BiggerPockets Real Estate Podcast - What Happened to Real Estate Investing?
Episode Date: April 10, 2026What happened to real estate investing? From 2010 until 2022 everyone wanted to buy real estate. Fortunes were being made, cash flow was plentiful in many markets, and real estate seemed to only ...go up…until it didn’t. Now influencers are saying “real estate is dead,” some investors have given up on financial freedom, and many are taking a pause. But, if you ask any American if home prices will go up in the next ten years, they will reply “of course!” Is it the same with stocks, crypto, precious metals? Not at all. So, where are we at in the cycle? Is this the bottoming-out period that 2030s investors will look back on and wish they could have bought, or is this the new normal now that the “goldilocks era” of investing is over. Today, we’re answering two questions: What happened to real estate investing and why we’re still investing in it, today. It may not be as easy, but it’s still looking so worth it as crypto falls off a cliff, stocks see their worst weeks in years, and real estate deals get more meat on the bone. This is why we’re still investing in real estate today, even if we’ll never return to the 2010s era. In This Episode We Cover What happened to real estate investing? Why cash flow was uniquely easy to get in the 2010s Market pain = opportunity: the real reason why experienced investors are heavily buying in 2026 The “get rich quick with real estate” expectations are wrong (but you can still retire early with rentals) How we’re changing our strategies in 2026 to buy at bigger discounts and protect against downside risk And So Much More! Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-1263 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email advertise@biggerpockets.com. Learn more about your ad choices. Visit megaphone.fm/adchoices
Transcript
Discussion (0)
For a decade, real estate investing was easy.
It was predictable.
It was profitable.
So what happened?
Well, the market changed, and those easy deals are much rarer today.
You don't find 1% rule deals on the MLS in most markets.
In some places, they've been gone for years.
But frankly, I'm not even sure that's a bad thing.
Investing in real estate might take more work today.
It might be riskier.
But it is still the best way to grow your net worth.
and one of the only ways to achieve real financial freedom.
And now, there's actually fewer people doing it,
which means there's less competition for good deals
because most people just aren't willing to put in the work.
But I am.
I've adjusted my strategies, and real estate is still growing my net worth.
Hey, everyone, I'm Dave Meyer, Chief Investment Officer at Bigger Pockets.
Henry is here, of course, too.
Henry, what's up, man?
Hey, what's up, buddy? How are you?
Good. I'm doing well, despite all this negativity.
out there about real estate.
But I mean, I think it's fair to say that real estate has changed a lot over the last couple of
years.
How would you describe that shift?
You know what?
It feels like a shift to people who probably started investing during the last 10 years.
But I think to people who were investing prior to that, it's just part of a cycle.
Real estate isn't supposed to be easy.
And I think we're just now, if you started in the Goldilocks years, you're just now seeing the hard
part for the first time.
I think that's exactly right.
It's so much of this is about expectations.
And I mean, to be fair, like I started investing in 2010, so I haven't really seen a situation like this personally.
But I do think I have the advantage of spending so much of my time looking at the history of the housing market and just can understand from the data and information and research that this has gotten a normal.
The fact that it goes into these cycles that ebbs and flows and things get better, they get harder, and then they get better again.
is just a normal part of not just real estate, but any economic cycle.
Same thing that happens in the stock market.
Same thing that happens in cryptocurrency or anything that you invest in.
Is it wrong to say that I think it's good?
No, dude, I think it's good too.
Why were you saying that, though?
Because everybody's doom and gloom about it.
But I think it's a good thing for several reasons.
A, I think it's a good thing if you want to buy assets.
Because in any investing scenario, it's always easier to buy at a discount when there's some
sort of uneasiness or pain involved in the market. So there's opportunity to buy a little bit lower
right now. And it's not super easy. It takes work. But there's still the opportunity to do that.
I think that it weeds out people who aren't great at investing or maybe were in your way of
buying deals before and not doing a lot of research when they didn't have to because everything was a
deal. It was tougher. Yeah. And I think if you get started
now and you get your reps in in a difficult market, when the market does come around and it
becomes easier, you're so much better positioned to clean house because you learned and you got
prepared during a challenging time. If you do it the other way around, you can sometimes get
smacked in the face when the hard times come because you're so used to it being easy. So I think it's a
great time. I actually think that makes a lot of sense. Just trying to learn during a more challenging time.
