BiggerPockets Real Estate Podcast - The World Has Changed, But THIS Is Still the Best Way to Invest in Real Estate

Episode Date: April 16, 2025

Real estate investing in 2025 has huge, underrated potential to make you wealthy—but hardly anyone is talking about it. As tariffs, mortgage rates, and stock market volatility take over the news cycle, average Americans are turning away from time-tested investments like real estate and worrying about unstable markets instead. This could be a huge mistake because, as I’m about to show you, the ability to get rich with real estate has not disappeared—if anything, the opportunity has grown. For months, I’ve been talking about how we’re entering the “upside” era of real estate investing—a time when patient, prudent investors can make a killing by pinpointing often-overlooked opportunities. Today, I’m sharing the exact “upsides” to look for in 2025 and how I’m buying real estate deals RIGHT NOW that will make me wealthier in the not-so-far future. Even better? I’m proving how real estate BEATS your other investments—especially during turbulent times. Stocks, bonds, cryptocurrency, and even private businesses can’t hold a candle to real estate. Now is the time to get in, and if you don’t, you can be sure other investors will pick up what you missed, building their financial freedom where you could have built yours! In This Episode We Cover: The “upside” era explained and seven different ways to build wealth through real estate NOW Real estate vs. stocks vs. cryptocurrency vs. businesses: which reigns supreme? How to achieve financial freedom in just a decade if you start investing NOW Real “upside” deal examples Dave is doing now to build wealth in today’s market  Huge economic tailwinds real estate has over the next few years (if not much longer) And So Much More! Links from the Show Join BiggerPockets for FREE Let Us Know What You Thought of the Show! Ask Your Question on the BiggerPockets Forums BiggerPockets YouTube Apply to Be a BiggerPockets Real Estate Guest Get Early Bird Tickets to BPCon2025 ($100 Off!) Baselane: Automate your real estate finances with banking and AI-powered bookkeeping. Claim your $100 bonus Find YOUR Perfect Investing Strategy with Dave’s Book, “Start with Strategy” Sign Up for the BiggerPockets Real Estate Newsletter Find an Investor-Friendly Agent in Your Area The One True “Inflation-Proof” Investment (EVEN with Tariffs) Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-1109 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

The world has changed over the last couple of weeks, but the best way to invest in real estate hasn't. If you can't keep up with the economic news right now, you are absolutely not alone. Tariffs are on. Now they're off. Stock market is down. Now it's back up. It's been a complete whirlwind out there, but my real estate investing is staying almost exactly the same. And today, I'll share my updated and adapted upside era investment strategy for uncertain times. What's up everyone? I'm Dave Meyer, head of real estate investing at Bigger Pockets, and I've been buying rental properties for 15 years, and I've written two books on how to invest. And back in January, I released my personal theory on the best way to invest your money right now. It's called the

upside era, and it's based on my analysis of all the economic data that powers the real estate market, and it draws on my experience from my own investing career. But so much has changed in the three months since the upside era began. The entire U.S. economy might be reshaping around us. So today, it's time for a refresh. Call it the upside era of real estate version 1.1. In this podcast, I'll explain the unique advantages of real estate investing during the upside era, why real estate is the single best way to achieve financial freedom and the key investing principles to follow if you want to build life-changing wealth. I'm going to include some from a very volatile first quarter, 2025, and I'll show you some real-word examples of

investment deals that are aligned with this strategy and that most people could find right now. This right here, it is the path to taking your financial future into your own hands. Let's get into it. So this idea of the upside era came about through the recognition that real estate investing has changed. And if you've been in this industry for a couple years now, you probably recognize this, right? This year and the last two or three years look pretty different than the times during the pandemic or the five to ten years preceding that. And maybe this is even the most important thing

to remember about the upside era that even though investing conditions have changed, it's okay. There are still absolutely undoubtedly ways to build financial freedom and to succeed as a real estate investor, even in today's day and age. To me, real estate still offers a very clear path to financial independence, really to anyone who's willing to learn and who is willing to adapt to the new circumstances that we're going to be talking about today. All you need to do is find the upside. And that's really what we're going to be talking about today is even though investing conditions have changed, there's still huge potential in real estate. All you need to do is be able to find the deals that have that worthwhile, very meaningful upside and pursue those.

