Are $100K Rental Properties Ever Worth It?

Is a $100,000 rental property ever worth it? We see so many markets across the country that sport cheap rental properties. But, are you really just buying a problem that will never truly cash flow, or do these dirt-cheap deal-finders know something that we don’t? We’re back, as Dave and Henry answer your questions from the BiggerPockets Forums. First, we’re talking about cheap rental properties—$100K or less—and when Henry will and won’t buy them. How much money should you put down on a rental property? One investor has a different idea than the standard 20%-25% down, and Dave agrees—if you want more cash flow, less stress, and a more stable portfolio. Is flipping…moral? Concerned homebuyers say house flippers are taking inventory off the market, and Henry…thinks they have a point (to some extent). Finally, after years of working with hard money lenders, Henry shares (more like yells) some choice words at any lenders listening on how to make the industry suck a little less. In This Episode We Cover $100K rental properties: Are they too cheap to be a cash-flowing investment? How much money to put down on a rental property to cash flow in 2026 Interest-only loans: When Dave and Henry say it’s totally worth it Henry’s rant against hard money lenders and why investors must be careful The morally-right way to flip a house (without hurting homebuyers) And So Much More! Check out more resources from this show on ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠BiggerPockets.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.biggerpockets.com/blog/real-estate-1232 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠[email protected]⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Dave Meyer?

  Should you buy a property for less than 100 grand? It's definitely tempting because that is relatively not a lot of money to get into the real estate game and start building a portfolio. But on the other hand, anything that's cheap is usually cheap for a reason. It can be the properties with the lowest purchase prices that end up costing you the most in the long run. So let's break it down. Should you scoop up that low-cost property or steer cold?

• 0:31Dave Meyer?

  Hey, everyone. Dave Meyer here, rental property investor, housing market analyst and head of real estate investing at BiggerPockets. And today I've got my friend, Henry Washington, with me on the show. Henry, what's going on, man?

• 0:44Henry Washington?

  What's up, Dave? You know, I love talking about properties and answering questions.

• 0:48Dave Meyer?

  Yeah, we got some good ones for today. Our producers picked some, just especially for you to get you a little riled up. We just pushing your buttons today. It's gonna be fun.

• 0:58Henry Washington?

  Soapbox Henry.

• 0:59Dave Meyer?

  Oh, yeah.

• 0:59Henry Washington?

  Man, could be dangerous.

• 1:01Dave Meyer?

  Soapbox Henry is definitely coming out today. We got some great questions, though. We're going to debate on whether it's a good idea to buy a property for under 100 grand. We'll weigh in on whether it's unethical for investors to buy properties off the MLS and eventually sell them for a profit. And then at the end of this episode, Henry is going to rant for sure about one of his all-time real estate pet peeves. So strap in for that. Henry, are you ready to help the people out?

• 1:28Henry Washington?

  I don't know, but let's go.

• 1:31Dave Meyer?

  We're gonna give it a try, one way or another. All right, our first question comes from an investor named Eric Estrada, who asked, "Why do some investors purchase sub 100K properties? Are these properties really that profitable? When I look at the numbers of these properties, it seems like a few couple hundred dollars in cash flow and thousands of dollars in fees, repairs and maintenance. Wouldn't it be better to park 40K in a high-interest savings account or the S and P 500? Is this more of an income tax strategy? I'm just confused as to why some investors buy these kinds of homes." There's a couple of questions in there, right? It's like, if you're gonna buy an investment property, should you buy a cheap one? That's one question.

• 2:13Dave Meyer?

  But then there's a whole other question of like, is it better to put your money into a high-interest savings account or into the S and P 500? Let's just start with the 100K property. What's your take on this?

• 2:25Henry Washington?

  I think as someone who currently owns properties that I paid for under a hundred K. And as someone who also has sold some properties that they paid under a hundred K for and wanted to get rid of. It depends. It's hard to have a blanket statement that says if it's sub a hundred K, run away. Like that doesn't make sense.

• 2:50Dave Meyer?

  It's totally relative, right? To the market, you know, if you're in Detroit or Cleveland, like you can buy a decent home for under a hundred K. If you're just buying it because that's some arbitrary number that you've picked out. Then in a more expensive area, you're probably not going to get a lot of value.

• 3:07Henry Washington?

