You’re not alone. From the rise of tiny homes to the spiking interest in green housing ideas, people from all walks of life are rebelling against skyrocketing traditional home prices.

And it’s not just about money, either. With more Americans than ever working remotely, there’s less reason than ever to chain yourself to one location.

18 Alternative Housing Options

A decade ago, green homes were rare, as were tiny homes, accessory dwelling units, and smart home technologies

You’re not alone. From the rise of tiny homes to the spiking interest in green housing ideas, people from all walks of life are rebelling against skyrocketing traditional home prices.

And it’s not just about money, either. With more Americans than ever working remotely, there’s less reason than ever to chain yourself to one location.

18 Alternative Housing Options

A decade ago, green homes were rare, as were tiny homes, accessory dwelling units, and smart home technologies that reduced energy usage.

Today they’re everywhere.

Whether you’re looking to save money, embrace a more eco-friendly or nomadic lifestyle, or just beat your own drum a little differently, scope out these ideas to get you excited about alternative housing.

1. House Hack with an ADU

Who wouldn’t want to live for free?

The idea is simple: you buy a home and find ways to have someone else pay the mortgage. The classic model is buying a small multifamily, and renting out the neighboring unit(s). Sharing walls with other housing units is inherently more eco-friendly than detached single-family homes, both in the use of building materials and energy efficiency. Here’s a detailed house hacking case study on how a 27-year-old with no real estate experience house hacked and currently lives for free in a beautiful suburban home.

If you don’t love the idea of living in a multi-unit building, or if multifamily properties are scarce where you want to live, you can house hack with an accessory dwelling unit (ADU). That could mean a basement or garage apartment, or a standalone structure like a carriage house or tiny home on your property. You can continue living in the main house if you like, or move into the ADU and rent out the main house. Not only would you collect more rent, but it will help you live more simply, and with a smaller environmental footprint.

Alternatively, you could rent out bedrooms to housemates in a single-family home. Deni and I have both done this, and it worked out beautifully.

In fact, Deni even house hacked her suburban single-family home by bringing in a foreign exchange student, and the placement service covered half her housing costs! A little creativity can go a long way, both with alternative housing and clever ways to cover your traditional house costs.

Compare mortgage terms on Credible, and keep in mind you can use the rents from neighboring units to help you qualify for the loan.

2. Tiny House in Tow

By now, everyone’s familiar with the tiny house movement. But tiny homes are good for more than just adding an ADU to your backyard. You can also use them to travel comfortably and even live nomadically, hitching up a tiny house to the back of your car or truck.

First, you don’t need a dedicated RV — you can keep your own car or truck, assuming it has enough power to pull a hitch. Which, let’s be honest, is usually much cheaper than buying an RV for your alternative housing.

Second, you don’t necessarily need to stay at RV parks for power and water. Many tiny homes have their own solar roofs, with rainwater reclamation and filtration systems for the ultimate green housing solution.

Beyond the warm-and-fuzzies of green housing, tiny homes with solar power and rainwater reclamation systems also help you stay self-sufficient. That means you can pull up just about anywhere you like, and settle in for as long as you like. Assuming the law doesn’t come shaking its stick at you.

Who needs a mortgage, anyway? Throw down $10,000-50,000 and go forth into the world!

3. RV Living

When you think of an RV, what do you picture? If you think of those rickety beige trailer-buses from the ‘70s, think again.

Today’s RVs often share more in common with luxury homes than trailers. Many include enormous “slides” — rooms that slide out of the main section to create a multi-room home when parked. From jacuzzi tubs, queen-sized beds, fully-equipped kitchens and comfortable bathrooms to any other amenity you could ask for, RV living is whatever you want it to be.

Or you could keep it simple with a classic camper van. Your choice.

Whether you earn $1,000/month or $10,000/month, consider a fun and mobile RV lifestyle at whatever luxury level you can afford. It sure beats overpaying for a dingy apartment!

My father-in-law doesn’t live full-time in his RV, but he and his wife take off for months at a time. They stay as long as they like at a given RV park, then move on. This is alternative housing at its finest.

On the other end of the spectrum, Paul and Nina live a frugal-but-fun and rewarding full-time life in their RV on a modest budget. They prove you don’t need much money for a fun nomadic life, and can take advantage of the many cheap unconventional housing alternatives out there. Your only limits are your own creativity.

4. Stay at a Campground

Many campgrounds offer RV parking, water, sewer, and electricity. In fact, I’m told that some campgrounds fill up for the year within minutes of opening reservations.

But you don’t have to have an RV to spend a month or two (or longer!) living at a campground. When I was younger, I used to stay at Cape Henlopen State Park’s campground, nestled between Lewes and Rehoboth Beach in Delaware. They had full bathrooms with showers, and fresh water pumps. My friends and I would spend all day on the beach, then shower and go out to restaurants and bars at night.

I never stayed longer than a week, but a determined camper could push those boundaries if they had a few solar chargers. As green housing ideas go, it doesn’t get much more eco-friendly than that.

Or much more affordable, for that matter.

5. Live on a Boat

Who says you have to live on land?

My sister Lauren dated a guy who wanted to live closer to her, so he bought a used houseboat for around $40,000 and rented a slip a few blocks down the waterfront Promenade in Baltimore’s Fells Point. It had two bedrooms, full electricity, a 46-inch LED television, heat, running water, and of course a motor.

I always thought they should have toodled down the coast, parking the house boat in the Florida Keys or somewhere equally enticing. They didn’t, alas. But I love how this other couple sold their home, bought a multifamily rental to become landlords, then bought a houseboat and are currently sailing around Europe. All with far lower living expenses than back home in the US.

If you’re interested, my fellow personal finance blogger My Money Wizard breaks down all the advantages to a houseboat, from cost to mobility to an upgrade in scenery and view.

Nor is a houseboat the only boat-based alternative to buying a house. Why not sail around the world with your spouse, significant other, or just a (really) good friend? Check out Kristin Hanes’s experience at The Wayward Home to see what it’s like to live full-time on a sailboat.

And ditch your assumptions about costs. Boats can offer extremely affordable housing with low energy costs, your own built-in outdoor space, and plenty of mobility.

Who needs a mortgage, anyway? Throw down $10,000-50,000 and go forth into the world!

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6. Prefab Cabins

Own some land? Pick up a prefab cabin!

Even better, build your own cabin using a cabin kit. My father and uncle did this — they bought a 10-acre lot near the Madison River in Montana, bought a three-bedroom log cabin kit, and spent a few summers building it.

It’s gorgeous, boasting solar panels for electricity, a rainwater reclamation system for running water, and a propane-powered on-the-fly hot water heater.

For heat, a pellet stove or wood-burning stove works wonders, and are cheap to buy and install.

Prefab cabins offer affordable, self-sufficient green housing options with low environmental impact.

7. Yurts

Yurts originated with the nomadic tribes of Central Asia, as round, dome-like tents. Today, people often use them for “glamping,” and they run the gamut from spare and easy to move to luxurious and semi-permanent.

You can buy comfortable, high-end yurt kits online for between $5,000 – $10,000, with the glaring addendum that “some assembly is required.” Note that yurts tend not to have electrical wiring or plumbing, so people typically use composting toilets with them.

Consider erecting a yurt on your property to rent on Airbnb for vacationers looking for a unique glamping experience. You could also build a yurt on land that you own, whether to rent to campers or to use yourself.

Or, if you’re feeling adventurous, you could try moving around with a yurt that’s easy to set up and collapse.

8. Housesit

Not everyone without a permanent address is homeless. Why not go live in other people’s homes?

Want to stay for free in others’ homes? Offer to housesit! For free matchmaking services for pet owners and house sitters, check out TrustedHousesitters.com, Rover.com, or HouseSittersAmerica.com. In most cases, you do have to care for other people’s pets while they’re away. But that’s a small price to pay for free rent at upscale homes.

Additional options include Craigslist, local pet owners’ groups on Facebook, and local Realtors.

While some people use housesitting to score free accommodations while traveling, others actually live as full-time nomads housesitting for other people. Check out Brittnay and Jayden’s blog about housesitting full-time for a fun example.

9. Home Swaps

When you travel, your house sits vacant and unused.

But just as you need a place to stay when you visit another city, other vacationers need a place to stay when they visit your city. Housing swap websites offer a network of people who make their homes available while they aren’t using them, so you can stay at other people’s vacant homes and they can stay at yours.

In the classic housing swap, you and someone else literally swap homes for a week or however long you like. But that’s hard to arrange, finding someone in the exact place you want to go who also wants to visit your city — on the exact same dates.

So websites like HomeExchange.com let you accrue Guest Points as a house swap currency. When people stay at your home, they pay you in Guest Points. When you stay in other people’s homes, you pay them with Guest Points.

Think of it like Airbnb, but instead of paying with money, you barter home stays.

For nomads looking to spend much of the year traveling, you can theoretically stay for free indefinitely at unique homes around the world, for endless alternative housing options.

10. Airbnb & Geoarbitrage

If you hadn’t noticed, the cost of real estate isn’t exactly the same everywhere.

The cost per square foot of housing space in San Francisco is around $1,100(!). In Buenos Aires, the cost per square foot is around $167.

You can live like a king on a modest income in some parts of the world, or live like a pauper on a high income in others. So stop thinking so linearly about where you live, and start exploring parts of the world you never considered before. Research places with a high quality of life at a low cost of living.

Having traveled all over this planet, a few that come to mind for me include:

Go stay for a month at an Airbnb or VRBO vacation rental. If you like it, consider moving there permanently.

11. Teach Abroad & Live for Free

My wife Katie is a school counselor, who spent the first four years of her career in Maryland. Then she took a job at an American school in Abu Dhabi, where we thought we would spend two years as a fun adventure before moving back to the US.

That was eight years ago. We still live abroad, currently in Brazil.

International educators get not just a comparable (or higher) salary than in the US, but they often get free furnished upscale housing, full comprehensive health insurance, and paid flights home to the US each year.

Couple that with the fact schools typically put you up near campus, so you may not need a car. Katie and I shared one car for the four years we lived in Abu Dhabi, and didn’t bother getting a car at all in Brazil.

That means that three of the largest expenses for most households — housing, transportation, and health insurance — are completely removed from our budget. We can save and invest all of the money we would otherwise have spent on them.

Here’s the island where we lived for free in Abu Dhabi:

12. Shipping Container Homes

Once considered a novelty, shipping container homes have come a long way.

Think of shipping containers as lego building blocks, that architects and home designers can mix and match any way they like. You can create a home that shows off its roots, or a home that you can’t tell was constructed from old shipping containers.

Not only are these homes more affordable to construct, but they’re also incredibly durable. And that says nothing of the environmental impact of recycling old shipping containers to build sturdy, beautiful homes rather than cutting down trees to do it.

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13. Boxcar Homes

The same principle applies with boxcar homes. But instead of using old shipping containers, builders recycle old train cars.

On the downside, boxcars don’t combine easily like shipping containers. That limits your options for building larger or complex homes.

But as a tiny house, boxcars offer plenty of character, with minimal cost to convert. And like shipping container homes, they reuse existing structures to create a new home, rather than having to use new materials.

Since they once served as a mode of transportation, many boxcar homes lend themselves to towing behind a truck as well.

Here’s an example of what they can look like as homes:

(image courtesy of Goods Home Design)

14. Pallet Homes

Many people and companies consider wooden pallets to be commercial waste. They literally just throw them away.

But it’s useful wood, already constructed into building blocks. That means you can get the framing for free, to construct a modest DIY house out of recycled materials.

Again, it offers an eco-friendly alternative source of building materials, using existing wood for framing. Just beware that these homes may not be sturdy enough to withstand extreme weather, if you live along the path of frequent hurricanes, tornadoes, or earthquakes.

(image courtesy of 99 Pallets)

15. Silo Homes

What happens to the silos when a farm closes down?

In a perfect world, they become the structure for a home.

Or part of a home, if you prefer. You can incorporate a silo as simply one architectural element in a more traditional home, to give it some unique personality and flair.

You can often pick up old silos for free, or rather for the cost of hauling them away. And once more, you get to reuse existing building materials.

If you like the idea of rustic charm for a do-it-yourself homebuilding project, look into converting a silo into a home.

(image courtesy of Decoist)

16. Earth Berms/Hobbit Holes

We all fell in love with Bilbo Baggins’ hobbit hole in The Lord of the Rings. But I didn’t realize people actually built and lived in these until I saw a Welsh guy and his father-in-law build one in the late 2000s.

They dug and built the hobbit hole house in four months with no heavy construction equipment, and created a gorgeous, infinitely livable home. And they used nothing but locally available building materials, such as stone from the dig-out, tree branches, and lime plaster. Straw bales provided breathable flooring and wall insulation, and of course all hobbit holes have a green roof.

See the details of how they built this eco-friendly hobbit hole here.

You can also buy prefabricated shells to embed in hillsides as earth shelter homes. That spares you having to frame out the walls and roof, and offers more moisture protection, but comes with higher costs. Learn more at providers like Green Magic Homes.

As green housing ideas go, hobbit holes offer built-in insulation for energy efficiency. They stay cool in the summer, and if you get chilly in the winter, a fireplace, wood-burning stove, or pellet stove can heat the entire house.

17. Cob Houses

As an alternative to modern building materials, you can go old school with cob houses.

Cob or cobb is a type of earth masonry, made with subsoil such as clay, fibrous organic material, and sometimes lime. Made properly, it’s as strong as concrete, but more attractive, temperature regulating, and environmentally friendly.

You can build charming cottages that look like they stepped out of a fairy tale with cob. Check out a few examples to see what I mean:

Image: Thannal

Image: Michael Buck

18. Treehouses

What kid doesn’t want to live in a treehouse?

If your inner child never quite let go of that dream, consider building a habitable treehouse. Treehouses come with some challenges, since you’re building the structure around a living organism that constantly grows, moves, and changes.

But you win infinite style points for a proper treehouse.

As a variation on treehouses, you can also install a free spirit sphere in a large tree. It hangs suspended — securely — from the tree.

Final Thoughts

As someone who hasn’t paid full price for housing since 2011, I’m all about alternative housing ideas.

That could mean more travel-oriented housing alternatives such as RVs, houseboats, housesitting, or housing swaps. Other people get more excited about green housing ideas such as earth berms, cob houses, silo homes, shipping container homes. And some combine travel with green housing options like tiny homes that you can take anywhere.

Many of these green housing alternatives are also self-sufficient. Eco-friendly homes often include rainwater reclamation systems for water, small Energy Star appliances, and solar panels or green roofs.

Bear in mind that many parts of the world use housing with a far lower energy consumption than the US. My apartment in Brazil uses an electric tankless water heater for the showerhead, and requires no central heating or air conditioning because the climate is mild year-round. Our home has almost no carbon footprint.

Think outside the box when you explore sustainable homes. You can find cheap alternative housing ideas in other countries that offer green home designs at a fraction of the cost of similar homes in the US.

What alternatives to buying a house have you considered (or done)? Share your experiences and thoughts on alternative housing in the comments below, we love hearing from readers, and are always looking for case studies to feature!

More Unconventional Reads:

How to Invest $1,000 in Real Estate

How to Find Good Deals on Investment Properties – Even in a Hot Market

About the Author

G. Brian Davis is a landlord, real estate investor, and co-founder of SparkRental. His mission: to help 5,000 people reach financial independence by replacing their 9-5 jobs with rental income. If you want to be one of them, join Brian, Deni, and guest Scott Hoefler for a free masterclass on how Scott ditched his day job in under five years.