Let's talk for a minute now about this new era of real estate investing. This is going to be like a little bit of a history lesson, but I think it's really important because it will help you understand why, even though things have changed, there is still great opportunity in real estate. The thing that we all need to recognize is the previous period, which I define as 2013 to 2022. This period of time, I call the Goldilocks era because everything was just almost perfect, right? It was this magic mixing of conditions that made real estate not just profitable. It definitely was profitable, but the upsides and the benefits were just really obvious during that time.

Just as some examples, we had, first and foremost, abnormally high affordability in the housing market. After the crash in 2008, home prices went down. The most that they've ever gone to, down in U.S. history, at least as far back as we have data, home prices crashed 20 percent. That is absolutely huge. Meanwhile, in reaction to what was going on in the broader economy, the Federal Reserve lowered interest rates, they started doing quantitative easing, and this made mortgage rates extremely low during that time. So we had this sort of historic period where home prices were super low and mortgage rates were really low, which made it really easy to afford real estate, even if you were just brand new to real estate, you could get into the market almost

easier than any other time in American history. And actually, if you're watching this on YouTube right now, I'm putting up a chart right here that shows you just how true this is. This is a chart of home price affordability. And I'll describe it for everyone listening on the podcast. But basically, what it shows is that home price affordability, you know, it varies here and there over the last couple of decades, but there's really only one time where it's been as low as it was during this magical Goldilocks era, and that was back in the 1970s. So I think it's important for everyone to remember that this time during the 2010s where everyone was buying all this real estate, that was great while it lasted, but it is not normal. So just remember that things were way more

affordable than they normally are during the Goldilocks era. So that was just one. That was a pretty big one, but that was just one of these near perfect investing conditions. The second thing that happened, which is still happening, actually, is strong demographic tailwinds. Millennials started to age. They're now the biggest group, the biggest generation in the United States, and they are reaching their home buying age. And so that gave a really big tailwind, not just for home prices, but rent prices too, because there was a lot more people who needed apartments for rent. The third great investing condition was those rent prices. Rent grew above its long-term average for pretty much the entire Goldilocks

era from 2013 to 2022. And the last perfect condition was that, unfortunately, during the Great Recession, a lot of builders went out of business. And so there was a lot less construction. And that's unfortunate for, you know, housing affordability, long term, and it's created a lot of problems. But for people who owned real estate during the 2010s, that was actually a boon because there was less competition, there was less supply, and that drove up the prices of existing homes as well. So this is why I called it the Goldilocks era, right? All these macroeconomic demographic conditions combined to make real estate particularly amazing during this time. Now, fast forward to today in the upside era, what has actually changed? Of all those conditions that I just described that

made real estate investing so great, how many of them have actually changed. When I think about them, I'm going to list out seven different conditions right now that I think are really important to the future of the housing market. Housing affordability, low interest rates, relatively low home prices, strong wage growth, demographic tailwinds, rent growth, and supply constraints, right? Those were the things that helped contribute to the Goldilocks era. Of those, I think it's the first few that have actually changed, right? We no longer have super low interest rates, and we don't have relatively low home prices. And this has shifted us from a market where affordability was unusually good, where almost everyone could afford it,

to almost the opposite. We're now at a 40-year low for affordability, and getting into the housing market is particularly difficult. And that is a real challenge. We're going to talk about it a little bit more later in this episode, but that is a real challenge. But the thing I'm trying to convey here is that is the main thing that has changed. Many of the other great investing conditions that existed during this Goldilocks era still exist today in the upside era. We still have strong wage growth as of this recording. We still have this demographic tailwind.

