If You're Scared About the Economy, Listen to This

If you're scared about the economy, listen to this, inflation is up. Unemployment is rising.

World events are feeling crazier than ever. If you're feeling uncertain about your financial

future, you are certainly not alone. I'm definitely feeling it too. But I'm not sitting on my

hands, holding onto cash and hoping everything will be okay. I'm still investing. The economy feels

less predictable than before, and that makes me more motivated to put my money to work. But I need

to own assets that I control, not just stocks or crypto that feel like they just go up and down

almost randomly these days. For me, that means single family and small multi-family real estate.

I'm still finding ways to make those deals work today, and you can too. Maybe you even need to

make those work these days, whether you're looking for your first deal or optimizing a long-standing

portfolio. Hey, everyone. I'm Dave Meyer, Chief Investment Officer at Bigger Pockets.

Here do try and make sense of these wild economic times is my co-host, Henry Washington.

All right, Henry. So give it to me straight. How you feeling about the economy? Good. You happy?

He excited? On a scale of one to ten, I'm about about a fear factor of six.

Okay, yeah. I think that's right. It's not a disaster. It's just confusing, right? There's

like, yes, weird signals going in every direction. So it's like hard to be at a one or a ten.

I feel like the only logical answer is to be somewhere in the middle, because one day I'm like,

oh my god, the economy's in the crash on the next day. I'm like, everything's great.

It's totally hard. It's hard to get a beat on, and everything is changing so quickly.

I couldn't agree more. It is very confusing. I'm just trying to stay fundamentally

sound and pay attention to like what's truly happening locally and not what's happening in the

headlines. I think that makes a lot of sense. And I wish I could do that. But man, I just

read the newspaper all day. Every day just freaking out about everything I read. But I will just

say this. I want to be honest with people that, you know, I give like an assessment of the

economy very regularly here and on the market as well. And I'll just say like, I do think the

economy is getting worse. I think that generally speaking, if you're talking about the average

financial position for the average American, it does seem like it's deteriorating. Now there are

good things going on with the economy as well. The stock market continues to do well. GDP is growing.

If you're the owner of some sort of AI startup, you're probably crushing it right now. But I think

the average American, if you just look at the data, you look at spending patterns, you look at

savings rates, you look at consumer sentiment, it's starting to deteriorate. And I don't really see

how that turns around in the short run. I think that's the thing that kind of worries me about

the economy is that like unemployment starting to go up. If the Fed cuts rates, I don't really think

that's going to change that much. I think it's like an AI-induced labor shortage. And I just think

we're in for what a lot of people have been calling for, which is sort of like a transitionary time

in the economy. We have this brand new technology. We're sort of at the end of an economic cycle.

And whether they call it a recession or not, I think we're in for like a shift in the economic

vibe. That's just how I see it. Not necessarily saying that means negative things for real estate. We'll

get to that in just a minute. But I just think if you're looking at the macro picture, it's slowly

deteriorating in my perspective. Yeah, I find it hard to see how people who only depend on one

income stream are going to continue to be able to afford to live comfortably with the rate which

things are going up in price. I mean, everything costs more money. Groceries rent. And if you don't have

some sort of plan to bring in more income to supplement that, then you end up supplementing

with credit card debt. And that's probably why credit card debt is at an all-time high right now as

well. Yeah. And defaults are starting to go up, which is the stuff that's, you know, you see credit

card debt going up and up and up. And you're like, okay, that's going to end someday. And that's

going to end badly. And maybe that time is soon. And usually when credit cycles like that, and

that's when you start to see a recession, it's typically how it happens. Now, I don't know if we're

going to call this a recession or whatever. I think that, you know, that's up to some academic

people who make those decisions. But I just, I do get the sense just not even data like anecdotally,

I don't know about you. Like everyone I talked to is just constant source of conversation. It's

just like how expensive everything is. People are having a hard time making ends meet. And even if

you're not currently having a hard time making ends meet, you're worried that AIs coming to take

your job. Like it just feels like there's so many risks or threats to financial security right

now. I think it's on people's minds and sentiment, whether it's accurate or not, does impact behavior

and does impact the economy. So I just generally think we're in for more difficult economic times.

