The Best (and Worst) Real Estate Investing Advice for 2027

Dave:
There’s absolutely no shortage of advice on the internet for how real estate investors should handle the 2026 and 2027 markets. Some of it’s good advice. A lot of it is terrible advice. So today on On the Market, me, Kathy, James, and Henry are breaking down the best and worst advice for real estate investors heading into next year. This is On the Market. Let’s get to it. Hey everyone. Welcome to On the Market. I’m Dave Meyer, joined by Henry Washington, James Dainard, and Kathy Fettke today for an episode on the best and worst advice. I don’t know about you guys, but I’m hearing opinions all over the board on how to handle it. So you guys down today to try and separate some of the good advice

Kathy:
From

Dave:
The bad?

Kathy:
I’m looking for some good advice. I can’t wait to hear what you guys have to say.

James:
Yeah. If anybody can give me little hints, I could use it for 2027.

Dave:
Yeah. Guys, we have to give the advice. You know how a podcast works.

Kathy:
Got it.

Dave:
Shoot. So Henry always tries to get me going, so I’m going to make him go first. I want to hear Henry. Perfect. Henry, give us your bad one first. I want to hear the advice that makes you mad.

Henry:
I’ve been saying this for a long time. It’s not even related to this new market that we’re in. I just don’t like it when people say wholesaling is the best way to get started in real estate. It makes me angry. And here’s why. There’s a lot of bad wholesalers and there’s a lot of good wholesalers. And the reason I think there’s a lot of bad wholesalers is because it’s touted as this strategy where you don’t need money, you don’t need banks, you don’t need credit, you just go find a deal and then you mark it up a bunch and you make a bunch of money. But wholesaling isn’t a beginner strategy in my opinion, because if you are really good at wholesaling, you are really good at almost every aspect of real estate investing that happens before you buy the property, which means you’re an excellent marketer in generating leads, which means you’re an excellent communicator at talking to sellers and negotiating.
It means you’re an excellent underwriter of understanding what it’s actually going to take to renovate a property, how long it should take, what kind of money it’s going to cost you to renovate that property. It means you’re an excellent marketer on the sales side because not only do you have to market to find the deals, but you have to market to find the buyers for the deals and you’re an excellent communicator to them. The amount of being able to keep up with your leads, both on the buy side and the sell side in order to be very efficient, in order to underwrite effectively enough to leave yourself with profit and leave a flippersome profit, this is an advanced strategy in my opinion. And the better wholesalers are the ones who are experienced investors. In my opinion, the better wholesalers are the ones who probably started out flipping and then pivoted to wholesaling because it seemed a little bit easier because they got good at all the other parts of the business and they didn’t have to worry about the renovation.
So it just grinds my gears when people say, “Yeah, start out wholesaling and then move your way up.” I think it’s not the easiest way to start, in my personal opinion. I think if you want to be good at it, it takes a lot more experience.

Dave:
Henry, why do you think people give that advice so often?

Henry:
Because the one thing that really holds people back when they’re getting into real estate is they’re scared of not being able to have the money for deals. And so this is super attractive to them because they’re like, “I can do this strategy and I don’t need any money because I don’t actually end up owning the asset.” And I think that’s very attractive to people, but that’s only part of the story. There’s so many other parts of this that are hard and a seller is depending on you to sell their property for the price that you agreed to. These sellers oftentimes aren’t in the best situations and then you tie up their house for 30 days, 60 days, 90 days because you can’t find a buyer. The seller is the one who ends up losing in these transactions when a wholesaler’s not good. To me, that’s just not a beginner strategy.
And I want to be very clear. I’m not saying wholesaling is bad. I think it’s a tool in the tool belt used in the right situations. It’s great. I think you can absolutely make money wholesaling. I think there is absolutely a need for wholesalers. There’s investors out here who make money on all of their flips and all they do is buy from wholesalers. I think it can be done well and should be done well. My only beef is that throwing beginners into it creates a lot more bad ones than there are good ones.

Dave:
Can I say why I think it’s…

Henry:
Absolutely you can.

Dave:
Because people are trying to take advantage of people who don’t have money. There’s a lot of real estate gurus out there just saying that you can become a wholesaler and get rich quick. I think that is a big part of this because I mean, if you’re a good wholesaler, you could clear a 25, $50,000 check, especially during COVID. That’s awesome. It’s amazing if you’re good at that. And that’s appealing to people who might not understand the business and how complicated, as Henry just accurately pointed out, that it’s hard and complicated and takes some skill. But I’m curious your opinion, James, because you kind of started wholesaling, right?