  So it's not about the price because I've bought some great homes, sub a hundred K. It's more about what's the age of the home? And how much maintenance has been done on the big ticket items? I had one house that was sub a hundred K that I sold. And it, and one of the problems was that the foundation was so not great. We even went in, we fixed the foundation, but the home was so old, you can't air quotes, fix the foundation. You can stabilize the house, but it still felt like you were walking through a fun house. And there was no fixing that.

• 3:43Dave Meyer?

  Yeah.

• 3:44Henry Washington?

  Right? And so I did sell that one to get out because it's just, it just makes it hard to rent. People don't, even though you tell them, hey, this stuff, it's not going anywhere. It's still a scary, weird feeling to have that kind of a problem. So it's not the price point that you should watch out for. It's what's the condition?

• 3:59Dave Meyer?

  Yeah.

• 4:00Henry Washington?

  And are you underwriting for the things that you'll need to spend in the future?

• 4:06Dave Meyer?

  Yeah, I guess to me, it just comes down to, it sounds overly simple, but it's just like, do the numbers make sense? Right? You could buy a $70,000 property. And if it's, you have a hundred K renovation budget and that thing is going to rent for 2,500 bucks a month, or you can sell it for 250, then yeah, go do it. You know, it like, it really just comes down to the math. I don't think there's some arbitrary line in the sand where like properties over this amount are good. And properties under this are good because where you are in the world totally depends like if you're in New York City or where I live in in Washington, like you're just never going to find a property for a hundred grand. They just don't exist.

• 4:49Henry Washington?

  Parking spots cost more than that.

• 4:52Dave Meyer?

  So you're just never going to find that where Ashley Care lives in Buffalo, like you probably could find good deals for a hundred thousand dollars. I actually, we've had a couple of guests on the show recently from Detroit and I was talking to an agent there, looking at deals, they're good deals. They actually make sense. And so I think it really doesn't come down to a hundred K. There is a whole other question here, though, which is sort of my problem with Detroit is like, is it enough to scale? Is it enough for me to like, take on a unit and the work that goes into that in order to make 75 or a hundred bucks a month, even if my cash on cash return is great, like I could have a cash on cash return of nine or 10%, but like, do I really

• 5:34Dave Meyer?

  want to scale that way? I think that is actually a good question. I don't know about you.

• 5:38Henry Washington?

  Like my last three rental property purchases, all bought under a hundred K, but they're not sub a hundred K properties, right?

• 5:46Dave Meyer?

  Right, exactly.

• 5:47Henry Washington?

  I'm under contract right now for 80 grand. I'm going to spend 60 on the reno, ARVs 250, right? Like, that's great.

• 5:55Dave Meyer?

  Do that all day. Why wouldn't you do that?

• 5:57Henry Washington?

  I have another one. I literally paid a hundred and 2,000 for it. It needs a 60 K reno, ARVs 275, right? So I'm buying properties worth well over a hundred K. I'm just getting them for a hundred K, less than a hundred K. And I think that that's the right move.

• 6:12Dave Meyer?

  Yeah. And that's just value. That's just a good way to do it. So yeah, I think, you know, a hundred K, not an arbitrary line. I think it really depends what you're going to do to the property and you understand it. I'll also just say that when I look for rental properties these days in the Midwest, I target 100 K a unit, not necessarily for a single family home because those are harder. And per my point about scaling, if I'm going to buy properties at this point in my career, I'd rather get four of those all at once, have one roof, one thing to think about, one thing to manage. Then it actually achieves a meaningful amount of cash flow for me at this point in my life. So I don't have any problem with that at all. All right. One last thought on this too,

• 6:54Dave Meyer?

  though. There is a common error that real estate investors make, especially newer investors, which is totally fine. It happens a lot, but people just buy properties because they're cheap. That I don't recommend. Like, I think if that's the question here is like, you're just buying it because it's the cheapest deal and that's what you can afford. No, I would not do that. It really comes down to what Henry said about your goals, to the numbers that you run and see if this has a profitable rate of return. To me, that's, that's what it comes down to. But you should not just buy properties because they're cheap. They are cheap for a reason. And unless you have a way to fix that, the problems that exist with that property, you are just going to be in for a lot of headache and a lot of stress.

• 7:35Henry Washington?

  Agreed. And stop picking markets because you think it's a cheap market. Pick a market based on if you can hit your financial goals.

• 7:41Dave Meyer?