We're still in the sort of the peak of millennial home buying. And the front end of Gen Z is also a very big population. And so this is probably going to last for several more years at least. I also strongly believe that rent growth, even though it's been flat, for two or three years, I think it's going to accelerate in the next couple of years. And supply constraints are actually only getting worse. And I think we might actually see a decline again in construction over the next couple of years.

So when you look at the upside era, yes, affordability is difficult, but there are so many macroeconomic and demographic fundamentals that still make real estate investing incredibly exciting and have huge potential for profit. So that's my analysis of the different eras that we've been in recently. And now I want to turn our attention and our conversation here today about why real estate is still such a great asset class, even despite everything that is going on in the broader economy. We're going to do that right after this break. They say real estate investing is passive, but let's get real. Chasing rents, drowning in receipts, and getting buried in spreadsheets feels anything but passive.

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They've partnered with Bigger Pockets for over a decade, helping thousands invest smarter. If you want to do the same, visit BiggerPockets. Welcome back to the bigger pockets podcast. I'm here talking about the upside era and why there is still so much potential in real estate despite everything that's going on. Before the break, we talked about how there's still a lot of demographic and macroeconomic fundamentals that point to positive opportunities for real estate investors. But let's go one level deeper.

Let's just talk about is real estate still a good asset class? is it's still a good way for you to pursue financial freedom? My first question when people ask me this question is, what else are you going to do with your money? Because as investors, that's the game, right? The whole game is resource allocation. Whether you have 10 grand, you have 100 grand or you have a million dollars. Being an investor is about deciding how to allocate that capital to different types of investments.

You have to balance your own risk. You have to balance your own appetite for a reward and figure out where, you're going to put your money, right? And I'll ask you, I will pose it to the audience today. If you're not going to invest in real estate, where else are you going to put your money today? To me, cryptocurrency, and I'm not a crypto hater, but cryptocurrency is speculation. It's not based on some of the fundamentals and intrinsic value that things like stocks and equities, bonds, or real estate offer. And so, although you could earn huge returns in crypto, it's very risky and I would consider it speculation. All right. So then let's talk about the stock market.

And if you've been watching and listening to the show, you know that even before the tariff announcements and the crash and recovery and then crash again that's been going on over the last couple of weeks, I've been saying for several months now that I thought the stock market was overvalued. It was too expensive. And I sold about 25% of my entire portfolio, which is sizable amount because I wanted to get out of what I expected to be a volatile period in the stock market, that is proving to be true. And I might be wrong in the long run, but right now that decision is looking pretty good. But I made that decision because I looked at the stock market and said the valuations are just way too high to justify buying in right now. And when I look

historically at the stock market, it's just more volatile. And I like the stock market. I invest in the stock market. But this is just true. The math just shows it that in any given year, there's more risk in the stock market than there is in real estate, which is much more of a slow, steady, stable type of asset where the stock market goes up and down. The other thing about the stock market is that although it can really appreciate and build your net worth, it's not as easy to replace your income with the stock market as it is with real estate. Sure, you can get dividends from some stocks, but that's, you know, one to three percent, whereas in real estate, you can buy a deal today off the MLS and get that equal or better cash on cash return. And the great thing about real

estate is your cash and cash return grows over your hold period. And that's what really enables financial freedom over the long run. We could talk a little bit about bonds. They're not the most exciting thing because they're great for maintaining wealth. That's kind of what they're there for, but they don't build wealth. So unless you're already super wealthy, you don't want to put a ton of your money in bonds because it's just not going to grow that quickly and it's not going to offer you the same upside as some other asset classes. What about other things like private businesses? I actually think those are opportunities. Like if you wanted to go buy a laundromat or service business, like those, I think do offer good returns, but they're super time consuming. You need to learn how to be an

operator. And they're a bit riskier, at least to me, than real estate. You know, real estate, very low risk of your assets going to zero. If you buy a private business, the chance of them going out of business or bankrupt is significantly, significantly higher. I do think, like, based on macroeconomics, like, those are good investments, but you just have to consider if you're willing to take on that work and risk. So that brings us to real estate and why I just keep coming back to it as the best way to pursue long-term wealth. To me, there are basically four things about real estate that I really, really like. There's more than that, but I'm just going to share with you four things today that I like. One is the return diversity. You've probably heard this,

