Chad Carson: How to Retire with the Fewest Rentals Possible in 2026

22:58I'm like, I'm just going to keep buying rental properties. You know what's not boring is just having very stable, predictable income every month. That's just great. I can tell you from experience, having done this 15 years now, it goes by quickly. It's not like you're going to be grinding away for your whole career. We're saying slow and steady, but 10 years, 15 years, you're going to be in a fantastic financial position. And I also think people often overlook sort of the incremental value of real estate. People always say like, oh, it took me 15 years to get to financial freedom. Seems like a long time.

23:31That's fine. But I bet you in your second year, you were a little bit better off than you were in year zero. And then in year four, you were better off and then six and then eight and 10. And that incremental benefit matters still. Like I don't see it as this binary where it's like I was not financially free and now I am financially free. It's like every step, every property you acquire is an incremental improvement. And that's awesome. And you should be excited about that. Yeah. A lot of it happens below the surface. Some of it is just your own knowledge compounding. I know for me, like the first five years, I was kind of spinning my wheels, but I was learning and I was growing and I was building a team.

24:04Another metaphor is kind of like farming. Like it's not sexy to watch an orange tree grow for the first five, six years, but you got to plant the seed. You got to water it. You got to do all this stuff. And you can't speed up nature. Like the natural process happens. And I think sometimes we just want to force it a little bit faster. And so rental properties are like a seed. You plant them, you grow them. There are ways to go faster, but I think let's separate investing from entrepreneurship and starting a business. Like, so you can start a business, a side hustle. You know, I used to flip houses a lot.

24:33That's how I kind of generated extra cashflow. But many people listening to this, they have a full-time job that's 50, 60 hours a week. Like they're doing real estate on the side for five hours a week. You need to keep it boring. Like don't, don't try to get your excitement from real estate. Go learn to fly an airplane or go on a vacation or something. If you want excitement, don't do that in your real estate. Real estate does not need to be exciting. It needs to be boring, boring, boring stuff. I love that. Yeah, yeah. Get your thrill somewhere else. There's no need for adrenaline in real estate investing.

25:01So for those of our listeners who subscribe to this belief or who are at least intrigued by this idea of small and mighty, what are the kind of deals you recommend people look for in 2026? I would separate this into a couple of categories. And this has been a kind of something I've realized lately is that people who have five to 10 hours per week, I'll put in like one category. So if you have, if you, if you can at least spend like 20 minutes a day during your lunch break and maybe a couple hours on the weekend, I would put you in like the five hour investor category. And I think people like that should avoid fixer uppers and major kind of like projects.

25:33They should just look for the boring real estate. That's a little bit, a little bit more turnkey. That doesn't mean you have to buy it from a turnkey provider. That just means something that needs maybe light cosmetic work. Maybe you get a 10 % discount. Maybe you pay full price for it. The strategy there is to buy a really solid property in a solid location that has growth potential to it. And then you put as much money down as you need to, to get a property that cash flows at today's interest rates. Over the last couple of years, that's meant like 30, 40 % down for some properties. And so I think that's one category of investor.

26:04What you're looking for is good properties in good locations that you can buy and hold for a long time. And that's just going to be super, it's just gonna be a super boring structure there. There's nothing fancy about that. If you have more than five to 10 hours per week, if you have a partner or a spouse who has extra time on the side, or if you have a job that allows you two or three days a week to do this extra, I think you can get more into what we were talking about earlier. Maybe do some direct mail. Maybe do some off-market strategies like the Henry Washington and other people talk about a lot.

26:32Actually go and try to do that negotiation with people who might be a little bit more motivated. those are going to be your best deals, but it just, it requires a little bit more time and effort. And so I think those are, those are the two kind of paths I think about, um, for, for different people in 2026. All right. Well, I love this. I really agree with the way that you broke it down. I love Henry. The way he approaches real estate is totally different than I do because I'm, I'm group one. You know, I, I worked full time at bigger pockets. I have stuff to do. I've flipped houses and I've done burrs but that's because I have partners who who have the time and who I essentially pay to do that similar to what you were talking about earlier Chad like I I would be generous giving myself a b-minus on renovations I think you're probably better than I am but you're an a you're a plus on spreadsheets though and data exactly I'll give you that so I do what I'm good at like analyzing deals analyzing neighborhoods underwriting deals like that's what I'm good at.