I agree with you. That doesn't mean you shouldn't invest. And I actually think a lot of people would

make the case that that means that you should invest. So I'm just curious. Like given the fact

Henry that you have at least some nerves, you're at a six out of 10. You're not panicking, but you're

above average. How does that impact your investing decisions? It impacts my investing decisions in a

way that helps me be more conservative with what I'm investing in. But I mean, the truth of the matter

is no matter how uncomfortable it is to say is that like wealth is created when there's pain

in the market, right? Pain creates an opportunity to buy assets at a discount, whether that's real

estate, stocks, crypto, like that's when people buy crypto's down right now. And if you believe in

it as an asset, this is when you should buy. So because you're betting on it going back up with

the stock market tanks because we are in a war or some crazy decision is made that causes fear

and stocks go down. I mean, historically, we've seen that stocks will come back at some point. And so

the the opportunity to build wealth is built during times like this, but that doesn't make it any

less scary to spend money on those assets during times like this. And so the way that I battle with

that fear is with being very picky about what it is that I'm buying. And so this is another time

when I feel strongly about single family and small multifamily asset class A because it's

more affordable than than buying a multifamily asset class B because regardless of what's going on

with AI and the economy, people still need a place to live. You know, people have to have four

walls in a roof. And so I can afford the single family asset class. If things go terrible, I think

demand for this single family asset class will continue to rise. I mean, we're still

historically, we still don't have enough inventory to supplement the demand that we have,

even though in some markets, it seems like real estate is going down. There's just a need for

housing, both for rentals and for owning. And so I'm just buying less risky assets and buying

at deeper discounts. And there's actually more opportunity right now. It seems to buy at a

discount the last three deals we put under contract. I mean, I've gotten them at 50 cents on the

dollar, some even lower than that, which is, which is really, really good or just it hasn't been

like that in a few years. Are you buying more or less than you were like a year ago?

A than a year ago, I'm probably buying more, but we were down so much last year versus what we

done in the past that it's not that much more historically, I'm probably on average compared to

what I do each year. But last year was such a low for us that I'm definitely buying more, but

but not a ton more. Yeah, last year was just rough. I feel like last year we still had no inventory,

but things were incredibly unaffordable. That was like just a tough year in 2025 where things are

getting a little bit more affordable. And there's better deal flow now. So I do think things are

getting better. But I guess the question about whether or not to invest in real estate comes down to

what else are you going to do with your money right now? Because it sounds like I know that's

just such like a lame thing to say, but it's true. Holding cash is okay, but there's inflation. So

if you're going to just put it in a savings account, you're probably not going to make money. If you

put in a money market, you're about flat. That's okay, but I would like my money to earn some money.

The stock market, I have a good amount of money in the stock market, but I am not putting new money

into the stock market right now. If it tanks, like Henry said, I would put more money into it right

now. But it is at very frothy valuations historically. And I have a hard time seeing how it's going to

go up much more. I think there's just it could go up more, but I think there's more downside risk

to upside potential right now in the stock market. I don't bet a lot on on cryptocurrency. And so

I'm just asking myself like, where would I want my money? If there's a recession, what do I want

to do with my capital? And I just keep coming back to real estate. And like, I'm not just saying that

because I host this podcast, like I will admit to everyone, I am selling some real estate right now,

too. Yeah, me too. Yeah. So like I am I am pruning and just keeping the stuff that is really good

that I know I want to hold through a recession. But generally, I just feel like everything that Henry

said is true. Where do I want my money in recession? I want it in something that is generally

recession proof real estate might not grow a ton during a recession, but it traditionally does

not go down that much and rents really don't go down that much. It is a great inflation hedge.

You're still getting amortization. You're still getting tax benefits. And so like all of those

things, even during a hard economic time, maybe the safest place to keep your money. And so you said

you were being conservative. I have felt for the last year, so that it's like a quote unquote

risk off time for investing. I'm more focused on modest returns and not losing money

than I am on taking big swings and getting great returns. And to me, real estate is the best

asset class to do that still. Yeah, I agree with you. I mean, where a lot of investors are

willing to buy at the same margins they bought at last year and the year before last. I'm not,

I am buying at much deeper discounts. And if that means I do less deals, it means I do less deals.