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Looking for easy ways to save more money?

Start by cutting these 12 expenses that can save you more than $12,000 per year, without ruining your quality of life.

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Deni: How is everybody doing? Welcome to Spark Rental podcast. Facebook Live Stream.

Brian: Youtube stream.

Deni: Right. All of the above.

Brian: Today we are talking about 12, quote, invisible costs to cut for $12,000 a year in annual savings. These are things that do not ruin your quality of life. Easy things you can cut, easy expenses to cut. If you’re looking for ways to save more money without eating ramen noodles every night for the next month.

Deni: I used to do that with my kids.

Brian: I did, too. I mean, you know, that’s called college, right? I mean, that’s just what you do. But you probably don’t want to live like you’re in college when you’re an adult. So diving right in with something that is just super simple is stop buying bottled water. Bottled water is 2000 times more expensive per ounce than tap water is. So if you don’t like the taste of the water where you live, just get a filter. You can’t get a water filter. So the the water project dot org estimates that the average American spends $100 per year per person in the household on bottled water. But it could be way higher than that for you. It could be thousands of dollars per year if you or your family members drink nothing but bottled water. So this is a really simple one. Just get a water filter in your kitchen so that you don’t have to buy bottled water in areas where you don’t like the taste of the tap water.

Deni: And what is some others?

Brian: Well, in keeping in that same theme of beverages, sweetened beverages, which include sodas, sweetened teas, coffee beverages like packaged coffee drinks.

Deni: Oh, so pre-made.

Brian: Yeah. Beverages that come in a can or in a bottle that have sugar. Like soft drinks, basically. So, first of all, this statistic is a little bit outdated. This is from a few years ago now from the USDA. So they estimated that the average non snapping food stamps program, the federal food stamp program, the average non stamp household spends $ 2,239 per year on sweetened beverages. What’s really disturbing, though, is that SNAP recipients so food stamp recipients… Sweetened beverages actually made up the second largest grocery expense total on their average grocery spending bills after meat. That’s pretty scary! So it made up almost 10% of food stamp recipients. Grocery bills, the sweetened beverages. Sodas, basically. I mean, all of the rest of us are subsidizing billions of dollars to the soft drink industry every year, which I got to tell you as a taxpayer really pisses me off. Yeah. But sweetened beverages are also terrible for you. I mean, this is like the fast lane to diabetes. So save yourself thousands of dollars a year, avoid diabetes, stop drinking sweetened beverages, make tea at home.

Deni: Oh, and it’s so much better!

Brian: Yeah. Yeah, absolutely! My wife, Katie, and I, we just we keep a pitcher of green tea and the refrigerator. We throw a little bit of stevia in it when we make it, and we make iced tea with green tea. A little stevia that’s sugar free. It’s dirt cheap. It probably costs us a few cents per glass of tea. All right, enough proselytizing!

Brian: Number three: wasted food. The USDA estimates that 31% of the food that consumers buy goes to waste. 31%. That’s almost a third of the food that the average American household buys goes to waste. So with an average annual grocery bill of around $4,500, according to the BLS, that’s close to $1,500 a year in annual food waste per household.

Deni: That’s hard to hear. It’s like my father used to say at the table, Don’t waste your food. There’s a poor, starving child somewhere. And a smart butts, we would say name, name one. But there are. There are. And it’s sad to know that we have all that waste and that could be actually feeding somebody else.

Brian: Absolutely. All right! Number four: coffee shop coffee. So people love their lattes from Starbucks, but and they spend an absurd amount of money on them. So I was just looking at this earlier today. The the the average cost of a medium latte or cappuccino at Starbucks is close to $5. Now it’s $4.55.

Deni: For one coffee?

Brian: Yeah, one coffee. So if you have one of those every workday throughout the year, that comes out to almost 1200 dollars a year, it’s $183 a year. This is another easy one to fix. Make your own coffee at home and pay pennies per cup instead of almost $5 per cup on coffee.

Deni: That’s true.

Brian: All right. Number five: Cigarettes. Average cost of a pack of Cigarettes in the US is around $8 a pack. This varies wildly by state as different states put different taxes on tobacco, but it’s around $8 a pack. Nationwide average that comes to almost $3,000 per year for a pack a day smoker, it’s 20 $920 a year. So it’s like with the sodas, like you’re paying a fortune every year to give yourself cancer. This is totally irrational. Stop doing it. And this says nothing of the health care savings either, both on the health insurance premium side and on actual health care bills. And of course, your health, which is priceless.

Deni: Right.

Brian: Number six: happy hour drinks and happy hour snacks and bites. If you go out to happy hour once per week and if you spend $25, including drinks, bar food tax tip, that comes to 1300 dollars per year in happy hour drinks and snacks.

Brian: I get it. You want to meet up with people after work, try to find ways of doing that without going to a commercial establishment. Go have drinks at the office, have drinks at someone’s house, have drinks at the local park, go to the local boardwalk or beach or whatever and have some drinks there. Find ways of not spending money at commercial establishments for this stuff.

Brian: All right. Number seven: Cable TV. Average cost of a cable subscription, $106 a month. That comes out to $1,274 per year. Just get a streaming service for ten or 15 bucks a month.

Deni: Yeah, I mean, slowly but surely that’s being phased out as we move forward anyway.

Brian: Cut the cord. Cut the cord.

Brian: All right. Number eight: similar here. Landlines. Landline, home phone service, average annual cost of a landline. $353 a year may not sound like much, but I can think of things that I would rather do with that $353 every year.

Deni: Especially since it’s probably just sitting there now.

Brian: Yeah, we all have cell phones, right?

Brian: All right, number nine: unused gym memberships. Average monthly costs $60 per year. But here’s the thing. 67% of gym members, two thirds of gym members never actually go to the gym. I go to the gym. I love going to the gym

Deni: They join them in January.

Brian: Yeah. So we call them resolutions. You know, the first three weeks of the year, the gym just floods with people. And then by the end of January, they’re all gone. Like, Yeah. Resolutions. But yeah, look, if you use your gym membership, by all means, keep it! I pay for a gym membership and I use it several times a week. But there’s no reason to spend an average of $60 a month on a gym membership if you don’t actually go, That’s 70. I’m sorry, $720 a year wasted for a service that you don’t use.

Brian: Okay. Number ten, moving right along here, checking account fees like monthly maintenance fees on your checking accounts. These come an average of around $11 a month, $10.99 a month. But they can be as high as $35 a month. So that means you’re spending between $132 a year and or as much as $420 a year on something you can get for free. Tons of banks offer free checking accounts. There’s no reason to pay a monthly maintenance fee.

Brian: All right. I’ve been talking a lot. Deni, tell us about number 11.

Deni: Credit card interest. We shouldn’t be using them anyway, you know, maybe for emergencies or whatnot. But credit card interests on average household debt is almost $9,000, and that’s 20.38% comes to about $1,822 in credit card interest a year. And I believe, more people that have more. And I think working to reduce that will help greatly and help your credit.

Brian: Yeah. Credit cards are a tool. Like any tool, they can be abused and misused. If you are not paying your credit card balance off in full every single month, you’re doing it wrong and you should not be using credit cards. So until you get to the point where you’re paying off your credit card balance every single month in full, put your credit cards aside in like a locked drawer or something, or cut them up or whatever. But think of credit cards as a privilege, not a right.

Deni: Right.

Brian: All right. The last one here. Mutual funds, transaction fees or commissions on stocks or ETFs. These transaction fees typically range from like around $5 in the low end, like 4.95, up to $20 in the high end, like 1995. You can avoid these by either using a commission free brokerage like I use Charles Schwab, or avoiding mutual funds that charge transaction fees, lowered fees. So instead just buy index fund ETFs. And if you were to buy shares in two funds every time you got paid every two weeks and you were paying an average of $10 per transaction, that would come to $520 a year and wasted money to bank fees, basically brokerage bank fees, investment bank fees. And I can tell you right now, JPMorgan does not need that money from you. This is not like a charity we’re talking about here. Like save yourself the money.

Deni: Yes. Wow. That’s that’s crazy. Do you know what else. I know we’re only supposed to do 12, but I’m going to add a 13 real quick!

Brian: Please yeah, absolutely! We got a bonus.

Deni: Subscription fees. So you don’t know how many times people don’t even realize they’re getting charged them.

Brian: Absolutely.

Deni: So I go through your credit card bills or your checking account or whatnot and look and see which ones they are and cancel them because you’re probably not using 95% of them.

Brian: And yeah, it could be like those beauty box subscriptions. It could be like an audio streaming service, could be a video streaming service, you know, Dollar Shave Club, you know, believe you me, these guys, they’re making a good profit margin on these. You are not saving money by having razors delivered to you every month, I promise.

Deni: Well, they’re premiums now.

Brian: Deni, anything else you want to add before we call this episode complete?

Deni: I don’t think so, Brian. I think that was it.

Brian: All right. Well, on that note, happy Tuesday! You guys stay in touch. Let us know what you want to hear more about in future episodes and future weeks. We are here [email protected] We read all these. Stay in touch.

Deni: See you later, bye!

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When should real estate investors bring on a co-signor for an investment property mortgage?

Brian and Deni break down when it makes sense to use a co-signor for investment property loans — and when to fly solo.

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When should real estate investors bring on a co-signor for an investment property mortgage?

Brian and Deni break down when it makes sense to use a co-signor for investment property loans — and when to fly solo.

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Want to compare investment property loans?

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We compare several buy-and-rehab lenders and several long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

Brian: Hey, guys. Happy Tuesday. So we’re glad to be with you as you guys join us. Let us know where you’re tuning in from. We love to hear that stuff. Let us know your questions. This is a dialog. It’s not. Deni and me just talking at you. So today we are going to talk all about Cosigners for investment property loans. So how to use a cosigner to help you borrow money if your credit is not up to snuff or if you have some other challenges with getting a loan to buy rental properties, investment properties, this is how to do it. So without further ado, Deni, what is a cosigner and what are their responsibilities?

Deni: Well, people confuse cosigner and co-borrower and they are different. A cosigner has no ownership in the property itself. They’re just basically backing your loan.

Brian: Your guarantor for your loan.

Deni: Right. So if you default, they’re basically responsible.

Brian: So no upside for them.

Deni: Yeah, not really. There are a few and we’ll talk about that later. And it’s usually usually, usually it’s a very close family member or friend or something like that.

Brian: Right. You’re doing your favor basically.

Deni: Right. It’s not like you’re going to go out and look for an investor cosigner. It doesn’t. Right. But it is a good way for maybe somebody who is entering with little to no credit. It’s a little harder to get cosigners When you have bad credit, it tends to be a little easier if you have a little bit of a lower income amount like than they ordinarily would use. But if you have iffy credit, they can also help. But if you’re if you have super bad, bad credit, most banks are still not going to allow you to use a cosigner. And frankly, most cosigners aren’t going to unfortunately, they’re not going to say, “sure, I’ll take the chance!”

Brian: So but even if so, if you have bad credit, would a bank and let’s say you lined up a cosigner with excellent credit, would a bank lend to you?

Deni: It depends like if we’re talking like low 500 for three, probably not. You know, but if you’re on the, you know, middle ground like between five and six, possibly, Yes.

Brian: Okay. All right. So now what’s aside from the cosigner just doing this because they love you, You know, because your parent or your spouse or something. Why would a cosigner do this for you?

Deni: Well, I mean, you don’t have any financial investment. There’s no payment. Hopefully, you don’t have to deal with the day to day management of anything. And if the payments are made on time, it actually has a positive effect on your credit.

Brian: For conventional mortgages that report on your credit, not for portfolio lenders who don’t.

Deni: No, no, no, no, no, no.

Brian: Right. Okay. Well, that all makes sense. And who is the ideal borrower to do this with? Like when did someone say, “You know what? I probably need to bring in a cosigner here to help me?”

Deni: I think if you’re close, you know, I mean, like, if you have your mortgage process or whoever says, look, you’re a little shy here on income, your credit’s a little iffy, but we might be able to push this through with a cosigner under those circumstances. It’s not a bad idea. And, you know, you could refinance later on your own. Once payments are made on time and your situation changes. So it could also be a temporary situation. I know people that have done that. But yeah, for the most part and again, it’s great for the one somebody that wants to get involved early because let’s face it, when you’re young, you have either school loans and you’re just not you know, you’re not in the position as some other people might be. So it’s a good way to still be able to invest in real estate, get a portfolio started and get, you know, get it going.

Brian: Yeah. So that’s how I’ve seen people use Cosigners in the past to get started with real estate investing. You know, typically younger borrowers, people in their twenties, maybe their thirties either don’t have much credit yet or maybe they’ve made some mistakes with their credit, but they have parents who are willing to take the risk with them and cosign the loan on their behalf. Maybe an older sibling who’s willing to do that on their behalf. It’s also great for house hacking. People who are looking to buy, say, a multifamily property, move into one unit, rent out the other units. One of the advantages to doing that is that you can use the future rents from the other units to help you qualify on income, but sometimes that still isn’t quite enough to get you over the hump on your debt to income ratio. So you can use a cosigner to. Help with that to help you qualify on income to house a multifamily property. So I’ve seen people use Cosigners successfully there as well.

Deni: And that’s probably one of the most popular scenarios for this. But obviously there are others as well, and it’s good to know that a lot of your loan processors and whatnot, they’re going to want to know the relationship. So it’s not like you’re going to just, you know, call some whatever, you know, maybe have a side deal or something with them or whatever. And and then they can cosign for a lot of banks are very tough on that. There would have to be some type of an existing relationship.

Brian: So restricted to family members. Or can friends cosign for you I mean how does that work?

Deni: I think depending again, on the lender and underwriters, processors, whatnot, it could probably be a friend, but you probably would have to maybe exhibit to them where this relationship started and and all of that.

Brian: Yeah. And sometimes mortgage lenders will require a letter of certification from people like Cosigners. If someone gives you a gift to help you with your down payment, they’ll require a letter certifying that it is a gift that doesn’t have to be repaid. It’s not a loan. So yeah, to your point, sometimes lenders do want to get a letter from people who are involved in your loan, you know, just sort of lying on paper what the relationship is with the expectations are from the cosigner and so forth.

Deni: Yeah, It’s not like you’re going to go out and buy a 30 unit multi-unit building on your first try and then try it with a cosigner. So we’re looking when you’re first getting in, not that it couldn’t happen that way, but chances are not. Yeah but it’s a great way to knock down those barriers that might ordinarily prevent you from getting getting involved.

Brian: Yeah, because, you know, it’s something that you and I talk about all the time. There are some barriers to entry with real estate investing, you know, from the down payment to credit requirements, income requirements. So, you know, like you said, using a cosigner is a great way to get over that hump and break through that barrier to entry for new investors. By the way, we did add a link in the comments to where you can compare lenders who specialize in working with real estate investors. You can compare some some terms, their loan terms. Deni, Is there anything else that people need to know about borrowing money with a cosigner to buy investment properties?

Deni: Well, just make sure that you know that if something happens and you have a close relationship with this person, it could potentially, you know, mess that up as well. So you want to make sure if.

Brian: You default on your payments, any other person gets stuck holding the bag? Pretty much.

Deni: Pretty much, Yeah. You know, that’s pretty tough. So you want to make sure that the relationship is strong and that you are committed to the process.