I mean, I think that's sort of like the last generation of great real estate investors.
A lot of them were investing through the financial crisis.
It's not like they had perfect market timing and started in 2009 or 2010 and then just rode the wave.
Most of them, whether it's our mutual friend, James Danard or Brian Burke, who we were talking to the other day or Jay Scott.
Like all these people learned how to really be good and stick to the fundamentals.
Because if you can learn in a market like that, then, you can learn.
you can succeed in a market that has some tailwinds.
And I think really, ultimately, what is going on in the market?
If we're trying to answer the question, like, what happened to real estate investing?
I think people's expectations just have gone crazy.
Like, they're completely out of whack.
And that is due to, I guess, some combination of the Goldilocks era.
If you listen to the show, we call the Goldilocks era the time between about 2012 and 2022,
when literally everything was perfect for real estate investors.
Prices were low, rents were high, you had structural supply shortages,
you had super low interest rates.
There is an abundance of information from bigger pockets and other sources that made it easier to learn the business.
Like, it was just so much easier to do it.
On top of that, we got to call it out, had a lot of people on social media,
raising people's expectations even on top of that and showing off and perhaps even
exaggerating, I dare say, their results of what they're doing, of what they do and how well they
do on real estate.
And that just created this idea that real estate is something that is not, that it is a get rich
quick thing or that retiring within two to three years and quitting your job and not having
to work and that it's totally passive, that that's a thing.
And it's not.
And it never was.
And like, I think that's, that is the fundamental challenge that this industry is having
is resetting expectations back to what it's like to be a real estate investor in normal market
conditions. Yeah, especially when you look at things that are a little bit more risky,
because we were talking a little bit about this with Brian Burke. If you got into large-scale
multifamily syndications and you were raising money in the Goldilocks area, it probably felt like you
couldn't miss. You raise some money. You go buy an asset. You start producing returns for your investors.
and it feels great.
And then the market shifts and things aren't as easy.
And a lot of those people are getting themselves into trouble because, like I said,
they got it in a good time.
And when the market shifted, it smacked them in the face.
And so if you were dabbling in single family, you probably took a lot less of a hit
or were a lot less in shock when the market turned versus if you were doing something
that required a lot more capital and a lot more experience.
And now the market is forcing people to be much more fundamentally sound if they want to produce
results. And if you didn't develop those fundamentals in the beginning, you're going to have to
develop them now. And it's going to cost you something to develop them now. A lot of people rightfully
started. They bought single families. They bought small and multi-families during this Goldilocks era. And they're
like, hey, I could do this. I can do a multifamily. And then all of a sudden, in all these tailwinds that
we had that was just lifting all ships, you know, like the rising tide was listed in all ships.
I benefited from it too, probably thought I was smarter than I was in some of deals. And I think that's
kind of just what happened with a lot of a lot of real estate. And now it's just become work,
which is, which it's supposed to be. Like, you know, like real estate investing is entrepreneurship.
You're going to have to work on it. But that part hasn't, in my opinion, fundamentally changed.
Like the things that allow you to do value at investing or to generate cash flow or loan paydown or all that still there.
It's really just this like era where you could get appreciation from,
doing nothing and count on massive gains with easy cheap money, that's gone away. But even without that,
I still think there's good opportunity. And I still think it's better than other opportunities.
I see other things that I would choose to do with my money. Yeah, I'm not shifting. I'm staying here.
Yeah, right. That's a good question. Like, do you see your margins changing a lot? Or like,
are your returns on individual deals worse now than they were, I mean, they have to be a little worse, right?
Yeah, yeah. I mean, we're trying to mitigate that by just ensuring that we underwrite more conservatively and we buy it deeper discounts to maintain our margins.
But that usually means you have to increase your volume of offers in order to keep the same amount of deal flow or you have to be willing to do less deals because you're willing to pay less, but the deals end up being more profitable.
