How to Diversify Your Rental Portfolio for Financial Freedom Faster

Dave:Should you diversify your investments with a new strategy or double down on a formula that’s worked for you in the past? It’s a question you’ll almost certainly encounter as you scale a real estate portfolio and take steps towards securing your financial future. Today I’ll explain how to answer. Hey everyone, I’m Dave Meyer, head of Real Estate Investing at BiggerPockets. You might only be 10 years away from achieving financial freedom if you start investing in real estate now, and this podcast teaches you exactly how to do that today in the show I have Garrett Brown here with me. Garrett is BiggerPockets short-term rental expert and the host of the Bigger Stays YouTube channel. But Garrett, the reason you’re here today on this episode is because you’re actually thinking about expanding your own investing outside of short-term rentals. Is that right?

Garrett:Yep. I’ve dipped my toe in the mini facets of real estate investing before, but I got the short-term rental bug and went full force there. But now I think it’s time to maybe explore a little more diversification as I try to grow my portfolio.

Dave:I love it because this is such a personal question. I don’t know if there’s really a one size fits all, should you keep doing what you’ve always been doing, should you explore new diversification options? So I’m excited to get into this with you today, Garrett. And actually Garrett has brought three different real life deal options that he’s actually considering pursuing. He’s got a triplex in a new market that he could long-term rent. He’s got a short-term rental or two new build single family homes he’s considering. So what we’re going to do is we’re going to break down the pros and cons of each investment and explain how we think about these deals in relation to Garrett’s existing portfolio and his future goals. So even if Garrett’s specific situation is different from your own, because of course it will be the questions we’re answering today are the same sort of thought process that you can use to ensure you’re making the best investing decisions for your own future when you’re ready to jump into the market and make your next purchase. So let’s just start there, Garrett, maybe you just tell us where your portfolio stands today and tell us a little bit about your goals that you’re trying to pursue through real estate.

Garrett:So I currently have one long-term rental, but I own eight short-term rentals and I manage seven short-term rentals for other people. And so I kind of got way further in the short-term rental investing side than I expected. I love what I do and I love this niche of it. I like the creative side, but I think the one thing that I get disappointed when I hear short-term rental investors and gurus I have quotations going is that they talk about how passive it is and how easy it is. And I’m here to tell you that when you’re doing short-term rentals, it is real estate mixed with a business and so I’m growing a business on that side, but I need a little more diversification in my portfolio to not rely on one subset of it but then also have some different advantages and maybe just take a little pressure off myself of having another rental that has almost a 24 hour job. So I’m kind of exploring to see where I can end up in five to 10 years from now and hit my financial freedom goals.

Dave:That makes a lot of sense. I think that diversification is kind of a point that a lot of real estate investors reach, but not necessarily just for risk mitigation, but just for time too, because you said you have one rental, how does managing that compare to, for example, managing one of your short-term rentals?

Garrett:It is extremely easy because I know all about the tenant application process. I know that being a realtor, so I’ve been blessed with great tenants over there and it’s been amazing as compared to short-term rentals, which I built out systems and it’s became a lot easier, but it seems like there’s always something you’re dealing with a guest. So I’m very excited to explore the possibilities of the long-term rental side, at least getting some of my time back in having a good appreciating asset.

Dave:So you said about your goals, you said five to 10 years. Do you have a financial goal? Are you trying to be fully retired? Do you want to be work optional? What are you working towards?

Garrett:I would like to be work optional in about 10 years and being in Texas and near Houston, Texas, there was some report I saw that I think five of the fastest growing top 25 zip codes in the country were near Houston.

Dave:Oh, I’d buy that for sure. Yeah,

Garrett:So I’m trying to bank into the appreciation that’s out there too. I get a ton of cashflow for my short-term rentals. I get a ton of tax benefits already, so I personally am leaning towards probably the appreciation side, but as you know, there’s pros and cons to every single deal you’re looking at. So I’m just kind of waiting in the water right now. So I’d love hearing your thoughts as I’m kind of going down

Dave:It. I love this, talking to people about portfolio strategy is my favorite thing in the world, so I’m very eager to do this today.

Garrett:I’m very lucky to talk with you about it, so let’s make it happen.