talked about on this show, but you don't just make money in real estate by the price of your property going up. That's what a lot of people think, but that is just one and maybe one of the least reliable ways of earning money in real estate. Instead, you make money from, yes, appreciation, from cash flow. You make money from amortization or paying down your loan using your rental income. And you also get amazing tax benefits. So those are all ways that you earn potentially great returns of one single investment. There is not any other asset class that I know of that offers that same potential. So that's number one. The second one is the income potential. I have talked about this a little bit before, but with real estate, you can get a cash on cash

return in the first couple of years of six, eight, ten percent. If you hold on to that property, you can see a cash on cash return of 10, 12, 15 percent. You just don't see that ability to generate cash in the stock market, in bonds, or in cryptocurrency. And so, again, if your goal is to replace your income and long-term financial independence, that's why real estate is so valuable. Third is the market stability. And I know that there's always risk in the market. I am not trying to underplay that. There is risking every investment in every asset class. But if you look back over the last hundred years of real estate, go do this. Google this at some point today. Go Google. the median home price in the United States over the last 100 years. And what you'll see is

remarkable consistency. It just goes up slow and steady. Now, 2008 was an exception to that. And I'm not saying that it's impossible for that to happen again. But that was an outlier. And it was caused by some pretty unique lending conditions that just don't exist today. Could there be a Black Swan event? Could something crazy happen with this trade war where the market crashes, of course. But I personally don't believe like a significant market crash where we see prices in the housing market fall by 10% or more. It's not at least right now the most likely outcome. Instead, we're probably going to continue with what the housing market normally does, which is stay close to the pace of inflation. And then lastly, is this concept of a risk-adjusted

return profile. Now, I think a lot of, especially newer investors sometimes miss this. They've looked at investments and just look at the potential upside, right? You look at crypto and you say, oh my God, I know a guy who made 10,000 percent on Bitcoin. That's great. I also know a guy who lost 10,000 percent on Bitcoin too, right? It's a super volatile asset class. And as investors, as a smart investor, what you need to be thinking about is what asset class offers the best risk-adjusted return. This means take into account how much risk you're taking on, while you're thinking about the amount of money that you can make at the same time. And for me, when I do those calculations, you look at bonds, right?

That's one low end of the spectrum. You're not taking on a lot of risk, but you're not going to earn a great reward. On the other end of the spectrum is probably cryptocurrency, right? You might make amazing returns, but you might lose a lot of money. When I think about the right balance between risk and reward, real estate offers the best to me, the best risk-adjusted return because there's all those ways to make money and it's relatively stable. And again, there is risk. But when I think about risk-adjusted returns, real estate sort of stands alone as an asset class, at least in my mind. So those are the big four things

that I always like about real estate. Return diversity, income potential, market stability, and risk-adjusted returns. Next, I want to address something really important about real estate investing and financial freedom. During the Goldilocks era when everything was perfect, it became really common for people to want to or successfully quit their job through real estate. And a lot of people, primarily on social media or on YouTube or whatever, made it seem like this is the norm and that it only took a couple of years. But I want to make sure that everyone understands that even during that Goldilocks era, that was exceedingly rare. I know a lot of people who have quote unquote quit their jobs, only to go on to be a real estate agent or a loan officer.

And that is totally fine. Like, that's a great career decision for a lot of people. But my main point is that even during the Goldilocks era, it took somewhere between eight to 10 years to achieve financial freedom. And I'm not just making that up. I actually did the math. Like, if you were to have an average price job, if you were to buy the average price home over the period from 2013 to 2022, the amount of time it would take. take you to replace your income entirely usually takes about eight to 10 years, which is still amazing, right? The average career in the United States is 45 years. So you're saying you're cutting that down by a massive, massive amount. That was during the Goldilocks era. What about today, right?