Brian: Absolutely. All right. That’s all for today. Quick, simple. You know, great way to get started, though, with real estate investing. So on that note, we will see you guys next week. Stay in touch. Let us know what you want to hear about support at Spark Rental dot com. Deni and I read all those emails and we will catch you on the flip side.

Deni: Absolutely. Have a great day, guys!

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Rent never came. And you find out your tenant is in jail. What do you do? What steps do you take? Brian and Deni break down what landlords should do when their tenant is locked up.

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Rent never came. And you find out your tenant is in jail. What do you do? What steps do you take? Brian and Deni break down what landlords should do when their tenant is locked up.

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Brian: Hey, guys! Brian Davis and Deni Supplee here from Spark Rental.

Deni: Hi, everyone!

Brian: Happy Tuesday or whenever it is that you’re listening to the podcast recording. Super glad to have you with us. Last week, Deni interviewed Courtney Poulos about flipping during this environment. You know, there is a lot of uncertainty about interest rates where housing markets are headed, whether there’s a recession coming. All that good stuff. Today we’re driving a little bit more niche into a question of what happens if your tenant goes to jail, which I’ve actually experienced this before myself. Deni, have you have you had this personally happen to you?

Deni: I did.

Brian: Yeah! It’s weird. So as you guys join us, let us know where you’re tuning in from. Fire questions at us. It’s an interactive podcast, video broadcast. You guys are just as much part of the show as Deni and I are.

Deni: Absolutely.

Brian: On that note, Deni. Let’s start with the basics here. What do you do if you suspect that your tenant has been incarcerated?

Deni: Well, let me clear something up. If you are just suspecting but the rent is coming in and everything else, I don’t think I would do anything. At this point. I mean, housing, rents, right? I mean, unless there’s other things going on like you see, you know, drug deals or whatever hanging out in the front. Right. But other than that, I would just leave it. Leave it go. Because you can’t just…

Brian: What if the rent is not coming in.

Deni: Now if the rent’s not coming in or there are other issues or you just hear through the grapevine as we all do, first of all, you don’t want to call family or friends or anything and say, yo, is so-and-so in jail? You don’t want to do it. Can actually get in trouble for it. What you do want to do.

Brian: Though, it’s public information if someone gets it is.

Deni: But there is something there are legal ramifications in certain instances where a family could say different things. And then if you go ahead and try to evict, say not so much based on nonpayment, but say there is issues like damage to the unit or people hanging out or something like that, then you could get into some hot water. So it’s best not to just you know, you could call them and say, how is so-and-so? I haven’t heard from them. I’m a little concerned. But, you know, stay away from the circumstances.

Brian: You can ask if they are still residing in the property.

Deni: Yeah. Just be vague and say, oh, are you behind bars? And then Shani Dixon, this has happened to someone I know. I think that if you’ve been in this business long enough, it probably has happened. I was lucky. Ironically. The person who, you know, the situation I knew he was on work release, so he continued to pay for his rental and his family took care of it and made sure the heat was on, trash was out and all that stuff. And they came to me, so I wouldn’t have known, but so that was a little bit easier of a situation. Now when you have another situation where they’re not paying rent and whatnot, there are several ways that you should handle this. In most states, we as landlords have the obligation to secure the unit. So what this means is maybe there was a raid and windows are open and the doors left open or something like that. You do have the right to go in and secure the the place and everything else. Or what if it’s in the middle of winter and the heat’s turned off? You can do what you need to do to make sure that you’re not going to frozen pipes and all of those things. But you can.

Brian: Do this even if the tenant is paying the rent, right? Like if you think that they’ve been.

Deni: If it’s abandoned. Right. Well, if you see any signs of abandonment, you know, where you feel that your property is in danger, then you have the right to go in.

Brian: Like if the place is freezing and they don’t have the heat on or…

Deni: Right. Now say you go in and everything’s out of there. There’s nothing in the refrigerator. All the furniture is out. Maybe the family came in and took everything out. You can then go through the normal eviction procedures and. You know.

Brian: As an abandoned unit.

Deni: Right. You’re probably not going to have too much. When you start eviction procedures, make sure that you are following your state’s letter of the law, the notices and everything else you would send them to the unit unless you have another address for it. But for the most part, you would send it directly to the unit. Yeah. Really? Oh, maybe. Yes. Mail forwarded there. But anyway, so you want to do that? A lot of times you’d be surprised. You know, people have family taken care of. Even if they’re not paying the rent, they you’ll still maybe see a girlfriend, boyfriend, somebody going in and out and they might get the mail and get it to them. So you want to mail your notices as you would at any other time. Right. There is also I mean, if you wanted to I don’t suggest this, but it is an idea you could actually, you know, if they reach out to you, if he say they reach out to you, then incarcerated tenant, then you can actually say, look, I’ll come down if you want to release and relinquish the apartment and give me the permission to allow your family to come in and clean it out and all of that. I can come down there and then you can have him sign him or her sign a document and then close it out right there.

Brian: For an early lease termination, you mean?

Deni: Yes, yes…

Brian: Why don’t you recommend that?

Deni: I mean, I don’t know. I just, you know, going to the prison, getting all that done, you really should get it. Load of rice. So you got to bring somebody else or a witness. And I mean, do you really want to take your day and go to the county jail?

Brian: But it might be worth it to to close out that lease contract cleanly.

Deni: Right? Oh, right. And if it’s that easy, like if if this tenant is contacting you and then it’s not that far, you’re not driving 3 hours to do this, right? Then it probably makes sense to do it.

Brian: But you can always send like, you know, your deadbeat nephew to the prison to get this signed. Right.

Deni: And send Greedo? No.

Brian: Yeah.

Deni: Anyway. So those are the things that you want to do. You want to start eviction if you need to. If the rent is not coming in. If the rent’s coming in, I would just leave it. Just make sure it’s not abandoned. You don’t want to harass anybody. And I’ve heard stories of people doing that. And that’s going to come back to bite you in your butt. You definitely don’t want to do that. You don’t want to go into the unit for any other reason to take their stuff. Don’t do anything with any of that stuff until you have permission written and…

Brian: Until the sheriff goes with you. Right?

Deni: Yeah!

Brian: Or hand back possession to you.

Deni: Even then, you have to be careful and handle the property as per your state’s regulations. And there are some states that make you hold it for 45 days…

Brian: Yeah. And some cities there are some very tenant friendly cities with anti-landlord laws that we talk about all the time that have just crazy regulations on this side where the tenant can abandon their junk and the property and you as the landlord still have to pay to store it even after the eviction for months afterwards. And that can certainly apply here if your tenant is imprisoned.

Deni: Absolutely.

Brian: These are reasons to avoid areas with anti landlord laws. You know, it’s funny. So Shani Dixon says that for the person that it happened to, that she knows, she says I happened to see it in the online newspaper. By chance, owner had no idea that their tenant had been arrested and incarcerated. Wow.

Deni: And I mean, generally, you’re not going to know if everything is is good and if it’s the middle of the month, you’re not going to know to rent do again, unfortunately, unless you have some kind of inkling or like I had maintenance people that would tell me if an apartment was abandoned or whatnot. So, I mean, it’s kind of. Oh, my goodness. He was for murder!

Brian: Yeah. In the comments. For anyone even listening, Shani said that the tenant had been arrested for murder, unfortunately.

Deni: So chances are he’s not going to have work release.

Brian: Right. Well, I suppose that’s true, Deni.

Deni: So I guess, yeah. That’s all I have for today. Again, don’t throw away their stuff. Don’t take anything if you have to inventory it. He never came back. Shani Dixon just said. I would assume so.

Brian: Yeah. But, yeah, the bottom line here is you really have to follow your state and city eviction laws to the tee. Document everything. You know, C.Y.A. right. Because you may be challenged later either by the tenant when they get out of prison or by their family members. So you really have to Cover Your Ass here and just document everything, cross every t, dot every eye when it comes to your state’s eviction laws and city eviction laws.

Deni: And the legal ramification that I was talking about, like, if you ask a family like say, you know, this guy is is in for murder, technically until he has his court hearing, he’s not a murderer. So if you act upon something like that without, you know.

Brian: Oh, yeah, yeah, you can’t evict someone for alleged crimes that they have not been proven guilty of. Even if your lease has a clause about criminal activity in it, you really have to. You can only evict people for violations of the lease agreement.

Deni: Exactly.

Brian: All right. On that note, we will see you guys next Tuesday. Stay in touch. Let us know what you want to hear about in the coming weeks and we will catch you guys. On the flip side.

Deni: We are and I’m going to be a grandmother tomorrow. I’m very excited. Another grandmother, my 11th. Thank you. Yeah. Yeah.

Brian: Well, congratulations again, Deni, and we’ll see you guys soon!

Deni: All right. Bye.

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Deni interviews Courtney Poulos, hos of Season 2 of The American Dream TV, a former member of the Forbes Real Estate Council, and a recurring panelist at Inman Connect, Awesome Females in Real Estate.

Courtney explains the pros, cons, and risks of property flipping in a cooling real estate market.

Video Broadcast Version

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Deni interviews Courtney Poulos, hos of Season 2 of The American Dream TV, a former member of the Forbes Real Estate Council, and a recurring panelist at Inman Connect, Awesome Females in Real Estate.

Courtney explains the pros, cons, and risks of property flipping in a cooling real estate market.

Video Broadcast Version

Audio Podcast Version

Also available on iTunes, Stitcher, and wherever else you listen 🙂

Want to compare investment property loans?

What short-term fix-and-flip loan options are available nowadays?

How about long-term rental property loans?

We compare several buy-and-rehab lenders and several long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

Deni: Welcome everyone to Spark Rental Facebook Live and podcast. Brian is having technical issues, as we all do lately in this tech world that we live in. I am really excited though today! We have a guest. We have Courtney Polos and we are going to be talking about flipping houses and this kind of cool or cooling, I should say, home market. If you guys have any questions, anything, please just throw your comments in the chat. This is a very relaxed format, as everybody knows me. Courtney and I were speaking about our dogs. And you have anybody who’s been watching this long enough has seen my dogs or heard my dogs barking in the background.

Courtney: Anything could happen. And a dog situation any moment.

Deni: It’s so true. So before we move on, I want to let everybody know about you. Courtney, you’re very impressive. You have you currently co hosts a podcast called Under All is the Land. Is that weekly or…

Courtney: It is weekly. We are just about to start season two. We’re recording our first season too. So this Friday it’s available on our YouTube channel and then all of the other [platforms]: Apple, Spotify and all the other jazzy distribution networks out there. But our YouTube channel is YouTube.com/ACMERealEstate.

Deni: Okay. And I am going to be putting Courtney’s website address. is this information there as well?

Courtney: Yeah. Yeah, there are links to the podcast on the website as well.

Deni: Perfect. Perfect. And then you host season two of the American Dream TV.

Courtney: The American Dream. Do you watched it?

Deni: I think I have seen it. Yes, that’s crazy.

Courtney: Luckily, like, you know, there’s an LA show, there’s a Philly show, there’s a miami show. So it’s all over the country. And they take five real estate and lifestyle experts and they give us free permission to pursue whatever kind of interviews we want all over the city and really get get allow viewers to get an inside look at things that you might not see from a real estate agent on their day to day Instagram or social media.

Deni: Right! Wow. Very cool. Very cool. Oh, there’s so much. There’s so much. But I want to get into our subject. If you guys really you have to visit the website. I’m actually going to pop it up now. And you know, when we’re done here, check Courtney out. There’s a lot, a lot to her. I find it interesting we were talking to beforehand. We all know that I’m a most of us know most of you know that I’m a realtor. But Courtney also is a… You’re a broker actually.

Courtney: I am. Yeah.

Deni: And you’re in Florida and California.

Courtney: That’s right. So in Florida, I have a co founder who’s a broker in Florida, Heather Unger. So we have Acme, Florida. And then I run the LA office, which has 60 agents and two locations in LA. And the reason why I love our podcast topic today is because we actually started during the last crisis recovery, right, when people were very uncertain about the market and I built my business on renovation resale. So I worked with a lot of flippers and you know, in a changing market. So kind of a similar circumstance that we’re having right now.

Deni: I love that.

Courtney: [Inaudible: Response when Deni’s dog is barking]

Deni: No, don’t even worry about it. The other thing that I really like, Courtney, is that you have a passion for empowering women to achieve financial independence, and I’m seeing that increase more and more. I have friends that are in the business in different facets and they too are catering to women because, you know, it’s good that we all do this to empower. It was a man’s field I started way back in the eighties, so I’ve been in for a while. And I remember when I first entered into real estate, it was a man’s world.

Courtney: Well, it’s interesting because in California, especially, there are more female licensees than male. But the amount of people who are actually broker owners as females is very, very small. So, you know, so that’s one part that’s changing in our industry environment. But when it comes to actual financial stability, this is the transition from what I call like the Cinderella story that maybe our grandparents narrative, we wait to buy a house until we get married and we have kids and dah and we stay in the same house for 30 years and we pay off our mortgage. That mentality of normalcy era thinking has been what we’ve been living on for many years, probably until the seventies, when women could actually get a loan without a husband. Cosigner. Thank you, Ginsburg! But now we’re in this moment where most women for probably the past 30 years that I know are capable of buying earlier in their professional careers, sometimes straight out of college and we shouldn’t wait. I think that starting your real estate investing, even if it’s just buying what you can, where you can, allows you a better platform. When it comes to choosing partners, when it comes to making bigger decisions about your future, you want that dream house. Maybe you don’t come from money, don’t know how to get it. And home ownership feels very out of reach for many people. It still does, right? But starting where you’re at when you can allows you to incrementally get there. And that’s something that I think has been lost on the narrative, especially in reality television. Real estate shows. You see people who have the money, but you don’t see how the people got there, you know? And it does take a little effort at the beginning and and it’s achievable. I don’t know any other thing you can do in America right now reliably to make hundreds of thousands of dollars just scraping $200 out of your paycheck every week isn’t going to do it. You know…

Deni: You know, it’s interesting too. I think that we have a lot of fear, men and women. And when we hear about flipping and, you know, I think so often we focus on the possibilities of what could happen. Bad. And I think that it’s good to hear good, positive stories because there are many of them, obviously, because people do.

Courtney: This is not for the faint of heart. This is where people get confused. Somewhere along the line when it’s kind of a seller’s market. And really seller’s market just means interest rates are low. There are more buyers than there are inventory and sellers feel like they have some power. These flippers were making money hand over fist quality or not when it comes to their product. So, you know, that is something that happens with every cycle whenever the conditions are like that. That’s why I actually think it’s an amazing time to buy right now for buyers, they have more power than ever. But when it comes to the flippers, yes, they are going to have to adjust a few things in order to accommodate the fact that now buyers do have some inventory to choose from. Their money is more expensive, so they’re going to be making different choices. The quality of the renovations that you put in the house are going to matter more, and they’re still hunting for the perfect house. So in fact, your opportunity to deliver a high quality product is really high. Flippers make a mistake in this market when they think that they can cheap out because the returns are not going to be as high. I think it always takes about six months for sellers to accommodate a change in interest rates. That’s dramatic, you know, so buyers 2% got you one thing a couple of months ago and now it’s 6%. So it doesn’t go as far.