Dave:Absolutely fun. Alright, so tell me about, let’s just start with the first deal that you’re interested in. What does it look like?

Garrett:So I live in an area north of Houston. It’s about 45 minutes, Conroe, Texas. It’s been named multiple times as one of the fastest growing places in the country. There’s been a deal that’s kind of been on my eyes. It’s in a really nice neighborhood. It’s a triplex, two one bedrooms and then one studio. So a little smaller. It’s a little older, but some of the bones were renovated. It needs a little sprucing up. How old? I think it was 1982.

Dave:Oh,

Garrett:That’s not bad. That’s not old. It’s not terrible. Yeah, it’s not terrible for sure. It’s not 1928. So

Dave:I was born in the eighties, so I don’t want to hear that. That’s super old, but from a housing and construction perspective, that’s not that bad.

Garrett:It’s not terrible. And they’ve done a little work on it. They had it listed at like 450,000 for months and it was way overpriced and they’ve kind of gradually been dropping it. They have it at I think 3 75 right now. I know what I need to get it at. It’s a little bit lower than that, but as we know, this is a good market to make a couple disrespectful offers, especially in my area.

Dave:That’s a market value offer. If no one’s buying, it’s not disrespectful. You’re offering market rate.

Garrett:Absolutely. So I think my biggest concern with this property and why it’s been kind of holding me back is the appreciation. What I’m seeing at this moment isn’t as good as downtown Houston or where I’m looking at with these new constructions. I could see where appreciation over 10 years could be pretty tremendous in this area, but it’s hard to kind of pinpoint. But the other big concern I have with this is it’s in a really nice neighborhood, but we both know what comes with really nice neighborhoods, really high HOA fees for this type of

Dave:Conflict. Oh, it’s HOA. Okay.

Garrett:It’s about six something a month, which is yeah, because kind of like a townhouse, it has a community club in it. It’s one of those kind of places. Right. Oh

Dave:Cool. Well I was liking everything until I heard that. Let’s keep going

Garrett:Though. So just to give some quick simple numbers on this, I have about a hundred thousand dollars to invest, so I didn’t mention that from before. That’s about the base number I’m working with in cash in my possession as to why I’m looking at these type of deals and analyzing these specifically. So went to about 20% down with say we get about a 7% interest loan, 30 year loan. The gross income, I’m estimating between all the units, it’s going to be about 44,000 per year. My expenses estimated about 19,000, which leaves me with about $25,000 in NOI. And then annual mortgage is about $20,000. So my cash flow is sitting at about five to $6,000 a year. It’s probably about 8% cash on cash

Dave:Return. That’s with the HOA,

Garrett:That’s with the HOA. I think some of my concerns are it’s not as high of an appreciating area. Some of these other deals we’ll talk about and then I’m worried that the HOA could just, they could keep going up if they’re already at 6, 6 50 or whatever they’re at and they have a community club and it’s a little more hoity-toity or whatever words you want to use for it. I’m a little worried that after a couple of years they’re like, okay, your HOA is a thousand dollars now. So that’s the thing that’s hard and they seem like they have good financials on their HOA from what I’ve seen, but as we both know, sometimes things aren’t. It’s always what they see when you walk into something they could show you something and then it’s a total another way. So vacancy, I’m not too concerned it will have a small amount of vacancy, but this is a pretty good area, pretty fastly growing area.

Dave:That was going to be my question. It’s just about rental demand in this area because a lot of times when you’re in these nice HOAs, everyone is a homeowner, there aren’t as many renters. So I was just curious if you have any read on, is there a renter population in the area?

Garrett:Yeah, it’s actually pretty high for this one right on the lake that’s really popular there and it’s a big community to where they have a ton of single family houses and a ton of condos, townhouses, a couple multifamilies, just like they have quite a few triplexes like this that are in the market. So it’s kind of like its own big community. So rental demand is pretty strong, not as high as probably one of the other deals we’ll talk about, but I’d say vacancy between all three units is probably going to be about 5%. I would say maybe 10% somewhere.

Dave:Okay, that’s not bad. Yeah,

Garrett:Yeah, it’s not bad at all. So

Dave:Then you mentioned appreciation. So you said it’s not as good. What has appreciation been over the last couple of years? Texas has kind of been one of those markets where some markets still growing, some are tanking. What are you seeing?