James:
I’m going to disagree with you guys completely on both. Well, I think you guys are also both right like Dave. Yeah, people are trying to sell.That’s the hook for everyone. Get into money with no real estate or no money down, that’s wholesaling, right? But also I think the pitch was look how well I can grow my wholesaling business and you can make all this money and you can build out and spend all this, you got to mail and set up the lead processes. And honestly, most of the people spending this online are out of business right now because wholesaling is actually a very simple business. And I do think it is the greatest way to get going if you do it the right way. When I was 22, that’s how I got in the business, but I didn’t go start a business. I went to work for an investment company and would wholesale them direct deals.
And so they gave me the leads. I didn’t have any marketing costs besides gas. I mean, the beautiful thing about wholesaling is –

Henry:
Of course they gave you an easy button, James. That’s not how most wholesalers get started.

James:
This ain’t an easy button, getting in your car and banging on 50 doors a day. That is how you can make money wholesaling, face-to-face talking to people. And then the nice thing about getting going is this company would teach me how to underwrite the property. This is what their offer price needed to be and why. And so I was able as a young person to go, this is how investors look at things and they would buy the deal and give me the number. And my average check, it was not 25 grand, it was like 3,500 bucks, but I learned a lot and I made 3,500 bucks. And so I think as long as you do it the right way, you don’t need to take over the world. Go find an investor in your market that is buying deals. Go find Henry in Arkansas and go, “Hey, I want to work for you.
Give me a target list of properties. Let me cold call, let me bang on doors. You don’t need to spend more money. Have Henry give you an offer and go try to get the deal done.” You will learn so much. You’ll learn the basics and at the same time you can make money without having to spend it.

Dave:
All right. I like it. It got Henry going. All right. But now Henry, we got to hear your good advice.

Henry:
Oh man.

Dave:
What do you think the best advice is?

Henry:
I think the best advice right now, and this is more so for those investors who got in the game somewhere between 2015 and now. I think the best advice for the people in that bucket is you got to act like you’re a brand new investor again. We got spoiled in the past few years. We got spoiled in 2020 and 2021 where it was very easy to make money. We got spoiled in 2015, 16, 17, 18 and 19 because it was pretty easy to find deals that penciled. It was pretty easy to burr a deal and get all your money out fairly quickly. And now as the market has shifted, this group of investors has also gotten more seasoned. And as you get more seasoned, you get lazier in a sense. You don’t want to do the things, the hard work it took to get you to where you are.
Now you have resources, you want to hire people, you want to hire people. But what’s working right now is a lot of the dirty work that you were willing to do when you got started that you’re not willing to do anymore. And especially in this market where it’s hard to sell, but it’s a whole lot easier to buy. So if you get that hunger back, that hunger to scrounge up that really good deal, that hunger to generate the leads you need to get those really good deals, you can find yourself some of the most amazing deals you’ve ever purchased because of the market conditions right now. And the investors that are kind of failing or getting out of the space are the ones who systematized everything and the systems aren’t producing the results that they want them to produce anymore. The numbers aren’t quite there and they’re not making the necessary adjustments to go and scrounge up that good deal.
Because you can find a good deal on the MLS by making lower offers because there’s so many people that are struggling to sell. But if you now layer on top of that, the level of hustle you had when you first got started, you can literally get yourself deals for 40 cents on the dollar, 30 cents on the dollar, 50 cents on the dollar. There’s such opportunity out there right now and you need margin in this market. So if you can, like James said, he used to knock on doors. If you go knock on doors right now, you’re going to get screaming deals. If you ramp up your marketing right now, you’re going to get the best bang for your buck in your marketing. Like I was telling Dave in a previous episode, our last mail marketing campaign, the response rate is through the roof right now, and that’s just because sellers are struggling to sell.
And so now someone’s sending them mail saying, “Hey, I’d like to buy your property.” And they’re like, “Yeah, here, come talk to me.” So you’re going to get a higher return on the money you spend for your marketing right now, and you can get deeper discounted deals. It’s just if you act like you’re a hungry new investor again, you can clean up and in 10 years you’ll look like a frick-frecking genius.