Courtney: So, of course, you’re not going to be paying the same price for that house if you don’t have to write your monthly payments going on. So sellers might have to take a little bit less profit on the homes they have listed right now, where they were using six months ago projections for the future market value. But as you go into this next moment, you are able to acquire homes more easily now too, because a lot of investors have gotten out of the market. So now you can get a better acquisition price and you have an opportunity to choose and make a more unique, beautiful home that’s going to attract those buyers who are being picky. And that’s where the money is. It’s in quality. So it’s the exact opposite space of what most… I don’t mean to offend anybody, but I’ve learned in my 17 years of doing renovation resale that there’s a masculine mindset to bottom line numbers for a lot of flippers, and they don’t look at the emotional touches that make buyers fall in love. I feel like a lot of women make buyer’s buying decisions for families, but a lot of the work, contracting work and flipping kind of investment stuff is done by men. So the most successful flips are the ones that marry those two, no pun intended, that actually have a sensibility about spending, but a design sensibility that accommodates making a unique product, that has an emotional composition, you know?

Deni: Yes, that’s that’s a great point. And out of curiosity, just in California, I mean, I know the prices there are completely different than where I am and people complain about how high they are here. So how do you find, you know, a worthwhile flip in California.

Courtney: So they’re actually everywhere. People will tell you it’s very hard. I mean, obviously, I don’t work all of California, so I’m just looking at Los Angeles. There are a lot of opportunities that are sitting on the MLS. So I look for hidden value. That means big lots that are underutilized, extra spaces like detached garages that can be converted into accessory dwelling units. I look for properties that are duplexes that are vacant that could potentially be combined to make one house because a lot of flippers forget to look for duplex.

Deni: Wow!

Courtney: Yep. I look for properties that have a hurdle that is jumpable. So one thing you want to stay away from and they’re usually the cheapest properties on the market are the ones on busy streets or the ones that are adjacent to commercial or where you hear some kind of noise, some kind of freeway noise or busy street noise or something. There’s some kind of distracting noise. Those hurdles buyers can add 100,000, 200,000 value, too. So we want to stay away from those. But if there’s a hurdle like an underutilized backyard that I know could be magic, if we just added a fence to go to add some privacy, or if we planted some olive trees or added a hot tub and some twinkle lights or something to make it feel magical and it jumps the hurdle. Those properties are opportunity properties, also properties that are listed with like shitty photos. Love those!

Deni: *Giggling*

Courtney: And getting Flipper. I’ll be honest. Crappy flips are a great place to start! So if you see a house that’s been sitting on the market because buyers are pickier now. Right. And it has laminate floors and cheap finishes, Home Depot fixtures and whatever. And you think, hmm, this place could benefit even though it’s been remodeled, like the systems are all done right. It just needs cosmetic help. Then you have an opportunity to save a lot of money because that systems work is what takes $60,000 to $80,000 worth of renovation budget. And you can just focus on the cosmetics, right? That allows you to flip that flip. And believe it or not, the buyers will come for high quality design. That’s what I learned during the last cycle, and that’s the most important lesson for going into the flipping market right now.

Deni: Now, tell me something that a flip that you have, I’m assuming you’ve been involved in flips yourself.

Courtney: I don’t do a ton of flips myself, believe it or not. We just represent them. I’ve done them. I’ve done one. I mean, I’ve done 1/2, but I don’t compete with my clients. We really focus on finding them deals, giving them design guidance, project management and then resale.

Deni: I love that you add design guidance in there as well because a lot of people need that and it’s nice to have that piece.

Courtney: It’s the most important piece. It’s the most underutilized piece. And I think, again, like you have to understand as a real estate agent, you know, because we’re on the ground, we hear what buyers are saying when they’re walking through houses. They’re not saying, oh, I wish I had a mirror in the like in the bathroom that had fluorescent lights on it. Nobody’s saying that. They want a kitchen where they can prep food. They want a family room that’s open. So if they have kids, the kids are running outside to the yard. They can watch the kids while they do the wash by washing up the dishes. Or something it’s functionality of key piece of design that gets missed on finish that someone decided this is what they think a flip looks like. But let me tell you, nobody likes laminate floors, nobody likes them. They’re bouncy, they’re cheap, they feel cheap. And the difference between a good engineered floor and a laminate floor for a flipper should be nominal. You know, you should have access to people who are giving you wholesale deals. You should be buying in bulk so you can use those hardwood floors on multiple different properties, but get good quality floors. It matters. It just makes it look like you. You care more.

Deni: It’s funny, as an as an agent myself, it’s one of the first things people notice when they walk into a place. You know what I mean? It’s just I mean, I still see really horrible carpeting. And I as soon as it turns, it turns. It could be a great house. But that.

Courtney: Just because a lot of buyers don’t see beyond what is actually there. That’s why when I’m advising my clients and they have a small third bedroom, but it still fits a full bed. Like, don’t say it as an office, stage it as a bedroom. Anybody can look at a bedroom and say, I could use that as an office, but a lot of people can’t look at a room that’s staged as an office and think, I can see that as a bedroom. So you have to remember what buyers are looking for when they’re walking through the property. And if you see a hurdle as a buyer, which is what your reptile brain is trying to tell you, to see all the things that could be wrong. Right? Like we don’t want to make any bad moves. Nobody wants to be made a fool of by the buying process. You know, you see dirty carpet or you see carpet anyway and you’re like, Oh, we’d have to do the floors. Like, that’s just going to cost too much money, you know, or something. It just checks off something in your head like, Yeah, that’s not going to work. I can’t move right in there. It’s a really simple fix.

Deni: It actually is. It’s probably one of the more simple ones. So you have a client brand new wants to flip never has done before. What is the first thing that you do?

Courtney: Well, the first thing we do is we figure out how much money they have. So I’ve had people come to me where they say they want to flip, but then I ask them how much money they have for the renovation and they don’t even have 20% for the down payment on the loan. Not that you have to have 20%, but remember this is a non owner occupier loan that you’re probably getting if you are a flipper. So that means that there are different down payment requirements. You might want to go into hard money financing, which is high interest rate, short term loans where they’re some of them are kind of like construction loans where there’s a distribution situation. Like as you proceed through construction, some of them want to see that you have a track record. So we have to make sure we understand the financing first.

Deni: Right. There are ways to get in through those barriers, even with I’ve seen it with FHA and whatnot to buy a duplex, live on one side, flip the other.

Courtney: Thaht’s a very good point! That’s a good point. With FHA, you have to technically live in one and then you, of course, could renovate the other. Fha has an owner occupier renovation loan, so there’s nothing stopping you from doing a three and a half percent down 203k loan, getting it, renovating it, living in it and then deciding to sell it. I mean, that’s okay too. But for most flippers that come to me, they usually have some maybe they have some money set aside. They have some money for the acquisition cost and some money for the renovation. So then we look at what their budget can get them and where. Looking at comps when you are working with a flipper is a skill that a lot of real estate agents actually don’t know how to do. So we’ve learned over the years how to accurately project what a good looking product in a particular area will net by being able to read the comps in between the lines. So the mistake a lot of people make is that they comp the fixer. Well, there’s no sense in being the fixer because it doesn’t matter really what you acquire it for. What matters is how much work it needs, what your budget is, your good contracting team, and how much it will potentially resale for. How much value can you add?

Deni: So you have to project.

Courtney: …Have to project. So we start with what their numbers are and then I look at where what emerging neighborhoods could be good fits for that budget. On the acquisition side, given those individual properties that I find, I look at each one and say, Could this have an ADU added? Could this have an extra 300 square foot master bedroom addition at it? Could we bolt those ceilings? Is this a historic home? Does it have any regulations? Is it an iPod? Does it have a court ordered probate? Like what is it specific conditions? Does it have a tenant in it? What’s what’s its trouble? And then I say, okay, can we solve this? And if we do solve this, how does it look now? It’s a two bedroom, one bath. How does it look as a32 in this neighborhood and renovate it renovated. Okay, then I back it out. So there’s a formula that I use to assess whether or not there’s money in the deal. So you take the future market value, essentially, you multiply it by we usually use like 7% commission and closing costs as a rough conservative like more than enough estimates. So say I multiply the future market value by 93%, then I deduct the acquisition cost, the carrying costs and the projected renovation costs and add a 10% contingency for change orders. So if you’re doing it with permits possible, the inspector could come in and say, Look, I know you wanted to save this ductwork, but it has asbestos, can’t save it. You’ve got to go to that. Whatever. So add that and then and then at the end of that, that should be your profit.

Courtney: So if in a hot market, there were some flippers who were looking for a 200 or 300,000 minimum return on any property, now it might be a quantity game, so maybe you’re going to make 50 to $100,000 but you can do a shorter flip, like carry it for six months instead of a year. So you have to figure out like what you’re carrying costs are and how that eats into your profit. Because really time is what costs most flippers, the most amount of money. It’s the carrying costs and the high interest home renovation loan or loan. So if they can make 50 to $100,000 on multiple houses, that’s probably the easier way to get through a changing market. If you’re kind of doing your first one with first, first time flippers, I think you should start gently. Like I said at the beginning, it is not for the faint of heart. People don’t understand how much anxiety renovation causes, even for flippers. You cut open the wall and you’re like, What’s in there? Know, it could be old wiring, it could be something. Fire hazard, dead animals, who knows what? But timeline’s matter. Contractors quit. You have to have a good contracting team, the backup team. You have to order your materials so far in advance because of supply chain challenges. That’s another place where a lot of flippers get stuck. They wait till the last minute to order their light fixtures and then they’re not able to get the ones they want. And then they settle for something at Lowes.

Deni: Which is this, that also has been more of an issue after COVID. I hate to say it, but…

Courtney: Yeah, and remember, wood prices have been going up and then the door and there are all kinds of of increased costs associated with supply chain problems and COVID problems, supposedly. I don’t know how much longer we can blame stuff on COVID. I think by now people need to get their shit together, but there are things that are out of people’s control. So you have to have a good plan at the beginning and really execute on multiple levels at once. And a lot of flippers don’t do that. They want to focus on construction, but they forget the bigger picture planning. So that’s definitely, I think that like for beginning flippers, if they can find a house that is kind of a unicorn, but a house that maybe has had some systems updates over the years, like the roof still has some life in it. You know, the electricity was updated in 96, something like that. And then they can improve on what’s already there as opposed to doing a teardown or having to do a big addition. Then you might find yourself getting more familiar in so that you can get comfortable with doing the heavier renovation projects. When people dive head first into teardowns, they. Frequently lose money or get super overwhelmed and stressed out, and they didn’t realize what they were getting into. So, yeah, people out of that.

Deni: That’s a whole different ball game.

Courtney: A whole different ball game!

Deni: Well, I mean, we’re running out of time, so I just wanted to let everybody know that if you have any questions or you want to get a hold of Courtney. Her website is in the chat box and you can always reach out to Brian or I or Tara and we will make sure and put you in touch. I want to thank you, Courtney, for all the information.

Courtney: And thank you so much for having me!

Deni: Yeah, and maybe we could do this again on another subject. I would love to do that!

Courtney: That would be great. That would be wonderful!

Deni: Thanks, everybody! And I’ll see you next Tuesday and have a good day.

Courtney: Bye!

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Heard the term “internal rate of return” or IRR thrown around, but not sure what it means?

Don’t sweat it. I worked in real estate investing for two decades before I completely understood it.

But don’t follow my example on that front — you should understand what internal rate of return is, how IRR is calculated, and how to use an IRR calculator online to evaluate real estate investments much sooner than I did.

Fortunately, it’s not as complicated as most explanations make

Heard the term “internal rate of return” or IRR thrown around, but not sure what it means?

Don’t sweat it. I worked in real estate investing for two decades before I completely understood it.

But don’t follow my example on that front — you should understand what internal rate of return is, how IRR is calculated, and how to use an IRR calculator online to evaluate real estate investments much sooner than I did.

Fortunately, it’s not as complicated as most explanations make it sound.

What Is Internal Rate of Return?

In plain English, internal rate of return is the compound interest rate you can expect to earn on an investment.

Imagine you invest $100 and you expect to receive it back plus a $40 profit at the end of two years. The average annual return would be 20%: $40 net return divided by two years. But that simple average doesn’t take compounding into account: if you had received returns in the first year, and had been able to reinvest those returns, you’d have earned even more returns on your returns.

Internal rate of return takes compounding returns into account. If you’d invested $100 at 18.32%, you’d have received back $18.32 after the first year, and if you’d reinvested it at that same 18.32%, at the end of the second year, you’d receive back $21.68. That would leave you with a total net return of $40.

That’s how IRR works — it offers an “apples to apples” comparison between potential investments that pay returns on different timetables.

Technical Definition of IRR

The technical definition of internal rate of return is “The discount rate that makes the net present value (NPV) of an investment project equal zero, in a cash flow analysis.”

What a mouthful. Let’s break that down into plain English.

“Discount rate” refers to the rate of return you expect to receive. Simple enough.

As for “net present value,” that refers to the value of all future cash flows for an investment, based on a specific discount rate or return. It dictates what you should invest if you have a target end balance and return in mind.

You can also think of NPV as measuring the time value of money if you really want to geek out. Or, from a fundraising perspective, you can think of it as the cost of capital.

IRR Calculator

Internal rate of return is complicated enough that no one other than finance students actually calculate it by hand.

Which is precisely why we offer a free IRR calculator online.

A few quick notes:

To get the feel for it, try entering the example numbers outlined above. That means an initial investment of $100, $0 in cash flow in Year 1, and $140 in cash flow in Year 2. 

Happy number crunching!

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How to Use IRR in Real Estate Investing

Real estate investors typically use internal rate of return for evaluating real estate syndications and other commercial property investments. When evaluating single-family rentals or small multifamily properties like duplexes and triplexes, it usually makes more sense to simply calculate cash-on-cash return, monthly property cash flow, and cap rates. (Use our free rental cash flow calculator to run the numbers on any rental property.) 

But for evaluating potential real estate syndications, IRR offers the most accurate measurement of returns. Each real estate syndication deal pays different levels of cash flow each year, and in many cases, investors get their big payday after 3–6 years when the property sells. 

For example, imagine you want to compare two prospective real estate syndication deals. Property A pays a 10% preferred return for cash flow, and after five years, the sponsor expects to sell it for 1.7 equity multiple (70% above the purchase price and costs). Property B pays a 6% preferred return for cash flow, and they expect the same 1.7 equity multiple, but plan to sell after three years. (In this example, we assume each property pays the full preferred return each year for the sake of simplicity.)

Which pays a higher return? 

If you run the numbers in the IRR calculator above, you get the following IRRs:

Property A: 18.33%

Property B: 23.09%

Purely based on returns, Property B is the better investment. But other factors might affect your decision — you might prefer steady cash flow from long-term buy-and-hold real estate investments, for example, and don’t want to worry about having to find a new investment in three years to redeploy the money. Or perhaps the risk profile for Property A is lower, if it is located in a better neighborhood or a city with faster population growth. 

Internal rate of return doesn’t tell you everything you need to know about an investment, but it does offer a uniform yardstick to compare returns on multi-year investments. 

What’s the Difference Between IRR & ROI?

There are many ways to measure return on investment (ROI), and IRR is one of them. 

Put another way, IRR is a type of ROI calculation. It’s just not the only one. 

Other common ways to measure returns in real estate investing include cash-on-cash return, cap rates, monthly cash flow, and average annual returns for long-term investments. 

