BiggerPockets Real Estate Podcast - The BRRRR Formula Has Changed (It Still Makes You Rich) | AMA (Ask Meyer Anything)

Starting point is 00:00:00 If you're struggling to move forward towards financial freedom keep listening or answering your question today. Let's up everyone. It's Dave Meyer, head of real estate investing at Bigger Pockets, joined by Henry Washington today and we're diving back into the bigger pockets forums to help the people out with a little Q and a We're going to touch on how to make a burr work in today's environment when it's the right time to scale up from residential to multi-family investing. How to invest it a very young age and much more. Henry, how's it gone. So, live, happy to be here. Good. Well, we've got some great questions. A couple of them, I think are right up your alley. So let's jump in. But first, I want to remind all of our listeners that these questions come right from the bigger pockets. F o's, right from the bigger pockets forums go to bigger pockets.com slash ff forums where you can ask three million bigger pockets members,

Starting point is 00:00:55 your questions and they might just get picked to be answered here on this pf, all right, h, h, h, our first question today comes from David in Houston. He asks for those focused on the burr strategy what strategies are using to find deals in a market with rising interest rates and fluctuating property values. You're having more success sourcing off-market properties or do you focus on distressed opportunities through agents or wholesalers. and with lenders tightening up are you still able to generate your desired profit when you refinance. this one like a set seems right up your alley do a lot of renovation value ad investing, Henry, give us some insight into how you're managing it these days. Yeah, it was like 17 questions and one. Yeah, it was. Yes, we will be here all day. Let's start with the first one. What strategies are using the find deals. We're mostly sourcing our deals still through direct mail and some other channels. We use a auto direct mail. We do some paper click running a f r r r r w w w w w w w w w w w w,

Starting point is 00:01:52 that out people who are looking for us to be able to be able to find us easier but answer is question what you really just need to do is figure out what you're willing to spend to find deals. We all spend something to find deals, but you're going to spend time or you're going to spend money and so he needs to take an inventory of what he has. How much time does he have to find deals and how much money does he have to find deals. If he's got money and not time then this the strategy you can reach the most of most and people with the least amount of dollars. Typically that's going to be direct mail or some sort of cold cool calling service if you have time but not money making offers on the mls is a great strategy, but you're going to spend time both looking through a ton of properties, analyzing a ton of properties and then making a ton of offers and then it's not just making the offers but people forget the real takes up the is the follow up is you having to check on that list every week and see okay i reached out to these people and made these many people and maybe these many offers now I need to follow up and see did they counter did they not counter, can I send a second offer or what kind of

Starting point is 00:02:59 f f f fs, that's what takes a lot of time that's what takes a lot of time that and analyzing of the deal so that you can make the offers so it's just a matter of figuring out what do you have to spend time or money and then pick a strategy that fits the budget you have. Yeah, totally agree because for me it hasn't changed either. I still primary get deals from agents, uh, uh, pocket listing, uh, but it's not like I'm going out and sourcing these off market deals myself but it costs me time not in that it's like I'm sitting I'm a computer all day or doing anything but it I just get less deals you know I I don't have as much volume as Henry does because h, Henry is going out and being much more proactive about that and that hasn't really changed. This is

Starting point is 00:03:39 sort of how I've always done it sounds like Henry's kind of doing what he's always done. And yeah, like there are less deals on the market day if you look at inventory than there was four or five years ago, but it's actually starting to go up. I'm already starting to see more deals and deals sit on the market longer and just as a reminder this question came in the context of burr but I think what Henry and I are both saying applies to any kind of deal find it right now it doesn't it's not strategy specific. and then it said and with lenders tightening up are you still able to generate your desired profit when you ref finance no yeah Let's use a fs you's a billion dollars on every deal and I can't generate it well tell me more. I'm going through several refinances right now of properties and some of them we're having to leave

Starting point is 00:04:28 Chach in them more than we expected because rates did not go down like we had hup to when we of them a year or two years ago some of them we are having to bring cash to the table in order to to re-fx them yeah typically that is because when I put it didn't put any cash down. So we were we were able to buy them without having to put any capital into it and since that we are refinancing them at rates that aren't as low as we had expected when we under wrote them we are having to put the money that we didn't put down down down now to refinance it, which isn't the into the world no i guess for me this question about burr is really about ex-spectations and i was actually interviewing another investor about this