But I'm actually finding the opposite right now that people are taking the offers that we're

making right now. It's creating opportunity for us for the future. They're opportunity to hold

on to some of these assets that we're getting at deeper discounts as rental properties or

opportunities to turn around and sell these assets to some of these other investors who are less

risk averse than I am and taking them on. Yeah, I think that is the flip side of this. There

is going to be additional opportunity. And that is the main reason I said I was selling some

stuff. It's not because I want to get out of real estate. It's because I want to reposition

into different real estate because there are certain times deals sort of peak out at their useful

mess. You know, you do a bird, you do the renovation, you get the equity kicker, you stabilize it.

And it's good. But like, you know, if you sell that property and put it into the different

bird, you might make more money. And so like, that's kind of what I'm thinking about because I just,

I think the deals are starting to be there at least in the places I invest. But I think more are coming

is my expectation. For better or worse, when the economy does poorly, people sometimes freak out

and just sell stuff that maybe they shouldn't even sell. Or there is unfortunately some financial

hardship. And like, I'm not rooting for that. But I'm just saying as an investor, like if people

are selling and there's more inventory on the market, there's more deals on the market, there's

going to be more opportunities for you to find the kinds of assets that you like. And to me,

that's the upside to this whole situation. I'm not expecting, though, these deals to be grand

slams in the first couple of years. I'm basically sticking to this sort of upside error that I've

been talking about for a long time here is that I'm going to buy deals now knowing that they might

be flat in terms of value for a year or two or three, but they will recover. And I'm just treating

this more as an opportunity to get my portfolio in place for like the next era of growth,

whether that comes in a year or two years or five years from now. So that's a little bit about

what Henry and I are doing and how we're feeling about the economy. But we want to talk a little

bit about you and what investors at different stages of their investing career should be thinking

about how they should be adjusting their strategy and tactics. If they are fearful about the economy,

we're going to get into that. But first we got to take a quick break. We'll be right back.

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Carefully consider the investment objectives, risks, charges, and expenses of the fund-rise flagship

fund before investing. This and other information can be found in the fund's perspective at fundrise.com

slash flagship. This is a paid advertisement. Welcome back to Think of Pockets Podcast. Henry and I are

here being honest about we're a little scared about the economy. I think that's the general vibe.

I think we're feeling a little better maybe than the average person because we own some real estate

and have some secondary sources of income and some control over our finances. But I think

we need to address that this is going to be an uncertain time economically. But Henry I'm curious

what you think for people who are fearful about the economy haven't done their first deal.

Thinking about doing a deal I'm wondering with everything going on and all the uncertainty

is now the time to do it. How would you advise someone thinking that? Again, there is opportunity

right now to enter the market and yes it's going to feel scary but this is the time when you need to

really focus on the fundamentals. One of the things that you said on previous episodes is that

people should buy the best quality asset that they can in a particular market and I think that

there's some truth to that. If you're looking to enter the space right now especially if you've never

done a deal I think there's a lot of value in learning how to do this business with a single

family or a small multi family to start off and this isn't the time to search for the cheapest

market where you can buy the cheapest asset but I do think starting with a single or a small

multi and being pretty cheesy about the market that you do that in. So if you live in a market where

you can generate cash flow or buy a deal that you can afford that's going to produce the return

you're looking for that's great you probably should invest in your backyard there's advantages to

that but that doesn't that's not everybody in the United States so if you have to invest out of

state I think that you want to be pretty selective in the market that you do that in we've had

several shows where we've talked about what areas of the country real estate is doing well in

right now the northeast and the Midwest are both performing fairly well they both have assets that

are affordable but also there are several markets within the northeast and within the Midwest that

have rents that are performing above the national average I'd be choosing a market where population

growth has been steadily improving you don't want to see a big hockey stick in population growth

but you want steady steady population growth I'd look 10 to 20 years and remove the outliers so don't

look at the covid years don't look at the real estate 2008 crash years so you're want to look for

median and not average population growth and then I'd be coupling that with job growth so what markets

in maybe the Midwest or in the northeast that have positive population growth positive job growth