  All right. Thank you to Eric Estrada, not of chips fame, apparently. Maybe it is. Eric, let us know if you were the star of chips. We would love to know. Thank you for that question. It's a great question. We have more great questions coming from our community right after this quick break. Running your real estate business doesn't have to feel like juggling five different tools. With ReSimpli, you can pull motivated seller lists. You can skip, trace them instantly for free and reach out with calls or texts all from one streamlined platform. And the real magic, AI agents that answer inbound calls. They follow up with prospects and even grade your conversations. So you know where you stand. That means less

• 8:22Dave Meyer?

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• 8:37Dave Meyer?

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• 9:10Henry Washington?

  Here's a strategy that most W2 employees have never heard of. Normally, if you want to write off a rental property against your regular income, you need real estate professional status. That means tracking hundreds of hours a year. Rent to Retirement just launched a program that skips all of that. It's called the STR loophole tenant placement program. Here's how it works. You buy one of Rent to Retirement's Class A new construction investment properties. You set up an Airbnb listing and self-manage it for the remainder of the year. Rent to Retirement then rents the home as a short-term rental to establish it as an STR for the year. No furnishing required, making this the easy button to save five or six figures in taxes this year.

• 9:52Henry Washington?

  And because you're the sole manager, there's no hourly minimum to meet. That lets you use a cost segregation study to accelerate the depreciation and potentially write off over $100,000 against your income, even on your first rental. Add in cash back up to 13% of the home price, which exceeds $60,000 on some properties. With this massive cash back incentive, investors are seeing total returns up to 126%. New construction, A-class properties, and inventory is limited. Learn more at biggerpockets.com/retirement or text REI to 33777. Again, text REI to 33777. Quick word about a new pro perk you'll want to know about.

• 10:36Henry Washington?

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• 11:19Henry Washington?

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• 11:37Speaker 02

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• 12:06Dave Meyer?

  Welcome back to the BiggerPockets Podcast. Henry and I are here answering community questions. We had a great question about purchasing inexpensive properties before the break. Now, Deborah from Colorado Springs has a moral dilemma for us. She wrote, "Some people say flipping distressed properties off the MLS pushes prices higher and makes it harder for first-time home buyers to compete. They say investors are scooping up homes that should have gone to families, then relisting them at a premium after cosmetic rehabs. On the other side, many investors insist flipping off the MLS is just a smart business. The investor takes on the risk, puts in capital for repairs, boosts neighborhood values, and provides a product that buyers want. Some call it market manipulation, others call it entrepreneurship.

• 12:51Dave Meyer?

  Do you think this is hurting affordability or adding value to communities? There's a lot in there. That's a very good thoughtful question here from Deborah. Henry, you want to start?

• 13:00Henry Washington?

  I think there's probably two sides to this coin, right?

• 13:05Henry Washington?

  I think that there are people who buy properties, slap lipstick on it and then price it high and try to sell it. And there was a time in 2021 to 2023 ish where those things actually sold. But in the real estate market that we're in now, it is extremely difficult for people to do that. Yeah. Those properties don't sell because there are more listings, there are more opportunities for people to buy. Buyers have more power in this market to ask for things, to ask for things to be fixed. And so that strategy or that philosophy doesn't work in all real estate

• 13:48Henry Washington?

  markets. But I think from a general perspective, a healthy real estate market needs investors to add good inventory back to the market. As an example, if I'm buying a property on the MLS, I'm typically buying properties that have been sitting on the MLS for a substantial period of time. Like I'm specifically looking for properties that have been on the market well over the average days on market. And then I'm making offers to buy those at a discount so that I can rehab them and sell them. And so is it taking an opportunity from

• 14:30Henry Washington?

  a home buyer? I don't see it as that because it's been sitting there for months. Somebody had the opportunity to buy it. And I think there needs to be some education for home buyers to do what we're doing. I think the reason investors like myself are able to go in and snag some of these deals is because the traditional home buyer doesn't go and make an offer at 100K less than what's listed. Either they don't know they can do that or their agent doesn't want to do that. But they can do exactly what I'm doing. Right? But they don't. So the property sits, the investor capitalizes on the opportunity, renovates the property and sells it. Now, I think there's a second tier to this question, which is offering the properties back to the community. Right? And I think what happens is

• 15:14Henry Washington?

  Neighborhoods get gentrified because people go buy distressed properties, even off the MLS. They fix them up and then they sell them at these outrageously high price points. I don't know that you can do that now. And what I like to focus on and what I think more investors should focus on is revitalization over gentrification. Right? So how do you buy a property at a price point that allows you to fix it up? And sell it back to the community at a price point that they can afford. And that's a decision that the investor has to make and you've got to be able to buy it at a price point that allows you to do that.