I began this episode by saying that the real estate market has changed. So how much has that changed? Well, it has, but my math says that now you could achieve it between eight to 12 years instead of eight to 10 years. So what I'm saying here is that even if you just bought the average price deal and bought them at a relatively modest pace every other year or so, in eight to 12 years, even today, during all these crazy things, in eight to 12 years, you can buy enough real estate to entirely reprise your current income. And the interesting thing about the math here is it doesn't actually matter if you make $50,000 a year or $100,000 a year. The amount of time it takes is actually relatively simple because if you're, you know, making 50 grand a year, you have to replace

less incomes. You need to buy less properties. It might take you longer between buying properties, but you have to buy less. Meanwhile, if you make 100 grand, you're going to need to buy more, but it'll be relatively easier because you have a higher income. But just take a minute to think about what I'm saying here. Even though investing conditions have changed and we're not in this magical Goldilocks era and there are tariffs and there's trade wars and there's so much going on.

in eight to 12 years, just buying average price properties doing the most plain type of long-term rental property investing, you can replace your income in eight to 12 years. That is amazing. And if that does not get you excited and eager and ready to go invest in real estate, I don't know what will. To me, that is what keeps me going every single day. It's what got me into this in the first place. If you take something away from this episode, I hope you all can see that that is still absolutely if you're willing to adapt and learn how to find upside in this new era. So hopefully I've sold you because I'm super in on real estate and I just really believe in the long-term benefits of real estate.

So let's talk about if you are into it, if you buy what I am selling right now, how do you find upside? How do you find deals here in 2025? We're going to get into that right after this break. If you own a short-term rental, here's something worth knowing. Not all landlord policies are built for your. your type of property. And with holiday bookings, chilly weather, and higher guest turnover, having the right coverage is more important than ever. Steadily offers insurance designed

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Welcome back to the Bigger Pockets podcast. We're here talking about the upside era, why real estate is still such a great asset class to invest in. And we're going to turn our conversation now into if you're in, if you want to be active in the real estate market, how do you find deals? Because deals, frankly, one of the changes from the Goldilocks era to the upside era is that deals are everywhere, but they are just not as obvious as they used to be. You have to dig a little bit deeper. You have to look a little bit harder to identify. the upside. Now, I've been saying this word upside a lot, but what does that actually mean?

To me, it is some characteristic of a property or a deal that you're buying that can take the deal from a good deal today to something that is excellent over the long run. And today I'm going to share with you seven upsides that I'm particularly excited about. There's probably way more than this, but these are ones that I am looking for in my own portfolio. They are rent growth, value-add investing, buying deep, zoning upside, owner-occupied strategies, the path of progress, and learning. Those are the seven. I'm going to go through each of them one by one and explain to you why finding a deal with one or ideally like two or three of these upsides can take you from a good deal today to an amazing deal over the long run. First up is rent growth. I personally

believe that macroeconomic conditions are developing in a way that in the next couple of years, growth is probably going to accelerate. And over the last two or three years, we've seen rent growth go really flat due to this big glut of supply in the market. But the pendulum is swinging back in the other direction. And that means that there is going to be a lack of supply, but there's still going to be strong demand from millennials in Gen Z to rent homes. And that's going to push up rents over time. So why is this an upside? Well, if you buy a deal today that has cash on cash rates, return of two or three or four percent, that might not sound super exciting. But if rent starts growing at four or five or six percent for several years, maybe starting next year and continuing for a

couple years, that cash on cash return could go from modest to really, really good over just a couple of years. And that, to me, is huge upside. Second is value ad. If you haven't heard this term, this is just basically building equity in your properties through improving it. This can be flipping. this can be burr, this can be just renovating a property you already own to drive up rents. But I think this value-ad strategy works well in almost any market conditions, but works particularly well right now in the upside era. We're seeing this sort of splitting of the housing market where properties that need renovations are sort of flattened prices.