Garrett:Just from what I’m kind of seeing in the data out there, it seems like it’s around 3% for the area

Dave:Which is normal,

Garrett:It’s pretty normal. But as a realtor, one thing that I really, really look at, especially realtor and investor is where are all the big home builders going and building tons of communities because my guess is that they have way better data than I do of where people are moving to. And this area has had a massive, massive influx of Dr. Horton, Lennar, every single big home builder is just building tons of communities here. And so I don’t know if that’s a red flag to me. I’m going to be competing against all these new construction single family homes and I did mention the triplex is they live on top of each other, so it’s not

Dave:Like

Garrett:Separate units. They’re all, it’s like an apartment style more, which isn’t my favorite. So I’ve been battling with that and trying to figure out the same thing there. Is this the route to go or should I lean into some of these new constructions that are coming out there that may not have as high of cash flow? But there’s a lot of positives to those too

Dave:For why

Garrett:I’m wracking my brain.

Dave:This one is intriguing. I wouldn say at this point I’m like the HOA if it wasn’t an HOA, I’d say it’s almost for sure yes, but that one is a little bit nerve wracking and just for everyone’s knowledge, H ho A is homeowners association aren’t necessarily bad. It just introduces an element of risk and unknown that you may not want as an investor. There might be great HOAs that actually add a lot of value because they make the property values go up. There are really bad HOAs that mismanage money and then there are special assessments and that’s the challenge and that’s why I think Garrett and I are both saying this is an unknown, not necessarily you can’t do it, but it does add a question to this deal.

Garrett:Yep.

Dave:So last question about this one though, Garrett is rents you getting about 3,300 bucks a month in rent? Is that current and do you think go up at all?

Garrett:I think they currently have tenants in two of the units and it’s getting 1300 for the one bedrooms and then I think the studio is open and they had it for around 1150, but it hasn’t been rented, so I’m guessing it will be in the 1100 range. So it’s about 37 a hundred a month and I think they will be able to gradually increase. I could do a little bit of renovation on the inside, a little bit of cosmetics here, but I wouldn’t want to over renovate it for this particular area. So that’s kind of why I’ve been on there. So I wouldn’t say rental growth is super high. I’d probably say it’s probably very similar to the appreciation rate of the area in general. So that’s kind of where I’m at with it.

Dave:Not bad though.

Garrett:Yeah, it’s not bad.

Dave:Yeah, it’s good. I mean I invest in a syndication in Houston and rent growth has been a struggle there. There’s been a lot of building and so I was just curious about

Garrett:That. Yeah.

Dave:Well I think this is an interesting deal. There’s a lot to like about this, so I think you got a legit lead here, but we obviously have two other options to consider. We are going to take a quick break, but we’ll get into those two other deals right after this. This week’s bigger news is brought to you by the Fundrise Flagship fund, invest in private real estate with the Fundrise flagship fund. Check out fundrise.com/pockets to learn more. Welcome back to the BiggerPockets podcast. I’m here with investor, short-term rental expert and maybe a guy who’s going into new construction or long-term rentals here. Garrett Brown. Before the break, we talked about a potential long-term rental for a triplex in the Houston area, solid numbers, but there’s an HOA, which is kind of calling into question at least raises a couple concerns about the deal. What are the other deals that you’re looking at?

Garrett:The second deal that I’ve been kind of kicking the tires a lot on is a short-term rental that’s closer to downtown Houston. There’s a few areas inside of Houston that are actually unrestricted even. They’re some of the biggest ones, most popular downtown Houston is one. There’s another one called Houston Heights. These are areas that are unrestricted places that typically will allow short-term rentals and they’re not residential neighborhoods. Even though Houston is the home of townhouses, we built so many townhouses in Houston that they’re everywhere. So as I’ve been kind of looking at these deals, there’s a townhouse, there’s no HOA, it’s in a really, really good area. It’s about $450,000, so I’d have enough for the down payment and I can work out some seller concessions probably if I run it as a short-term rental downtown Houston. There’s a lot of competition out there, but there’s also a lot of demand still surprisingly, there’s so many people come to Houston, I could probably make about as is about 60 to $70,000 in revenue for a year if I spent another 50 to $60,000, which I currently don’t have.