So yes, you can still get the margins if you adjust.
the underwriting, but I would be lying to you if I told you that I bought deals that are giving
me the same margins now that I was getting in 2016. Now, that's just not true. The margins are
not as good. Yeah, and that makes sense to me because just to do a little bit of a history lesson
here, right, like what happened during the great as long as back as we have data since the Great Depression,
since the 1930s, that was the biggest drop in home prices. So would deals coming out of that be the best
that people have ever seen. Yeah, they definitely would be like, I truly don't think we'll ever see that again in our lifetime. Like, I think it's unlikely that we see those kinds of deals again. And I think that's where people get hung up is they're like, I compare the deals and the returns that I get here in 2026 to what I can get in 2016. And it's frustrating. Yeah, everyone wishes they could get easy money. I do too, right? Like, that would be great. But the job of the investor is not to say, I'm not going to invest today because I got better returns.
turns yesterday. The job of the investors to say, what is the best use of my time and my money
here in 2026? And real estate still seems better to me than every other thing out there. And so,
yeah, margins are probably lower, harder to find deals. But can I still find today a real estate deal
on market that is better than what I think the stock market will do over the next three years? Yes.
To me, yes. Like that's the important thing, right? It is worth it to me to do the extra
work of real estate investing because if I can get a 15% return instead of an 8% return,
you compound that over 10 years, that is millions of dollars, millions and millions of dollars
for the average person. So is that worth the time? Hell yeah, it is. Yeah, 100%. It's absolutely
worth the time. All right. So that's, I think, a fair assessment of what has happened to real
estate investing is that it was abnormally easy to be a real estate investor. And that's great.
I'm happy that that happened. Now, I think we're back to just more normal,
fundamental style real estate investing.
But I want to talk to you specifically, Henry, about like, what has gotten harder?
The specific things that people should be looking out and why that has caused such a shift in,
I think, mentality and psychology in the market, even if the return profile of the best deals,
hasn't changed that much.
Let's get into that.
But we do have to take one quick break.
We'll be right back.
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.
I kept thinking, if this is one unit, how do people run 10?
Baselaine changed that.
It's BiggerPockets official banking platform that handles expense tracking, financial reporting,
rent collection, and even tenant screening, all in one place.
It's the system I wish I had from day one.
Sign up today at baselane.com slash bigger pockets and get $100 bonus.
Baselane is a financial technology company and is not an FDIC insured bank.
Banking services provided by Threadbank, member FDIC.
Real estate investors, the April 15th tax deadline is coming fast.
If you own rental property and haven't visited Costsegregation.com yet,
you could be handing thousands of dollars to the IRS that you don't have to.
Costsegregation.com is self-guided software that helps you write off up to 25% of your building
to generate huge tax deductions. With pricing under $500 and average tax savings of $25,000,
cost segregation.com is fast and affordable, making it perfect for single-family rental properties,
condos, townhomes, and even ADUs.
What's more? Audit Defense is included in the price and backed by KBKG, the number one
cost segregation company in the U.S.
Costegregation.com was launched over 10 years ago and has a 100% success rate under IRS audit.
You heard that right.
A 100% success rate, and that's over 10,000 studies.
Go to costsegregation.com and use code tax deadline to get 10% off your first report.
Don't overpay the IRS.
Head to Costsegregation.com before April 15th.
The rise of the tech savvy investors here.
You don't need a huge team or tons of overhead to manage rental properties.
Just the right tools.
So I want to tell you about how I use rent-ready to get ahead.
For landlords who treat their time like capital and recognize the cost of sweat equity,
this tool gives you everything you need to scale.
Rent collection, tenant screening, maintenance accounting,
so that you're organized come tax season,
and you can run numbers in preparation for future deals.
And more.
all in one platform via a mobile app or desktop.
Modern landlords don't just own property.
They optimize it.
Rent Ready will keep you organized, running leaner, and ready to grow.
Start with RentReady.
Visit rentready.com slash bigger pockets.
That's RentR-E-D-I.com slash Bigger Pockets.
And use code BP 2025 to get Rent Ready's six-month plan for a dollar.
My home and I have a very one-sided relationship.
And I work hard to pay for it, and it mostly just sits there.
It's got no side hustle.
No part-time gig.
Just four walls living its best life while I'm covering the mortgage.
Here's something I recently learned.
When you're away from home, it doesn't actually have to sit empty.
You can list your space on Airbnb.
And now there's something called the co-host network, which makes it a lot easier to do
and takes a lot of the pressure off getting started.
A co-host is a vetted local with hosting experience who can help take care of all the details.
