The 2026 Housing Market is Right here: 3 New Strikes We’re Making This Yr

Dave:Pleased New Yr, everybody. Welcome to the BiggerPockets Podcast. I’m Dave Meyer, head of actual property investing at BiggerPockets. I hope you all had an awesome vacation and are excited as I’m to develop your portfolios this 12 months. Right this moment, we’re kicking off the 12 months with New Yr’s resolutions. And for that, I’m joined by my on- the-market co-host, Kathy Fettke and Henry Washington. We’re going to share our targets for the 12 months, the methods we’re planning to attain these targets and the dangers we’re avoiding in a altering market. A heads up that this present may also be printed on the On the Market podcast feed over this New Yr’s break, and ensure to tune in subsequent week for my annual state of actual property investing present and an enormous announcement for the BiggerPockets podcast you’re not going to wish to miss. With that, let’s bounce in. Kathy, Henry, how are you?Pleased New Yr. Pleased New Yr to you.

Henry:Pleased New Yr.

Dave:I’m not going to lie and faux that we’re recording this within the new 12 months. It’s not likely the New Yr, however proactively to everybody. We’re recording this in December, however pleased New Yr to all of you. Kathy, you’ve some nice vacation plans. Inform everybody what you’re as much as. You’re all the time someplace enjoyable.

Kathy:Nicely, sure, I’m in Paris recording this from a cave.

Dave:You actually appear like you’re in a medieval extensive vendor proper

Kathy:Now. I’m fairly certain I’m. I’m within the oldest a part of Paris, however I’m right here for the Christmas markets and primarily as a result of my daughter is getting married in France. So I needed to come see the venue along with her. Had

Dave:To.

Kathy:After which it’s also-

Dave:You needed to.

Kathy:I needed to, and it’s the final 12 months of the northern lights being actually intense. So we’re going to take a bit of journey as much as the North Pole, to the North of Norway.

Dave:Oh, that’s so nice. Wow. What a enjoyable journey. Henry, what have been you as much as within the holidays?

Henry:Meals.

Dave:Sufficient set,

Henry:Actually. Completely. I imply, I’ve little youngsters, so I do get to benefit from the pleasure of Christmas nonetheless, in order that’s enjoyable, however principally I’m consuming my manner by means of the vacations.

Dave:Yeah. Good for you. All proper. Nicely, let’s bounce into right now’s episode as a result of I actually wish to simply begin wanting ahead. Final 12 months was a attention-grabbing … I wouldn’t name it an awesome 12 months. I used to be going to say it’s an awesome 12 months. I’d not have known as 2025 an awesome 12 months. That may’ve been a straight up lie. I’m feeling optimistic going into 2026 and nearly actual property on the whole. So let’s discuss this when it comes to what our New Yr’s resolutions are. We’ll begin with actual property, however if you wish to throw a non-real property one in, I’d love to listen to them. However Kathy, what’s your actual property New Yr’s decision?

Kathy:Nicely, I’ve a couple of, however one is to essentially dive into AI becauseRich really purchased a extremely costly program and he’s completed it and I’ve not. I’m not even shut. However I do know it’s so highly effective. I imply, one of many issues that Wealthy did is he uploaded every little thing. Our financial institution statements, the money circulation, our system is aware of every little thing about us. And after we add it, we might know which properties are performing nicely, which aren’t. I imply, we ought to be figuring out that anyway, however I really feel like generally it’s simple to get lazy otherwise you’ve simply owned properties for some time and haven’t actually taken a glance. Is that this nonetheless a very good performer? So utilizing AI to optimize our portfolio is my objective for actual property.

Dave:I like that quite a bit. I like this as a objective. It’s not like, oh, I’ve to purchase this property by this date. That is extra like a progress mindset form of objective. How do you simply evolve as an investor usually in an effort to make higher choices going ahead? Is that program, is that actual property particular?

Kathy:No, no, it was only a bunch of enterprise homeowners. However I imply, it’s like he’s bought a enterprise marketing consultant now. All of our enterprise financials are in there and we had each worker element what they do, not in a canine form of manner, however I suppose form of like what do you do all day? And so AI is aware of every worker and is aware of learn how to optimize for them. It’s actually been phenomenal.