27:29And that's how I spend my five hours a week on real estate. So I think about that, but I want to just dig into each group a little bit. So I agree with the turnkey thing. The biggest way to set yourself up to fail if you're in that group one is to take on more than you can chew. It's going to be stressful. And even if you wind up pulling it off, you're going to hate it and you're not going to scale your portfolio because you're just going to be miserable the whole time. So I buy into that, buying something relatively turnkey. I've done this over the last couple of years. But tell me more about putting more down, because I think that that's a hard thing for people to wrap their head around.

28:03One, if you're capital constrained, you might not be able to do that. But two, it sort of goes against this idea of trying to scale and get to as many properties as possible. So why do you make that recommendation? And what are some of the trade offs you have to consider? Yeah, I think the reason people don't like putting more down, if I had to guess is that their return on investment is going to be lower, they're gonna I'm a low, they're going to look at their cash on cash return and it's going to go like one or 2%. Or they're going to say, I'm going to be out of the game for two years now until I save up another down payment.

28:34Those are probably the reasons they say that. And what I would say is like, that's true. But the biggest risk I've seen in real estate investing, the only way I've seen anybody go out of business is that their mortgage, they had negative cashflow, they got a bad mortgage and their mortgage led to them going out of business. And so to me, if you're going to get this business, the number one thing you want to take care of is staying in the business as long as you can. And so I think when you get into a deal, you don't ever want an alligator. You don't want negative cashflow. So priority number one is buy a deal that cash flows today.

29:07And with interest rates a little bit higher, there's no secret. The only way to get your cashflow higher on a property that has a certain rent to price ratio is you have to borrow less. That means you either put more down or you buy at a lower price. There's no magic there. You can do both. And so I do think This is why we talk about if you have cash now to go buy a property, even if you're the five-hour investor, negotiate hard. Try to get a 10%, 15 % discount on a nice property. You could do that. That's very doable in today's market. You have to make a lot of offers. Not everybody's going to do it.

29:37Let's say you buy a$300 ,000 property for$270 ,000 and it rents for$2 ,200 or something. You buy it for$270 ,000, but you might have to put$70 ,000 to$100 ,000 down in order to get a 6 % mortgage that actually cash flows with a$2 ,200 payment. And so the question is, is that a good deal? And I would make the argument that you have to look at all the different metrics that make a good deal a good deal. If the property cash flows today and you have a really low cash on cash return, you're also getting principal pay down. And hopefully you also bought it in a location that has a, even if it's flat for the next two or three years, the reason you're buying that location is there's a limited supply, there's population growth, all those things that are like the most important parts of buying a good location, over the long run, you're buying a property that hopefully is going to grow at least at the rate of inflation.

30:24And so you got to run your numbers. If it doesn't work putting$100 ,000 down and you're getting an abysmal return on that money over the next 10 years, then don't buy the property, buy another one. But don't just say, I have to put less money down to make a good deal. Putting a lot of money down is a safer way to invest if you're wanting to survive and stay in the business. Absolutely. And I think it gives you the optionality to invest in areas that may not be cash flowing at 20%, which are often the best areas. I think this is a common mistake that people make is they'll invest in a class C, class D neighborhood or a class C or class D property because that's what they can afford.

31:01And that's what will cash flow at 20 or 25 % down. But you're missing out on some of the best neighborhoods. I think this makes so much sense. If I look at my own investing career, I don't think I've ever regretted buying a good asset in a good location ever. Even if I had to put 50 % down, 70 % down to make it work, I've never regretted it. And honestly, the few deals I've regretted, I don't have too many, but the ones that I feel just like meh about, like not super excited about, were like ones that kind of, you know, cash flow to 20%, but weren't in the best neighborhood or didn't have that much upside potential.

31:40And just were deals that I didn't want to own long-term. I have completely shifted my focus to, I don't buy a deal that I don't want to own for 10 years anymore. I think the, the, Hey, I'll own this for a couple of years. It will do something for me because it works at 20%. Like that's just not worth your time. I would rather, you know, take the long view on every single deal I personally buy. Yeah. And I think it also, it goes back to like, what kind of investor are you? Like know who you are. And if you're the five hour investor who has, you already have a full-time job, you've already got a job.

32:11You don't need a second job. You need an investment. And so that's why like a little bit higher quality, maybe a little bit, they're gonna be a little bit lower cap rates because of that. That's your style. I mean, when I first started though, I was buying the cashflow properties and I don't regret doing those because I think it taught me a lot. I had to work harder to get that cash flow, but I had lower down payments, lower prices. So I think there's a time and place for that. So if people are listening to this, just know what role you're in and know what you lean towards. But I just think so many people avoid the higher down payment, the lower cash flow properties, because they think, oh, that's just not a good deal.