Starting point is 00:05:09 yesterday and he admitted that he sort of became obsessed with this idea of a f r or where you can pull out a hundred percent of your equity and i've just been trying to tell people all year about the fact that when that was going on when the burr book came out from bigger pockets like that was a very unique time interest rates were super low and property values were appreciating burr still works i like i just i don't know how else to say it it's still works if you have app appropriate expectations if your expectations or that i'm going to be able to continuously buy property and put zero money into any of them you're going to be waiting a

Starting point is 00:05:44 a lot time but if your expectation is hey I could build tons of equity and hopefully pull of my equity out during a burr you could probably still do that. Yep, you can probably We still do that. You know, some real life examples. I have plenty of investor friends who are doing burr's right now and pulling all of their money out. Why? Because they bought some phenomenal deal. Yeah. at such a cheap price that they're able to do it. So have investor friends who are burring, and my self-en-h-h-hs, who are not pulling nearly as much out as they expected to. and that's okay. That's still a burr. Yeah. When I caught the bur boot camp for bigger

Starting point is 00:06:21 fs the first lesson of the burr boot camp was to change what you think about burr deals and your expectations because yeah, even if you can pull out one fourth of the money that you put into it like that's still be awesome. It's great. It's still burr you don't have to do a full burr. The basic of hib hs, is accelerating your scale right, you're taking money and rather than leaving it as equity in an existing being it out and applying it to a future deal that is still true even if it's not a hundred percent of your deals and who's right it a perfect burr is still possible but they're going to be rar and i actually asked this question to the investor yesterday i asked him straight up i was like do you think you would have been better off just doing a couple regular deals instead of waiting for this perfect sort of gauly lock scenario and he was like yeah I definitely should have just done a couple of deals where I pulled less money out and obviously it's going to be different for everyone's situation but I think that rung true for me that doing smaller deals more frequently is also a very effective way to scale and perhaps more effective than waiting for some perfect scenario.

Starting point is 00:07:28 You can also be a little more open-minded or realistic about your time frame when you do this as well. Like, I'm refinancing two properties right now that I bought three years ago and I'm refinancing them and I'm pulling cash out of them. I'm pulling about 50 thousand dollars out I paid no money down to buy these properties and and now a few years later after they've been cash flowing well I'm able to refinance them pull some out they still cash flow after I pull money out it's good situation for me so it didn't it didn't happen in just you know six to 12 months where I heard it had to wait a few years but the opportunity is there you just have to rethink what a bird deal looks like it's not the same as it was i'm doing the same exact thing i've renovated property have some equity sitting in this deal that i can pull out but because i'm not as aggressive as deal finding i don't have a deal to put it into right now i'm

Starting point is 00:08:19 looking and i'm waiting and i'll refinance it when i'm ready like when i need the money i'm just gonna to enjoy the higher cash load by keeping that equity right now and then I'll refinance it when I found another deal. before we move on to our second question just want to call out that this segment is brought to buy re simply s r r m built for real estate investors automate your marketing skip trace for free, send direct mail, and connect with your leads all in one place. Head over to re simply dot com slash bigger pockets now to start your free trial at 50 percent off your first month. All right everyone stick with us. We'll be right back for more forum questions. thinking about wholesaling or flipping your first property but not sure where to start the truth is deals don't just fall into your lap anymore you need to go out and create opportunities that's for props

Starting point is 00:09:08 St, with PropStream, you get instant access to over a hundred and sixty million properties nationwide. Use 20 pre-built lead list such as pre for closures, tax delinquencies and vacant homes to find motivated sellers fast. F, and now, PropStream has integrated batch leads and batch dialer to provide you with a complete all-in-one solution. that means you can not only find motivated sellers, but you can also reach out right away. Sik trace phone numbers free on select plans then send postcards emails or call sellers directly. Don't worry if you're new. Propstream also gives you a i powered insights and coms that are over 99 percent accurate. Do you know you're making smart offers plus you'll have access to Pops stream Academy to guide you step-stst, okay, to guide you step by step. start your seven day free trial and get 50 free leads at Pops stream.