Kathy:
Well, here’s the thing. I just don’t see James knocking on doors anymore, but –

James:
Oh, I still do.

Kathy:
Okay. Okay. Maybe I’m wrong there, but there are people who maybe don’t need to go back to what got them to where they are, but they have the wisdom and they have the knowledge and experience and maybe they can find the hungry people, train them to go do the thing that they used to do. But you’re just maybe not as hungry when you kind of have enough, I should say.

Henry:
When you’ve eaten a few steaks.

Dave:
I think that’s great advice, Henry, whether you hire someone else to do it, but I think you’re spot on. I see this in myself, not willing to put in some of the groundwork –

Kathy:
Yeah, me too.

Dave:
To do the stuff that I did 10 years ago, 15 years ago. But I do think you’re right that that’s kind of the game right now and I’m willing to do some of it, maybe not all of it. I’m not going to manage my properties again.

Henry:
Amen. Nope. Never again. Amen, bro.

Dave:
I’m not going to do that, but I might go look for some deals. I’ll go with James. James, you want to knock some doors? Let’s go.

James:
I love knocking doors. It’s the best. You never know what’s behind the door.

Henry:
It’s a hard pass for me, but you guys enjoy.

Dave:
All right. Well, Henry, that was very good advice. I like both of those. Who’s up next? James, what do you got? What’s the worst advice you’re hearing right now?

James:
So I’m going to piggyback off of getting started with Henry and it’s house hacking is the best way to get started in real estate right now.

Dave:
Those are fight words.

Henry:
Those are fighting words, buddy.

James:
Yeah, I know.

Dave:
BiggerPockets is going to fire you after that.

James:
Yeah. I just 100% don’t agree with it right now.

Dave:
Well, in Seattle.

James:
And it depends on the market. Yes. It depends. If you’re in a major metro city, I don’t agree with it right now because the cost of rent is so much lower than owning a home.

Henry:
I agree with that. I agree with you.

James:
The point being is when you’re house hacking, you want to be cheaper than what you could rent for. And if you look at the major metro cities, it doesn’t pencil right now.

Dave:
It doesn’t.

James:
Because rates are too high. They’re at the seven and a half percent. If your whole goal is to cover your living expense, not the right idea. Now, if it is to grow equity and get your path going for financial freedom and just building your portfolio, it could be a great thing because you can buy things very heavily discounted and you can put some equity in the bank in the next couple years. But the whole concept of house hacking on keeping your costs down, I just don’t agree. You can rent cheaper.

Dave:
I like this, James. I’m with you. I think it’s just a math problem. People just automatically assume house hacking’s the right way, but Seattle, no way. New York, LA, San Francisco, no way. But in the Midwest, I still think it works in cheaper markets for sure. But I’ve been saying this for a while, but I think if you live in Seattle or these expensive markets, rent and buy property in the Midwest or in the Southeast, that’s a better way than house hacking.

Henry:
Dave and I actually did a BPRE show about this very topic, like if house hacking makes sense, where and why. And that’s really what we talked about is in a lot of major metros, it’s just better to rent and invest somewhere else than it is to house hack in that market for the reasons that James just said. But in a lot of markets, house hacking is a great way to get started and it’s totally feasible. But Los Angeles, the numbers don’t work. Other areas of California, the numbers just don’t work. It’s just cheaper to rent and then take your investing money and take it to a market where you can actually get a return.

Kathy:
I think it just depends. It just depends on the property you find and if you could put an ADU on it, if it’s a five-bedroom house and you got a great deal on it and could rent a bunch of rooms. I think I’ve told you guys, one of my daughter’s ex-boyfriends who we kept because we’re like, “We love him. We’re keeping him as a friend and in our lives. He’s in the military and he bought a couple of places in San Antonio through house hacking and rents to other soldiers and is killing it. He’s living there free.” So again, it depends on your ability. And if you want to buy and get in the game and you only have to put three and a half percent down on your primary, it’s an easier way to get in than maybe some other ways. Maybe you just still don’t have the 20% even to buy in the Midwest potentially, whereas you might be able to put that three and a half percent down in house hack.
Even if it’s not covering everything, it’s at least bringing some income in.