Garrett:So I’ll have to figure that out with maybe some creative things or maybe partner with somebody. If I put another 50,000 or so into it, I believe I could get it up to about 85 to 90,000. Again, this is all the data I know and everything I know about short-term rentals, but even then it’s still not absolutely going to happen. The big thing that weighs on me for this one is the taxes are so high in this area. Oh really? I think it’s about $800 a month in just taxes. Whoa. Property taxes, very high rate. Being in downtown Houston, it’s about half a million dollars. So yeah, so I’m paying about 10 to $11,000 per year in property taxes. Wow. Texas is great. We have no state income, but they make that money back up on their property taxes. So

Dave:Yeah, it’s one of the highest tax rates in the country. Property tax wise, the average for the country is about 1%. I think Texas on a state level is above 2% and I think some of municipalities, like you said downtown Houston might even be above that.

Garrett:You can get to 3% in some places in Houston very, very easily. My God. Yeah,

Dave:I mean that is sort of at the same level of the H OA we were just talking about in terms of cashflow and although I don’t think taxes are as unpredictable as an HOA, it could still go up too if they’re going to appreciate as well. So what’s your gut better than I do about what your cash on cash return would look like in a deal like this?

Garrett:I like being very realistic without putting the investment into it. The extra $50,000 and just setting it up is how it is. I think we could get to about 10 to 12%, and I’m a little different than other people too because I have a team built out for short-term rentals. I have a business for short-term rentals. Not everybody has that capability. So it’s like I have assistance that can help and this falls in line to what I already do, but it goes back to am I putting all of my eggs into one type of real estate investing basket because I get a ton of tax benefits from buying another short-term rental, especially with a hundred percent bonus depreciation coming back. This is a townhouse too, so there’s not much land. So the bonus depreciation is going to be pretty high mainly on the structure and everything involved in it.

Garrett:I think my other worry is that it’s so tied to the short-term rental performance and regulations still too, and I have always not been a big fan of investing in short-term rentals in urban areas for these particular reasons. It’s vacation rental areas. They depend on short-term rentals. They’re not going away anytime soon. Place like Houston, it’s still up in the area. You never know. You never know. You never know. So I always get a little worried. Insurance is so much higher on short-term rentals, it’s probably double what I’m paying for landlord insurance usually to get good proper coverage. And it’s a highly competitive market. It is. I’m very good operator. I went to school for hotel management and I still am scared of the competition and saturation that’s in some of these markets. So I think the appreciation will be pretty high though because a really good area, it’s in downtown area of Houston, which is to my knowledge, is going to hopefully just keep going up quite a bit, but you never know is how some things can go. So that’s worrying me with this one. I’m not a hundred percent sold in. And again, I kind of want to diversify my portfolio.

Dave:I know I’m hearing it in your voice. I don’t feel like this is the one for you. You seem skeptical about this. I’ll just one question just for audience education as well is if you had to, what would this rent out for long-term if something happened regulation wise,

Garrett:That is one thing that is gives me hope for this though. It still do good as a long-term rental. I think we’d be between probably about 3,400 a month as a long-term rental, just one unit by itself. It’s a three story townhouse, really nice view has a rooftop deck and I think the cash on cash return for that would be about six to 7% because those taxes eat a lot into it

Dave:Still good. I mean especially current. If rents are going to go up, it’s going to get better

Garrett:And I have the option to short-term rental or long-term rental or midterm rental, which is all options.

Dave:Well, I don’t hate this deal. I mean the numbers make sense, but I think this market shortterm rentals better than I do. Your instinct about the risk I think is probably the most important element here, and you don’t seem in love with this deal and it’s not really aligned with your strategy. You want to diversify. So I get why you would consider this. I do this sometimes too where I’m like, oh, I should diversify, but then you just find one that’s doing the same thing that you’ve always done. It’s just a layup and then you just do it again. But it sounds like this is not so great that you would forego the diversification benefit that you’re looking for. So I think we got to move on to the third deal. All right, we got to take one more quick break, but we’ll hear about Garrett’s third deal option right after this. Welcome back to the BiggerPockets podcast. Garrett and I are here discussing three deal options that he’s thinking about investing in. Talked about the first two Garrett, what’s the third deal?