Starting point is 00:09:52 F, up, p, F, R. F, F, F, f, F, F, F. S, F, F, F, F, F, F, F, F, F, Ft, F, F, F-S, F-S-E, F, F-E, F F. F-S- Ft, b b b f don't just dream about real estate make it happen with props stream. Did you know your house gets bored when you leave. I can't actually prove that, but it probably miss is out the fs, the footstaps the late night fring rids, yeah, when you're gone, your place is basically It's sitting there in the dark thinking I could be being, or, your side room wants a side hsle. Even your wife f f, is like, we could be networking, you're on vacation, spending, spending money like it's a sport while your staircase at home is fully capable of sending your

Starting point is 00:10:33 i, here's the twist. You can go on a trip and actually earn b b b makes that possible with the cohost network if you're away for a while or have a a second or have a secondary property you can hire a vetted local cohost with real host real hosting experience to handle it all a coast can handle guest people people, it can manage reservations and keep things running so you don't have to check your phone between each days that means less stress and more time enjoy your trip you can relax knowing guests are taking care of and your place is in good hands you travel your house works everyone wins if you're ready to host but

Starting point is 00:11:10 you're ready to host but you're ready to use some help find a co-hast at air b b b b b b h hos Okay, we're going to shift gears for a minute to cover something important, especially for new landlordss. The shows often talk about getting stuck doing everything ourselves and the cost of sweat equity. The key question is simple is my time better spent elsewhere. I use a tool that cuts down on a lot of landlord hassles. And the wild part is it's just $12 dollars a month. It handles rental screenings, rent collection, maintenance requests and accounting. All in one platform via a mobile app or desktop. It saves me time and tenant communication and keeps me organized for tax. It keeps me organized for tax. It's called rent ready and you can sign up for a six month plan for just one dollar with promo code bp 20 25 pro users get it for free because we believe in it. just sign in through your pro account to get started. Rent ready helps insure on time rent with auto reminders, people, and lets you post listings to multiple sites. Check it out at rent ready dot com slash bigger pockets. That's rent r e d d i neurot которого suppressed 58 average have you ever lost D Scyr deal because the financing just took too long red flags popped up thought up late the lender needed more time the deal felt part our friends at diminian financial

Starting point is 00:12:20 just launched a program to help prevent that with a new express rental loan you can close in 10 else and they still offer their price meat guarantee so you can get great pricing and a time light you can count on fast, simple, reliable. That's dominian financial. Check them out at bigger pockets.com that's bigger pockets dot com slash dominion. Welcome back to the big or pockets podcast. I am here with Henry. We're answering your questions. We just talked about burr next question comes from Damian in hartford, Connecticut. Damian says I'm a rookie investor with one long term rental deal under my belt that is cash flowing more than a thousand dollars. That's great. I hope that means a

Starting point is 00:13:04 as I take in as much content as possible from listening to real estate P podcast and the rookie podcast I feel drawn to building multi-famil multif families and renting them out. I have a w two that I'm passionate about so I feel this process will allow me to make sound decisions as opposed to quick fix and flips. I also have a family friend who's a gc building multi family homes. I'm interested in any advice on a bill to rent strategy. Okay. There's there's a lot here. There's a lot here. We got some juicy questions today. How about this. Anytime I hear rookie and building multi-f family in the same sentence I am scared. I was trying to figure out a nice way to say that say that. It's not that it's a bad thought process and not at all. I I am 15 years into my real estate investing career and I am scared to be old f f f f fs at maybe i'm too timid i don't know i'm some of a conservative of a It always worries me is when you change a lot of variables at once. So you're going from buying existing homes to developing you're going from a single rental to a multi-family home you're talking about going from stableized assets to

Starting point is 00:14:31 to build to rent there are a lot of different things a lot of things to and my recommendation is if this is your gold built a rent multi-family that's great personally what I would do is try and get there over the course of four or five deals by making incremental steps towards this you know you're probably going to need 10 new skills between now and then try and learn two of those skills in your next deal then try and learn two of your skills on the Supsk good deal and two more of those skills and build your way up to this because this is a big swing nothing wrong with that but I personally would recommend trying to get there a little slower. And please don't take this advice as us telling you you're not capable of doing this. It has nothing to do with that. You are probably absolutely absolutely capable of getting this done. But what you have to consider are what is the risk if I fail. Because it's a real possibility and there's a lot of risk in development.