I'd be looking for markets where the average cost of a home is less than the median for the nation

and I'd be looking for markets where the average rent is somewhere around the median or higher than

the median because that's where you can probably find cash flow and where you might get some

appreciation as well those are just good market fundamentals if you can buy a single family asset

in a semi decent neighborhood in a market where people are moving to that has the jobs for people

who are moving to that market where the home is somewhat affordable and where rents are going to

supplement that that's just a formula for an asset that you can probably hold on to through the

storm now you need to be financially capable to hold on to that asset because we don't know what's

going to happen there can be some blacks one event that causes something terrible to happen in

the real estate market but the people who lose when that happens are the people who don't

have the financial backing to be able to hold on to those assets and so first and foremost is

you got to get financially stable enough to be able to afford an asset and then the second is you

want to buy an asset in a market where it has great fundamentals and then you just try your best

to hold on to that asset and let it produce some income for you I know that sounds very rudimentary

and basic but that's in my again primal easy to easy brain like that just seems like the safest

way to get into this space because worst case scenario you have an asset in a market that people

want to live in and where rents support that asset and that's just a good formula what you're saying

tactically I stand by I want to say something about the mindset of this for people because if people

feel that it's risky to get into real estate right now I don't blame you for thinking that but I

would say this find a deal that lowers your overall risk and I know that might sound impossible

but I actually think for a lot of new investors going out and buying a rental property or even

better house hacking you are probably lowering your overall financial risk as opposed to doing

nothing just say you're sitting on $50,000 right now and you're worried about whatever your stock

portfolio going down or that something bad is going to happen in the market can you reduce your

overall living expenses by house hacking if so you are reducing your risk during a financial

downturn you're actually improving your financial situation in the short run and giving yourself

that upside if the market actually goes well if you can buy a rental property that brings

in an extra $500 a month and you're worried about inflation or childcare or whatever it is that's

causing you stress that can actually reduce your overall risk the thing I want to remind people

is that even though there is risk in the housing market I think certain markets are going to see

5% declines this year often seen a 10% decline you know there's going to be declines in the market

that's why you need to do it Henry saying buy it a discount buy in a market with good fundamentals

but even in markets that go down to percent you're still going to be improving your financial

situation because you're going to get tax benefits you're going to get cash flow you're still going

to get amortization and so I just encourage you not to take additional risk but find deals that

lower your overall risk in the big picture because that absolutely can be done right now

so that's for newbies and I totally agree with what you were saying Henry I think low risk

figuring out the ways to buy with good fundamentals don't need to take a big swing just find a way

to conserve your capital and let it grow consistently over the next couple of years despite

what happens with everything else for decades real estate has been a cornerstone of the world's

largest portfolios but it's also historically been sort of complex time consuming and expensive

but imagine if real estate investing was suddenly easy all the benefits of owning real tangible assets

without the complexity and expense that's the power of the fund rise flagship fund now you can

invest in a 1.1 billion dollar portfolio of real estate starting with his little is 10 bucks

the portfolio features 4700 a single family rental home spread across the booming sunbelt

and also have 3.3 million square feet of highly sought after industrial facilities thanks to the

e-commerce way the flagship fund is one of the largest of its kind it's well diversified and it's

managed by a team of professionals and it's now available to you visit fundrise.com slash bp market

to explore the funds full portfolio check out historical returns and start investing in just minutes

carefully consider the investment objectives risks charges and expenses of the fund rise flagship

fund before investing this and other information can be found in the funds perspectives at fundrise.com

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that's n-r-e-i-g dot com slash bp pod when I bought my first rental I thought collecting rent

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what about experienced investors and we've talked a little bit about what you and I are both

doing but like what's your general mindset for for people who maybe own you know two to ten units

out there if you own ten assets around that you need to be assessing the performance of the assets

and I would encourage you probably need to be doing this on a quarterly basis because things are

things are changing so rapidly what I'm doing is I'm looking at the assets I'm seeing the ones that

are performing the best and I'm seeing the ones that are underperforming and then I'm taking an

assessment of the ones that are underperforming and figuring out how much capital do I have to throw

at them to get them to perform yeah and before I even make that decision I am asking myself like

on its surface now that I've been operating this asset for a while is this asset truly one

that I want to maintain in my portfolio for the next 10 years yeah if it's not I'm heavily considering

selling it and selling it means what's the tax implication if I sell it and what can I do with

that cash if I sell it because right now what we are seeing and what Dave and I talked about

earlier is there are a lot more opportunities coming up to buy at better discounts than when