They can help set up your listing, manage reservations, message guests,
and even provide on-site support.
So hosting stays stress-free and manageable.
So instead of your home just sitting around waiting for you to come back,
it could actually help bring in a little extra income while you're away,
whether you're traveling for work, visiting family, or just taking a vacation.
And that feels like a much healthier relationship, honestly.
Find a co-host at Airbnb.com slash host.
Welcome back to the Bigger Pockets Podcast.
Henry and I are here answering the question,
what happened to real estate investing?
And before the break, we talked about just expectations have changed.
They were high.
People were expecting returns that are probably not sustainable well into the future.
But Henry, tell me a little bit, what has relatively become harder for you in your day-to-day
that has changed so much in the last 10 years?
Yeah, I think everything got more expensive all at the same time.
When interest rates started going up, right, that was just kind of a shock for people because
we were at such historically low interest rates to then jump up to around, I mean, for investors,
we were getting deals with, you know, nine, nine and a half percent interest rates at the height
of the interest rate hikes. And when you have like one of the real estate levers that goes up,
you can make an adjustment. And I think people were still finding ways to find deals or make
deals work even at an eight or nine percent interest rate. But at the same time, insurance started to
go up dramatically. There were storms across the country. There was problems in California. So
insurance premium started to go up like crazy right around the same time. And then taxes started to go
up. And we were getting hit with higher than ever tax bills. Yep. Then we weren't seeing the rent
growth that we were used to seeing. So rents weren't growing as fast as we would have expected or wanted
rents to grow. It's just been one thing after the other. That is true. And then, yeah, prices were
still going up. Even with all these other factors, some people were expecting prices to come down a
little bit, and they just didn't. Like, not drastically. And then on top of all of that,
seller expectations did not adjust with the new pricing. And so if you were being a fundamentally
sound real estate investor and you were adjusting your underwriting for all these new higher expenses,
which essentially means you need to offer at lower price points, sellers were not here for it
because they just felt like their houses were worth substantially more than what a good
fundamentally sound investor could pay. And that just made finding and buying good deals
extremely challenging. Yeah, it's just, I think you're right. It's just this one thing after the other.
I do think this is a real thing.
Like, if you look at behavioral economics, people just, like, have an anchor in their brain
of what things are supposed to cost.
And once that changes, it just, like, fries your brain.
I experience this every day, right?
Like, you go to the gas station.
You're like, this is wrong.
I think you are incorrect about what you are charging me.
And I think this is happening in real estate, right?
Like, you start underwriting a deal and you just get, like, insurance.
And it's like, all right, it's going to be three grand for insurance on this $200,000.
or house, you're like, no.
Yeah.
Even if you're like, I underwrite the deal and it makes sense.
You're just like, no, I refuse to pay that.
But this is what I mean by the expect is by like being expectations and less about actually
what the bottom line winds up being.
It's just we're all still trying to adjust to this new reality that has changed really
quickly.
So that's why that I think, you know, people are feeling like these things don't work.
But like you wouldn't be doing deals if they don't work.
right? So somehow you were making that work. Yeah. Now, I will say, 24, going into 2025 was probably the
lowest volume of deals I've done in a single year because of the things that I mentioned. Like,
I was making adjustments in my underwriting. So I was offering price points that would still allow me
to make money, but I just couldn't get people to say, yes, enough. And so we did our lowest amount of
volume that year. But yeah, I mean, we're still buying deals. And I think part of what's changing
is sellers' expectations are adjusting a little bit.
They're starting to realize, yes, they're starting to realize that, okay, in some markets,
homes are valued at what they were before, but in some markets, things are coming down,
and buyers aren't expecting anymore that if they say, someone by my house, that 37 people
are going to raise their hand and say, here's an offer. Like, they start to realize that now.
Yeah, I think that that's the big thing that is starting to shift. And I think that's, honestly,
where a lot of the negative sentiment is, like, I truly believe you can invest in it.
any kind of market. History has proven that. Like, that's just absolutely true. But normally,
I feel like the peak, the transition between like a seller's market like we're in for a while
to buyer's market, which we're going into, is faster. Right. Like you usually go, you know,
and you start to see, okay, inventory's going up. Maybe things are a little bit less affordable.