Starting point is 00:15:31 Experians developers fail. Yes. There's a lot of up front cost with developing that you just spend and do not know if you'll get the grain light on your project. And you don't hold the cards that allow you to pull this off. Somebody else, several somebody else's, several somebody else's have to sign off and agree that you get to do what you want to do. A lot of opinionated city council members. You get to decide what goes out here. Yes, yes. Yes. And so I agree with you from the of like there's a lot of skills you need to build to pull this off successfully could you pull it off successfully, you absolutely could. Could you the one thing in this question that I like is you said you have an experienced develop, yeah, that you have a relationship with and so what I would tell you to do is to go get with them and figure out how to be someone that can either job shadow and

Starting point is 00:16:31 value in some way to be a part of a project that they're working on. Can you take a minority partnership state and it would deal that they're working on. Can you bring them a and then partner on them with them, bring them a land deal or something and then partner on it like don't take on all that risk at first without some experience but after you've got some experience then maybe go take it on on your own or maybe go try to build a single family home it's a lot less risky to do a single family new construction build they're pretty easy to get approved in the right areas The land cost is pretty low depending on where you're buying the land like it's a lot less risky but you'll get all of the same experience and skill sets that you need to go do a larger project. look I am an experienced investor I've done hundreds of real estate deals there have been at least three times that I've had a piece of land that I was going to build multi-family on and started the process and just went

Starting point is 00:17:30 bs, man, and so and just sold the land to an experience developer. That's a good business, I like that. And I made money every time I did it. I made money every time I did it. It was a lot easier. Um, um, and I'm not saying like I could do it. I could do it. I could do it. The amount of time of time and effort that it was going to take and how much of that time and effort it would take away from me doing things I'm really good at just didn't make sense for me. Yeah. But I know enough to know that's not easy. I know enough to know that's not easy. I know enough to. I know enough to. to know that you can spend a lot of money and not get a pay day for it. Yeah. And so just be careful and if you have somebody experience that you can work with, find a way to work with them on a deal. every time I ventured into a new real estate niche. I didn't do it on my own. I found somebody who that's what they that's what they focus on and I found a way to add value to them to partner with them. That's how I bought my mobile home park that's how I bought my first commercial real estate deal. Yep, did not just go buy them on my own. I went into them with partners and I went into them with such good deals that if I had to get out if I had to turn around and sell the asset as it sat I was going to make money. So it limited my risk. So just be careful.

Starting point is 00:18:45 the other thing I would say is that built to rent sounds great, but you need to think about the liquidity of this like a lot of the times that the way this works is the person who builds it and develops it is not the person who holds on to it and operates it because they need the cash back there's so much. There's so much. F, and time put into developing the property, they sell it to an operator and then they go on and develop it. the development of bill to rent and the operation of it are often different businesses. And so I think you need to sort of think a little bit about in which business you want to run there. All right. Let's move on to question number three comes from Craig who said I'm starting to see the light. This deal would be my first deal focusing on equity gain and appreciation. All right. So, 's moving on from a k, a cuch flubs session that sounds like he says it's a three two house I found a off market for 1 75. Mechanicals are all less than five years old so it needs less than 15 thousand to be an excellent shape. I beat a hundred ninety k all in with 25 percent down at conventional law. Saving 15 percent for repairs, vacancy, and cap x, I would cash a 1 28 per month, according to the bp calculator, and cops, so I guess the ar v would be 2. I have five rentals and a hundred twenty eight bucks per month would be my lowest cash flow but I'm focusing on the 30 grand plus in equity would you do this deal. Me now yes, me just starting out probably not say more about that. So if you're a brand new investor and you're just starting out

Starting point is 00:20:18 cash flow is important yeah because it's your safety net it's how you protect yourself in the event that something goes wrong and so that's a big chunk of change that 25 percent down to only beginning a hundred and something bucks in cash flow I mean one thing breaks and your cash flow's gone for the year. Me now me today like buying a deal where you're walking into 30 thousand dollars of equity where you're going to be able to cash flow it and it'll be a performing property which means I can do a cost segregation study on it and accelerate the depreciation on that asset which will save me another 20 to 25 to 30 grand on my tax bill that year. So I've got equity, I've got cash flow, I've got app, I've got pay down through my tenant pay and the mortgage. That's a win all day long in my book now, because I'm less concerned about the cash flow now that I have a performing portfolio of cash flowing I would say that for me personally I would probably do this deal I'm just doing a little bit of the math in my head um and I agree with Henry like I would do it now but I would also consider doing it as Craig said that it's his fifth deal. So I would consider if I were Craig too. So let me just do a couple of the numbers here. This deal roughly I'm just estimating based on what we know would get him about a 3.3 percent

Starting point is 00:21:42 cash on cash return. Now that's not the most exciting cash flow in the world, but if you've been listening to the show this year, I've been preaching this idea of upside and find deals that makes sense today, but have some ups side that can really generate better returns in the future. So if this deal was like in a just okay area, rents were probably not going to grow, it's not in a great market, I wouldn't do it. But if this is a good market that rents are probably going to increase over the next couple of years, maybe there's some good zoning, maybe you're in the path of progress, like, then I would consider this deal because as long as you're holding back enough for repairs, vacancies, Kapp X which you might need to do a little bit more than 15 percent and it's going to grow in the future like I think this could be a pretty solid deal right now. I think this is a decent one. Yeah. I think is decent just a Bs hit real estate deal done the old fashion way.