James:
And I think that could change too, the incentives like we saw in 2008 when they would give you that tax credit when you buy. I think we might see those in 2027 somewhere, and that’s where you do want to jump on it because they’re incentivizing you to make this decision. But the incentives right now are to rent because you can get in some of these metro cities three months rent-free.

Dave:
Totally.

James:
And that’s hard to give up for ownership. I’d rather just save the money right now.

Dave:
Yeah, I’m with you. I think the point, James, is really important is that the advice is often blanket advice. We’re talking about bad advice. People are like, “Just house hack. It’s the right answer.” And there was a time that was true. From 2015 to 2022, it kind of was just like house hack, don’t overthink it. But now you do absolutely need to consider what’s the best use of their money. And I agree, in a lot of these expensive markets, it’s not. So then James, what’s your good advice? What’s the best advice you’re hearing right now?

James:
Well, I think 2026 and 27, it’s buy equity positions, not cash flow right now because I’m looking at multifamily deals and things aren’t really getting done right now. There’s not a lot of transactions because people can’t make them cashflow the way they want or people’s expectations of cash flow, getting a 6% return is just boring. It’s because people can buy or put it in the bank and make money, but the equity positions are real. I mean, we just closed on a property, it was 88 units, and the appraisal for the bank came in $2 million higher than our purchase price. And I would say it’s an average cash flow deal, but the location’s great, the building’s great, and that’s $2 million that we get to put in the bank in an area that yes, could go up and down, but over 10 years it’s going to be up.
So it’s so hard as an investor when there’s a lot of fear in the market that you just get locked up and can’t make a decision. But if the deal is good and you’re buying the right equity position or you’re buying well below replacement costs, those are the metrics that I’m trying to focus on right now. Because if I throw on my cash flow calc, it’s not going to look great.

Dave:
But do they cash flow at all?

James:
Yeah, they’ll cash flow. Yes. I mean that will be cash flow. Am I going to bur everything and get 100% of my money out and cash flow? No, that’s not going to happen. But everyone’s so afraid to leave money in a property right now because they want to hang on to cash. And I get that. I want cash too, but it’s okay to leave it if it’s a really good investment. If you are picking up the right property, the right purchase price, and you’re picking it up on the right discount, over 10 years it’s going to pay you back because the dips are there right now.

Dave:
I agree. As long as you can cash flow and hold onto these things, I think that’s the key. It doesn’t need to be great cash flow. I agree with you, but we don’t know how long this dip’s going to be. So you just want to make sure that you don’t get yourself in trouble by buying an equity position that you can’t maintain for the next couple of years.

James:
Yeah.

Dave:
All right. Well, I like that advice. There’s going to be a lot of those opportunities. Find equity right now to walk into equity. That’s one of the things the market is going to be giving us for sure over the next couple of years. All right. Well, we got to take a quick break, but we’ll be back with my best and worst advice and Kathy’s best and worst advice. Stick with us. Welcome back to On the Market. I’m Dave Meyer here with Henry, James and Kathy. Kathy, you’re up. Worst advice. What is just the dog poop advice that you’re hearing right now?

Kathy:
I mean, there’s so much, but one that comes up a lot and always has, it’s nothing new, is that you get started in single family and once you grow up as an investor, you get into multifamily and bigger deals. And I just don’t agree with that because to me it’s just two completely different businesses. And when I say multifamily, I’m not talking about two or four units. I’m talking about anything over five units because it’s a different game. It’s a totally different thing, different animal. So yeah, that advice just bothers me because I think you can scale with single family and I think you can grow incredible wealth with single family and you could do it with multifamily, but it’s not one or the other. And it’s not like you’re a low level, entry level investor if you just stick with single family.

Dave:
I totally agree with that. Do you think that advice is… I feel like a lot of those multifamily people have shut up recently.

James:
The advice is over. Oh man. The plan didn’t work.

Kathy:
The plan didn’t work. I mean, it’s just jumping, it’s diving into the deep end before you really know how to swim, and even some that knew how to swim are being taken down. For sure. And the difference, the huge difference as we know, is the financing. Financing is very different on multifamily or commercial real estate over, again, with multifamily over five units. With single family today, it’s a lot more predictable. Your expenses are pretty much more predictable, not always, but more so with multifamily if you’re on adjustable rate. If you can get a fixed rate on multifamily, that’s great, but I think it’s harder to do. But if you’re on adjustable, how do you plan for where rates are going to be? You just don’t know. And how do you know what cap rates are going to be if your plan is to sell at a certain cap rate?
That’s what so many people have gotten messed up with is making assumptions about where things are going to be in three to five years and you just don’t know. And if your business plan is completely dependent on that, boy, I don’t need to emphasize how stressful that is. So they’re just different businesses, but I think we all know people who stuck with single family and are not complaining today. They’re in a good shape today. Would you agree?