And in some places, in some cases, they're actually going down. But meanwhile, renovated properties or stabilized properties, as you may hear, them called, those prices are stable or going up. And so that means often the gap between what you're able to buy a property for and sell it for if you're going to do a renovation is widening, which improves your potential for profit. To me, this is an exciting thing because if you go out and look on the MLS, you might not see this perfectly renovated rental property that's going to generate you a 10% cash on cash return. But if you're willing to buy a property and then fix it up and rent it out, you have enormous potential to make profit here in the upside era.

And not just rentals. This works for Airbnbs. This works for flipping two. Value add just works right now. The third thing in the upside era, and this one's getting even better, I think, every single day, is buying deep. This is the concept of finding deals and buying them for under market value. And I know that sounds super easy. It's like, yeah, everyone wants to do that. But right now, again, given what I was just saying about this is sort of splitting of the housing market, we are seeing conditions where this, I think, is going to become easier. The market is softening and we are moving towards a buyer's market. And that does mean, in a lot of cases, appreciation might slow down over the next couple of years. That's important to note in your underwriting. But what it means

is that buyers get the power and buyers get to negotiate deals that they probably couldn't get even during this Goldilocks era because there was too much competition. And this is a huge upside because if you buy a deal under its actual market value, you're making money from day one. That is huge upside, right? You're walking in to equity in your deal that normally might take years of market appreciation to achieve. And so, yes, appreciation might be slowing down a little bit, but there are other ways to build equity and realize upside by buying deep.

The fourth, this one is nerdy, but I love this one so much. It is zoning upside. If you're not familiar, zoning is basically the laws that each state and city have that dictate what types of properties you're allowed to build on a given piece of land. And for generations in the United States, zoning has been pretty restrictive, right? You're not allowed to build an ADU or a second unit in your backyard. You need to have all these parking requirements or setbacks, and it makes building new units really difficult. That is one of the reasons we have supply problems in the United States and the

housing market. But governments are getting wise to this. And all across the country, in red states and blue states, all over, there is this wave of zoning reform, which is making it easier to build new units and to add capacity. So this can come in the form of putting an apartment above your garage, building a new unit in your basement, taking a single family you have and turning it into a duplex. These are all awesome ways to add upside, right? Just think about that. You can buy a property that's a single family home, and you can put an entirely new unit on it.

And the cost of putting that new unit is going to be proportionately so much less than just going out and buying a second single family home, that your return on building that ADU, that return on building that second unit is going to be really, really high if you do it, right? They can be really, really high. And that provides enormous upside. And one of the reasons I personally like this upside is because you don't have to do it on day one. I'll share with you a little bit more about this in a little bit in an example.

But I bought this property that's a duplex, but it's zoned for up to six units. The duplex is cash loan great right now. But I have this upside potential over the long run to turn this property into a six unit of property. And I probably will one day. The next upside is owner occupied. Sometimes in today's day and age, if you just go on a listing platform, you go on bigger deals and try and check out where you can, find a rental property, you might not find as many deals as you're looking for. But if you are willing to live in the property, so many more properties become available to you because you don't

have to generate huge amounts of cash flow to make those types of deals work. They just have to significantly reduce your cost of living to the point where you are saving more money and improving your overall financial situation. And I think this is really important right now because one of the reasons real estate is so valuable in such a good long-term strategy is that if you can find properties that are just in great locations, a great asset with strong intrinsic value, and you can hold on to that, that is going to build a lot of wealth for you over the long run. And some of those properties right now don't cash flow and don't make sense unless you owner-occupy them. So the reason owner-occupied strategy offers upside is it may mean that you can get into the

to a property that otherwise wouldn't cash flow and get a really good strong long-term asset that you can control. And over two or three years, when rents grow up, if you have that upside as well, you can move out of that property, move on somewhere else. And at that point, it probably will be cash flowing. And you can have this amazing asset that you otherwise wouldn't be able to buy. Now, house hacking is only one example of owner-occupied strategies. There's also the live-in flip, which I am doing right now,

which is a way that you can build massive amounts of equity using the value add upside, and you get huge tax advantages because if you live in a property for two plus years, when you go and sell it, you don't pay capital gains, which is amazing. So owner-occupied amazing upside here. Next upside is the path of progress. This is the idea of trying to buy in a place that has a high probability of appreciating above the market or area average. And there's no way to get it.