32:44But they're intelligent investors, Dave, other people, myself, who are buying properties that maybe other people kind of turn their nose up at, but over the long run could still be a good investment. Great advice. So that's category one of investors, the people who are working full time, maybe have up to five hours a week. But there's this whole other category of people who want to invest more time into their investing career. We're going to get into that, but we've got to take one more quick break. We'll be right back. For decades, real estate has been a cornerstone of the world's largest portfolios.

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37:39Welcome back to the bigger pockets podcast. I'm here with Chad Carson talking about what we're thinking for 2026. Chad, you talked about this first bucket of investors, people who don't have too much time for the break. Second bucket of investors, you know, what are the kind of deals? What kind of cash flows? What kind of numbers do you think they should be looking for here in 2026? Yeah, when you have more time, then you can be a little bit more ambitious with the types of deals you get. And so this is like, I mean, the classic deals people have heard about, like the BRRRR strategy, which more broadly means going after properties that need work.

38:11They have some kind of problem. I had a mentor early in my career. He used to say, you know, Southern folksy kind of conversation. He'd say, Chad, you need to look for good dogs that have fleas. That means a property that's a good potential property in a good neighborhood, but man, it's like the worst house in the street. It needs work and there's issues with it. Very often it's the remodeling that needs to be fixed. And so this is like, instead of just a cosmetic fixer upper that we talked about with the five hour investors, a light, light cosmetic, this is, I mean, you can be a little more ambitious, buy a property that has, you know, it needs to remodel the whole kitchen, or it needs to have bathrooms that need to be updated.

38:45Or maybe if you're like really, if you have really good contractors and you're more ambitious, maybe you're adding an ADU to the property and doing new construction. So I think there's a spectrum of your skillset and the amount of time you have to add to that. But that's where the best deals come in from like the deals that you can buy where the property is worth in the end, you know, 300 ,000 and you're in it for 70 % of that, you know, maybe you're buying it for 200 ,000 or something like that. So, so those deals are out there, but they're going to, they're going to start off really ugly, like in some way, because the remodel is ugly, you know, the property looks ugly.

39:17Other people don't see it yet, but because you understand underneath the surface that there's potential there, either through the value by fixing it up or by changing the zoning or something, Those are the deals that have a really high equity growth potential and also a better cashflow potential. Because as we mentioned earlier, the cashflow, there is no secret. You have to borrow less money in order to make the property cashflow. But our five hour investors probably are going to have to put more money down to make that work. But the more entrepreneurial investors who have more time, you could buy a deal way below its value and then use cash to buy it and then refinance it and be at 70 cents on the dollar with your loan and still make it cashflow because you might have very little cash in the deal.

39:55That's a great deal. But it is it takes there's more to it. You know, that's that's why I think I kind of reserved that for the second category of investors instead of the a lot of the people who don't have that much time. This market in general, like I just feel like it's not the time to take a lot of risk because you don't have to. But also if you're newbie, like there's just no reason to take a lot of risk. Like you said earlier about cash flow, this key is to stay in the game. Don't lose. Like just you don't even need to win. You just need to not lose, especially in your first couple of deals.

40:26And so I think that's excellent advice here. I love your framework, by the way, Chad, of starter, builder, and harvester. So you're in the harvester phase of your career now, right? So tell us a little bit about that and what that's been like for you. Because I think this is where everyone wants to be eventually. So I'm more of a harvester now. And I've been doing it for 22 years. But to me, the difference, most of the investment we talk about is either the starter phase, getting your first deal or two, or the builder phase where people are, you're trying to take $100 ,000 that you saved up and turn that into a million dollars.

40:59That's the builder phase. And it's all about leverage. And it's all about maximizing the amount of growth you make and your return on investment. And that's great. There's nothing wrong with that. But the harvester phase is almost like you're switching to different laws of physics because the goal isn't just to grow and maximize your wealth, although you want to keep growing, but it is also to increase your cash flow. It's also to reduce your risk. And it's also to increase your time, like the amount of time you have to actually go take those trips and enjoy your life. And this is the reason we did it in the first place.

41:28So harvesting is really about transitioning your portfolio from one that has a lot of equity, but not much cash flow, which is very common in real estate, by the way. I've seen so many people who have a million dollars or$3 million in wealth, but they're making a much smaller cash flow than they should for that amount of wealth. And so what Harvester is all about is making these harvester moves, which could mean selling some properties. It could mean refinancing strategically. It could mean paying off debt, which for me has been all three of those, all of the above. We've gone from instead of having my whole portfolio is at 70 % debt to value.