Average annual returns are just the simple average of the total returns you earned, divided by the total number of years you owned the property. In the earlier example, where you invest $100 for two years and receive $140 at the end, your average annual return is 20%. But because this ignores the potential compound returns you’d have earned if you received the full return each year, it’s less accurate than IRR. 

Difference Between IRR & Cash-on-Cash Return

In real estate syndications and single-family rentals alike, cash-on-cash (CoC) return refers to the annual income yield you earn while you hold the investment based on your actual cash investment. 

If you invest $50,000 of your own money — whether as a down payment on a rental property or your total cash investment in a syndication — and you end up collecting $4,000 in net cash flow each year that you own the property, that means an 8% cash-on-cash return. 

Often in real estate syndications, you’ll see a preferred return listed for cash-on-cash return. That means that the first returns go to you as the passive investor first, before the sponsor or general partner (GP) starts collecting returns. 

For example, say the preferred return is 8% and after that there’s a 70/30 split for cash flow. If a property earns 12% in cash flow one year, the first 8% of that goes to you and the other limited partners, and the other 4% gets split 70/30 (70% to you, 30% to the GP). 

How Is IRR Calculated Manually?

Are you sure you want to know? 

All right, here’s the formula for IRR. Knock yourself out:

Where:

II = Initial investment

CF1, CF2, … CFn = Cash flows

n = Each period

N = Holding period

NPV = Net present value

Didn’t find that particularly useful? You can instead learn how to calculate IRR with Excel.

(article continues below)

Want to compare investment property loans?

What short-term fix-and-flip loan options are available nowadays?

How about long-term rental property loans?

We compare several buy-and-rehab lenders and several long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

How to Calculate IRR in Excel

Fortunately, there’s a built-in function to calculate internal rate of return on Excel. 

To use it, you need a series of data fields showing first the initial investment (written as a negative number), then the cash flow generated each year thereafter. The last number can include the proceeds from a sale. 

The Excel function is simply =IRR(cell range).

To continue our simple example from above, you would calculate IRR in Excel as:

The formula entered in the last box would be =IRR(B1:B3) if the three values on the right were in cells B1 through B3. 

Easy peasy lemon squeezy.

Disadvantages of Internal Rate of Return

For all its strengths, IRR comes with a few limitations. 

First, it doesn’t tell you anything about the time period that the investment is held. A project could offer astronomical returns, but most of them come at the end of a 20-year period and if you need passive income now, the high IRR won’t help you. 

Internal rate of return also tells you nothing about risk. A property could appear to offer double the IRR, but come with triple the risk of a more conservative investment. Most investors wouldn’t make that trade off. 

Finally, beware that as a measure of return, IRR provides no information about amounts. Imagine you need $200,000 in investment returns, and you’re considering a real estate syndication that pays a high 25% IRR. If they cap each person’s investment at $500,000, that won’t meet your needs (although it’ll at least get you the first $125,000). 

Final Thoughts

The IRR of a potential investment represents its annual growth rate, over whatever period of time you plan on holding it. It measures the total return, including both positive cash flows and the capital gain from selling. In the case of businesses or real estate investments with capital calls, it could also include negative cash flows. 

While the formula is a bear, you can use financial calculators like the online IRR calculator above or the internal rate of return Excel function to do the heavy lifting for you. 

Use this annual rate of return to make investment decisions, knowing the potential return of various investment options. In particular, use it for an “apples to apples” way to compare rates of growth on different types of investments, such as stocks and real estate syndications.♦

What questions do you still have about using IRR to compare prospective investments? What other gauges do you use to evaluate investment opportunities?

More Real Estate Investing Reads:

House Hacking: 10 Ways to Live for Free (Even in a Single-Family Home)

Minimum Down Payment for an Investment Property: How to Invest with Less

About the Author

G. Brian Davis is a landlord, real estate investor, and co-founder of SparkRental. His mission: to help 5,000 people reach financial independence by replacing their 9-5 jobs with rental income. If you want to be one of them, join Brian, Deni, and guest Scott Hoefler for a free masterclass on how Scott ditched his day job in under five years.

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Real estate investments can offer some huge tax breaks — if used wisely. In fact, some investors opt for real estate specifically for the tax breaks!

But how is rental income taxed? What other taxes do landlords and real estate investors pay? How can you avoid the worst of these taxes?

Leave your watch calculator at the door, and we’ll break down rental property taxes in layman’s terms.

How Rental Income Is Taxed

As a general rule, the IRS classifies rental income

Real estate investments can offer some huge tax breaks — if used wisely. In fact, some investors opt for real estate specifically for the tax breaks!

But how is rental income taxed? What other taxes do landlords and real estate investors pay? How can you avoid the worst of these taxes?

Leave your watch calculator at the door, and we’ll break down rental property taxes in layman’s terms.

How Rental Income Is Taxed

As a general rule, the IRS classifies rental income as passive income and taxes it accordingly. That means you pay taxes on it at your regular income tax rate, between 10-37% of your income. Womp womp. 

But there are plenty of other rules, exceptions, caveats, deductions, and loopholes that affect rental property taxes beyond how passive income is taxed. 

Strap in.

Passive Activity Losses

Broadly speaking, you can’t offset active income (like your W2 salary) with passive losses (like losses on stock investments). 

But there are special rules for how rental income is taxed. If you “actively participate” in overseeing rental activities, you can offset your active income with up to $25,000 in passive losses each year. 

For example, say you have a modified Adjusted Gross Income (MAGI) of $80,000, and you lost $24,000 on paper on your rental properties. You can deduct that $24,000 to reach a taxable income of $56,000. 

To count as an active participant, you don’t have to field 3AM phone calls or unclog toilets. You do need to own at least 10% of the property and be involved in major management decisions such as approving and screening tenants, approving repairs, or raising rents. That means you can still hire a property manager and deduct passive rental losses. 

That’s the good news. The bad news is that the ability to offset active income with rental losses starts phasing out at a MAGI of $100,000, and disappears entirely above $150,000. 

Do Landlords Pay Self-Employment Taxes?

Most landlords don’t have to pay self-employment taxes (FICA taxes of 15.3%). That’s because of how rental income is taxed: as passive income on an investment, rather than an active business.

The tax code does make a few exceptions however. If they classify you as a “real estate dealer,” they make you pay self-employment tax on rental income. Real estate dealers are those considered to be in the business of buying and selling real estate, such as full-time house flippers. 

You must also pay self-employment taxes on rental income if you provide additional paid services to your tenants. For instance, if you own an apartment complex and provide add-on services like dog walking, laundry, dry cleaning, and maid services, you likely have to pay self-employment taxes not just on that income but also your rental income. You go from collecting passive income streams to becoming a real estate professional with active business activities. 

When in doubt, talk to a CPA about how you can avoid paying self-employment taxes on rental income. 

The 14-Day or 10% Rule

Which properties count as second homes and which count as rental properties?

If you rent out a property for 14 days or fewer in a given year, it counts as a personal residence or vacation home. You don’t have to declare the rental income — but you also can’t deduct rental expenses. You can deduct mortgage interest and property taxes, just like on your primary residence, but it requires that you itemize your personal deductions rather than taking the standard deduction.

The property also counts as a second residence if you used it more than 14 days or 10% of the total days that it was rented. So if you rent it out for 90 days and use the property personally for 10 days, you can’t classify it as a rental property and deduct rental property expenses on your Schedule E.

Oh, and it must be rented out at fair market rent. Charging your brother a monthly rent of $50 doesn’t count, for a vacation property with a purchase price of $500,000. 

If you lease out the property for more than 14 days and personally use it less than 10% of the days it’s rented, it counts as a rental property. That means you can take rental property deductions (more on these shortly).

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Other Types of Taxes Landlords Pay

Before all the tax crusaders get too frothy about how landlords should pay even more in taxes than they already do — and rental income is taxed at the ordinary income tax rate — bear in mind that they do pay even more taxes.

Real estate investors pay property taxes, to begin with. Like landlord insurance, vacancy rate, property management fees, and repairs, property taxes are an expense that landlords should include in their expense figures when calculating rental cash flow. 

When landlords sell a property, they pay capital gains taxes on it. If they own the property for under a year, they pay short-term capital gains, taxed at their regular income tax rate. Properties owned for more than a year qualify for the lower long-term capital gains tax rate. Fortunately, you do have some options to reduce or avoid capital gains taxes on real estate investments, such as 1031 exchanges). 

Landlords also have to pay depreciation recapture tax when they sell a property — even if they never took depreciation on it. More on depreciation shortly. 

In most states, landlords must also pay state income taxes, and sometimes local income taxes too. Which says nothing of local fees charged to landlords, such as rental property registration fees.

Finally, landlords pay sales tax on all materials they buy for repairs and capital improvements. At least in states that charge sales tax, which is most of them. 

How to Reduce Taxes on Rental Income

Despite the high tax rate on rental income, landlords do have a few options in their toolkit for reducing taxes. 

Rental Property Deductions

First and foremost, rental investors can and should take advantage of every landlord deduction they possibly can. 

Remember, landlords take their rental property deductions on the Schedule E form of their tax return. That means that all expenses count as above the line deductions, and you can take them while also taking the standard deduction for yourself personally. 

Here are a few common operating expenses you can take as rental property deductions:

Don’t pay taxes on income you didn’t actually earn!

As a final note, security deposits do not count as investment property income. The exception: if you deduct part or all of the tenant’s deposit to cover damage. In that case, it counts as a type of income, but that’s offset by the costs you incurred to repair the damage. 

Rental Property Depreciation

Landlords can deduct the cost of the building itself, certain closing costs, and any capital expenditures that improve it or extend its life. You just can’t take the deduction all at once.

Instead, you have to spread it over 27.5 years. It’s called depreciation, and it’s not as complicated as it sounds. Use our rental property depreciation calculator to see how much you can deduct as an annual depreciation expense.

Bear in mind that you’ll owe depreciation recapture when you sell the property, even if you don’t take depreciation now. That means you’ll pay taxes twice if you don’t take depreciation each year that you own your property.  

Qualified Business Deduction

Some business owners can take an extra 20% deduction on qualified pass-through business income. Known as the qualified business income (QBI) deduction, pass-through deduction, or Section 199A deduction, it gets complicated fast. 

Talk to your tax professional about whether you qualify to take it; in the meantime, here’s some titillating reading from the IRS about it.

(article continues below)

Want to compare investment property loans?

What short-term fix-and-flip loan options are available nowadays?

How about long-term rental property loans?

We compare several buy-and-rehab lenders and several long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

Rental Income Tax Calculation Example

So, how does this actually look in real life? 

Say you own a rental property that generates $24,000 in gross rental income (you collect $2,000 per month). You deduct the following expenses for it:

You calculate depreciation as follows: You bought the property $250,000, and $200,000 of that was the value of the building rather than the land. That means you can deduct $7,272.73 for depreciation (1/27.5th of $200,000). 

That comes to a total of $27,572.73 in deductible expenses. Thus, on paper, you took a loss of $3,572.73, which you can (probably) use to offset your other taxable income. 

How to Report Rental Income on Your Tax Return

You enter both your gross rental income and all rental property expenses (including depreciation) on Schedule E of Form 1040. 

As noted above, that means you can take rental property tax deductions and also take the standard deduction personally. You don’t need to itemize your personal deductions. 

Online tax preparation software will guide you through it, as will an accountant. You can also do it easily enough on your own, but your time is valuable and you’d probably rather spend your Saturdays with your family or friends than hunched over a pile of tax return documents.

Why Do I Have to Pay Tax on Rental Income?

Because the IRS hates you and wants to punish you. The end. 

Well, not entirely. Every American has to file a tax return and pay federal income taxes. We can disapprove of how the government manages our money, but the simple fact is that we still need a government, and it costs money to run. So it taxes us on every dollar we earn — not just our salary or self-employed income, but also our investment income. 

You can use deductions and depreciation to reduce your tax liability on rental income. You may even create paper losses while collecting strong rental income in the real world. But eventually you’ll have to pay the piper when you sell, reimbursing Uncle Sam for depreciation recapture. 

I deeply disapprove of our government’s fiscal policies, so I spend most of my year living overseas and take advantage of the foreign earned income exclusion. That also helps me avoid paying state and local taxes on rental income. If that sounds appealing to you, check out this couple’s story of moving to Europe and living on a houseboat as fun and cheap alternative housing.♦

How do you lower your effective tax rate come tax season? Share your tips on reducing real estate taxes below!

More Real Estate Investing Reads:

How to Invest $1,000 in Real Estate

How Is an Amortization Schedule Calculated? Loan Calculator with Amortization Schedule

About the Author

G. Brian Davis is a landlord, real estate investor, and co-founder of SparkRental. His mission: to help 5,000 people reach financial independence by replacing their 9-5 jobs with rental income. If you want to be one of them, join Brian, Deni, and guest Scott Hoefler for a free masterclass on how Scott ditched his day job in under five years.

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Connect with us on social!

Podcasts offer a convenient, semi-passive way to consume content and get educated. You can listen to them while you’re working out, driving,  walking the dog, or cooking dinner.

They’re also free, which doesn’t hurt.

So, we decided to round up the best real estate investing podcasts of 2022 so you can learn how to make more money in the real estate business — even while multitasking. 

The Best Real Estate Investing Podcasts in 2022

The following podcasts aren’t

Podcasts offer a convenient, semi-passive way to consume content and get educated. You can listen to them while you’re working out, driving,  walking the dog, or cooking dinner.

They’re also free, which doesn’t hurt.

So, we decided to round up the best real estate investing podcasts of 2022 so you can learn how to make more money in the real estate business — even while multitasking. 

The Best Real Estate Investing Podcasts in 2022

The following podcasts aren’t necessarily in order of quality. They’re all excellent, hosted by smart, experienced investors with a fun radio presence. 

Without further ado, let’s start streaming.

1. The Remote Real Estate Investor by Roofstock

A platform for buying and selling rental properties, Roofstock specializes in turnkey properties for long-distance real estate investing. In fact, over 62% of the transactions on Roofstock involve buyers who live over a thousand miles away from the property they buy.

So, it makes perfect sense that Roofstock’s official podcast, The Remote Real Estate Investor, focuses on long-distance investing. 

And to be honest, long-distance investing makes more sense than ever before. The largest, most expensive cities in the country — which is disproportionately where many real estate investors live — offer the worst cap rates and GRMs in the country. Many smaller cities and towns offer far better rent-price ratios (see our map of the best cities for rental investing). 

Which says nothing of the anti-landlord laws in many larger cities. 

Hosts Michael Albaum, Tom Schneider, and Emil Shour do a great job of helping you build your comfort level with buying rental properties sight-unseen, from halfway across the country. Even better, the podcast and platform both help you build your team of local support personnel, from property managers to real estate agents to home inspectors to contractors. 

2. The Best Ever Show with Joe Fairless

It’s hard not to like Joe Fairless or his perfectly named Best Ever Show.

Yes, it’s the longest running daily real estate investing podcast. And yes, it has more listeners than just about any other podcast on this list. But the real bragging rights go to Joe himself.

Joe controls over $900 million in real estate investments. For his first multifamily deal, he raised over $1 million in private capital. He knows what he’s talking about, firsthand. 

As an introduction to The Best Ever Show, check out this episode where Joe hosted me!

3. REtipster with Seth Williams 

Seth Williams knows real estate investing inside and out. And the REtipster podcast, co-hosted with Jaren Barnes, covers a wide range of real estate investing strategies from flipping houses to rental properties to wholesaling and beyond. 

