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Linda McKissack from Texas was drowning in $600,000 of debt, before she invested in 108 rental properties and became a millionaire landlord. Sterling White from Indiana was collecting welfare and selling Pokémon cards until he accrued a portfolio of 400 rental properties in less than four years. Stephanie Betters, a nurse practitioner from North Carolina, manages 1,000 units between shifts at the hospital.
They are all guests on the BiggerPockets podcast, America’s number one real estate investing show. Every week, host David Greene — a former police officer turned rental property magnate, encourages millions of listeners to invest in rental properties and quit their nine-to-five.
“This is the most popular real estate investing has ever been,” Greene says, and the latest data agrees. In the fourth quarter of 2021, investors bought 18.4 per cent of the US homes that were purchased, a record high, according to Redfin. Investors big and small are taking advantage of extreme demand for rentals and skyrocketing prices, with rents up 16 per cent year-over-year in December, according to property portal Zillow. Encouraged by historically low mortgage rates, ordinary Americans are racing to diversify their investment portfolios with rental properties, snapping up houses like players in a game of Monopoly.
“The stock market and real estate are the two easiest ways to take a large amount of money and deploy it without a whole lot of oversight. So that’s increased demand for these assets,” Greene says. And there is no shortage of high-paying tenants.
“It’s the biggest surge ever in rents and the lowest vacancy rate in 50 years,” says Kenneth Rosen, chair of the Fisher Center for Real Estate at UC Berkeley, Haas School of Business. “What’s driving this is the reopening of the economy, the mandates have gone away, and people [have to] go back to work.”
At the same time, people are moving to the suburbs, he says, especially to the Sunbelt locations and mountain states, such as Florida and Arizona — “There’s a lot of in-migration to these areas,” he adds. “We just created a lot of demand for housing.”
The piping-hot rental market has transformed BiggerPockets from a blog into a movement. Founded in 2004 by Joshua Dorkin, an actor-turned-landlord, the Colorado-based company publishes a magazine and more than 30 books, while its forums host an online community of 2mn investors sharing tips on flipping, renting and building vast portfolios of homes.
Greene, who has a closely shaved head and a tidy beard flecked with grey, has been a real estate evangelist for BiggerPockets since 2018. The show enjoys a cult-like following, and callers from across America pepper Greene and his guests with questions about creative financing, negotiation and renovation. In episode 413, the actor Matthew McConaughey spoke about “balancing ambition with family and freedom”. Almost every episode mentions the word “freedom”, or “independence”, the keystones of the American dream, of course.
“I think our average listener wants financial freedom, which we would describe as: there’s enough money coming in from your investments that work becomes a choice, not a requirement,” Greene explains. In the world of BiggerPockets, the American dream is not owning one family home, but a hundred.
Greene’s own path to financial freedom began just after the real estate crash in 2007. He bought his first house in 2009 with money saved up from working in restaurants. He became a deputy at the Contra County Sheriff’s Department in Northern California and worked overtime to buy more rental properties. When he was priced out of California, he started snapping up foreclosures in Florida.
By then, police work had become “horrid”, Greene says. “We had a night where we had arrested a pimp who was driving around with a teenage girl and selling her to different men in Oakland. And we caught him and we arrested him. He was mocking us, and me, the entire way back to the station — ‘They’re gonna let me out, you can’t do anything to stop me.’ And it sort of hit me that he’s right,” Greene says. “He’ll be right back out of prison doing this again. And my heart broke for the girl.”
Greene handed in his badge and gun. “Real estate was the only other thing in my life where I thought I could help people in a genuine way, that I’m not able to do with law enforcement,” he says.
Today, Greene owns 35 properties across America’s south-west, including a commercial building in Minnesota, a portfolio of short-term rental homes in Hawaii and 10 other units on the western coast of the US, Scottsdale and the Smoky Mountains.
Greene’s podcast persona is an intoxicating mix of self-help talk and sports metaphors. To outsiders, BiggerPockets can seem to have its own special language. People throw around terms such as cash flow and yield; real estate units are called “doors”. Greene encourages his disciples to “drive for dollars”, or cruise around neighbourhoods searching for distressed properties. He recommends “house-hacking”, converting garages, basements and spare bedrooms into profit centres. Many callers who ask for Greene’s advice are advised to simply buy more doors, or graduate from owning single family homes to entire blocks of apartments.
Greene is known for introducing investors to the methodology “BRRRR”, which stands for Buy, Rehab, Rent, Refinance, Repeat. (The “rehab” part might involve a lick of paint or a new kitchen.) It’s a five-part real estate strategy in which investors buy a property under market value, add value with renovations, rent it out to tenants, remortgage the property, then use that money to do it all over again.
In his book on the subject, Greene reveals how he used the technique to acquire properties at the rate of two homes a month, achieving his financial independence. “Real estate is something that will pay you back,” he says. “I always tell people, ‘It’s going to give you more than you put in.’”
