hold you back. That's hostfinancial.com where your property's potential meets unlimited financing. Welcome back to the Bigger Pockets podcast. I'm Dave Meyer. Talking about how you can get started investing in real estate on a middle class salary. Yes, even here in 2025. So what are the steps you got to take? We've done a lot of episodes on this. So I'm not going to go in depth into every single step. And I'm going to give you a high level overview. So if you're taking notes or anything like that, write down these things that you should be doing. And then we have other podcast episodes and resources on bigger pockets that can help you with each of these steps. So I'd say like first step is identify which of these four strategies that you want to do.

I went into more detail of step one here today because I want to show what works for middle class today. So I personally would pick one of these four strategies. There are other things that you can do. But I think these are the most reliable, low risk, go hit a double, get your foot in the door, get in the game, kind of approach. So pick which four of these that you want. want to do, that is step one. The second step is if you are not going to do one of the owner-occupied

strategies, you need to go out and pick which market you're going to be in. Because like I said, if you're not partnering and you need to go target these properties that are $150,000 to $200,000, it's going to be in a limited number of markets. And so I recommend, you know, we have some of these on bigger pockets, but go do some research into which one of these markets you want to actually invest in. I think great place to start is look at the Great Lakes region. There are markets like Pittsburgh. I didn't mention that one earlier. I think Pittsburgh's a great market you can consider. There are markets like Tulsa, Oklahoma, that you can potentially in the Midwest. These are places that you can go look at and do your research. Again, there are other resources that will go

into detail that you should follow on finding a market, but some things that you want to look for is one price point. Cash flow potential is the second thing. So you got to get that cash flow potential. And then you don't want to be in a market just because it's cheap. You don't want it to be in a market where prices are going to stagnate or decline. And so you want to check and make sure that the economy is good. The best way to look at this, I would say there's two numbers that you really want to look at

is household growth or population growth. So make sure that's at least stable or going up. And then jobs. You just want to look at the unemployment rate. Are there more jobs coming into that market? Those are going to be really good indicators of markets that aren't just cheap because they're not desirable places to live. But there are other reasons markets are cheap and you want to be one that's cheap but also has the potential to grow. And so you want to check that out.

That is step two. Step three and step four. You can do these in either order. I don't really care. People have different preferences on this. But step three and step four are go to talk to a lender and find a great agent. I'm going to start with lender because I think this is one that people skip often, but especially if you're in this situation where you're in the middle class, you have this, you know, a solid amount of savings, but it's not like obvious that you can go out and buy real estate. Talking to a lender is one of the most freeing and helpful things that you can do because so many people spend their time thinking, oh my God, can I afford this?

Am I going to get a loan? Can I buy that property? We'll just go talk to a lender. They will tell you that for sure, one way or another. Yes, you can buy that property. No, you can't buy that one. Here's your exact budget. Here's how long it's going to take for you to close.

Lenders will give you this information for free. So you can go on bigger pockets and find the lender. You can go to a local community bank. That's a great place to find lenders. You can go to a meetup and meet a lender. There's tons of different ways. You can go call whatever bank you bank with. Go talk to a lender.

See what you will qualify for. It does take a tiny bit of work. It will take you an hour of work. But it will allow you to really understand which things are available to you and allow you to put you in a position that when you go out and find a deal that you're going to be able to execute on it quickly. And that's really important because you're going to want to negotiate in this market and you want to be able to close when you find a good deal. And you need to have your financing lined up. And so go talk to a lender.

Step four, again, you can do this earlier if you want, but go find a great agent. That's the other thing because once you find a market and pick a strategy, you're going to want to talk to an agent who can validate that your approach. is going to work in your market. Because I'm giving you broad generalizations and averages, but you might want to do a traditional rental in Tulsa, and you call an agent, they said, actually, you know, you're going to need more money.

Sorry, this just isn't going to work. Okay, that's disappointing, but you can move on to another market. Or you might call an agent and say, I want to do a house hack. My budget is $400,000. I want to buy a duplex. They might say, you know what? you might actually be able to buy three units at that price.

You need that agent, you need that industry expert to go out and validate the market you're looking at, the strategy you're looking at, and your buy box, basically, the price point that you are willing to pay and the amount that you want to put out. These two people, having an agent, having a lender, is going to be extremely helpful to you in navigating your first purchase. And I get the idea that people are sometimes shy about going out there. maybe you don't know that much about real estate investing yet. That's fine.