But REtipster particularly shines in their coverage of land investing. Seth is one of the country’s most knowledgeable land investors, and he teaches one of only two reputable courses on land investing (we highly recommend it!).  

Seth and Jaren help you approach your real estate investments as a business, not just a passive investment. Which is precisely what most new investors need to do better. 

For full disclosure, I’m a regular contributor to the REtipster blog. Just one more reason why it’s so awesome!

4. The Real Wealth Show with Kathy Fettke

Real estate investing expert Kathy Fettke launched The Real Wealth Show as a weekly podcast in 2003, if you can believe it. Since then, it has continuously cranked out excellent free educational content for investors.

Kathy also hosts a sister podcast, The Real Estate News podcast. Which, as you might have guessed from the name, covers housing market trends and news rather than educational content. 

The Real Wealth Network can help you buy turnkey rental properties, and they also do syndications. That said, they restrict most syndication and other group investments to accredited investors. Read more about syndications and other types of real estate investments here.

I’m also a fan of Real Wealth’s blog, which perennially ranks among the best real estate investing blogs. We’ve even written some guest articles for one another to bring our own unique expertise to each other’s audiences.

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Ditch Your Day Job: How to Retire Early with Rental Income (Free 8-Video Course)

5. Epic Real Estate with Matt Theriault

Professional investor, bestselling author, and entrepreneur Matt Theriault walks you through all the conventional ways to invest in real estate on his aptly named Epic Real Estate podcast. 

But where it gets interesting is Matt’s more creative approaches to real estate investing. He brings on other experienced investors as guests to cover everything from private notes to mobile home investing to tax strategies like self-directed IRAs. 

Matt claims a similar perspective and investing style as Robert Kiyosaki, while forgoing the staid, boring approaches for the masses embraced by the likes of Dave Ramsey and Suze Orman. I couldn’t agree more. 

6. BiggerPockets

BiggerPockets is the content juggernaut of the real estate industry. It’s everywhere, and does everything for everyone. 

They publish a long-running podcast. And do frequent webinars. And their blog features thousands of articles (I’m a regular contributor here too, heads up). Which says nothing of their social network for real estate investors — arguably their best feature.

The podcast features a rich diversity of guests from every real estate niche. No matter your exact niche in real estate investing, there are at least a few podcast episodes about it on BiggerPockets, featuring fascinating interviews with investors to discuss it.

And that’s just the BiggerPockets Real Estate Podcast. They also release a personal finance podcast, a business podcast, a beginner’s podcast, plus a daily audio reading of the day’s top blog post. 

7. How to Scale Commercial Real Estate with Sam Wilson

Most of the podcasts above focus on residential real estate investing. Sam Wilson from Bricken Investment Group wants you to think bigger. 

Sam interviews guest experts across the spectrum of commercial real estate investing to remove the gloss and intimidation. If you’re interested in scaling your portfolio to include commercial properties, don’t miss his excellent podcast. 

For that matter, the podcast covers some residential investing topics too. Sam hosted me once and we had a fun chat about not just investing but also travel, expat life, and investing from abroad.

8. The Real Estate Syndication Show with Whitney Sewell

Whitney Sewell is a real estate syndicator, also known as a sponsor, who puts together large commercial real estate deals. Through his private equity company Lifebridge Capital, he raises money from passive investors for these deals.

But real estate syndications are complicated, and come in many shapes in sizes. So Whitney brings guests on his seven-days-a-week real estate show to explain what kinds of deals they do, how they structure them, and what passive investors should look for when vetting real estate syndications.

If you like the idea of passive investing in real estate, with no tenant headaches or hassles with finding good property deals or borrowing investment property loans, check out The Real Estate Syndication Show.

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Want to compare investment property loans?

What short-term fix-and-flip loan options are available nowadays?

How about long-term rental property loans?

We compare several buy-and-rehab lenders and several long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

9. Afford Anything with Paula Pant

Paula Pant is a woman after my own heart. She invests in rental properties, loves passive income, believes in financial independence, and spends much of her time traveling abroad. If we weren’t each already taken, I’d publicly profess my undying love right here and now. 

Her core message is simple: you can afford anything but not everything, which means you need to prioritize your goals. In other words, you need to get intentional about creating your own perfect life (read: lifestyle design). No one else can do it for you. 

A perfect blend of money mindset, investing strategies, and gritty tactics, the Afford Anything podcast always delivers. It also publishes content more regularly than the blog, with weekly episodes.

10. Think Realty with Abhi Golhar

I love Think Realty’s tagline: “A Real Estate of Mind.” Like Paula and myself and so many others, host Abhi Golhar truly wants you to think differently about both money and real estate investing. 

I also appreciate that the Think Realty podcast keeps its weekly episodes short, sweet, and to the point. No fluff, just juicy morsels of real estate investing advice and ideas. 

Abhi brings an uptempo personality and style to the podcast, making it a pleasure to listen to. I particularly like the diversity of topics and themes, from multifamily investing to single-family properties, and plenty of niche investing strategies like self storage, mobile homes, land, and more. 

In fact, we like Abhi so much we brought him on our podcast to share some times with you!

11. The Real Estate & Financial Independence Podcast with Coach Carson

Another investor after my own heart, Chad “Coach” Carson and his family recently spent a year and half living in Ecuador. Living on their real estate investment income, of course!

Chad reached financial freedom in his late 30s, and aims to help his listeners reach financial independence with real estate as well. Sensing a theme here?

He also happens to be a genuinely nice guy, in addition to his wealth of knowledge. Expect actionable insights and investing tips from The Real Estate & Financial Independence Podcast, plus a wealth of resources to help you succeed.

12. Live Off Rents with Deni Supplee & Brian Davis

It’s our list of best real estate investing podcasts, so we reserve the right to list ourselves too!

In our Live Off Rents podcast, we cover rental investing, passive income from real estate, financial independence and retiring early (FIRE), property management, and other landlord-related topics.

Deni and I intentionally aim to keep the episodes short, punchy, and filler-free. No time-wasting tangents here — most episodes range from 15-20 minutes, packed with content. 

We also broadcast them live, to allow audience interaction and live questions. That makes the episodes less polished and more raw, which not everyone appreciates, but we launched the podcast first and foremost as a way to connect with our audience. We don’t need our egos stroked by editing out every snafu or verbal stumble; we keep it real. 

Join us live Tuesdays at 2pm EST on our Facebook page or our Live Off Rents podcast page, or iTunes, Stitcher, or wherever else you listen to podcasts.

Final Thoughts

The list of best real estate investing podcasts above is far from exhaustive. Other excellent real estate investment podcasts include Master Passive Income with Dustin Helner, One Rental at a Time with Michael Zuber, Real Estate Success with Jim Ingersoll, The Apartment Building Investing Podcast with Michael Blank, and Real Estate Guys Radio with Robert Helms and Russell Gray. 

Podcasts offer a free way to learn some of the basics of real estate investing, even while driving, working out, brushing your teeth, or walking to work (my personal favorite time to listen). Take advantage of this free source of education, and happy investing!♦

What’s your favorite real estate investing podcast? Why?

More Real Estate Investing Reads:

How One Couple Moved Abroad & Retired by 30 with Rentals

What Is Leverage in Real Estate and How Does It Help Investors?

About the Author

G. Brian Davis is a landlord, real estate investor, and co-founder of SparkRental. His mission: to help 5,000 people reach financial independence by replacing their 9-5 jobs with rental income. If you want to be one of them, join Brian, Deni, and guest Scott Hoefler for a free masterclass on how Scott ditched his day job in under five years.

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Are credit score woes keeping you down? If you have a lower score, it could be stopping you from getting a loan or the rental unit you really want. And while it’s possible to get an investment property loan with bad credit, it’s much harder and costs you more.

The good news: you don’t have to settle for a low credit score forever. Keep reading to find out how credit repair works and what you can do to help work to see your score rise in the future.

What Is Credit Repair?

Are credit score woes keeping you down? If you have a lower score, it could be stopping you from getting a loan or the rental unit you really want. And while it’s possible to get an investment property loan with bad credit, it’s much harder and costs you more.

The good news: you don’t have to settle for a low credit score forever. Keep reading to find out how credit repair works and what you can do to help work to see your score rise in the future.

What Is Credit Repair?

Credit repair refers to a series of activities meant to address negative items on your credit report. These items are those that bring your score down. Credit repair services tend to concentrate on inaccurate negative items that can be removed or corrected.

Is Credit Repair Good or Bad?

Credit repair is definitely a good thing. If it’s done right, it can make your credit reports more accurate—and may improve your score if your negative items are unfair or inaccurate. And you can take some steps to help repair your credit yourself.

What Can Credit Repair Remove?

Credit repair works to request removal of inaccurate negative information on your credit reports. In general, credit repair doesn’t remove accurate negative items on your credit reports. Some things a credit repair process can uncover and get corrected include:

How Much Does It Cost for Credit Repair?

The cost for credit repair depends on the route you take. You can DIY credit repair, and that can cost a decent amount of your time, plus some expenses for printing and mailing letters and documents.

You can save yourself a lot of time and hassle by working with leaders in credit repair, like Lexington Law or CreditRepair.com. The costs for credit repair services depend on what’s being provided. Many organizations charge a monthly fee to match the service level you choose. According to CreditRepair.com, its most popular service level costs $99.95 per month.

Disclosure: Credit.com and CreditRepair.com are both owned by the same company, Progrexion Holdings Inc. John C Heath, Attorney at Law, PC, d/b/a Lexington Law Firm is an independent law firm that uses Progrexion as a provider of business and administrative services.

(article continues below)

Ditch Your Day Job: How to Retire Early with Rental Income (Free 8-Video Course)

Common Steps to Credit Repair

Now that you know a little more about credit repair, you may want to start repairing your credit. Whether you work with a consultant or start the process on your own, the steps to credit repair are similar. But keep in mind—you won’t see results overnight. Credit repair takes time and effort.

1. Get copies of your credit reports

Get started by finding copies of your credit reports. For the best outcomes, order reports from all three of the major credit bureaus—TransUnion, Equifax and Experian. But keep in mind that your credit information will vary from bureau to bureau. Some bureaus have information that the others might not have, so you might see errors on some reports but not on others.

You can get a copy of your credit report from each bureau via AnnualCreditReport.com. This free service offers one credit report per year from each bureau, but during the COVID-19 pandemic, you can get a copy weekly for a limited time. If you work with a credit repair service, they usually help you get copies of your report and may provide access to updated reports as long as you’re a client.

You can also sign up for ExtraCredit to keep an eye on your credit reports while enjoying other benefits, such as cashback for qualifying for offers.

2. Look for inaccurate information

Carefully look through all your reports for inaccurate information. It’s a good idea to get any inaccurate information taken care of—including typos or incorrect addresses. But the main reason you’re doing this is to get information fixed that negatively impacts your credit.

Wondering how credit repair works? To really understand credit repair, and what to look for on your report, you need to understand what impacts your score:

3. Send a request for investigation to the credit bureau in question

Once you identify inaccurate information, you can send a written request to the credit bureau to challenge it. Include a copy of your credit report with the inaccurate information circled or otherwise highlighted. You should also include an explanation of why the information is incorrect and documentation that demonstrates your point.

It’s typically best to send a dispute letter for each error in your report for organizational purposes and clarity. But keeping up with all these documents and letters can be a massive pain—which is why a lot of people work with experienced credit repair companies.

4. Follow up with your request if necessary

Credit bureaus have a certain amount of time to investigate any issues you send them. If the original reporter—often the creditor—doesn’t provide proper documentation within a certain time frame, the credit bureau must remove or edit the inaccurate data until it can be substantiated.

It’s a good idea to follow up to ensure this happens. That can mean pulling your reports again in a month or two. You also have to watch for correspondence from the credit bureau asking for additional information.

(article continues below)

Want to compare investment property loans?

What do lenders charge for a rental property mortgage? What credit scores and down payments do they require?

How about fix-and-flip loans?

We compare the best purchase-rehab lenders and long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

What Credit Repair Isn’t and Credit Repair Scams to Watch for

Working with a credit repair service is a great idea—if you have reasonable expectations and know what to look out for. Credit repair can’t magically fix all of your credit problems overnight. Some things credit repair can’t do include:

If you come across credit repair “experts” who claim they can do any of the above, steer clear. Remember: professional credit repair services don’t work to improve your credit score. They work to make your credit reports more accurate. Any credit score improvement can be a byproduct of removing inaccurate negative information from your reports.

What Is the Credit Report Organizations Act?

The Credit Report Organizations Act (CROA) is part of the Consumer Credit Protection Act. It governs how professional credit repair services can be marketed and sold to consumers. Specifically, the CROA:

Understanding Red Flags for Credit Repair Scams

Companies that don’t comply with the CROA may be scams. If a credit repair service seems to promise things covered in the above section on what credit repair isn’t, you probably want to avoid them. Some red flags include:

Work To Repair Your Credit Now

You can definitely work to repair your credit yourself. But if the task proves to be too complicated or time-consuming, there are plenty of credit repair services available. You can sign up for credit repair services today to work on getting your credit reports as accurate as possible. Consider working with Lexington Law Firm, a reputable credit repair leader that follows the law as it works with clients.

This article originally appeared on Credit.com and is republished here with the author’s permission.

More on Credit & Financing:

How to Flip Houses With No Money Down

How to Invest $1,000 in Real Estate

Real Estate Crowdfunding Investments: The Easiest Way to Diversify?

About the Author

Credit.com is the only company of its kind to be founded and run by leading credit experts including journalists, authors and consumer advocates. We’re committed to helping consumers understand and master the confusing world of credit and improve their financial standing by recommending products and actions that are in their best interest.

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Keeping renting out properties long enough and you’ll encounter junk abandoned by your tenants.

Deni and Brian break down what to do when you discover your renter moved out and left behind trash, furniture, and more.

Video Broadcast Version

Audio Podcast Version

Also available on iTunes, Stitcher, and wherever else you listen 🙂

Resources Mentioned in This Podcast & Video:

Want to compare investment property loans?

Keeping renting out properties long enough and you’ll encounter junk abandoned by your tenants.

Deni and Brian break down what to do when you discover your renter moved out and left behind trash, furniture, and more.

Video Broadcast Version

Audio Podcast Version

Also available on iTunes, Stitcher, and wherever else you listen 🙂

Resources Mentioned in This Podcast & Video:

Want to compare investment property loans?

What short-term fix-and-flip loan options are available nowadays?

How about long-term rental property loans?

We compare several buy-and-rehab lenders and several long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

Brian: Hey, guys. Happy Tuesday.

Deni: Hey Everyone.

Brian: Brian and Deni Supplee here from Spark Rental. Super excited to be with you today. Today we are talking all about what to do when your tenant leaves junk behind in your property, which is not fun.

Deni: Outside of your property.

Brian: Or. Yeah, yeah. The broken-down pickup truck on the lawn, which happens all the time.

Deni: Oh. So, when I managed apartment complexes, which was our biggest issue.

Brian: What?

Deni: Abandoned junk, abandoned cars and abandoned vehicles? Yeah, it was crazy. It’s like, you know.

Brian: Because you have to pay for them to be towed. Right.

Deni: Yes.

Brian: And that falls on you?

Deni: Yep.