42:04Now we're more like 15 % or 20 % debt to value. Some of that's just been amortizing loans over time, but some of it's just been deliberately paying properties off. We have $150 ,000 saved up from selling a property and cash flow from our rentals. What do we do with that money? Most people would say, well, go buy three more rentals and put$50 ,000 down or buy two rentals and put$75 ,000 down. That's a builder move. A harvester move is to say, no, I want to keep my portfolio as simple as possible. I'm actually going to go pay off$150 ,000 loan that's at 8 % interest, which is a little higher than my other loans.

42:34And now I own that property free and clear and I've freed up$1 ,200 or$1 ,500 per month with zero risk. I didn't add any risk and I I increase my cashflow. And that's a, that's a very good move as a harvester. I wouldn't recommend it as a starter, but as a harvester, that makes a ton of sense because you shifted to a different goal than just trying to maximize your return on investment. Yeah. I love this, this framework. I think it's so good for everyone listening to just keep this in mind because there's so much advice out there about real estate. All of it is good advice, but where you fall within this framework, I think is so important to your decision-making.

43:10Like the stuff that Chad was just talking about of paying down debt, it's where a lot of us get to. Once you've been doing this for 10 or 15 years, you realize you just want this simple. But it makes sense. It's not what you're going to do on your first deal. You're not going to buy something for cash. You're probably not going to take out a 15-year mortgage instead of a 30-year mortgage because you want to pay, you have less debt. So just keep that in mind. And I think, especially now at the beginning of the year, it's really important to just sit down and say to yourself, like, this is what I'm doing.

43:37I'm still a starter, so I'm going to make starter moves. or I'm a builder and I'm going to make builder moves or I'm a harvester and I'm going to make harvester moves. I think that will really help simplify all the noise out there because it's not that it's bad advice, but there's just so many different things you can do in real estate. You can't possibly consider them all. And it's better to just sort of narrow down on the things that make sense for you. It's psychologically is hard sometimes because it's easy to compare ourselves to others. That's what we humans do. So I get why it's hard to do.

44:05You see, you see your buddy over there who's flipped three houses and done two bird deals and isn't that amazing and you're just as smart as them like how come i can't do it but i think the strongest investors know themselves and they're okay and then they accept the fact that this is where i am i have five hours per week and i'm a builder i'm not a harvester this is what i'm going to do or hey i have five hours per week and i've built enough wealth i think this is enough like that's that's a really hard thing for investors to say because we're very ambitious myself included but to acknowledge that, you know what, I have transitioned to where I have enough wealth here.

44:37It's time to take some risk off the table. That is a very difficult thing for people to do who have been building for years. And the way, the trick that I've tried to get in my head is that this isn't a forever thing. This is me winning the game so that I can stay in the game for the rest of my life. I've won the game. Warren Buffett always says, it's ridiculous or and sanity to risk what you already have, this wealth that you've built for something you don't even need. You've got enough. You've got enough. Why would you risk the thing you already have for this extra property, this extra wealth that you don't even need?

45:13Take some chips off the table. All right. Well, Chad, thank you so much for being here. It's always fun chatting with you. Any last advice to the audience for 2026? I would say it's going to be an exciting year. I mean, you're going to have to channel the news and the information you get. Listen to Dave, Listen to my podcast. Listen to people who are going to be more optimistic, but realistic. We're not saying wear rose-colored glasses and say everything's going to be rosy. We might hit a recession. We might have bad news. But I think the message that I'm trying to convey is that if you think long-term, it's almost like you're going to cross the ocean.

45:43You're going to hit some storms. You're going to have some waves. It's going to go up and down. But keep your eye on the prize. The prize is getting to the other shore, the other side of the shore. And the more long-term thinking you are, the more long-term investor you are, it's a calming effect. You don't have to worry about the ups and downs as much. In fact, when you have downs, that's an opportunity. And I think that's really where we are. Who knows? I'm not good at predicting, but I think this is an opportunity year. And so keep your eye on the prize long run and then be disciplined and safe with your approach, but then go out and do it.

46:13Go out and buy some properties, find your lane, whether you're a five-hour investor or a 20, 30-hour-a-week investor, find the lane that you're good at, and then let that be enough. I love it. Well, thank you so much, Chad, for being here. It's always great to have you. It's a pleasure. Thanks for having me. And thank you all so much for listening to this episode of The Bigger Pockets Podcast. We'll see you 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 any other podcast platform.

46:41Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian Kay. Copywriting is by Calico Content. And editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing.

47:09You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. BiggerPockets LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.