Garrett:The third one has kind of really caught my eye. There’s quite a few new construction deals that I could look at, but they’re all kind of fall into this similar umbrella. It’s near where I live. It’s in a different city that’s called Willis, Texas, still a little rural, but it has very similar growth to Conroe where I’m living at now. So I could buy two single family new construction homes. They’re about two 20 to two 30 each each. And I’m hoping that with seller concessions from the builders because they’re offering all these crazy closing costs, really, really good interest rates, which I need to do a little more analysis on that. I was kind of penciling stuff out at traditional numbers. Every new builder is different, but I think I could take advantage of that. And I also, as a realtor, some of these places are offering really high BTSA sales agent commissions extra on top of it. So that’s a personal perk that I don’t mind seeing.

Dave:No, interesting. Okay,

Garrett:So if we’re just keeping at the numbers though, down payment, I’d have to get it to around four 20 to 4 25 for both properties. Total cost to make sense, the rents in the area, it’s about $2,000 per unit, but I am buying in the last phase of a lot of these newer constructions. So I don’t think the appreciation is going to be, it’s probably closer to 2% in this area, this type of property. I don’t think the rents are going to go up a ton because there’s a ton of supply coming into this particular area, but the net operating income would be about $33,000 per year. If I went this route. Mortgage is probably 27. If I can get these builders to get, maybe I can buy down some rates and really start to take advantage of some of these negotiations right now. I could probably get that mortgage down to maybe 25 per year for both of them combined. So right now what I’m analyzing with just traditional numbers, I think my cashflow would end up being about 6,000 per year for both units, which is like a 7% cash on cash return. But if I can do a little negotiating and really get a little bit better deal, I probably get closer to that maybe 9%. I think

Dave:That’s pretty good, man. It’s

Garrett:Pretty good it, it’s low maintenance. Low insurance, the taxes aren’t great. It’s another municipality that charges about 2% on tax rates, but it’s kind of steady in this area too. HOA is much more reasonable. It’s about I think $50 per month or something per house or something kind of in that area. But I think having two doors, I’m a little worried on the vacancy side, but I think single family homes seem to have a little lower vacancy in this area and that’s what I’m hoping for. And so yeah, I’m back and forth on it. I don’t know.

Dave:Do you have a sense of vacancy in the area right now in this community with these new builds? Always. The thing I think with these big sub developments is as an operator I always worry about standing out. It’s hard to differentiate and so your rents and your vacancy rates are just going to be tied to the area and that sometimes is good. Sometimes the wind is at your back. Sometimes if there’s a lot of inventory coming online, you’re going to face inventory challenges that you really can’t do anything about the only way you compete against your neighbors by lowering your price and you might not want to do that. So just curious if you have any thoughts on how that’s going right now

Garrett:I’d probably say they’re leaning probably to 10 to maybe even 15% in this area because there’s just so much supply and that’s the one thing that scares me as a creative short-term rental person on the long-term side is there’s just not much I can do to really improve my chances. Short term I could spend some more money and make it stand out. I’m really good at that. That is my concern with the new construction is there’s just so much supply. I’m afraid that even more builders are going to keep building over in this area and then who knows where I could be in a few years. The growth seems good, but they might be outbuilding the growth,

Dave:Honestly, I like the idea of new construction a lot right now. I think the numbers work right now what you’re saying, unless there’s high vacancy, which is always a concern. I think the thing I would do next if I were you is look into the construction pipeline. That is one benefit of new construction and multifamily that you have is that these things get permitted years in advance and so you actually get to look a little bit in the future, whereas almost every other data set you’re guessing are there going to be more short-term rentals in a year from now? I don’t know, but a lot of these are publicly traded companies too, and you can understand if you’re going to invest this amount of money, it’s worth spending a little bit of time and looking into that because my feeling on this deal is if supply is going to dry up soon and you’re just in a short term vacancy increase, then it’s fine.