The digital revolution has made it easier for everyday people to buy and manage multiple rentals, Greene says. “Now we have podcasts, YouTube channels and software to help you keep track of everything you have going on. You have analytical tools, so you don’t even have to be good at math. You can let the computer do all the work and tell you [the] return.”
The BiggerPockets website offers online calculators that help investors determine the profitability of a potential property (for $390 a year, after five free goes). On its forums, investors compare the Customer Relationship Management software, or CRMs, they use to track “leads”, or people who are considering selling their home.
On the website Roofstock.com, you can shop for a $56,000 family home in St Louis, Missouri, as easily as ordering the latest John Grisham thriller on Amazon. Many of the properties listed on their online marketplace already have tenants, and Roofstock connects buyers to professional property managers, offering a “hassle-free” investment experience. Too scared to buy a house sight unseen? Some Roofstock properties come with a 30-day money-back guarantee, like buying a T-shirt from Zara.
Yet houses are rarely hassle-free. Water heaters fail. Roofs collapse. In America, tornadoes howl and earthquakes rattle. “Or you get a tenant who’s basically on drugs and causing a nuisance and you can’t evict them,” adds Rosen, the economist.
A nurse who owns 1,000 rental properties may remind you of a scene in The Big Short where a stripper admits to taking out multiple adjustable-rate mortgages on her five homes and a condo, and one wonders if this buy-to-let boom might signal the next catastrophic crash.
Some of the advice doled out by BiggerPockets is not for the faint of heart. Wholesaling, or acting as a matchmaker between a seller and a cash buyer, is a popular topic on the podcast and forum, but in many states is fraught with legal issues — though the podcast does not advise doing anything against the law. Taking out a HELOC (Home Equity Line of Credit), refinancing your home to borrow cash to buy more homes, and taking hard money loans — which are secured by property — at high interest rates to flip houses is risky even when the market is booming.
“Buying hundreds of properties as an individual, I think, unless you’ve got a lot of experience managing them, is just a recipe for a disaster when the downturn happens, and the downturns do happen,” says Rosen. “If you use hard money or other types of risky leverage, that is the wrong way to buy things. It works well on the upside, but it works terrible on the downside.”
A quote often heard on the BiggerPockets podcast is one attributed to Warren Buffett: “Only when the tide goes out do you discover who’s been swimming naked.” But rental properties remain a safe investment, Greene insists, because rents can rise with inflation.
Inflation is a bigger danger than a housing price crash, he says. “You won’t know what real estate’s actually worth because you don’t know what a million dollars is worth. There’s already people who are afraid of that, and that’s one of the reasons crypto has become so popular lately. People are fearing what we’re doing to the dollar.”
Greene believes property could actually help investors survive a potential collapse of America’s currency. “I can ask you to pay me my rent in whatever I want. You can pay me in bitcoin and litecoin and dollars and chicken eggs.”
But in a recession, many people can’t pay rent at all, says Rosen. “I think an amateur investor holding 100 properties couldn’t possibly manage the vacancy during a downturn. People can’t afford the rents so they move back with their parents, or they leave and double up as roommates. So you’re going to have empty space, no income, and you have got to pay the mortgage. And if you’ve got an aggressive mortgage, you’re going to be in trouble.”
For all the talk of cash flow and yields, one topic rarely mentioned on BiggerPockets is the real families who live in these cash flow-producing assets. “It’s not like owning a piece of stock,” says Rosen. “It’s very important to say that you’re providing housing services to the renter. Real estate is the most management-intensive of assets.”
Tenants are real people who have no option but to rent, and have no path to the financial freedom promised by BiggerPockets. Many feel exploited by their landlords. In 2019, BiggerPockets went viral when a podcaster called Tony Wagner tweeted screen grabs of four posts from its forums, including one from a landlord asking: “Beside . . . late fees, what kind of fees can I legally charge a tenant in NY (Buffalo)?” It makes you wonder who Greene’s real estate advice is more likely to benefit, the teenage victim from his police days or her pimp.
Until the start of 2022, Greene co-hosted the BiggerPockets podcast with his friend Brandon Turner, who boasts a more impressive beard, and who left to focus on his business investing in mobile home parks. I asked Greene if investors should be concerned, for Turner is known as something of a bellwether in the US property market.
“When there’s a recession, everybody moves down a peg,” Greene says. “Mobile home parks sit at the bottom of the most affordable form of housing […]. But I don’t think that means everyone’s going to end up there.”
Yet, in February there was a definite sea change in Greene’s sermon. On BiggerPockets episode 568, guest Ivy Zelman, an analyst who claims to have predicted the 2007 crash, told listeners that she is seeing “yellow flags” in America’s real estate market. At the end of the show, Greene said: “I will go on the record and say something that’s going to be very unpopular to a lot of people, especially listeners of our podcast. Don’t quit your job.”
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