Speaker 4:Wow.

Kathy:And we had the most effective months ever for our firm final month. I don’t know if it has to do with that or not, however that’s unusual, proper? At a time when actual property has been so sluggish, gross sales have been sluggish, we had a extremely good

Dave:Month. That’s superior. So it sounds such as you’re utilizing AI not simply to establish properties or offers, however work on and in your online business as nicely.

Kathy:Yeah. I imply, what number of occasions do you actually know what your insurance coverage covers?

Dave:Actually by no means.

Kathy:So with, I’ll say Claude, for instance, we will add our total insurance coverage factor. There’s a phrase for it.

Henry:Your insurance coverage binder? Yeah.

Kathy:Yeah, that factor, the binder. To simply actually know the small print of your insurance coverage coverage and even ask it, “Hey, is that this overlaying me for every little thing I want for this funding property on this explicit state?” It’s actually phenomenal with what’s accessible to us and it’s solely going to get higher, so why not be on the reducing fringe of it?

Dave:I adore it. Henry, are you utilizing AI commonly?

Henry:The quick reply is sure, however I’d be mendacity to you if I informed you I used to be utilizing it on a a lot deeper stage than simply the floor stage asking for assist with sure objects. Now, I did attempt to construct one thing just like what Kathy was speaking about about two months in the past the place I used to be importing transaction information and data from my property supervisor as a result of I needed to see if AI might give me a way of how nicely sure properties are performing. And I assumed if I might add the precise financial institution statements and marry that towards the information out of your property supervisor who’s really going out to the properties, doing the precise repairs. After which I needed to marry that towards what I’m spending with contractors on sure properties to get only a fowl’s eye view of my portfolio. And it was very difficult in ChatGPT. And so I’m questioning if I ought to strive Claude or Gemini or a kind of.

Kathy:Claude is so good for enterprise.

Dave:Oh, actually? I bought to test that out as a result of Henry and I have been simply in Seattle and other people have been raving about Gemini.

Kathy:Yeah.

Dave:I really feel prefer it’s a horse race proper now. One releases a brand new one and it will get a bit of bit higher after which the opposite one will get a bit of bit higher, however there’s not a transparent winner. I simply must let you know guys, I bought a bit of little bit of a behind the scenes have a look at a giant actual property firm’s new AI software. It’s not BiggerPockets, however there’s one other one which’s going to launch one quickly. I bought to do the beta. It’s so freaking cool. It’s unbelievable how good the evaluation and details about properties and markets. For a knowledge analyst, this factor is so cool. I’m tremendous excited to start out utilizing these sorts of instruments in my very own evaluation. However I’ve to ask you guys, possibly I’m only a full management freak, however I take advantage of this for analysis, however I double test every little thing

Kathy:That

Dave:I do nonetheless, proper? Okay,

Kathy:Good. As a result of it nonetheless makes a number of errors. It’s not there but, however it will likely be. Will probably be. So studying the issues that we’re studying. And backside line, the objective for me for doing all that is I wish to see if I can … Wait, let me say that in a extra highly effective manner. I’m going to extend cashflow by 10% by optimizing our portfolio, whether or not meaning taking some older properties that aren’t actually performing and 1031 exchanging them into higher ones or simply taking a look at issues like we purchased quite a bit 10 years in the past as a result of we have been residing at a home the place somebody was going to construct this mega field property that block our view. And so we purchased the lot they usually wouldn’t do it and now we don’t stay there anymore and we simply form of haven’t finished something with it. We tried to promote it.No one needed only a lot. In order that’s one factor. It’s like, how do I optimize this piece of land that’s simply been sitting there and we’re paying taxes on? And so I’ve been working with a manufactured housing firm and we’re going to place manufactured housing on that lot. And so after I’m doing an entire new factor and it’s really going to money circulation in CaliforniaCalifornia.Yeah. And if my daughter ever decides she needs to maneuver down the road from us, there’ll be a home there for her. Intent. However yeah, it’s form of simply stuff like that. Simply form of taking a look at what we have now, the theme is extra isn’t all the time higher. Take a look at what you’ve and make it higher.