Brian: Yeah. Not fun. You know, if you were in this game long enough, you will definitely have abandoned junk vehicles, you know, stuff left in your houses in addition to damage to the walls and the floors and all of the above. So, without further ado, you know, let us know where you’re turning in from, what your experiences have been with, with abandoned property, personal property in your real properties. And feel free to shoot questions at us as we go. That’s why we do these live so that you participate. So, on that note, Deni, tell us a little bit about where do you even start with tenants abandoning junk at your properties?

Deni: The very first most important thing is to determine if they actually have left.

Brian: Because maybe they just went on vacation.

Deni: Right? Right. And even if they still have the keys, they’re still paying rent. You know, the electric is on. And those things, even if there’s no stuff in there and they’re not paying the rent, you still have to be very careful in how you’re trading because technically you don’t have possession unless you evict them for nonpayment and you’re at the lockout point, even if you win a judgment in court. And you think they moved. You still have to go through certain things and depends on your state. But most states will allow you to secure the property. So, if you believe that nobody’s in there and the windows are open and, you know, the electric is off and the refrigerator is closed or whatever, you can go in and secure the place, but you can’t touch their stuff yet. Yeah. So, the biggest thing is determined have they left? And, you know, a lot of things come into play there. Do they give you notice and then leave before the lease was ending? Did they give you a notice and just left and forgot to give you the keys at the end of the lease or were they evicted? So, you really want to take all those things into consideration and be careful how you proceed and know your law.

Brian: Right. And the climate, the political climate of where you’re operating. I mean, some cities and states, super tenant friendly, you know, both in the actual laws, on the books and in the way that those laws are enforced by judges. So, you really need to have your finger on the pulse of how, you know, if there’s any sort of dispute, how friendly are the laws and, you know, judges’ interpretation of those law is going to be.

Deni: And be careful not to get your feelings in this, because I remember going into a rental that was in a bigger community that I was renting, and they destroyed it so bad they pulled the toilet. So, we had to go in and take care of that because there was flooding on the floor. And but they left their stuff in there. And we still had to follow the law. We still had to inventory it and take.

Brian: Even though it was waterlogged.

Deni: Yeah. All right. So be careful.

Brian: Yeah. And these are also I talk all the time about how you really need to be careful about investing in tenant-friendly markets, states, cities. We actually don’t recommend investing in any super tenant-friendly markets, but if you do, then you do have to watch out for all these things that you don’t necessarily have to watch out for in more neutral or more landlord-friendly states and cities.

Deni: Absolutely. And often your cities or your big cities.

Brian: Are usually tenant friendly.

Deni: Yes. So now you’ve done it. You made sure that tenants gone. He’s out of there. You want to go in and you want to document everything. You want to take pictures. There’s no reason.

Brian: CYA.

Deni: Yes. Big time. Because they can come back and they can say, well, this was in good condition and now it’s not. And my landlord did this or something like that, and you can be liable, and you do not want most of it. Well, I shouldn’t say that you don’t want to be liable for somebody else’s junk.

Brian: So, yeah, they’ll claim that you broke their 70-inch flat screen TV that had been broken for years, but they’ll try to pin it on you. Yeah.

Deni: Or it’s an all-black and white from back in the day. And another thing just to make sure that they’re going or whatnot, you can talk to the neighbors. Postal workers have a wealth of information. They’ll let you know if they put an order for forwarding address in and all kinds of that kind of thing. So, there are a wealth of information, you know, and then contact. They and say, you know, you have stuff here. Are you keeping it, leaving it, whatnot? Now, you can do that initially, but then when you are wanting to contact them to, you know, let’s get this out of here or not, that should be a formal written notice. So now we have all this stuff, and, in this market, you can rent things out so quickly. So, you don’t want this rental held up while you have this stuff. So is your money. Exactly. So again, what I used to do when I had the communities is usually had a place. Sometimes it was a vacant apartment or wherever we could find to store the stuff so that we could re-rent the unit out. But you have to in Pennsylvania, it’s either ten or 30 days, and you have to pretty much protect their stuff until they come and get it. Now, every state is different, so.

Brian: It varies by state law and in some cases by city law as well.

Deni: Right.

Brian: Yeah, I know in Baltimore City where I used to invest before I knew better. Yeah. I mean, you have to store there. The tenants abandoned stuff for months. I mean, it’s crazy at your expense.

Deni: So, and you got to be careful what to you looks like trash because the last thing you want is them to come around and then you’re. Yeah, it can be a nightmare. You also want to save all receipts, everything for dumpsters, man hours for removing the stuff and putting it somewhere else and securing it. If you’re renting a storage unit, all of those things you want to make sure along with the normal damages and stuff that you’re going to deduct if there are any from the security deposit. But you are definitely I mean; it can be expensive. Dumpsters are expensive.

Brian: Very expensive.

Deni: Yeah. Especially now. They’re crazy. So.

Brian: Yeah. And, those portable storage units, are expensive. I mean so yeah. And these are also deductible expenses. So, you want to not only keep these receipts and invoices to build a tenant for their security deposit but also in case you’re audited by the IRS, you’ll want to have records to show that these were actual expenses that you incurred.

Deni: Absolutely. If you happen to sell this stuff so you decide to have a yard sale of a junk cell and that can be done. I mean, you know, you can put ads on wherever and try to sell the stuff once. You followed all the state laws, city laws or whatnot, and you’re sure that you’re actually abandoned. But now each state law also can tell you what you can do with the money, whatnot. So, you got to be careful with that, too. Yes, seriously. Most often you can just. Yeah. Put it towards whatever damages they had or whatnot.

Brian: Because in most cases, if they left your property with junk and trash strewn all over it, they probably left it damaged and filthy in other ways as well. So, I mean, you’re going have to pay for a professional cleaning crew to go in there probably and probably contractors or handymen to go in there and patch the holes in the wall and in your case, install the new toilet.

Deni: So, oh, my goodness. They left personal pictures and stuff behind. I just thought that was crazy to me. I don’t know those things. I went through a fire and lost all those things. So, when I see somebody just leave those older pictures, I mean, now we have the internet, but. Yeah. Yeah, it is.

Brian: So, I, I had a really weird and funky story. This is probably an inappropriate story to tell, but there was a property of mine where the mother was the tenant. She was a tenant of mine for like 30 years. I mean, not thought that I had been her landlord for 30 years, but she lived there for I inherited her, and her son was kind of a deadbeat and moved back in with her. The mother died. The son continued paying rent for a little while, then stopped paying rent. And I went over there one day and we think that he offed himself, basically, like he wasn’t in the property, his body wasn’t in the property, but he abandoned all this stuff there that like it didn’t look like it was like abandoned and stuff, but it looked like he had been living there and then just was no longer there.

Deni: Wow.

Brian: But it was. Yeah, it was. It was bad. It was so yeah. That was quite a headache to sift through empty all the stuff out. We did have to go through some of those processes of giving it a certain amount of time and verifying that he had abandoned possession of the both the building property and his personal property inside it. So anyway, I don’t know. I don’t know why I share that story, but Adventures in the Morning.

Deni: If you’re like Brian said earlier, if you’re in this business long enough, you see some crazy stuff. Like I’m sure all of you guys have stories, some story where you went through an apartment and found some pretty crazy things and yeah, they’re yeah. Pretty, pretty nutty out there sometimes. A couple of weeks ago, maybe it was a month ago, I talked about what to do if a tenant passes in a rental. Make sure you watch that, too, because that’s a little bit different. So, you want to make sure and discern from that. I can tell you that one time I had a. A tenant who went to jail and his family started coming. And mind you, he was paid up till the end of the month, so I couldn’t do anything. And his family started asking for his keys and everything else, and it became a whole big rigmarole. So, you want to make sure and know your laws. And if you don’t contact an attorney because, you know, if you let somebody in an apartment that has no business being there and then the tenant does come back, even if he’s coming back from jail or whatnot, you’re the one that’s going to get it. So, in the same way, you got to handle their stuff, even if it’s ripped up and smashed or whatever, you still got to handle it.

Brian: The landlord’s always liable. That’s the bottom line. And then we should do a podcast episode soon on what to do if your tenant goes to jail. Because even though it’s sort of a niche experience, again, if you’re in this industry long enough, you’re going to come across that, especially if you’re working with lower-end units, which I used to be again before I knew any better.

Deni: That’s great. Yeah, it happens.

Brian: So, anything else? Yeah. Yeah. Is there anything you want to add before we call this episode complete?

Deni: Just those three things. Make sure they’re gone. Know the law on how to handle it and get rid of the stuff. Make sure you do it within the confines of the law. Whether it’s storing it for 30 days, they each have their time frames and be careful with the stuff. Even if you think it’s junk, you still have to treat it like it’s not right. And even if you’re pissed off because they ruined your place, unfortunately, you still can’t. Take it out on the stuff.

Brian: With a baseball bat, you know, like obviously.

Deni: I’ve wanted to, and that’s.

Brian: All right. On that note, we’re gonna wrap things up for today. We will see you guys’ next Tuesday, 2:00 Eastern, 11 a.m. Pacific. Let us know what you want to hear about in the future on these podcast series. You know, again, it’s about you guys, about what you want to hear about. And as always, they’re interactive. So, feel free to shoot your questions to us. Reach out to us anytime and [email protected] and we will catch you on the flip side.

Deni: Absolutely.

Keep Learning More, Keep Earning More!

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5 Fundamentals of FIRE from Real Estate

The Debt Snowball Method, FIRE, and Real Estate Investing

Ditch Your Day Job: How to Retire Early with Rental Income (Free 8-Video Course)

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Much has been written about the stages of financial independence (FI) in an effort to define financial freedom and the milestones along the way. 

These steps for financial freedom are easy to understand, if a bit harder to actually reach. The good news? It gets easier as you go. Like riding a bike, the first few pumps are the hardest. 

As you plan your escape from the rat race, expect the following stages of financial independence.

Stage 1: Negative Net Worth (In the Hole)

Much has been written about the stages of financial independence (FI) in an effort to define financial freedom and the milestones along the way. 

These steps for financial freedom are easy to understand, if a bit harder to actually reach. The good news? It gets easier as you go. Like riding a bike, the first few pumps are the hardest. 

As you plan your escape from the rat race, expect the following stages of financial independence.

Stage 1: Negative Net Worth (In the Hole)

Many of us start our journey below $0, with a negative net worth. 

If you’re not familiar with how net worth is calculated, it’s simply the sum of your assets minus the sum of your liabilities (debts). If you owe more than you own, you have a negative net worth. 

No bueno. But we all have to start somewhere. I’ve been there myself. 

Whether it’s consumer debt, credit cards, student loans, personal loans, upside-down real estate investments, or other types of debt, you’re under water. That’s what comes of lifestyle creep and trying to keep up with the Joneses. 

Consider it a one-way ticket to staying broke no matter how much you earn. 

Stage 2: Financial Solvency

Once you realize you’re on the fast track to nowhere, you jump off the train. 

You can then start building an emergency fund and tackling your high-interest debts. The next time you get hit with a surprise $1,000 car repair, it’ll still suck, but it won’t throw you into a panic. At this point, between your emergency fund and shrinking consumer debts, you’ll be able to absorb small financial shocks. 

Word to the wise: you can supercharge your savings rate by house hacking. Check out this case study of how one man house hacked a duplex and covered his monthly payments with rent from his neighbor. Getting rid of your housing payment opens up lots of extra money to hit your financial goals faster.

Try the debt snowball method to knock out each debt one by one and build momentum as you go. 

The higher your savings rate, the faster you’ll knock out your debts so you can proceed to the next level of financial freedom. 

Stage 3: Financial Stability

Once you pay off all your unsecured debts, you’ve reached financial stability. You probably still have a mortgage loan in place, and perhaps a small car loan, but no high-interest loans.

By now, you’ve scaled your emergency fund to at least two months’ living expenses, and perhaps as many as 12 if you have unstable income or expenses. You can handle all the curveballs life throws at you, even if they still sting when they hit you. 

At this point, you can put each paycheck’s savings toward investments rather than your emergency fund or paying off debts. This is where the fun really begins.

You can start investing for passive income from sources ranging from stock dividends to real estate crowdfunding to rental properties. If you need some fresh ideas, start with these passive streams of income from real estate. 

Don’t ignore your retirement accounts either. If your employer offers matching contributions to your retirement plan, you effectively earn a 100% return instantly on your investments. But even if they don’t, consider maxing out your Roth IRA for tax-free compounding and withdrawals in retirement. 

From here, you get to watch your net worth and passive income grow each month.

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Ditch Your Day Job: How to Retire Early with Rental Income (Free 8-Video Course)

Stage 4: Halfway Point (Half FI/Coast FI)

You’ve calculated how much money you need to retire. You understand concepts like safe withdrawal rates and the 4% Rule.

When your net worth gets halfway there — what some FIRE pundits call “half FI” — you’ve reached the next milestone in financial freedom. As an aside, we use “FI” and “FIRE” synonymously, the latter standing for financial independence/retire early.

Despite how it may seem, you’re actually much closer than halfway there. Because each investment produces additional income and growth, it adds to the amount you can invest each month. These compounding returns mean it’ll probably only take you half as long to reach full financial independence as it took you to get where you are today.

In other words, if it took you ten years to reach half FI, it’ll probably only take you another five years to build up the other half of your target nest egg.

There’s another concept worth mentioning here, known as “coast FI.” Coast FI means that if you stopped investing today, you’d still be able to retire on time. The compound interest and returns on your investments would get you there on their own.

For example, if you have $500,000 invested and want to retire with $1 million, it will take you around seven and a half years to reach your goal if you earn 10% on your investments. That’s without you investing another cent.

Play around with this compound interest calculator to see just how powerful compounding is.

Stage 5: Financial Security (Lean FI/LeanFIRE)

When you can cover your basic living necessities with passive income from investments, working technically becomes optional. You wouldn’t be trippin’ the life fantastic, spraying champagne all over people at black tie galas, but you could survive without ever working another day in your life.

People in the FIRE community call this stage of financial independence “leanFIRE” or “lean FI.” For some, it’s the end goal. They don’t need trips to Europe or filet mignon dinners. They just want to live simply in a quiet corner of the world and do their own thing.

Most of us want more flexibility and “freedom” in our financial freedom, so we keep investing money. But if you don’t mind a modest lifestyle on a tight budget, this can serve as the end of the road for you.

As an additional thought, I’m a huge proponent of lifestyle design and using your passive income to help you change careers to something you love rather than tolerate. That could mean taking a huge pay cut to switch to a dream job, or it could mean starting your own business, or something else entirely. But when you can cover your basic monthly expenses with passive income, you have the freedom to quit your high-stress day job and never look back.

Stage 6: Financial Independence (FI or FIRE)

When you can cover all your living expenses — including discretionary expenses — with passive income from investments, you can retire without any loss of lifestyle.

Welcome to financial independence!

It doesn’t have to require passive income, either. You could simply reach a net worth that supports you, at whatever withdrawal rate (e.g. 4%) you decided on. A 4% withdrawal rate should last you at least 30 years, but if you want your nest egg to last longer, plan on a 3.5% withdrawal rate.

Reaching financial independence isn’t about getting rich. It’s about retaking complete control over your time. Most people who reach financial independence live a middle-class lifestyle, but they do work they love rather than slaving away in corporate hell.

Pursue financial independence to retire at 40, or at any age you like. Here’s how much you need to save to retire quickly.