This is these people's jobs is to go out and help you find what works for you with your personal circumstances. So go and talk to them. And if they don't want to work with you, fine. Go find someone who will. You know, if there's a lender who's uninterested in work with you, move on. If an agent doesn't want to show you houses because they think your price points too low, I promise you there are dozens of other agents who do want to work with you.

So go find a great one who is excited about you. as a customer. We have tons of those people on BiggerPockets. Go to BiggerPockets.com slash agent, but keep finding TikTok into them until you find the one who's going to work with you. Once you've done that, you've got to drill down into the numbers. That is the next step. You need to be analyzing deals. This is sort of the key to being a real estate investor. You need to be able to spot the good ones. You need to be able ignore the bad ones. That is particularly important in the buyer's market that we're in right now. Buyer's market means there's opportunity, it also means that there is risk and there's going to be a lot of garbage out there.

And so analyzing deals is the way you filter through the garbage and you find the good ones. And we have tons of resources. I have made myself dozens, maybe hundreds of videos, webinars, written articles about how to analyze deals. I have a whole book called Real Estate by the numbers. Different ways to do that. But you want to get good at this. Right.

And what you're looking for, you know, I'm not going to get into all the math here today. You can look this up. but I'll just give you some rules of thumb that you could be looking for. If you're going the traditional route, like, you know, putting 25% down, not living in the unit, what you want to look for is cash flow and low maintenance. When I'm analyzing the deals for first deal, you want to hit a double, look for positive cash. So I'd say three to five percent cash on cash return would be great if you do better than that. Amazing.

But three to five percent, I think is going to give you a really solid place to start from. Because remember, that's not your only return. You're also getting amortization. You're hopefully getting at least keeping up with inflation appreciation. You're getting the tax benefits. All in all, if you're getting a 3, 5% cash on cash return, when you look at the big picture, you're beating the stock market. You're beating almost any other investment out there.

And your cash on cash return will grow over time. Rents grow up. And so I think if you're trying to get at this price point, 3 to 5% is a good rule of thumb to look for. You also want to look for low maintenance. Don't just go chase the best cash flow. chase something that has decent cash flow, but is not going to be a huge headache and going to cost you a lot of money. So you want something that's probably built at least in the 1950s, 1960s.

You can find something that was built before that, but it has to have been renovated. You need it to have new systems, right? You can't be buying something with old plumbing, old electrical, super old HVAC, a faulty roof, none of that. You got to find something that has some updates and has cash flow. Those are the things I would target in my analysis. For house hacking, number one thing is reducing your living expenses. You still want to buy a great asset. Don't buy something that's just that stinks just because it's going to, you know,

reduce your living expenses. Find something that you feel like is going to grow over time, that you're proud to live in, that you're going to enjoy living in it. Like, that matters, right? Somewhere that you are okay living in that reduces your living expenses or maybe even gives you positive cash flow. That's what's going to, you know, the analysis, focus your analysis on that, and you are going to find a great deal if you're willing to house.

hack. Highly recommend it. You're trying to identify a property that has a very big difference between what you can buy it for and what the fixed up value is going to be. In real estate, we call that the after repair value. And so what you're looking for is, you know, I can buy this for $200. I can put $20,000 into it. I could sell it for $2.80. That's going to build you $60,000 in equity. That's awesome. That's a great flip. I'm just making those numbers out. But that's what you're looking for. It's like, can I buy it for $2.50? Put $20,000 into it. Sell it for $3.10. Still a good flip. You're getting it. a good return on your investment. And remember, a live and flip, all of that equity you gain is

tax-free. So that is a cherry on top for that strategy. So again, we have plenty of other resources on bigger pockets where you can go and learn sort of the tactics, the nuts and bolts of how to analyze these deals. But that is step five here is to make sure you analyze deals. Moving on to step six, go make offers. You need to get a little comfortable low-balling in this kind of market. And it's actually not low-balling. I shouldn't call it that. It's offering what the real value is. Because right now in the market in 2025, one of the unique elements is that a lot of sellers are anchored on prices from 2022. They still think that they have all the power and that prices haven't come down, but in a lot of markets, they have come down, especially for low, you know,

distressed homes that need a little bit of love. Those prices have come down in a lot of markets. And so you need to protect yourself to maximize your returns. You need to buy. a little oftentimes below list price. There are sometimes properties go on the MLS and they are listed appropriately. Sometimes they're even listed low. That happens. I've bought deals that I am surprised why they have listed it so low. That happens.