Dave:That’s nice. Nicely, I believe that is an superior New Yr’s decision. I actually like this concept of getting higher at AI as a result of I’ll admit, I’m concurrently excited by AI and really, very fearful of it and terribly bored with it. And so generally I simply select to disregard it as a result of I’ll see these deep pretend movies on-line and I’m like, “AI is evil.” However then you definitely discuss all these items that AI is superb for. I simply want to determine the appropriate manner to make use of it for my enterprise that is smart and never be overwhelmed by the societal implications that is likely to be coming with AI on the identical time.

Kathy:For certain. I imply, an instance is simply, I’ve been working quite a bit with Claude, that’s what I take advantage of and asking for LA County, what do I have to find out about manufactured housing? Inform me this step-by-step course of. And it’s not 100%, it’s not simple, however it helps it really feel not as daunting.

Dave:All proper. Nicely, I really like this. It is a nice New Yr’s decision. Thanks for bringing this one, Kathy. We bought to take a fast break, however we’ll be again with Henry’s New Yr’s decision proper after this. Welcome again. I’m right here with Kathy and Henry sharing our targets, New Yr’s resolutions for 2026. We heard Kathy’s, which I really like about getting higher at utilizing AI. Henry, what’s your New Yr’s decision regardless that you don’t like them?

Henry:No, I don’t like them. And I all the time really feel awkward when individuals ask questions like this due to the form of investor I’m. I simply do previous, boring actual property, Dave. I purchase distressed properties, I repair them up after which I hire them out or I promote them. And I believe when individuals ask about resolutions, they anticipate to listen to some tremendous bold, artistic factor that you just’re doing. Like a giant pivot,

Dave:Such as you’re making some change. Yeah. Yeah.

Henry:And my targets are very comparable annually as a result of I simply wish to proceed to do what works and what’s labored for generations, which is one other iteration of the identical factor. However now that I’ve positioned that caveat, primarily I consider investing in three buckets the place you’re both rising, you’re stabilizing otherwise you’re defending.And we as buyers function in usually two of these buckets at a time, closely weighted extra so on one than the opposite. And in order I began in 2017, I’ve been much more centered on progress. So my targets annually have been all the time round what number of extra property do I want to amass? What number of extra initiatives do I have to flip to offer me the funding to amass these property? However now I’m in a spot the place I’m extra centered on stabilization and safety. And to me, safety is paying off. And so my targets for 2026 or my decision, if you wish to name it that, is extra centered round stabilization, optimization just like Kathy, and paying off debt. So I’ve a stretch objective of paying off two properties in 2026. And I do know two doesn’t sound like quite a bit, however we’re speaking about fully clearing the debt on two property, which I believe is a giant deal.So I wish to repay two of my property and there’s about 4 property that I have to stabilize as a result of I’m bleeding cash in them proper now.A few of them my very own fault, a few of them, no fault of my very own. One particularly, I purchased a duplex, not in a flood zone, and we had a loopy flash flood and it tore by means of each models of the duplex. After which on prime of that, a giant mistake occurred with one of many remediation firms the place they did some work unauthorized to the tune of $40,000. So I’ve a couple of $40,000 invoice that we’re combating as a result of they weren’t alleged to do the work. And I’ve a couple of $50,000 renovation I’m going to must fund out of pocket. So these are large ticket objects. They don’t simply come very simple. In order that property proper now’s a duplex that I pay month-to-month all of the bills on, however has no earnings. So stabilization is a giant deal for me in 2026. I even have some multifamily property I purchased in 2023.Once more, no fault of my very own. Town has are available and is requiring me to do some work that we didn’t plan on doing that the place you may’t actually battle. So there’s quite a bit that occurs in an actual property portfolio that I believe requires you to take a step again and consider. So 2026, stabilizing the property which are bleeding cash and paying off two properties. And so these lead me to my different targets, which is I want cash to do these issues. In order that guides me to what number of initiatives I have to tackle all year long to generate the earnings I want to resolve these issues, stay my life. Make sense?