Henry:
Man, single family’s cool again, guys.

Dave:
Cool again. Yeah, it wasn’t cool for a few years, but now.

Henry:
I was talking to one of my first business partners just about this yesterday, about how a lot of people that pivoted into multifamily are struggling, and a lot of those same people were the ones telling me a few years ago that I needed to scale. I needed to do bigger deals. I needed to move into multifamily. That’s just the natural growth path. That’s what I should be doing. I invest in single family for reasons that have less to do with money and more to do with the impact I have. So I never felt like I needed to do that, but a lot of people get caught in that trap. Now a lot of those same people are like, “Man, I really need to build up a single family portfolio. I want to get out of some of this multifamily and get some singles and duplexes and small multis again.” I’m not faulting anybody for wanting to grow and scale if that’s truly what they want.
But if you’re comfortable in your asset class, in your niche, it’s okay to be comfortable there. It’s okay to not pivot. It’s okay to just get better at what you’re already good at if the reasons you’re doing it are producing what you want it to produce.

Kathy:
And it was really a theme at BPCon of the small and mighty investor, would you rather have 10 cash flowing properties very close to being paid off or paid off or have a small investment in a bunch of doors and not really making any money? I think the braggadociousness of how many doors you have, I think that conversation is dead.

Dave:
Hell yes. Thank God. I hate door count.

James:
It would just drive me bonkers as one of these people get online, they’re like, “Oh, what are you going to buy a single family house and cash flow 100 to $200 a house?” What does that do for you? You can’t pay your bills and they’re talking so much grief about this. I guarantee you every one of those people that were just the poo-pooing on that would happily take the $200 right now.

Kathy:
Yeah. It’s a different business. You go bigger, you have more employees, you might have to syndicate and bring in investors. It’s not as simple. And even experienced investors are realizing, whoa, this is rough waters. You can see swimmers out of the ocean who swim all the time and all of a sudden a big wave comes and wipes them out. And that’s really what we’re seeing, things that weren’t expected. I talked to someone at BP Con who now, and I think we’re seeing this all the time, but the bank wants reserves. And when those reserves aren’t there, which it’s not, cash flows are down, the bank wants more money and people have to put in lots more money

Dave:
That

Kathy:
They weren’t planning on. And again, maybe didn’t have it in their proformas.

Dave:
Well, I’m with you, Kathy. I think when you get into these boom times, people stray from the fundamentals, and I’m glad I didn’t, but I get why people do. It’s tempting. And some people really did hit home runs, so good for them. But I think the advice coming back to the fundamentals is very good. So with that, you told us your bad advice. What’s your good advice?

Kathy:
Well, I think you just literally said it. I just had a women’s retreat. It was awesome. And one of the things I saw is little me, little Kathy basically and these women, which was, “I’m really good at this thing I’ve been doing, so now I’m ready for this thing.” And one was really good at actually selling real estate, really good agent and actually successful at it and flipping, and all of a sudden now is ready to do RV parks. And it’s like, “Ooh, is this the time to be trying a new business?” And we’ve got to look at… So my advice is if you’re doing something that’s been successful, just do it better. Stick with it. Get your operations in order, cut expenses, increase income, get better at what you’re already good at. If you’re going to start something new, you got to understand you’re starting something new in a very tough time to start something new.
So that’s my advice.

Dave:
Yeah. I could pick apart the mobile home park thesis, but I think generally you’re absolutely right, Kathy. It’s something I hear all the time. I’m doing this, what’s next? Just keep doing what you’re doing.

Kathy:
Yeah, just do better.

Dave:
Yeah. Henry and I had a really good conversation. I don’t know if you guys know Paula Pant. She hosts the podcast, Afford Anything. We were talking to her about this and she was saying the same thing. It’s just this human drive to do more and try the next thing. And that’s totally understandable. I have fallen victim to that like everyone I think has. But her advice was just find another outlet for that energy. If you’re a good agent, just be a great agent and then find a hobby or volunteer. You can grow as a person and as a professional in other ways without taking on unnecessary risk or disrupting something that you’re good at. Risking something you’re good at and that’s working to try something unproven. That to me is just not worth it.