• 15:43Dave Meyer?

  I personally agree with you about the MLS. Like if people put something out onto the MLS, they are asking for bids. And they get to choose whatever they want. And if they want to sell it to a homeowner, they can do that. So I think that, you know, there are always trade offs with these kinds of things. Like are you going to ask a home seller to make less money? Maybe you believe in that, but I think for me personally, if you're putting something out on the open market, then you're entitled to choose who you want to sell it to and who has the highest bid. And a lot of times when you have distressed homes, ordinary homeowners don't want to buy it. When I go around with James, James Danard here in Seattle and look at the properties, like no one's buying those properties.

• 16:25Dave Meyer?

  Like even if they're on the MLS, like homeowners don't want to buy them a lot of the time. And then I do agree with what Deborah said here is that if the investor is going to take on that risk and put into the work, they are entitled to a profit. I, I personally believe that. Now, I agree, I don't believe in price gouging or creating a situation where it's making, you know, entire neighborhoods entirely unaffordable. But what you have to ask is in sort of a free market economy like we live in, where is the demand? And oftentimes the demand from the homeowner is for a fixed up house. And if the, you know, if the seller has the capacity to fix it up and sell it, they have the option to do it.

• 17:07Dave Meyer?

  If not, they're essentially hiring a flipper to go out and create a new product that is of higher demand in that market. And if there was no demand for that higher price thing, flippers would not be doing it. So I understand that investors do play a role in the market that some people don't like. But I think when you think about it holistically, from the seller's perspective, from the buyer's perspective, flippers do play a role that is currently, in the way the housing market works today, needed to provide the housing that we need in the US.

• 17:39Henry Washington?

  100%.

• 17:40Dave Meyer?

  Let's move on to our next question, which is from Abdul in New Jersey, who wants to know if it's worth it to use a higher down payment. He said, "I've been running numbers and come to the conclusion that with a conventional loan in today's market, it's better to put 40% down and self-manage to generate cash flow. Does anyone else run into this situation?" Yes, absolutely. Yes. I think that is always the case regardless of market conditions. The more money you put down, the better your cash flow is going to be. Now, that is in absolute terms, right? The total number of dollars that you take in is always going to be better the less debt you have because you are not paying the bank interest.

• 18:23Dave Meyer?

  And I personally think that putting more than 20, 25% down is a perfectly good strategy, depending on what you're trying to accomplish. If you're looking for cash flow, yes, do that. That is why my personal goal, and I think, Henry, you're similar, is like in 10, 15 years, I hope to have no debt. Like, I want to just owe my properties free and clear because that's the timeline in my head where I'm thinking, "I just want cash flow. I don't care if my total return 10 years from now is optimized. I want to cover all of my living expenses and then some, and just to chill and not worry about things." So it really comes down to you. I think when people use debt, it's often to scale or for a short hold period. Like, if you're going to do a BRRRR, probably want to put less down

• 19:08Dave Meyer?

  because then you can use more of your capital to renovate the property before you refinance. But if you are concerned about cash flow, yeah, I think putting more down does make sense if you have the capital.

• 19:18Henry Washington?

  Agreed. I just did a whole exercise yesterday with my portfolio spreadsheet where I highlighted the properties that are lifetime keepers for me, and then I highlighted the properties that are... I'd keep them, but I'd also sell them if it made sense. And then I how I did the properties, that's like, I'm going to sell these. And then I did an exercise on, all right, if I sold these at market value, how much cash would I get? Which one would I pay off first? And then basically starting the debt snowball to paying off my properties, right? Because each one that becomes more cash flow positive because it doesn't have debt, produces more cash flow. You take that additional cash flow, use it to start paying down the next one, yada, yada, yada. So like, I just did this exercise.

• 20:01Henry Washington?

  So absolutely paying down less is just accelerating you getting to where you want to be in the future anyway, which is having a paid off asset 100%.

• 20:12Dave Meyer?