guarantee where things are going to appreciate. But if you like this kind of thing, I really like this kind of thing, studying different markets to try and find where infrastructure investments are going, where job growth is going, where amenities are being placed, those are places that historically speaking, prices of those houses tend to go up faster than in other areas. And so if you can buy a property that's good today in this path of progress, the upside era that could go from being a good property today to being an amazing property over the next couple of years. The last upside that I want to mention is learning. And this one gets really overlooked. But I think, especially in today's day and age, if you can find a deal that is good today has maybe one or

two of the other upsides and you're going to learn a lot by doing that deal, that is huge upside for the long term of your investing career. I mentioned earlier that I'm doing this live and flip. One of the main reasons is I want to get better at managing constructions and renovation. I've done it a little bit in my career. I don't think I'm an expert. I think it's one of the biggest weaknesses in my investing arsenal. And a live-in flip because I found a good property and it has this good value add upside, it has the owner-occupied upside, is going to teach me a lot of the skills that I wanted to learn.

And that's going to help me with the next deal I get and the next deal after that. And so don't just think about the immediate return that each property is going to get you. I encourage people to think sort of holistically long term about your portfolio and what you're getting out of this property hopefully will be financial. I'm not saying buy a bad deal. You need to be generating a positive financial return. But don't overlook the sort of less quantifiable benefits that you could get from deals right now, like learning, building your network, and just generally improving as an investor.

So those were the seven upsides I want to mention today. Just as a reminder, they are rent growth, value add, buying deep, zoning, owner occupied, path of progress, and learning. So let's tie this thing together and talk about how to actually make the deals in this upside era work. And to do that, I'm going to share with you my buy box and basically my philosophy for investing here in 2025. So my buybox for the majority of my portfolio is small, multifamily, and single family homes.

number one. I'm focusing on those. Number two, I want break-even cash flow minimum. And I know a lot of people say that break-even cash flow is not worth it. I disagree if you have the right upsides. I would take break-even cash flow if I had four or five solid upsides. If I only had one upside, I would need the cash flow to be six or seven percent today. So it really depends on what the long-term benefit is to your deal. And for me, I will never buy a deal that doesn't cash flow at least within the first year. But I'm willing to take lower cash flow if the long-term potential of the property is really high. So that's number two. Number three is I want at least a 10% annualized return on investment in year one. I want my ROI

to hit immediately. So that's one of the reasons I don't take negative cash flow deals. Please be sure. I'm not saying a 10% cash on cash return in year one. I'm going to add up together my cash and cash return, my appreciation, my amortization, any value add that I do, and my tax benefits. And I want that to beat 10%. Why 10%? Because the stock market, on average, returns about 8%. And I want to be better than the stock market, because real estate takes work. And so I need to outperform the stock market by at least a couple of percentage points in year one to make it worth my time. And then over the next couple of years, as we've talked about, that AAROI will probably go to 12% to 15%, 20%, but I want to make sure it's worth my time in that first year, so I'm looking for 10%.

Then the last thing is I want that potential for my ROI to go up to 15% within two years. So I'm trying to be aggressive here, right? You probably hear me saying break-even cash flow. It's like, oh, that's a bad deal. No, I'm willing to take break-even cash flow at the outset, but it has to at least beat the stock market in that first year. and then I need that 15% AAROI within two years. And that's where real estate is really good, right?