Starting point is 00:22:36 some money down get a convention alone makes some cash flow, a asset that doesn't take a ton of maintenance. I mean that's that's what you look for. Exactly. He's got five of these. So if this is a six you buy five more of these over the next of years and this kind of deal is not that hard to find. You own ten of these you start paying them down you pay them off in 15 years you're retired like this is old-fashian financial freedom and 10 years to look at this deal for like a genius. Exactly. Yeah, yeah, yeah. I think that's why yeah, people over think these things things things things, but I agree with you like this was my very first deal I would want a bigger cushion not because I needed more cash load, but because

Starting point is 00:23:16 you're not as good as underwriting and you just don't know how much things cost and you can you can you can learn and plan as much as you want and I hope you look at all resources we have on bigger pockets, but you're just gonna you're gonna get a little bit wrong and so you need a bigger cushion you need that 200 50 bucks 3 hundred bucks just in case that would be my recommendation so I think Henry and I agree on this one. All right thanks for your question Craig good luck you on landing that deal we do have to take a quick break will be right back with more forum questions think about wholesaling or flipping your first property but not sure where to start the truth is deals don't just fall into your lap anymore you need to go out and create s, that's where props stream comes in. With prop stream, you get instant access to over a hundred and sixty million properties nationwide use 20 pre-built

Starting point is 00:24:05 beat-built lead list such as pre-forclosures tax delinquencies and vacant homes to find So, the, ,, and now, PropStream has integrated batch leads and batch dialer to brav-d-do with a complete all-in-one solution. that means you can not only find motivated sellers, but you can also reach out right away. Sik Trey's phone numbers free on select plans, then send post cards, emails, or call sellers directly. Don't worry if you're new. Prop stream also gives you a i powered insights and coms that are over 99 percent accurate. So you know you're making smart offers. . Plus, you'll have access to PropStream Academy to guide you step by step. . Start your seven day free trial and get 50 free leads at Propstream.

Starting point is 00:24:41 r r r r s t r s t r a m dot com slash b p. Don't just dream about real estate. make it happen with props, did you know. your house gets bored when you leave. I can't actually prove that, but it probably miss is out on the action the footstaps the late night fring rids, yeah, when you're gone, your place is basically it's sitting there in the dark thinking I could be of,

Starting point is 00:25:10 ,, your side room wants a sidehs, even your wifs, f, you're, f, f, f, f, f, f, f, f, f, f, f, f, with the cohs, if you're away for a while or have a second day, you can hire a veted local cohs with real hosting experience to handle it all a cohs can handle hs, you can handle guests, w w w w w w w, if you're ready to host but could use some help find a co-hs, b b b b b d d rs of the tx avi investors is here you don't need a huge team or tons of overhead to manage rental properties just the right tools too i want to tell you about how i use rent ready to get a head for lords who treat their time like cap and recognize the cost of sweat equity this tool gives you everything you need to scale rent collection, tenets screening maintenance accounting so that your organized come tax season and you can run numbers and

Starting point is 00:26:25 for future deals and more all in one platform via a mobile app or deskt top modern landlord's don't just own property They optimize it. Rent ready will keep you organized, running leaner and ready to grow. Start with rent ready. choose rent ready dot com slash big or It's an IRS compliance strategy that lets you accelerate depreciation on your properties, which means you're paying less in txxs this year, and keeping more cash in your pocket for your next deal. Cogs, to keep tenants happy and owners' f f f fs, one delay can throw everything off. that's why hundreds of property managers rely on bill to

Starting point is 00:27:52 s, possible and currently living at home with low expenses. Should I buy a duplex as a hs as a house hack and cover the negative cash flow to start building equity or should I take of my low living costs and invest out of state in a more affordable market. home prices on long island depreciate quickly so I worry that waiting can make it even harder to afford a home when I eventually move out what would you do in my situation have a lot of questions but where would you go with this one I do too this may not be the people I don't know that I would be that I would be anything yeah I would go go