Dave:But if they’re going to keep building for two or three or four years and you’re just going to keep seeing this at a time where I think Houston long-term will probably keep growing. We got some labor data numbers, we might be going into a little bit of an economic lull. It’s like if there’s a lot of supply in that, you might have some short-term weakness, which you might be willing to do. But that is sort of what I would want to understand because everything about the deal sounds good unless there’s just going to keep building a ton of competition for

Garrett:You. What would be the best way to research something like that where they’re building or kind of seeing what may the future may unfold in the new construction side?

Dave:So I think the first thing you could do is most of them are publicly traded, so that means that a lot of their information is available. So I would look and see if you could figure that out.

Garrett:Nice.

Dave:The second thing I would look at is there’s publicly available information for housing starts and housing permitting, and I think that’s what I would look at next where it depends on how specific this neighborhood is, but you can look in Houston for sure,

Garrett:And

Dave:I would look for submarket and try and see just what are the trends in new construction, single families in your area. Multifamily is going to be different. So really try and focus on single families and try and look at is it going up, is it going down? See if you can identify specific developments, how many properties they’ve built. Because sometimes with these big sub-markets, they do these things in phases. Like you said, you’re sort of at the last phase. That’s kind of a good sign, right? It means they might not, but if they own three more lots down the street and then they’re just going to move down there and start building, they might be willing to do that. So I think that’s the big question I would want to answer before buying into this kind of market.

Garrett:Yeah, no, that makes a lot of sense. My gut is telling me new construction, single family at this moment in my investing career fits what I’m looking for. Low maintenance, low stress, not a lot of expenses probably compared to other places. And then just probably better family renters that probably stay longer and maybe just hopefully take care of the place better. That’s a little more anecdotal probably than anything. Yeah, I think that’s all great points about, because I don’t know what all these builders have planned because I know this area is very hot and there’s a lot of land still left to be developed, and I know they’re just salivating at the mouth to keep it going. So I’m hoping I don’t fall in the weird corner of it that gets kind of trapped into something I maybe should have looked into a little more. So that’s very good advice for sure.

Dave:Yeah, I’m with you, man. I have been really interested in new construction recently because at this point in my career I’m trying to buy 20, 30 year homes. The way I think about it’s like what do I want to buy now that I don’t want to touch until I’m in my sixties and it’ll be paid off and I’m going to still be happy to own it. And new construction is very appealing for that for obvious reasons. It’s a newer house 30 years from now, it’s only going to be 30 years old. You buy a house from the eighties and 30 years from now it’s going to be 70 years old. It’s just a different kind of thing. And a lot of the rate buy downs are really good. And so there’s a lot to here. I think the other thing that I would look at other than just sheer volume is how does your property compare to what else is being built out there? Because sometimes in these places where there’s massive building, there’s a lot of supply and that can be bad, but if your development is just better than the other ones, very true, more cost effective,

Dave:That can be fine. Some of them might be one bedrooms or two ones, and this area really needs three twos. You can sort of start to dig in a little bit just about the specific subset of the market that you’re trying to buy into. Because I clearly deals one and three here. I think both of them could be good. The way I think about it is if you do this research and the building conditions are okay and you’re not risk of supply, I’d probably go with three.

Garrett:My gut is definitely leaning towards the new construction. I had a question. I’m curious. Some of these new construction, you can get four bedrooms and they’re a little smaller or you can get three bedrooms and they’re just slightly bigger, but it’s similar square footage. What are your thoughts as an investor around that? I know it’s all market stuff great, but I’m like, which one would work better for the family? Would they want the four bedrooms but they’re smaller or the three bedrooms and they’re a little bigger. My head says the four bedrooms

Dave:Because

Garrett:The kids aren’t going to care, but I’m just kind of, I don’t know.

Dave:How is the primary?

Garrett:It’s pretty good both about the same size and the primary on each. The difference is three bedrooms a little bit bigger for the guest bedrooms or four bedrooms and they’re pretty tight, but same square footage and all that.

Dave:I think if it were me in that scenario, I’d take the four. As long as the primary is good, what people pay for is the primary. I think the adults will be like, my kids will be fine with 50 less square feet. And the other thing is that I don’t know this area a lot, but in the downtown areas I tend to rent in. You have a lot of tech workers, people who do hybrid work

Garrett:And

Dave:Oftentimes they’re using one of those bedrooms for an office, so having an extra one helps, but they don’t care about the size. Makes sense. An 80 a hundred square foot bedroom for an office is more than enough, and just having that extra space where it can be quiet is appealing to people.