So prices start coming down. Yeah. You get better deal flow. But there was just like, it was like
18 months. It's like two years of time where it was like the pendulum was like about to
to swing back? And you're like, has it swung back? Has it started? Has it started? And it like hasn't
come fully back. And it has started now. I feel pretty confident that that we are moving in that
direction. But it kind of hung out there for like a while. And I think deals were just really hard to
come by. And that didn't mean you couldn't find them. But you have to be patient. And I think that's
the other thing that has happened is like, you could just buy anything for so long. No one has
patience and understands that like you got to like maybe two percent of leads or deal.
You know, maybe 1% of leads are deals.
And that's okay.
Like, if you were in any other kind of market, if you were a stock picker, you don't get
half of your stocks that you look into you buy.
You know, if you're a private equity firm, you don't buy 10% of deals.
You look at you look at like one or two percent.
Like, this is normal.
You have to be willing to look for the cream of the crop.
The market that we're in, which I don't think is a terrible market, what it is forcing
us to do is to operate like a normal real estate investor.
to do the proper amount of due diligence, to actually evaluate a good number of deals before making a buying decision.
And the market's allowing for you to do that.
There's not 37 offers on every house.
You can take your time.
You can evaluate deals.
You can make lower offers.
You can ask for concessions.
Like, this is what you should want.
You should be a fundamentally sound investor and then buy something confidently.
And if you can buy deals that work in a market that's a little tougher, I am telling you when things should.
shift and you start to see better opportunities that are more profitable, you're going to be so
much better position to jump on those and beat out the competition when there is more competition
because the market's more favorable.
You're going to be in a better cash position to do it.
You're going to be in a better education position to do it.
You're going to have more confidence because if you can build confidence now, this is, I think,
a really good thing for a lot of investors.
It's hard to buy at the top.
That's the thing is we've just been at the top.
We've just been at the top for a while.
You could still do it.
You've done it.
It's very successfully.
But, like, it's just harder.
Like, it is harder.
And I do think things are going to get easier.
I'm not saying they're going to get more obvious, though.
I don't think we're going back to this age where it's like, oh, my God, I'm going to do a perfect deal and be really bad at investing.
And that's good.
Honestly, that's really good because now we're not going to have as many people who are bad at investing who are competing with us.
You know, if you're willing to get good at that.
this, this is an advantage for you over the long run. I think that's really good. So I want to talk to you
a little bit about some of the upsides and ways that you're looking for deals in this, but before I need,
I need to ask you something. What do you make of all these people on social media? People who are
or were real estate investors saying real estate is dead. How do you interpret that?
I just don't understand how you can say real estate is dead. Unless laws change that stop normal people
from buying real estate, I don't think it's ever going to be dead. And also,
If they're making money and not making money doing the thing they're trying to teach you how to do,
and that's probably a red flag for me.
So the people that I see saying that are usually the people that I just can't verify
that they actually do any real deals themselves.
Yeah, I think that's absolutely true.
Or like they were making so much money selling courses or doing burs or coaching or whatever.
And now the market has shifted.
There's lower interest in real estate.
I think like that's just true.
Like this is what we're saying.
There's going to be less competition.
And like maybe it's not worth it to them because they have this very high expectation of what
they're supposed to be able to earn, not just off real estate, but off of teaching other people
real estate.
I think that's like another part that's going on in our industry as well.
And they're just negative about it because this is the same thing with expectations.
They anchor their expectations to the best time they've ever had.
And that's just not the case.
I personally, maybe I'm really.
negative people are going to disagree with me. I just think investing returns across every asset
class for the next five to 10 years are going to be lower. I just don't think they're going to be
as good. And if you look at history, this just happens. It just happens. It's just part like we've had
some of the best probably last 15 years. It was incredible to be an investor. That can't last forever.
It just does not happen. I hate when people say about investment, what goes up, must come down.
That is not true. That is just historically, completely just dumb. That is not.
Not right. But does that, can you have an ever accelerating rate of growth? No. It's going to slow down.
And so, like, I think everyone needs to just understand that like returns are going to probably be lower across the board.
But like, can you still make 15, 20 percent return on real estate on a rental property? Yeah. Can you still make 50 percent on a flip? Yeah, that is unbelievable.