Starting point is 00:29:30 would go get a job in the real estate field somewhere maybe you're working or an agent or an appraiser or a contractor but something where you're gonna learn of the business and just stack as much money as you can you can you're living at home yeah, and then go buy yourself duplex and house hack it like when you have to move out. I don't know that I don't know that I would give up the free living cost of living expense because that's typically everybody's highest bill each month and you don't have that so just go try to get the highest the highest paying job you can and stack as much money as you can pretend you have to t r rants every month and just stick that way way away so yeah honestly I would do the

Starting point is 00:30:13 thing and I know that this is probably not going to be a popular opinion but I get the s, like, oh, you see properties going up in value and you want to, you want to, you know, get it on that. Which I get, I do personally think we're going to have not negative, but relatively slow or appreciation. So that's one thing. The other thing is that real estate is leveraged. So just think about the math here for a second. Let's just imagine that the house hack that you're going to do, Sean, is five thousand thousand dollars today. That means if you put five percent down, which is a solid amount is 25 thousand thousand. as you would need to put down. If over the next year or two, properties let's say they went up a lot 10 percent that would be a pretty big in my opinion to 5 hundred and 50 thousand the amount you'd have to put down if you're you're putting 5 percent down goes to 27 thousand five hundred so even even though the property price went up by that amount and you would miss out on some appreciation the affordability problem is probably not going to be that big

Starting point is 00:31:12 because you only need to put another two thousand five hundred dollars down meanwhile as henry said if you're saving two thousand dollars per over the next two years that's 50 grand you're saving so that makes up for the and it's just a more conservative way to go it's a safer thing because when you go and you go and purchase your property one you can choose to put more money down you can pay less and you just have more cash reserves or you can buy a househs, or you can buy a house hack and then quickly follow on with another property. It would just give you a better, stronger financial foundation. F,

Starting point is 00:31:45 f r f-t, it's just a long term game and I know you want to get into the of the market as soon as possible, but I think building the strong , f f fn foundation is what gives you the stang power, right, you can rush into it, and if you're not ready and have a strong financial position, you might need to sell that and then you'll get out of it after two or three years and then you're starting over. If you wait a or two and build a really strong cushion, you're going to be in an amazing position to be in real for 15 years you're probably going to be financially free by 35 or 40 like I would just recommend and taking that more patient approach personally just rethink in your brain

Starting point is 00:32:22 what it means to be an investor like you're thinking I want to be an in the in the game now but I would tell you that positioning yourself by s being at home and then saving as much as you can per pretending you have a a mortgage to pay for the next two years and just paying yourself that money that is an v v v v vs, you are investing totally you just haven't bought the property yet. So just re-resh out you're thinking about becoming an investor you already are one by doing that. that's great advice let's move on to our last question for the day which comes from a bigger Pockets member named Kylie she asks do any of you invest in small towns I'm thinking a small

Starting point is 00:33:03 t'r, I think a small town that has major stores and isn't too far from a big city could be a great place for me to start how do i cop properties in an area without many sales and what else should i know about small town investing now normally henry i would make fun of you for arkansas being a small town but it's just not so do you i know you you have like a couple auxiliary properties outside of northwest ark and side are any of them in small towns. Yeah, yeah, yeah, jopla, missouri, pittsburg, kansas, all right and what do you think about it I like it I like it cash flow towns appreciation is slow cash flow is great um because the job market and the economy is great and so the things you would need to focus on is really the answer their question if this were me I

Starting point is 00:33:49 would define what I feel like small town is right yeah and then once you have that definition you can literally ask chat gp t this stuff now you don't have to like go searching all over the place or you can get a list of t's with that population density you're looking for and then what i would be looking for is what's the economy like there like what drives the like what drives the kind of, and is their population growth because if you got a small town where population is growing where there are jobs that people want and people are moving to the or you can pretty much expect that property values are going to continue to go up in the area and rents are going to to go up in that area and so it's just a matter of you need to figure out what other economic

Starting point is 00:34:33 factors are important to you and then find market that has all those economic factors and then you can and start looking for properties in those areas. I only own one property in a small town, but I've done a lot of research into this. So just take this with a grain of salt, a lot of this is sort of like academic and not from experience, but I think that small town investing can actually be really lucrative. But as Henry said, there is a broad, broad range of what it means to be a small town. We saw a across the board universal appreciation and acceleration and acceleration of prices in the u s for many, f f f fs, and I think it's going to slow down. I think it's going to be a lot of these r r r r r r r r r r r r r r rs that were really beneficiaries of