  One of the things I'm thinking about doing, I was looking at this, is putting more money down on a rental property, but putting it on a 15 year note instead. So it doesn't actually improve your cash flow really because you're on a 15 year note, but you're paying way less total interest. And I want cash flow, but I'm not living off my cash flow. So it's not important to me. What's important to me is like, I know 15 years sounds like a long time. I've already been doing this for 15 years, so I don't feel like it sounds that long to me. In 15 years, I'll be 53 and I'll own these properties free and clear. That's retirement, you know, like that's, that's a great retirement that I can look forward to. So I, I think that's another good sort of caveat to this. You could do it with a 30 year too, but if you're not as concerned about cash flow,

• 20:55Dave Meyer?

  putting a little bit more down on the 15 year note will ensure that you're at least positive cash flow. So you can carry the property and you'll pay less lifetime interest, which is always good. All right, let's take a quick break, but when we come back, Henry, I have one that is going to boil your blood. So if you want to hear Henry cook a little bit, stick around, we'll be right back. For my wife's birthday, I wanted to make her a new website for her landscape design business. So I researched a lot of different options. I tried out a couple, but honestly, it was really overwhelming. It was pretty time consuming and still the site wasn't coming out the way I wanted it to. Then I tried hosting her and everything was super simple.

• 21:37Dave Meyer?

  I asked Hostinger's AI to build a clean site for her business and it had Working version up in minutes. No coding or designer needed. Plus, its AI agent helps with SEO, website copy and email marketing after launch. You get domain, website, email, all in one account. And right now, you can get Black Friday and Cyber Monday pricing through December 14th. So snag Hostinger's services at their lowest prices before the sale ends. Create your website today for just $1.99. Go to hostinger.com/realestate and use code REALESTATE for an additional 10% off Black Friday and Cyber Monday pricing. I just booked a ski trip to Park City, and I've already got the whole thing planned out.

• 22:21Dave Meyer?

  Five days, first tracks every morning before the crowds show up, my knees reminding me I'm not 25 anymore by the second run, and an embarrassing number of overpriced burritos at the lodge. I don't even care. This is the trip I look forward to all year. But here's the part I actually appreciate. The practical side of my brain kicking in is that my place doesn't have to just sit there empty the whole time I'm away. I can list my space on Airbnb and bring in a little extra income while I'm out getting humbled on a mountain. And with the co-host network, I'm not the one handling all of it. You can partner with a vetted local co-host who can create your listing, manage reservations, message guests, and even handle the styling.

• 23:06Dave Meyer?

  So I get to fully focus on my trip and my place is still working for me the whole time. Find a co-host at airbnb.com/host. Investing in real estate has always been smart, but it hasn't always been simple. Now, it's both, thanks to the Fundrise Flagship Fund. The Fundrise Flagship Fund launched more than five years ago with a mission of delivering low-fee access to blue-chip private market real estate. Today, the Fundrise Flagship Fund has grown to manage more than $1 billion of real estate on behalf of hundreds of thousands of investors, making it one of the largest funds of its kind. For those who believe real estate has an important role to play in their portfolio strategy, the Fundrise Flagship Fund has positioned itself

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• 24:24Speaker 02

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• 24:49Speaker 03

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• 25:20Dave Meyer?

  Welcome back to the BiggerPockets Podcast. Henry and I are here answering real live questions from the BiggerPockets community. I got a good one for you. I don't really have much to say about this, but our question, last one, comes from Roberto in Houston. And Roberto asks, what are your frustrations with hard money lenders? What are the things you would change about the hard money lending process? I can just see Henry breathing to try and not start yelling right now, but let's hear it, Henry. This is your venting session. Just get it all out.

• 25:53Henry Washington?

  Boy, boy, oh, boy. Oh, man. Hard money lending. My biggest pet peeve with lenders is that a lot of lenders approach lending to investors on real estate deals as if they are doing the investor a favor and the investor needs to bend to their will because they are the ones that have the money. And that is the absolute backwards way to look at it. 100%. Investors, hear me loud and clear. You are the prize. You are the prize. Lenders do not have a business if investors don't have deals for them to lend on.

• 26:37Henry Washington?

  They are the service-based business providing you the service. You do not work for your hard money lender. Your hard money lender works for you. Stop bending over backwards for these lenders and going to them with your little hat in your hand. And sir, I would, I would love for you, if you would give me some dollars so that I can go and purchase my real estate deal.

• 27:03Dave Meyer?

  Please may I have some more?

• 27:04Henry Washington?

  That would be very kind of you. Absolutely not. You are the prize. You are taking the risk. You are bringing the thing. If you don't have the thing, they don't have a business. So stop treating them like they are the king. You are the king.