Sorry, I'm cursing because it's just so much better than everything else. Like the stock market.
Average is 8 to 9%.
If you look at any projection in the stock market over the next few years, by any professional person, they say we're going to have a bad decade.
So like, why would you call real estate dead when it's still almost everyone agrees it's going to outperform every other asset class?
All right, we've got to take a quick break, but Henry and I will be back to answer the question, what happened to real estate investing right after this?
If my house had a resume, it would probably say great at structure and not much else.
I'm the one paying the mortgage. My house mostly just stands there looking supportive.
When you're away, it doesn't actually have to sit empty, though. You can list your space on Airbnb.
And now Airbnb has something called the co-host network, which makes it a lot easier to do.
A co-host is a local experience host who can help manage all the details, so hosting stays stress-free and manageable.
So instead of your home just sitting there while you're away, it could actually help bring in a little extra income.
Find a co-host at Airbnb.com slash host.
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.
I kept thinking, if this is one unit, how do people run 10?
Baselane changed that.
It's BiggerPockets official banking platform that handles expense tracking, financial reporting,
rent collection, and even tenant screening all in one place.
It's the system I wish I had from day one.
Sign up today at baselane.com slash Bigger Pockets and get $100 bonus.
Base lane is a financial technology company and is not an FDIC insured bank.
Banking services provided by Threadbank, member FDIC.
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 BPPod. That's NREIG.com slash BP pod.
Finding a strong rental property usually takes time, research, and calculated risk. Lanar Investor
Marketplace helps simplify all of that. With a free account, investors can browse new construction
homes built for rental potential alongside real-time data showing estimated returns, expenses,
and local market insights.
It's all in one dashboard,
making it easier to compare opportunities
and move when the right deal shows up.
Go to biggerpockets.com slash lanar
to create a free account and take a look.
That's biggerpockets.com slash L-E-N-N-A-R.
Sign up for free and start exploring
this smart investing opportunity today.
Please consult your own legal and tax advisors
to help evaluate the risks of any real estate transaction.
Lenar is an equal housing opportunity builder.
Welcome back to the Bigger Pockets podcast.
Henry and I are here, level setting, raising people's expectations to modern, normal levels and
discussing what has actually happened in real estate over the last couple of years and what you
should expect going forward.
We've been talking about essentially you have to adjust your underwriting so that you can
buy deals that perform.
But everybody underwrites deals a little differently.
And so can you explain to us a little bit about?
about like how you adjust your underwriting
or how you underwrite a deal a little differently now
than maybe you would a few years ago?
Great, yeah.
For me, for just buying regular rental properties,
I am assuming no appreciation.
Like, I think that's the way to go.
And, you know, it's funny.
I'm looking back on it, it's a lesson learned,
but I wrote a book with Jay Scott,
great investor, done it all.
And he said he never underwrites for appreciation.
Never has, even during the Goldilax era, never did it.
And I thought I was being conservative
because I do like 2% appreciation.
way under what we were getting, but I just thought that made sense.
Like, that's the historical average.
And now I'm just seeing the wisdom of just doing zero.
There's zero percent appreciation unless you're doing value at, unless you're forcing
appreciation, unless it is under your control, don't count it.
And I just like have come around to that philosophy a lot.
I am not saying I think it's going to be zero.
I have just reset my own standards to say, if it is zero, does this still make sense?
I have always underwritten deals with a total return.
I have a calculator on BiggerPockets.
You can get that for free.
Go to BiggerPockets.com slash resources,
but it's cash flow plus tax benefits plus amortization plus value at.
If that equals 12 to 15%, that's usually pretty good for me if it's a low risk deal.
If it's like, you know, I'm going to have to do a big, put a lot of money into it,
maybe 15 to 20%, something like that.
That just hasn't changed.
But I'm putting zero in to the equation there, which just means my cash flow has to be better
or my value at opportunity has to be better.
And so that's just the way I'm looking at it.
And although it hasn't shift, the pendulum's still holding, you know,
we're still at the top.
I think cash flow is going to get better.
I think prices are going to come down and rents are going to stay exactly where they
are or grow.
And so I think that's going to be the opportunity.
And that's how I'm going to underwrite deals.
The other question I have is it's easy to adjust your underwriting.