Starting point is 00:35:21 of COVID and the work remote policy. You are already starting to see data, you see reports about this, that a lot of these cities that boomed during or are already losing population, home prices are going down, rents are going down, and so, just be careful about that. I think, you know, just looking at the last five years of data is not sufficient. look at what happened in from 2,000 to now and, you know, try and omit the data from the last five years and if the numbers are still good if the job growth was good if there was rent growth and appreciation 50 years ago 10 years ago then it might be a good idea but I just I I I caution people to not assume that recent performance is going to be continued. I would also say it's cool to be able to to understand how to do a lot of this research yourself it's also cool to know that you don't have to

Starting point is 00:36:12 Because there are a lot of companies who pay people a lot of money to do this kind of research. Totally. For the company and you can leverage that research to help you pick where you should invest. So here's an example. I have an investor friend. He likes to buy properties in aircultz small towns that have minor league baseball teams. Why? Not because he likes minor league, it is very fun, though, to go to the might, but he does it, but he does it because the minor league baseball teams have done the

Starting point is 00:36:46 to figure out what cities have the population and economy to support a minor league Bs, and so he figured he did enough research to know that their economics and and demographic data is my same target market so I'm gonna buy where they're being teams if they're investing millions and sometimes billions of dollars I can go and and buy some homes in that area because I can trust that research it fits what I'm looking for right so think about what companies might be moving to an area you think about right like there's another investor I talked to that said they like to buy properties where they're being new chick filets because if you think about chick fil a only builds in the path of progress

Starting point is 00:37:30 and so they look for where they're putting new chick fleses and then they think what radius around those places could I buy properties. Yep that makes a lot of sense. Other things that you can do I've talked about this on other, I've talked about this on episodes in the past you can buy shares of stores of stores like Lows, h, h, h, h, h, b, b, and minards's, one share, just buy one share and when you buy one share, you now get a shareholder packet when they send them out. In the shareholder packets, they have information about where they're going to go and build new stores. What's cool about Lows and home depots and minards and all these stores is that they get offered tax breaks and tax incentives to go and open up stores in areas where new development is coming so that the developers have a place where they can go get and source materials and so

Starting point is 00:38:20 understanding where these stores are opening up new stores will help you understand where they're going to build new infrastructure where they're going to build new homes where they're going to build up different parts of a city and you can use that research to help you figure out what's all of the rise that are on the rise be the one next step so you don't have to do it all yourself. Yeah and I should just say on a philosophical standpoint the good thing about small town investing that I really like it's like it's like I've pivoted to sort of looking a lot recently at small cities, because I just think there's less competition from other reststers and as someone who's investing from out of state and doesn't do the like aggressive deal finding that Henry does it's better to be in a market that's kind to just like chug and a long and you can sort of be a big fish in a small pond rather. than the vice versa you know on paper i love charl like you know great city i have no advantage

Starting point is 00:39:17 there you know i i i i'm not going to be able to find the best deals there but some of the markets in the midwest that i have strong growth have strong fundamentals and like i can come in and be an aggressive buyer in that market that's really valuable. yeah you buy enough properties in the small town and you can be like the mayor or something. Yeah, it's like four square back in the day. You check in enough times. You've been F, Degg, my, I'm dating my self. Wow. All right, well, this was a lot of fun. Thank you so much for joining me answering these questions today. It's been a good time. It's great. Thank you. All right. Thank you all so much for submitting these questions. Again, if you want any of your questions answered, either by Henry or I or I or the three million plus members of the bigger pockets community, go to bigger pockets.com,

Starting point is 00:40:04 and ask your questions there. Thank you all so much for listening. We'll see again for another episode of Bigger Pockets Pockets podcast very soon. Thank you all for listening to the Bigger Pockets real estate Pets, 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. the host and executive producer of the show dave meyer the show is produced by e and k,

Starting point is 00:40:29 copywriting is by calicoe content and editing is by exs, if you'd like to learn more about real estate investing or to sign up for our free news letter please visit w w w w w w w w w big repkkkkkk's dot com the content of this podcast is for informational

BiggerPockets Real Estate Podcast - The BRRRR Formula Has Changed (It Still Makes You Rich) | AMA (Ask Meyer Anything)

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.