Henry:
James is over here like, “I know y’all ain’t talking to me.”

Dave:
James is like, “I’ll buy that mobile home park.”

Henry:
How much they want to sell it for?

James:
How much?

Dave:
All right. Well, I think that’s great advice, Kathy. I really think, especially in today’s day and age, when things were easy, sure, go take a shot. Right now, I would much rather see people really get good at something. That’s a surefire way to get rich and to be wealthy.

Kathy:
Or you do what Brian Burke is doing, where he went from multifamily into senior housing or assisted living, but he didn’t just jump in. He brought in, he hired an executive who’s done it for 30 years or whatever. So just got that 30 years experience. So that’s one way to jump into something new because you’re not really jumping in, you’re just learning, you’re apprenticing with somebody who’s already done it.

Dave:
All right. Well, I’ll give you my best and worst advice for 2027 right after this quick break. Stick with us. Welcome back to On the Market. I’m Dave Meyer joined today by Kathy, Henry and James. We’re giving our best and worst advice that we hear right now, and it is my turn. And my worst advice, James, this is going to conflict with what you said, but I think you might actually agree with me. I actually think you might agree with me. The worst advice that I hear constantly in any market, but especially in this market, is that your primary home is not an investment. And you hear very prominent real estate names, Grant Cardone and Robert Kiyosaki say that your primary home is not an investment. This drives me nuts because I think this is a choice. If you go out and buy your dream home in a fancy thing and you’re over leveraging yourself, yeah, that’s not an investment.
I agree with that. But if you want your primary home to be an investment, it can absolutely be an investment. Even James, even I agree with you, house hacking, it might not be the best, most optimal way to invest in certain markets right now, but if you want to buy a primary home and offset some of your costs, you can do that through house hacking. It might not be the optimal use of your money, but you absolutely can do it. Look at Kathy, she still does it. There’s absolutely ways to make money from your primary residence, from doing a live and flip to house hacking. I actually think I see more advanced investors getting back into house hacking right now, people who own a nice property, who are breaking off lots or who are building ADUs. I absolutely think your primary home can be a investment.
And I would argue that it’s more important now than it has been in our lifetimes because the cost of housing is just so expensive. Whether you’re a renter or a buyer, it’s expensive. So if you can find a way to even offset some of your cost of housing and think of it as an investment, you should do that.

Kathy:
I agree. Amen, brother.

James:
I mean, for everyone that didn’t buy during COVID, their primary residence, and they go, “Well, I’m never going to see this growth again,” this is the opportunity to get some good appreciation. I’m seeing homes sell for 300 grand less than they were trading for 12 months ago. That buyer in 12 months will see an equity gain from what they paid because they bought it on the dip. And so I mean, I would love to debate anybody on the primary residence is not an investment, and I will show them math, and there’s no way that they’ll be able to argue this math. It’s absurd to me when people say that.

Kathy:
Me too. I just had some friends visit and one of them has rented the same four bedroom house in Northern California for 20 years, just the most ideal tenant you could ever have. And I mean, I’m her friend, so trust me, I’ve been trying to get her to buy and she house hacks her rental. So that’s kind of cool. She rents out three of the rooms and her rent is very low. But dude, had you done that in a house hack, she’s already renting rooms and had locked in a low interest rate over the years, she would be a multi multimillionaire because the property is in the San Francisco Bay Area. So it’s like the argument might be, well, how could I do it? It’s too expensive. How can you do it? You find a way to do it. You find a way to do it.
You listen to BiggerPockets, you find out how to do it, but it can be done. And whether You get other partners.

Dave:
Three and a half percent down.

Kathy:
Yes, yes, yes, yes. So I couldn’t agree more is absolutely an investment, especially if you hold it.

James:
Or you sell it after two years.

Kathy:
Or do what James does.

James:
We’ll see what happens. I’m putting a sign in my yard soon.

Dave:
James, you’re going to have to tell us about your primary home investment if that one clicks out.

James:
Yeah, then I will debate anybody.