Better yet, pursue FI as part of a larger effort to switch careers to do fulfilling work you love.

(article continues below)

Want to compare investment property loans?

What short-term fix-and-flip loan options are available nowadays?

How about long-term rental property loans?

We compare several buy-and-rehab lenders and several long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

Stage 7: Financial Freedom (Abundance/FatFIRE)

If financial independence lets you continue living your previous lifestyle without a job, financial freedom shoots the moon.

People sometimes use financial freedom and financial independence interchangeably, but the definition of financial freedom as I see it is a life with few fiscal limits. You can afford luxuries like traveling around the world and fine dining without a second thought. You can pay for your children’s education effortlessly.

While many financially free people still live a middle-class lifestyle, they don’t have to. They are wealthy, at least by conventional standards.

Some in the FIRE community refer to this as “fatFIRE” as opposed to leanFIRE. You can expect to live comfortably without another cent of active income.

The longer you keep working and investing, the fatter your nest egg and passive income grow. But don’t continue working a miserable job just to reach fatFIRE. By the time you reach half FI or leanFIRE, switch to work you love. From there, every day feels like financial freedom.

Financial Freedom: Define Your Ideal Life

As long as you’re working a job you don’t love, you’re running in the rat race.

The FIRE movement gets a bad rap because critics assume that followers just want to lie on a beach sipping margaritas for the rest of their lives. But they’re missing the point entirely: reaching financial freedom is about retaking control and putting yourself in a position to do meaningful work rather than drudgery.

Work that, let’s be honest, doesn’t always pay well. Or if you’re starting a business, that comes with risk. I know all too well how harrowing the lean first few years in business can be.

I challenge you to dream bigger than just retiring. What would your dream life look like? Your dream work? How would you change the world for the better, if you only needed half the income to keep living your current lifestyle?

As you start climbing the steps toward financial freedom, start actively creating your dream lifestyle. It took me years, but I eventually built several sources of active income that I can earn from anywhere in the world, on my own schedule. I spend ten months a year overseas, and the other two months visiting family and friends in the US.

All the while, I continue investing and growing my net worth and passive income.

The irony is that in designing your ideal lifestyle, you no longer want to quit and retire. You want to keep working forever, because you love what you do.

In other words, the value in financial independence and early retirement lies in the pursuit, not in reaching a target number.♦

What are your financial goals? How do you define financial freedom, and what stage of financial independence are you aiming for? Share your financial plans below!

More Real Estate Investing Reads:

House Hacking: 10 Ways to Live for Free (Even in a Single-Family Home)

Real Estate Crowdfunding Investments: The Easiest Way to Diversify?

About the Author

G. Brian Davis is a landlord, real estate investor, and co-founder of SparkRental. His mission: to help 5,000 people reach financial independence by replacing their 9-5 jobs with rental income. If you want to be one of them, join Brian, Deni, and guest Scott Hoefler for a free masterclass on how Scott ditched his day job in under five years.

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Worried about a housing market correction?

You certainly aren’t alone. With the words “recession” and “correction” on everyone’s lips, here are some recession-proof ways to invest even if real estate markets dip in value in the near future.

Video Broadcast Version

Audio Podcast Version

Also available on iTunes, Stitcher, and wherever else you listen 🙂

Resources Mentioned in This Podcast & Video:

Want to compare investment property loans?

Worried about a housing market correction?

You certainly aren’t alone. With the words “recession” and “correction” on everyone’s lips, here are some recession-proof ways to invest even if real estate markets dip in value in the near future.

Video Broadcast Version

Audio Podcast Version

Also available on iTunes, Stitcher, and wherever else you listen 🙂

Resources Mentioned in This Podcast & Video:

Want to compare investment property loans?

What short-term fix-and-flip loan options are available nowadays?

How about long-term rental property loans?

We compare several buy-and-rehab lenders and several long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

Brian: Hey, guys. Brian Davis and Dennise Supplee here from Spark Rental, how are you doing today?

Deni: How is everybody? How was your fourth? I hope everybody had a safe and fun, fun times.

Brian: Everyone got blown up by fireworks.

Deni: Yeah, my husband’s a real pyro, so we had a lot of fireworks here.

Brian: Oh, fun. Yeah. My dad likes them as well.

Deni: Really? You know, it’s funny, when we went to buy him the box that he got this whatever was called the. The divorce maker.

Brian: Yeah, I love it.

Deni: What a name. Anyway, I’m glad that you’re all joining us. Let us know where you’re joining us from. Just throw that in the comments. And if you were with us last week, Brian, interview Tom Dunkel, who was an interesting, knowledgeable guy. And this week we’re going to be talking about how to invest if you’re afraid or fearing a housing market correction, which seems to be the topic these days, being a realtor, I don’t know how many people I hear. Even yesterday, some of the people that were here, there was somebody that was thinking of possibly selling their home because they don’t want to miss the opportunity, the high prices. And now with the radio, it’s like all the talk. So anyway, Brian, why don’t you start us off and give us some ideas on how to how to stay towards your goals of investment even during these times?

Brian: Sure. So first of all, it’s not guaranteed that we’re going to have a housing market correction. They don’t happen that often, even when we have recessions. Home prices don’t always dip. When they do dip, they tend to only dip 5%, maybe a little bit closer to 10% in the worst ones. But as far as I know, there have only been there’s only been twice in American history when housing prices have dipped more than 10%. And those were, of course, the Great Recession and the Great Depression. So, two quite extraordinary events, as you know. So, you know, we’re not talking about the end of the world here for housing prices to dip 5%. Now, if you are worried about it and it’s keeping you up at night, you don’t have to invest in real estate right now. You can always pump your money into stocks while they’re down. It’s a good opportunity to buy stocks at a discount, you know, on sale, as it were. So, yeah, if this is something that you’re chewing your fingernails about and keeping you up at night, then don’t feel like you have to invest in real estate right now. If you do want to continue investing in real estate, another option is buying long-term investments that cash flow well. So even if home prices do dip 5%, maybe even 10%, it won’t really affect you, right? Because your cash flow will continue coming in even while prices dip down a little bit and before they recover.

Brian: Who cares? As long as you’re holding it long-term, you can keep cashing those rent checks every month or keep cashing those dividends if we’re talking about real estate crowdfunding investments. So, bear in mind here, that rents almost never dip. So even during the Great Recession, when home prices dropped significantly. So, if you look at the larger cities, they dropped around 20% in some markets, in some rural areas, housing prices dropped 30, even 35% in the US. Rents didn’t drop. They leveled off some for a couple of years, but they did not drop. So even during housing market corrections rents, rents don’t drop. So, your cash flow will still keep flowing in. Even when home prices drop. Even if we do have a little bit of a recession now, that doesn’t mean that you don’t have other risks. As a social landlord during recessions, you may have higher default rates on the rent. You may see higher vacancy rates but rents themselves don’t drop. So, if you have screened your tenants really well, if you have really solid, stable tenants in there, you should be fine as a long-term rental investor.

Deni: And if you’re working the numbers out, you know what I mean? It does obviously the price does mat matter. But if the numbers are working and rents generally do go up, you should be okay. There is always some type of deals out there.

Brian: Yeah. So yeah, home prices, home price corrections in the US, represent an opportunity to buy houses at a discount. But so, we actually did an analysis about a month ago on how recession proofs our rental properties are and added a link to it in the comments here. But we have some graphs showing some of this data over time, including housing prices during recessions, rents during recessions, vacancy rates for rental properties during recessions, and during normal times as well. So, take a look at some of that data, if interested. And it’s a pretty clear breakdown of what are the risks as a landlord during recessions if assuming you’re not looking to sell during the recession, but rental properties are safer investments than most during recessions. Now, they’re not the only long-term real estate investment you can make. Crowdfunding investments like fundrise and streit wise are both long-term equity investments in properties. You’re buying fractional shares of pools of properties, so we’ll add a couple of links to.

Deni: I already did.

Brian: Oh, thank you, Deni. Yeah. So, I invest some of my personal money in both fundrise. And streit wise, I’ve had very good experiences with both. So, you know, those are they are long term investments, don’t get me wrong, five-year minimum investments for these. If you put your money out early, you do get hit with a penalty. So yeah, these are places where you park your money long term in real estate and in the meantime, you earn a healthy cash dividend every quarter. So streitwise has been paying 8.4% annual dividend for years now. So those are a couple long term options that you can invest in real estate. Even if you’re worried about a little housing market dip over the next year or two. You know, as long as you’re holding long term and just collecting the cash flow, you’ll be okay. Now, there are other types of real estate investments that people like as recession-proof investments. I put that in air quotes because, you know, is anything truly recession-proof? Who knows? But we had so last week we had Tom Dunkel on the show, and he was talking to us about self-storage facilities and that’s the niche that he is occupying right now. They do syndication projects for the self-storage facilities. They’re expensive properties usually. So, it’s not like the average person can go out there and just drop a million bucks to build one of these facilities. But you can invest in smaller ones. You can invest in syndication; you can partner with people. So, we’ll put a link in the comments here to last week’s episode with Tom Dunkel.

Deni: I just put it in.

Brian: Yeah. And so, the reason, by the way, let’s just explain for a second why people consider self-storage facilities, recession proof. So, during recessions, some people will downsize their homes. Or they will move in with family members or friends, which is effectively the same thing as downsizing. Right. They are moving into a new home that doesn’t have enough space to fill all of their belongings. So, what do they do? They put it in a storage facility. So that’s why self-storage facilities are largely considered recession proof, because as people shrink their home size down or they move in with someone else, which is, by the way, the technical term for that is household bundling, if you are a real estate nerd like we are. But that is that’s the side effect of downsizing or bundling your house over someone else, moving in with someone else. You don’t have enough room for your stuff. So, you put yourself in storage. That’s the bottom line there. So, yeah, that is an option as well if you are worried about a recession or a housing market correction. Self-storage facilities are a good place to start. Mobile homes, same concepts. You know, in recessions, people look for more affordable options for housing. Well, homes are historically a more affordable housing option. So, you can invest in mobile homes as a more recession-proof option as well. Or in that same vein, you can invest in mobile home parks. So rather than a single mobile home in the entire park. Different business models, of course, but the same underlying economic principle. Right. That in recessions people look for more affordable housing.

Deni: I actually even for like an Airbnb, if it’s in an area, you know, like a mountain area or whatnot, I love the idea of buying a piece of land, throwing a mobile home on there and which is kind of what they do. And I just thought that was the coolest thing.

Brian: Oh, yeah. And you guys have an RV for traveling around. I love it. I love it. So, yeah, no RV parks, mobile home parks. I mean, you know, all of these are viable options during recessions. And, you know, yeah, people do sometimes go live in their RVs during recessions and rent out their homes if they own a home, you know, or maybe instead of their family vacation that year being like, oh, we’re going to fly to Europe or fly to the Caribbean, like, oh, maybe we RV around for a couple of weeks.

Deni: There’s that’s been way popular even. Like it’s just funny how popular it is.

Brian: Yeah, absolutely. So, you know, these are all options if you’re concerned about housing market correction or recession.

Deni: It’s not just for senior citizens anyway.

Brian: Although, you know, let’s be honest, these cliches exist for a reason, right? Yeah.

Deni: Careful, I thought you were going to say. Well, look.

Brian: Yeah. So, you know, another option here for investing in real estate. If you are worried about a housing market correction, low LTV loans, loans that have that are a low percentage of the property value. So, there’s still plenty of meat on the bone. There’s plenty of room, plenty of equity. If the borrower were to default and the lender had to foreclose, they’d still be able to get their money back. So typically, we’re talking about hard money loans here to real estate investors. These loans are usually in the 60 to 75% LCV range. So, you know, if the housing market or housing prices do drop 5%, you still have 20 to 30% equity available in the property for foreclosing and getting the money back or working out a short sale or whatever with the owner. So, there are a couple of real estate crowdfunding platforms that specialize in these sorts of hard money loans with low LTVs. And by the way, the fact that these are two real estate investors make them way easier to foreclose as opposed to foreclosures on homeowners, a very lengthy process, and a lot of regulation. It’s a much more streamlined process to foreclose on a real estate investor where it’s not their primary residence. So as the effective lender here, that’s good news for you. So yeah, ground floor and concrete are two that Denny and I both invest in personally. Low LTV loans, hard money loans to real estate investors had great experiences with both. So those are options as well. So, Deni, what do you want to avoid during if you’re worried that we are approaching a housing market dip or a little housing market correction here?

Deni: I think the worst thing that anybody can do is panic and make decisions out of that panic without taking everything, you know, like just. Yeah. Because that can get you into more trouble than anything.

Brian: No question about it. And that goes for everything. That goes for selling stocks, selling real estate. You don’t want to panic, sell, you know. Everyone knows the rule. Buy low. Sell high. Panic selling is selling low. So that is the exact opposite of what you want to do. So, one strategy that does not work particularly well during or if there’s a housing market correction approaching is flipping houses because then when prices do drop, you can be stuck holding that property. So, if you are a flipper or a wholesaler, you want to have some contingency plans in place in the event that home prices do dip by 5%. Is that going to wipe out your entire profit? Is it going to put you in the red? So, you want to be careful about those because even though they’re short-term, flipping a house is a short-term investment. Six months, maybe a year. We don’t know what the real estate market will look like six months from now or a year from now. It might dip by 5%. We don’t know. We are already seeing market cooling, especially in the markets that overheated the most during the pandemic.

Deni: I never thought I would say this, but houses are sitting for over a week. In my area that’s like what?

Brian: Eternity.

Deni: It’s crazy.

Brian: Yeah. So, you know, the bottom line here, is there is still an inventory shortage. So, this is not 2008. We do not have the same fundamental problems or challenges in the nationwide real estate market that we did then. So, we’re not looking at a 20 or 30% crash in home prices the way that we saw in the Great Recession and its aftermath. That being said, housing markets have been overheated for a couple of years and they are definitely being cooled down by the jump in inflation, higher interest rates, the jitters among the general public. Consumer confidence is very low right now, so we may be spooking ourselves into a recession, even if the economic fundamentals are pretty strong at the moment. So, a strong labor market, for example. So, if you do want to continue investing in real estate and I encourage you to do so but build some extra buffer into your margins so that a 5% dip in home prices doesn’t put you underwater, doesn’t ruin your deal, or ruin your day.

Deni: So, when you’re figuring out what you’re saying, the numbers, and whatnot, make sure that you put that buffer in there so that you are prepared. And yeah, you don’t want to gamble on time and market.

Brian: No, don’t time the market. Investing one on one. Deni, any other comments that you want to add here before we call this episode complete?

Deni: I don’t think so. But I know that I’ve been through ups and downs in this market and survived in a lot of ways survived pretty good. So, I think there’s always a way to make money.

Brian: No question. And you know, so final thought for me on this is if we do have a housing market correction, take advantage of it and buy low.

Deni: Exactly.

Brian: All right, guys, we will see you next Tuesday at 2 p.m. Eastern. In the meantime, stay in touch. Shoot us an email. Let us know what you want to hear about soon and what you’re looking for as far as tools, tips, and anything else that we can help you with? As a real estate investor.

Deni: Absolutely. Have a good day.

Brian: Bye now.

Keep Learning More, Keep Earning More!

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5 Fundamentals of FIRE from Real Estate

The Debt Snowball Method, FIRE, and Real Estate Investing

Ditch Your Day Job: How to Retire Early with Rental Income (Free 8-Video Course)

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