But more common right now, people are listing above what you should actually be paying for it. That's why you should have a great agent. And you need to be able to be comfortable offering below list price because a lot of times the value to you as an investor is lower than what the seller thinks it is. Not every seller is going to accept that. And that's okay. They are entitled to sell it for what they want to sell it for, to hold out. It might sit on the market. Who knows?

But you have to stick to your numbers. When you analyze your deal, you need to figure out this is the amount I am willing to pay for this property. I'm going to offer that amount. And if I don't get it, so be it. That's fine. So that is something that you need to just get comfortable. That's step six and that's making offers. Hopefully, if you do enough, it might take you five offers.

It might take you 10 offers. You might get on the first try. I don't know. Right now, it's easier to get offers accepted. You might get on the first try. Once you get one of those done, you close, which is easy. Your agent, your escrow officer are going to help you with that. Then you got it. Step seven, this is just, you know, this is just executing your business plan. Like, I gave you different strategies. It's whether it's a traditional approach, live and flip, house hack. But each of them, you got to go execute your strategy and start to build for your next property. Because remember, that first deal is just to get in the.

door, learn and start building towards the next one. And so you need to execute for the next year or two on what's next. So for a house hack, that's going to be saving money and so that you can go and get your next house hack, ideally in one year or maybe up to two years if you're saving money enough. That's your business plan. Run your deal well. Learn to be a great landlord. Learn to take care of your tenants and to create mutual benefit.

Learn to keep costs down to be efficient and save money. That's what you do as a house hack. execute on that and you're going to get your second property one to two years. You're going to be well on your way to financial freedom. If you are to live and flip, move into that house, start renovations and over the course of two years, complete that renovation so that right when you get to two years and one day, you can go sell that property, get all that tax-free equity and invest it into the next deal. That's your business plan. Go execute that. If you're going to do the traditional route, it's a little bit harder business plan because you're going to be earning cash flow,

yes, a couple bucks a month, but you're going to have to figure out how to get that next deal. The ways to do that are either do value out on the first deal. So again, try and partner buy something that's in decent shape, but you can do a cosmetic rehab and boost your equity so that when you refinance or sell, you have money to invest in your next deal. Or in the next year or two, as you're running and learning to manage your first property, go find a partner for the second deal. And it will be easier to find a partner on the second deal because you have experience and you've done this yourself.

And so maybe you go and look for a partner down payment partner or someone who wants to partner with you to fund a renovation on your next deal. That's sort of the business plan you need to go out and execute if you're going to go the traditional route. Then step eight is to repeat these things. Do your next deal in one to three years. Now I know that so many people on social media are like, oh, go buy nine deals in the first year. year. I have seven units in six minutes. That is not the goal here. At least for me, I have built my portfolio over 15 years. And I have a rock solid real estate portfolio because I've taken the slow and steady approach. I try and hit doubles. Some of them have turned into home rounds.

Some of them have turned into grand slams. But I didn't go out there taking on extra risk, trying to, you know, do every little thing, trying to invest all my reserves, do risky strategies. just try and hit doubles. And sometimes it just things work out and you wind up hitting a home run. That is the approach I recommend to anyone in the middle class trying to get in real estate. And if you do this, you can retire. You can have financial independence in eight to 12 years. So just remember that the goal is to get in the game. Try these things. Learn and then do it again in one to three years and you're going to be well on their way. And I just want to call out one last thing here is that these strategies will work for people in the middle class.

But they are not just strategies for people in the middle class. These are really common things that almost everyone does. I started with three partners on my first deal. My next deal was a house hack. I'm doing a live-in flip right now. These are great strategies. And they start and build momentum. And if you want to keep doing them, you can keep doing them as long as you want because

they are proven ways, low-risk ways that you can get into real estate, get out of the middle-class trap and pursue financial independence. All right, that's what we got for you guys today. Thank you so much for listening to this episode of the Bigger Pockets podcast. I'm Dave Meyer. I'll see you next. 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. The show is produced by Ian K. Copy your writing 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 Pockets LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast. Thank you.