I bought some of these assets a couple of years ago and so now I'm at a pretty prime position in

terms of like the market's still giving me a good value for selling assets selling assets are still

selling and trading for for higher prices and so now I can sell something maybe that isn't producing

like I hoped it would produce and I can take that money and capitalize on new opportunities

that are in the market now or I can get a better discount or I can trim the fat in my portfolio

and just not purchase another asset yeah I can put that money towards the assets in my portfolio

that are performing well pay them down a little more and get them to perform better so for me it's

all a math problem but you've got to take the time to assess your portfolio and have some honest

conversations to give people a picture of what I've done I've gone through my entire rental portfolio

and I've given everything a green light a yellow light and a red light in the green lights of the

things that are performing well I want to keep for the long haul the yellow lights are things that

are performing well or okay I'd keep them if I have to but I'd be okay selling them if I need to

and the red lights are the things that aren't performing that I don't want to put money into making

them perform because I can get a better opportunity cause with that money either investing back into my

current portfolio of green and yellow lights or buying an asset at a deeper discount that's going

to give me a better cash on cash return than that one property is getting me at the moment I am doing

the exact same thing and it's it is difficult I think that that is true it's kind of frustrating

gotta be like that one didn't work out the way I was hoping that it did but that's just part of

being an investor literally you take risks to make reward I do think though what Henry saying and

what I am doing as well is selling some stuff but I want to be clear that I'm not selling it because

I'm panicking I'm not like oh my god there's going to be a crash I need to get out before

some crazy thing happens in certain markets I might do that if I was you know in in Austin two

years ago I might have done that but you know like in I think you know I live in Seattle I think

Seattle is going to be in for some tough years but I'm just saying in general I am not selling

stuff because I'm panicking I am as endeavor being one of the biggest corrections in the country

right now I'm not selling there because I'm panicking I am selling because the numbers just aren't

working as a buy and hold it's that's the difference I'm not saying like I'm trying to time the

market perfectly and in fact I'm holding on to most of my stuff in Denver because they are performing

actually and I'm just going to ride out the declines and appreciation I just think that there

are times when you look at an asset and you say appreciation is probably done I've done what I can

for this property I've forced enough appreciation and the market's not taking it any further

rents are what they are maybe they haven't grown as much as I wanted them to maybe the tenants are

you know difficult or whatever I can't find the right people to be in this home and it's just

time to move on like I just think that makes a lot of sense I'll just give you an example I was doing

a slow burr in this duplex I renovated the first one went great time to do the second one getting

quotes right now and it's going to be like 30 grand to do this unit and with the way things are

going it's going to raise my rents like 200 bucks and I'm like that's just not worth it you know

and I'm looking at the ARV and it's like I'll spend 30 grand it'll maybe increase the value 40

45 like that's just not worth it to me that's not worth the risk yeah so I'm going to sell it

instead I'll actually make some money off of it but like it's not what I wanted it to be that's

not why I bought this property you know but this is a house yeah I've been telling you I'm trying

to shed my like turn of the century civil war error properties and like you get rid of all your

robberty lease yeah exactly it was built in I think it was like 1910 right like Woodrow Wilson

was president when this was built I think I'm getting rid of it does there's still a post

out front where people would park their horse and buggy yeah yeah I should put my back out there

but like I just don't want it I would rather sell it I probably won't 1031 I'll just pay the

tax I know a lot of 1031 I'm a fan but I just don't want it right now I've said repeatedly on

the show that I think the number one value of a investor right now is to be patient and a 1031

does not allow you to be patient and so I'm gonna pay some tax and I think I will more than make

up for that by buying the right deal that I'm gonna hold on to for 10 years so like that's just

an example if I don't sell it if I can't get the price if I whatever I'll just hold on to it

it's not like a freaking out it's not gonna be terrible but I just this is kind of the calculus

that I'm doing because you know I look at this economy I think people are fearful I think the

market's gonna stay slow for a long time I'd rather be acquiring new things at discounts than

holding on to mediocre assets if you're gonna trim the fat it makes sense to do it at a time when

values are there for you to do that if something terrible happens and the market crashes and people

are forced to sell well now you're not getting rewarded for doing it right now I can trim the fat

and get a small reward for doing it because the market is allowing us to sell so when values are

up so trim the fat when you can so that way if the market turns now at least I'm sitting on a

portfolio of assets I know I want to hold on to and I've positioned myself well in a time of

crisis can I can I tell you something I'm thinking about doing yeah I'm thinking about like if I

sell this property right take this money and like either recasting a mortgage or paying off a

different mortgage not because I'll probably do it forever but I think it's actually a good way to

hold cash right now instead of like putting it into savings account I'm gonna basically put my

extra money into a rental property because it will earn me seven eight nine percent cash return

right by paying that down and then when I find a deal I'll just refinance that and that will cost

me a couple grand or I'll take out a HELOC or you know a line of credit on a rental property and

go buy something opportunistically but I actually just kind of like the idea especially in a

down economy of like less risk on that rental property so I'm taking reducing my overall risk but