• 27:22Dave Meyer?

  What about new investors, though? What about?

• 27:24Henry Washington?

  Same, same. Absolutely the same. You are the thing that they need.

• 27:30Dave Meyer?

  But couldn't you say like a new investor doesn't have capital, needs them too?

• 27:33Henry Washington?

  Everybody needs, most people need capital for their deals, but lenders are a dime a dozen. Literally hundreds and thousands of them. If the one that you're talking to doesn't want to work with you in the way that you need to be worked with, go find another one. Now, some investors can waste a lender's time by not knowing what they're looking for, not knowing what they're needing, buying bad deals, yada, yada, yada. That happens. I understand. So what are the things that I would change about the hard money lending process? Well, I would say that lenders need to act like they're in the customer service business because that's what they're in. They are in the customer service business. You're providing a service. And if you want to grow and scale your business, you need to provide a service that benefits the investor.

• 28:17Henry Washington?

  And a lot of the times in the hard money lending space, the things that, the hurdles that the investor needs to jump through can be very time-consuming and difficult. And when you're a new investor and you need money, you are much More willing to jump through those hoops. In other words, if you're a new investor and your hard money lender says every time you need to take a draw, I need you to go out there, take pictures, send me an email with all the things that were done. I need to have the list of the things. I need to see your scope of work. I need to compare it to the scope of work. I need to look at the pictures. And then once I do that, two weeks later, I'll give you a draw. When you're new, you'll probably jump through those hoops. But as you grow in scale, you don't have the time to do that.

• 29:01Henry Washington?

  You're not going to spend your time doing that. And instead, you're going to find a lender who's going to have a much easier draw process for you. And what happens is these hard money lenders, they want to grow in scale, but they put these investors through all these hoops. And then as these investors get more experienced, they move on from these hard money lenders and it's hard for them to keep getting business because they're not growing with their target audience. I think that there needs to be some sort of a middle ground or some sort of tiered approach where it says, based on your level of experience, these are the things that I need you to do. You're new, you have more hurdles to jump through. As you have more experience, there's less hurdles to jump through. Right? As you're in this upper echelon where you're doing huge volume, then those controls get even less.

• 29:41Henry Washington?

  Because what you've done is as you've increased your level of experience, you've proven yourself, you've proven that you can buy good deals, you've proven that you can evaluate the deals, you've proven that you can turn the deals over and you can make the money. And as you're going to do that, you're going to need less roadblocks in your way. And instead, what hard money lenders do is they just have their process because they're protecting their money. And I think they do need to protect their money. But I think you have to set your business up in a way where your investors can grow with you so that you're able to continue to service people where they are. And a lot of hard money lenders don't do that, which means that as investors grow, they stop using those lenders and they go look for more private lenders or people who can be more flexible.

• 30:21Dave Meyer?

  So why do you think they are so rigid?

• 30:23Henry Washington?

  Uh, because it's money, right? They're rigid because it's money and they don't want to lose their money and they don't want to get stuck working with a bad operator who then makes poor decisions and then they end up getting swindled out of their money. But they also. Have to take some accountability for being a good underwriter themselves. Right? Because essentially what you should be doing as a hard money lender is saying, I'm only going to lend on assets where I feel like they're getting the asset at a reasonable price point. So that if they suck, I get the asset back and I can go dispose of that asset, even if I dispose of it at a discount and I still end up making money. In other words, if I buy a property for $150,000, but the ARV is $400,000.

• 31:06Henry Washington?

  If I suck, I underperform and they take the asset back. What if they just go sell it for 350,000 or 300,000 to another investor? They would make way more money doing that than they would on the interest on the loan. But instead, a lot of hard money lenders don't quite know how to underwrite deals. And so they try to compensate for them taking on risk by putting all these controls in place for the investor, and that makes it difficult for the investor to operate.

• 31:35Dave Meyer?

  All right. Well, I really have nothing to add to that. I just wanted to let you go off on your soapbox. So, thank you. That's what we got for you guys today. Hope you all appreciated some of these questions and our answers here. And as a reminder, as always, if you want your question answered, either by us or by the hundreds of thousands, millions of members of the BiggerPockets community, go to biggerpockets.com/forums and you can ask your questions there entirely for free and get our community's feedback on the questions that you have as a real estate investors. It's an unbelievable resource. Go check it out. Thank you all so much for listening. Henry, also thank you for being here. We'll see you all next time.

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