Dave:It does make sense. I really like the mind-set backwards. Lots of people can be like, what number of flips can I do, maximize, after which take that cash and be like, what am I going to do with it? However I actually like fascinated with it like, what do I have to do? After which form of backing into the minimal quantity of labor that you are able to do. That doesn’t imply you won’t tackle extra offers when you discover alternative, however simply having a very good sense like, okay, I have to do two 1 / 4 or one a 12 months. I want to try this, ensure that I’m hustling on that after which I’ll take every little thing else that comes from there.

Henry:Yep. I common most likely round like $45,000 internet revenue on a flip and I’d estimate that I have to do about 15 initiatives to have the ability to repay the properties that I’m trying to repay and to have the ability to have the earnings essential to proceed to stay and be capable of stabilize the 4 property I have to stabilize. In order that’s my targets.

Dave:I adore it. I suppose I perceive possibly why you don’t love a New Yr’s decision as a result of this sounds prefer it’s a multi-year mission too. It’s not like that is one thing you do in 2026. It is a piece of a bigger objective that you’ve got been working for and can most likely have to preserve working in the direction of past 2026.

Henry:Yeah. My bigger objective, ideally, that is … Now they are saying your targets are alleged to be large and scary, proper? And in company world, they known as them stretch targets. The massive, scary stretch objective is to have a 3rd of my portfolio paid off 10 years from now. I

Dave:Like that.

Henry:That’s quite a bit. It’s some huge cash. Yeah. Yeah. However I really feel like when you don’t set a giant scare … Shoot for the moon land on the celebrities, proper? If I find yourself with half of that paid off, that’s nonetheless going to place me in an especially sturdy monetary place in 10 years. So the bigger objective is that. After which what I do annually is tying into that. After which I’ve to regulate annually as a result of yeah, I’ve a objective of two this 12 months, however what if I solely get one? So then I have to take what occurs in 2026 when it comes to the financial outlook and make new targets. Possibly 10 is likely to be too far out. Possibly I want to vary it. So I believe I’m not afraid to reevaluate my targets based mostly on what’s taking place, however I attempt to make all of it tie collectively.

Kathy:I really like that. It sounds such as you’re additionally wanting on the safety aspect of it as a result of as you begin paying off properties, oh, there’s such aid figuring out that if something goes unsuitable and also you simply can’t predict, you may’t predict issues like 2020 coming alongside that turned out to not be dangerous for actual property in any respect. Ended up being a fairly good time for actual property purchased, might have gone the opposite course. And if you’ve bought paid off properties, boy, all it’s important to do is promote a pair and it’ll assist pay for the opposite ones that you just’ve possibly over leveraged. And I do know that you’ve got manner over leverage to get to the place you are actually and that has labored. However sooner or later you’re like, okay, it’s time to show the ship and pay a few of this off. That’s nice.

Dave:It’s attention-grabbing to listen to each of you might be specializing in optimization as an alternative of progress. Is {that a} reflection of the market or simply the place you might be in your private investing journey?

Kathy:That’s a very good query. It was simply the very first thing that got here to thoughts as a result of it’s what I’ve been doing and enthusiastic about. Simply having a look at a few of these properties that purchased 10 or 15 years in the past, I actually haven’t paid any consideration to them. For instance, one, it simply vacated and I talked to the property supervisor and he or she goes, “For those who replace this by about $20,000, you’ll get about 100,000 further in fairness.” I hadn’t even thought

Speaker 4:About it. Straightforward.

Kathy:In order that’s thrilling. And if I do this, then we will promote that or preserve it, take the cash out. And so it’s nearly like an after the actual fact bur,

Speaker 4:10

Kathy:Years later down the highway, bur.

Dave:It’s a sluggish burn. A sluggish bur. It simply doesn’t matter. Simply preserve optimizing issues over the long term. That is the best way to do it. It’s completely proper. I really like that.