Garrett:I agree with that. I figured as long as the primary bedroom is good, it should be all good on my end too.

Dave:Yeah, right. So that’s my take. I think my instinct is number three. I would double check all that supply number, but all the numbers on all these make sense, so that’s good. You’re looking at good deals. So it really comes down to your goals and based on what you’ve been saying about diversification, buying things for the long term, not wanting to spend a lot of time on it. If you can make the new construction work, it just seems like it’s going to be a low lift thing for you to hold onto for a long time. And honestly, even if the vacancies high a little bit for a year or two, if you believe in the area and you’re going to have a home that’s going to last for a long time, that could be worth it.

Garrett:If I look into the supply and it looks pretty decent in the area, I think I’ve kind of figured out what I want to do or what’s the best for my season of real estate investing at this very moment too.

Dave:Exactly. That’s a good way to think of it. And that could change. You got to look at what the market’s giving you, and right now it’s giving people new construction. The average, the median home price on new construction is below existing homes right now.

Garrett:And

Dave:They’re doing rate buy downs. They’re doing closing cost reductions. There’s a lot of concessions on the seller side. 10 years ago, I would’ve said you were crazy. Look at new construction. But it makes sense. The numbers make sense, and I know a lot of people poo pooh it, but go around the numbers and tell me that it doesn’t make sense. It does.

Garrett:Yeah. No, I’ve been a big advocate for new construction in the past couple years, especially the same 10 years ago when I first started getting into it, it was, I always never buy low, find something that needs renovation, which still could work every day. It still works, but with how things are progressing and this insane new builder deals that are out there right now, it’s almost like right in front of my face that it’s like, I think I probably should take advantage of this right now.

Dave:It does make sense. And the other thing that we didn’t even mention, renters are going to want to live there. Of course, a renter’s going to want to live in a brand new home that is a very good selling point if they want to be in this area and they can rent in a brand new home. And it will probably attract the kind of tenants you’re saying, because I think in these kinds of places, when I rent single family homes, I want it to be family. I want them to stay for 10 years. That’s the ideal situation, and you might be able to do that in this kind of place. So I like it. This is fun though. I go through these things too. It’s just so helpful to talk it out with someone, even if you kind of know what you want to do. You just want some external

Garrett:Validation always. So no, sometimes it’s just got to talk it out and get all the deals out of my brain to focus on one that’s like, all right, let me stop getting shiny object syndrome and get to the numbers and the things that’s actually going to work for me.

Dave:Absolutely. Well, thank you so much for coming and sharing your story. You’re thinking with. I think this kind of conversation can be really helpful to our audience. So for everyone listening, I hope you appreciate what we’ve been talking about here today because oftentimes I’ll get this question, so I’m sure you do too, Garrett. People say, should I buy this deal or that? And there’s no way to answer it unless you have these goals set out like Garrett did, he has three good deals. You could buy any of these and be happy. I think that’s the cool thing is that you’ve identified three great deals, good for you, and then you just kind of figure out what risks you’re comfortable with, what upside you’re trying to capture, what your long-term goals are. And since Garrett has that clarity, it allows him to make this sort of decision. So if you find yourself in this kind of dilemma, maybe focus less on the cash cash return and maybe step it back and say to yourself, what am I trying to do? Where do I want to be in 10 years? And I find that will probably help you make this decision more than any further deal analysis provided that you’ve done the deal analysis correctly. You have to do that.

Garrett:Yep. Love it.

Dave:So thanks again for being here, Garrett. For anyone who wants to follow along with your journey and what you’re doing here at BiggerPockets, where can they do that?

Garrett:We have our own short-term rental investing YouTube channel called Bigger Stays, and I also write a weekly Bigger Stays newsletter. It comes out every Wednesday. You can sign up for it at BiggerPockets, and I’m putting out a ton of content over there all the time.

Dave:It’s awesome. Everyone, you got to check out the newsletter. I love reading it. Garrett is a wonderful writer, very funny, and offers great opinions. And thank you all so much for listening to this episode of the BiggerPockets podcast. I’m Dave Meyer. We’ll see you next time.