Dave:
All right. Well, our last piece of advice is my best advice right now. And I hear some people talking about this, but I think it should be talked about more. Right now, I think one of the best strategies you can use in real estate is paying off your debt, is using the money that you have or selling rentals that you don’t want anymore and paying down your debt. Because in a weird market, a weird economy like we’re in right now, a residential rental property with little to no debt on it is about as rock solid as you can get. We don’t know what’s going to happen with the stock market or crypto or gold or commercial real estate or even the housing market. But man, if you don’t have debt on these properties, put out a lot of cash flow and really, really low risk investment.That to me is a really appealing part of your portfolio.
I’m not saying you need to have no debt on any of it. I absolutely have debt on properties, but knowing that I have some properties that are paid off is a pretty good feeling knowing that one’s rock solid and we’ll provide cashflow in case I need it. And it also, to me, gets a lot of, for me personally, and I think for a lot of investors, gets you closer to your end game, which is to have a low risk long-term portfolio. And I know a lot of people out there say you’re crazy not to try and scale and to not leverage yourself as much as you can. That’s the benefit of real estate. I don’t know. It totally depends on where you are in your investing career. Young people newer probably need to use leverage. I’m with that. But I think if you’re a little bit later in your career, paying off debt right now, especially if you have any high interest rates, it makes a lot of sense to me.

Kathy:
I was just going to ask you that. Would you pay off low interest rate debt?

Dave:
No, no. No. Not anything that’s like three or 4%, but I think probably eventually I will.

Kathy:
I would keep those forever.

James:
I think that is some of the best advice people could have right now because I think the reason people are hurting is they just abuse debt. There’s too easy to get a hold of financing, too easy to hold to get money from other people, and now they’re in deep trouble. That was the lesson I learned in 2008 was don’t abuse debt. It will get you.

Henry:
This is absolutely something I’m considering and looking at right now too. I think it’s great advice. And people always say, “Well, you shouldn’t pay off your homes. Yo should scale.” But it’s not just because I’m selling some properties right now doesn’t mean I’m out of the game. I can go buy more. I’m just trying to secure a section of my portfolio for the future, for the long haul. And then maybe I’ll go build something else. I’m with you. I was talking to my wife about this as we were discussing the options and it was like, if I do this and I start building a rental portfolio again, how much better is that portfolio going to be? It’s a great time to buy right now. I know better what to go buy. I know more about what I like and what I don’t like. I know more about how to operate my properties.
I know I have so much more information and tools at my disposal now than I did when I first got started. I could build a much better portfolio.

Dave:
Exactly. It doesn’t have to be all of your portfolio, but finding opportunities to pay down debt I think is a really good thing to be thinking about right now. I’m definitely not two and a half percent mortgages that I have, Kathy. Absolutely not. But even 5% I’m considering paying off right now. I’d rather the cash flow. The other thing is right now, because we’re in this transitionary period and I personally am skeptical of the stock market and stuff and I could hold cash or I could pay off my mortgages and that’s essentially even if you pay off your 5% mortgage, you’re essentially getting a 5% return that’s better than a money market account. And then if the market changes, just refinance it. Then you can pull the money out. It doesn’t even need to be a permanent thing, but it can help you weather a confusing time like we’re in right now.

Kathy:
Another thing I used to teach is maybe you don’t have the means to really pay down your debt, but if you take the cash flow that you’re earning on some of these properties that maybe isn’t changing your life because it’s only a few hundred dollars and you just make that one extra payment. If you just take the cash flow, pay down the loan and make sure that the bank understands that’s what you’re doing, you can cut your 30-year mortgage down into 15.

Dave:
100%.

Kathy:
And even less. Yeah. So that was something actually I taught for years, Dave, was just take your cashflow. You don’t need it today.You’ve got a job. And maybe take all of it from your entire portfolio and pay one down. Pay your highest interest rate property with all the cash flow and watch, like you said, watch that get paid off at not just your stress levels, but your cashflow gets better.

Dave:
The math on that is very compelling. I won’t get into it, but if you look at the math of paying down your mortgages quickly, it usually is a very good return and is worth your time. So I’m totally with you, Kathy.

Kathy:
Yeah.

Dave:
All right. Well, this was a lot of fun. Some good advice, some bad advice, but always a lot of fun hanging out with you guys. Kathy, James, Henry, thanks for being here and thank you all for watching this episode of On the Market. We’ll see you guys next time.

Kathy:
See you soon.