Henry:For me, Dave, it’s extra a operate of the place I’m as an investor as a result of I’m a deal junkie and I really like the method of discovering offers. I really like shopping for an awesome deal and I really like working property in nice elements of the group. All of it is so enjoyable for me, however sooner or later I’ve to get to a spot the place I’m defending the property I’ve in order that I’ve paid off property to cross on to my kids. The overarching objective for my actual property enterprise is for my kids to have the ability to be the individuals they’re known as to be and never the individuals they must be for cash. So in the event that they want or wish to do one thing that isn’t going to pay them a ton of cash, at the least I’ve these property that will likely be paid off that may present earnings for them.And so to get there, I’ve to repay properties. And so I’ve to attract a line within the sand someplace and begin paying down these property. And in order that’s why I’ve the 10-year objective attempting to get a few of these paid off in order that I’ve these to cross. Now, after I get to that time, Dave, I may begin doing extra offers once more, however I’ll all the time have- You’ll. You’ll.And I’ll most likely nonetheless do offers which are like house run offers alongside the best way. I’m not saying I’ll by no means purchase one other rental property between now and 10 years from now. I’m simply saying I’m not in aggressive progress mode. So optimization is extra essential to me proper now than progress was. And progress was extra essential to me after I first bought began. It’s only a shift in the place I’m as an investor.

Dave:All proper. Nicely, these are nice resolutions. Thanks. I actually suppose these are, clearly they’re not simply resolutions, however simply targets and good perspective on the place you each are in your investing journey. We’re going to take a fast break, however we’ll come again with my New Yr’s decision proper after this. The Cashflow Roadshow is again. Me, Henry, and different BiggerPockets personalities are coming to the Texas space from January thirteenth to sixteenth. We’re going to be in Dallas, we’re going to be in Austin, we’re going to Houston, and we have now an entire slate of occasions. We’re undoubtedly going to have meetups. We’re doing our first ever stay podcast recording of the BiggerPockets Podcast, and we’re additionally doing our first ever one-day workshop the place Henry and I and different consultants are going to be providing you with hands-on recommendation in your customized technique. So if you wish to be part of us, which I hope you’ll, go to biggerpockets.com/texas.You will get all the data and tickets there.Welcome again. I’m right here with Henry and Kathy speaking about our New Yr’s decision. Kathy shared that she’s trying to optimize her portfolio and be taught extra about AI. Henry goes to be attempting to pay down a few of his debt and stabilize a few of his property. My New Yr’s decision for 2026, and I’m with you on this, Henry, that is one thing I’ve been fascinated with for at the least six months and goes to take me 10 years. However my plan proper now and the factor that I’m specializing in is enacting what I’m calling my finish sport.Hopefully not going anyplace, however I’ve been investing for 15 years now and I really feel like I’ve had these two completely different eras of my very own investing. My first 10 years, I purchased rental properties, I self-managed them, all of them domestically in Denver. These have been the primary 10 years. The final 5 years, then I moved overseas. I used to be residing in Europe. I bought some leases. I bought fairly into passive investing. I bought into lending. I do syndications. I nonetheless personal rental properties, however I’ve form of had this second period. And now I wish to transfer. I’m again in the US. I wish to transfer into my third act as an actual property investor. And I name it my finish sport as a result of I wish to spend the subsequent 10 to fifteen years placing myself into retirement. I’m in a lucky place the place I do really feel like I’ve sufficient capital to do it, however I have to rearrange my portfolio into an optimized manner in order that 10, 15 years from now, I’m going to have a portfolio that’s simply rock strong.It’s solely property that I actually like. Ideally, they’re paid off or have very low debt on my general portfolio. And I really suppose it’s a very good time to start out buying rental properties proper now. And so I’m seeing alternatives commerce out of a few of my extra passive choices or lending and begin buying the property that I wish to personal ideally for the remainder of my life.That’s form of what I’m beginning to consider. And I’m even contemplating, Henry and I have been simply collectively in Seattle. We have been speaking about this, fascinated with placing issues on 15-year notes, for instance, as an alternative of going to the 30-year repair that I’ve all the time actually used and simply begin considering, I’m 38 years previous. At 53, I most likely nonetheless received’t retire, however I would like the portfolio that I can retire off of and that I wouldn’t want to the touch if I didn’t wish to for the remainder of my life to be in place.That’s not going to occur in 2026. That is going to take me most likely at the least 5 years to reposition issues, do some completely different initiatives, be taught a bit of bit, however that’s my objective. That’s the factor I’m actually engaged on.