I'm not like limiting my options I can still go refinance that anytime I want to go buy something

else and I just been thinking about doing that rather than sticking money in a money market

account or a savings account because it just makes it's just a better return that's 100% what I'm

doing that's yeah my my goal is to my goal is to pay off two more assets this year oh that's

awesome like you're gonna sell and then pay off to whatever single families or two of my green light

rental properties yet boom that's just like I love that that's just like now you're good those

are just forever properties right it's just doesn't it feel good man I paid off but when I

paid off my first one this bad year like it just felt good it just felt good yeah I ended up

having to re-fi a property and pull some cash out and I took that cash that I pulled out and I

paid off another one and oh it's great it was perfect it was a perfect time so then we ended

up we paid off two last year I want to try to do two this year that's awesome good for you I love

that goal all right this is great advice I think again this is just risk off fundamentals investing

take care of any risks that you have don't limit yourself in terms of upside and maneuverability I

think that that makes a lot of sense question though Henry do you think there's like any situation

you think people should be selling or panicking or freaking out like are there any situations that

you would just really avoid right now like what are the signs that throw on your life vest exactly

like I think there are certain markets where if you have assets that aren't performing and the

market itself the fundamentals aren't good I would sell all if it if it were me like the reason

I'm holding on to in Denver because I believe in the long-term fundamentals of that market and

those assets are performing which is fine but if I was in a market where I bought in I'm just

gonna throw out markets some markets in Florida those markets might have years of declines to go

and if you're not performing now I wouldn't hold on to it to be honest even if I was selling

it a loss if it were me I would cut beat I was curious if you have any thoughts on like where you

might just need to bite the bullet and and live to see it another day for me the signs would be

if my market is doing the opposite of the advice I gave to new investors if you're starting to see

population decline year over year yeah and not to the opposite if you're starting to see jobs

decline year over year and conversely if you're starting to see rents go down like you're unable

to raise rents because of those things you probably need to pull the plug sooner than later unless

you know something that other people don't know maybe infrastructure or something is coming that

people don't know but typically if populations declining rents they're declining and there aren't

jobs then then you need to pull the plug that the the town is starting to to die the any could

economies dying yeah agreed and I think there's also just you probably know in your heart certain

assets you're like this thing is just it's just a turt like I got to get

I think there's just time sometimes by a turt guys yeah like sometimes if you're just struggling

with an asset and trying to figure it out and you're like oh if I just hold on or just hold on

like to me it's not the time to do that like unless you have a solid plan to turn it around

if you're questioning is this going to turn around or not those are the ones I would get rid of

the two best feelings I've ever had in real estate one was paying off an asset two was selling a

turd even if I tell us oh feel so good all right well thanks for being honest with us Henry I

appreciate it and I hope you all appreciate this because I I will be honest I am sort of obsessive

about following the economy I am a little bit worried about it but I am not freaking out about

real estate I'm more concerned just about average people being able to you know afford their

lives but I think real estate has provided me a little bit of a buffer and insurance policy if you

will against downturns that doesn't mean every asset I own is going to perform great if there's

a recession but it does mean that I know that I'm at least probably inflation the hedge to know

as I'm going to get tax benefits I'm getting cash flow that I'm not worried about going away

and that makes me feel a little bit better and I would encourage people to just figure out

ways to use real estate to make you feel better have less risk not feel like you're going out

there and taking some massive swing during a risky time couldn't agree more all right well thank

you all so much for listening to this episode of the bigger pockets podcast he's Henry Washington

I'm Dave Meyer we'll see you guys next time thank you all for listening to the bigger pockets real

estate podcast make sure you get all our new episodes by subscribing on youtube apple spotify or

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