What's hard is when you find those deals that are like just outside of your new
underwriting that maybe would have performed.
if you underwrote it the old way.
Are you finding it easy or hard to say yes or no to those?
Easy.
To me,
that's easy because I don't buy the same volume of deals as you.
So I'm patient.
Like,
if I buy five deals this year or I buy two,
like I don't care.
You know,
I just want these deals that make sense to me.
And I just think the window,
I think some people say,
oh,
the window of it's buying is the next six months.
Like the Fed's going to lower rates.
Like, I don't buy it.
I think we have like two or three years
where we're going to have,
flat and declining rates. We're going to be in a buyer's market for a while now. So I just don't see
any incentive to rushing into something or fudging your numbers. Yeah. I mean, I agree with you.
But I think that's where a lot of people struggle, especially if they are doing some sort of volume
or where I really feel like people struggle is people who are full-time investors, who've got to
feed their family by doing real estate deals, find it the easiest to kind of fudge numbers or just
be comfortable with things they shouldn't be comfortable with. And this is not the market to do that in.
So what do you do that? That is hard. That is hard. Well, you got to keep in mind that if you are doing some sort of volume, which means you should be generating leads on some sort of volume, whether that's leads you're getting for free by making offers on the MLS or whether you're doing off market stuff like me, you have to just always remind yourself, there's going to be another deal to underwrite very soon. And there's going to be another opportunity. And you have to be comfortable leaving potential money on the table, even though the deal doesn't
pencil because what we're saying when we adjust our underwriting, isn't that a deal just outside of our
underwriting won't make us money? It totally could if everything goes perfect. But we are purposely
not banking on everything going perfect. And so we are comfortable, what we're saying is I'm comfortable
leaving that amount of money on the table. There's too much risk for not enough reward. And so you've just
got to be very comfortable with your risk to reward profile and your risk to reward ratio and your
underwriting. And be okay.
leaving 10, 20, 30 grand on the table because you want to get a deal that's got 40, 50, 60 grand.
That's right.
I actually think this is the hardest mental thing.
For me, too, I don't do a ton of volume.
For me, the shift I've made in the last two or three years, just mindset-wise, not even
underwriting is priority number one in every deal is protect against downside risk.
Priority two is make money.
Right now, the idea is like, think about everything that's going to go wrong.
And that does mean you're going to be able to do less deals.
But that's okay because you're going to have rock solid deals.
Like that's the way I want to see is like this is bulletproof.
That is what gets me away from the fear because there's so much uncertainty right now.
And it's inevitable.
Everyone is afraid.
You read the headlines.
It's scary stuff, right?
But it's like if you're like, I just am being such a grumpy dude.
I hate everything.
I think everything is going to go wrong.
And this one still works.
I'm like, okay.
Yeah.
I could cock myself into it.
Yeah. You know, I just, I just want to highlight what you said for a second because that is probably the most valuable thing that was said on this show to date that we've talked about today. He said he's changed his priority from protecting against downside risk as priority number one when underwriting and then priority number two is making money. Because I guarantee you most people who underwrite deals still prioritize profitability over risk. And in a market like this where it is very likely,
that you can do a deal and lose money, protecting against downside risk is making money.
Exactly. Yes, that's exactly right. And if you protect against downside risk,
because then you'll hold on to a deal, you'll guarantee to make money. You're absolutely
going to make money. It might not be tomorrow. It might not be the highest, fastest return,
but it will be the most reliable. I mean, you and I have talked about this on several different shows.
Like the way to really lose in real estate is to not be able to hold on to your asset. So,
even if you buy a deal that doesn't work out on your numbers like you wanted it to and you're
losing a little bit of money, 10 years from now, somebody's going to call you a genius for buying
that deal. You just got to be able to stay in the game that long. So protecting against downside
risk is making money. A hundred percent. And I'll just call out like people worry about the market
as the risk as the number one thing. Like, oh, our price is going to go down. Yeah. Okay. That's a risk.
To me, I think the bigger risk that people ignore are like the risks of vacancy, like if there's too
much supply in your area or you haven't kept up with your units and they don't look as nice as
everyone else's and you're not going to be able to attract good tenants and expenses risk.
Like, are your taxes going to go up?
Are you going to, you know, I invest in Colorado.
Hard to get insurance here.