You're not getting that in most normal years in the stock market. You do in some years, but the average is 8%. I want to have within two years a property that's making me 15%. And that's going to help me outperform the stock market in almost every other asset class over the long run. So that's basically what I'm looking for. And just to be clear, like those deals that I'm looking for, I typically require them to have at least two, ideally,

three upside. So I need to either be in the path of progress and I'm buying it deep and getting a really good deal. Or I need it to be an owner occupied deal with huge value add potential and also some zoning upside, right? It's not just one or the other with the upsides. Like, ideally you combine all of them because maybe not all of them come true in the same way that you're wishing. But if you want the best risk adjusted return, if you have two or three these upsides, you're like almost certainly going to hit one of them and start to see the return on your. You're, you're like, almost certainly going to hit one of them and start to see the return on your deal get better and better over time. As one quick example, I bought a property in the Midwest is a duplex. I bought it for $252,000.

When I bought it, the rent was $2,300 a month. So it was already at a 1% rule, but this is a place where there's high taxes and high insurance. And so it was coming out to a little bit better than break even, but not that much better. I did a rehab on it. So value add upside, right? I put $18,000, into it. And after that, my rent growth went up to 2750. And the ARV went up to 320,000. So this deal is already working for me. And I still have upside. This is in an A plus location, right? This is a deal that's in the path of progress. So there's going to be rent upside. I have zoning upside. This was the one I mentioned earlier that it's zoned up to six units so I can add four more additional units. and I did my first burr in this new market, which was a lot of learning upside.

This was a smaller deal, a smaller renovation, where it could spend just $18,000 to learn, get to know my contractors, get to know my team, and that's going to make the next deal even better for me. So just as example, I bought that deal on the market. It was barely breaking even. And now it's gone to a deal that's going to outperform the stock market. It's going to offer me well above that 10% AAROI I'm looking for. And there's still.

a ton of upside to make this deal better over the next couple of years. This, my friends, this is what makes real estate investing still so exciting right now. I bought this deal on market, on the MLS. You all can do the exact same things and realize these exact same upsides. The other deal I'll just share with you, it's just like kind of totally different, but it's one that I'm working on currently is a live-in flip. I bought this property super expensive. I live in the Pacific Northwest.

Purchase price was $825,000. And this thing was a complete. complete dump, total gut rehab. It's going to cost $240,000 to renovate it. It's going to cost be $100,000 just in holding cost. But the ARV of this property is going to be $1.5 million. And so what I'm doing is saving myself almost $200,000 over buying an equivalent house. Like if I just wanted to go buy a $1.5 million house to live in, I would be paying more $210,000 more in my down payment and equity than I am by $1,000. doing this. And during the same time, I'm going to lower my monthly living cost from what I am paying

right now today. It's going to go down by $1,000 a month. So those are great upsides, right? I have this value add upside. I have the owner occupied upside. And again, for me, this is a learning upside. As I mentioned earlier, I'm really trying to improve my construction management and project management skills and get more experience there. And doing a live and flip is an amazing way to get that learning upside as well. All right, guys, that is what I got for you today. Hopefully you all see what I'm talking about here that, yes, things have changed, but there are still amazing deals. I just shared with you two deals that I'm doing. When I was thinking about writing this episode, I actually asked some my colleagues at Bicker Pockets for deals that they've done. And they sent

tons of deals just like the ones that I'm talking about that are good deals today. They beat the stock market. They beat other asset classes today and then they just get better from there. So as we leave this episode, just a couple takeaways for you to remember is one. Yes, things have changed, but there are still good deals. Real estate, this is a, you know, a subjective opinion, but to me, still offers the best risk adjusted returns, even despite what's going on because real estate is a long game. The long term fundamentals are still really good. And then the third thing, make sure to find two or three upsets. that take what should be a good deal today

and turn it into a home run over the lifetime of your investment. If you guys have any questions about the upside era or what this means or how you can get involved, please let me know. If you're watching this on YouTube, drop something in the comments,

or if you're listening on audio, you can always find me on biggerpockets.com. You can send me a direct message there. I read all of them, or you can also find me on Instagram where I'm at the Data Deli. Thank you all so much for listening to this episode of the Bigger Pockets podcast.

We'll see you next time. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K, copywriting is by Calicoke 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.biggerpockets.com.

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