Speaker 4:Find it irresistible.

Henry:Yeah, no, I believe that that’s simply good monetary planning. It’s just like what I’m fascinated with as a result of I get pleasure from what I do now. I like chasing offers. I like flipping homes. It’s nonetheless enjoyable and thrilling. And is there annoying elements of it? Positive, however I get pleasure from it. However will I nonetheless get pleasure from it in 10 years? Will I simply be bored with the chase? I’ve talked to quite a lot of seasoned buyers of their 50s, 60s, and 70s, and the one theme throughout all of them is sooner or later they bought bored with chasing offers. They bought bored with churning homes and flipping homes. And so if I can get myself to a degree the place I don’t ever must flip one other home if I don’t wish to, however I can nonetheless select to, that’s ultimate. And it appears like that’s what you’re attempting to get to.How do I get to the purpose the place if I simply wish to sit down and do nothing, I can. I’m taken care of, my household’s taken care of, my legacy’s taken care of, but when I wish to go do some cockamamie loopy deal, I can even go do this. Undoubtedly.Getting your self to retirement doesn’t imply it’s important to retire.

Dave:To begin with, I bought bored with flipping homes earlier than I even bought began. So good for you. I did one. That’s all I wanted. I’m at two proper now and I’m drained. And I didn’t even do the GC. You

Henry:Didn’t do the

Dave:Onerous half. I didn’t even do the laborious half. I’m bored with it. No, I signed final night time although and getting this factor finished. In order that’s nice. No, that’s precisely proper. For me, it’s not even the flipping. I’m all the time tinkering. I’m similar to an optimizer. I’m all the time shifting cash from right here to there. And I bought to cease doing that too. I’ll do a few of it. I’ll preserve a few of my cash for enjoyable as a result of for me, that’s enjoyable. Such as you have been speaking about, Henry, you want taking a look at offers. For me, I like investing in passive offers. I like underwriting offers and figuring them out and searching for completely different alternatives, however I have to put the rock strong factor again in place as a result of I had quite a lot of nice leases. I don’t remorse promoting any of them, however I’ve not rebuilt my energetic portfolio in the best way I wish to but.And in order that’s actually what I’m going to be specializing in. And like I stated, there’s higher and higher offers. It’s not even that costs have gone down that a lot. It’s simply the asset high quality is so a lot better, for my part. And also you’re seeing prime quality properties come available on the market. I believe multifamily is wanting increasingly more enticing proper now. And in order that’s the plan for 2026. My different decision, simply so you already know, as all the time, is to go on as many holidays as humanly doable.How do I journey on a regular basis?

Henry:Can we go on report, Dave, and set a stretch decision? You and I?

Dave:Uh-oh.

Henry:Can we set a decision that inside 5 years we land an Anthony Bourdain type TV present the place we journey round, eat meals

Dave:And

Henry:Discuss actual property?

Dave:That is our dream in life. Sure. We’d like a brand new imaginative and prescient board, you and I. All proper. Nicely, this was quite a lot of enjoyable. Thanks guys. I’d love to listen to your New Yr’s resolutions, proper? We wish to hear them. Share them with us within the feedback. We wish to hear what your New Yr’s resolutions are actual estate-wise, fun-wise, lifestyle-wise, as a result of on the finish of the day in actual property, we’re doing this normally not as a result of we simply wish to personal or purchase property for one thing, as a result of it frees up one thing else in our lives, spending extra occasions with our pals, household, touring, consuming disgusting quantities of meals. Because of this we’re really right here. So inform us what your resolutions are. Kathy, pleased New Yr. Thanks for being right here.

Kathy:Thanks. You too.

Dave:Henry, pleased new 12 months. Excited for one more 12 months doing available on the market with you each. And James, in fact, when he decides to grace us together with his current.

Kathy:Sure. Completely. Thank

Dave:You. Thanks everybody. We’ll see you subsequent time.