Same with places like California or in Florida.
Like those are the risks I'm trying to protect against because, you know, if the prices go
down 2%, I'm not going to love it.
I'd rather them go up.
But like the things that endanger my ability to hold on to them, those are the risks
that I think you really need to be protecting against.
Yeah.
And I think another risk that people don't think about because it's not part of underwriting
is the risk of running out of capital or additional capital that can help you stay afloat, right?
Yes, we underwrite these deals to pay for themselves.
In most instances, they do.
In some instances, they don't.
But the people who end up building true wealth over a long,
period of time are the people who were able to maintain a stable level of cash reserves to cover
them when deals didn't work out, when vacancy didn't work out like they wanted to.
And over-leveraging by buying too many assets that aren't penciling all at the same time is
going to deplete your cash reserves so quickly. And then you don't have any other options
if things aren't working out. You've got to sell or you've got to let it go.
Well, before we get out of here, I want to just, I want to end on a little bit of a positive note.
We've been saying a lot of things that have gotten harder.
But I think there are things that are also getting easier and better.
And that is lower prices.
Like people look at this correction in a market and say that it makes it impossible.
No, that actually makes things more affordable.
We've seen housing affordability get better for the better part of a year now, which is much better.
And I actually think cash flow is getting better and you're going to have better negotiating leverage.
So like, yeah, things have changed.
But some of it is for the better if you just, it's just about sort of like,
establishing that discipline to be able to only look for good deals and then work with what the
market's given you. Yeah. Over the past, I would say 90 to 120 days, we have been seeing
some of the best spreads on deals that I've seen in a long time since the 2017, 2018 time.
Seriously? That's encouraging. And I think a lot of that has to do with sellers, A, starting to finally
loosen up with what they're expecting. I think a lot of that has to do with.
people just getting comfortable with the level of uncomfortability that the market has been
providing. Like, people start to settle in eventually. Interest rates went crazy, and then they've
come down a little bit. Now they're just kind of chilling around the same. They're hovering a little
bit, but it's not drastic changes like it was before. Expenses, they went up. They're higher than they were
a couple of years ago, but they're not continually rising so drastic. People are just comfortable
with how much things cost, with how much real estate costs. And now people are willing to trade,
because a lot of people were locked into sub 4% interest rates, but now you can go get a new mortgage
at, you know, 6%. And a lot of people are willing to make that trade if they're getting a better
house and a better neighborhood or if it's providing something else for their lifestyle. And so I think
people are a little more comfortable. Sellers are a little more realistic. People still need to
sell. That's creating opportunity for us to come in and find deals that actually pencil with our new
levels of underwriting. I don't want to say that we've reached peak challenging. Who knows what's
going to happen? There's so much uncertainty. But there are reasons to believe that like this era of
really high prices, really high interest rate and rapidly expanding expenses and no rent growth.
Those are what, five of the hardest things that you could probably deal with as an investor.
They're starting to ease. It's not going to happen overnight. Like those people who are waiting
for that like magical day where it's all going to get better. It's not true. But it is getting
relatively easier. And I think it's just going to continue. And it's, you know, it's for the people
who aren't getting discouraged. Like those are the people who are going to benefit from this.
I mean, there's still a lot of garbage out there. You're still going to have to be super,
super patient. But like, that's the discipline. I encourage everyone to start thinking about and
practicing over the next month, year, two years. Like, that is going to benefit you for a decade or more,
even if it means it's a little frustrating right now. I think the goal right now is get a
comfortable level of cash reserves, stick to your underwriting, be willing to leave a little bit
of money on the table, only buy deals that fit into your buy box, don't fudge it at all,
and in five years you look like a frick-frecking genius. All right. Well, Henry, thank you so much.
This was a lot of fun. I always love ranting with you about this.
It's one of my favorite things to do was just to stand on a soapbox and rant about things.
So anytime you need me for that, I'm in. Absolutely. And thank you all so much for listening to
this episode of the Bigger Pockets podcast. He is Mr. Henry.
Washington. I'm Dave Meyer. Thanks for listening. We'll see you next time.
Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new
episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes
come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show,
Dave Meyer. The show is produced by Ian K. Copywriting is by Calicoe content, and editing is by Exodus
Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter,
please visit www.
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.