How to Invest in Real Estate on a Middle-Class Salary ($70K or Less)

24:41This is basically where you go out and buy a property and you fix it up, you make it worth more, and then you go and sell it, right? It's like flipping houses, but you're flipping the house that you're actually living. This is not for everyone because you are going to be living in a construction zone, but it is a super powerful way to make money. I'll just give you a couple examples. I would recommend if you're going to go with this approach, starting with 40 grand, you put like, I'd say 5 % down, put 5 % down, use 10 grand, essentially of your money to buy something that is livable. Because remember, you're putting 5 % down.

25:16And if you have 10K, that means you could go out and buy something for$200 ,000. In a lot of markets, you can do this. Not in every market. So in some markets, you might need to use 20 grand, for example, of your 32, and you have to go up to$400 ,000. You want to find something that is relatively inexpensive in your market. Like you can't be going out and buying a median priced home in your market. So even if you live in a market where the average price is like 400, go look for something that's like 200 or 220. Like it's going to need some work. But I think the key here is that it needs to be livable because if you want to go out and apply for a conventional mortgage where you can put 5 % down, it can't be so distressed that there are safety issues.

26:00Like if you do that, you're going to have to go get hard money. That's super expensive. It's not going to work on a$40 ,000 loan. I know a lot of influencers tell you to go do that. I would not do that. What I would do if I were you, find a property that is livable so you can get that really beneficial financing. That is what's so good about the live and flip. That's the best part of the live and flip is that you can go and get 5 % down. So go use 10K, 15K, put 5 % down, get that loan that is really valuable, go move into this property, and then use the remainder of your money to renovate. And the cool thing about the live and flip is even if you put$20 ,000 down, you buy something for$400 ,000, you only have$17 ,000 to renovate, that should hopefully go pretty far.

26:46$17 ,000 if you're living in it, that should help you. The cool thing about a live-in flip is you don't need to flip it quickly. Normal fix and flip, you're trying to flip this house in three months, six months, nine months. But to get the full benefit of a live-in flip, which is a tax situation I'll explain in a minute, if you live in that property for two years, you get all the gains, all the money you earn is tax-free. And so you want to live there for two years. And so that gives you two years to complete your renovations. So you have that 17 and a half, $20 ,000 to put towards renovations, which should get you a lot of the way there.

27:18But even if it doesn't get you all the way there, what it allows you to do is as you just earn normal money and get your paycheck, maybe you earn 500, your savings rate is$1 ,000 a month. You can take that income that you have regularly. Remember, you still need to have that emergency savings fund, but if you're earning more and saving more than you're spending, you can just put that into the renovation over the course of two years. You don't even have to start your renovation right away. You could just save up more money for the first year, then do all of it with$30 ,000. Once you've saved up some money, then you go after two years, you sell it for more than you put into it.

27:55So put$35 ,000 into it. Now it's worth 320, 310, whatever you go and sell it. You're going to have a hundred grand or so that you can go put towards your next property. Now you can go out and buy a traditional rental property for 25 % down. You could do a house hack. You could do another live in flip. This is what I'm trying to share with you is that if you go in and just get your first deal, right, doesn't need to be a grand slam, but like this live in flip, is it the best, most comfortable way to live for two years? No. I'm doing it right now, though. People still do this. Real experienced investors do this all the time.

28:29But it's not the most comfortable thing to do. But also, being stuck in the middle-class trap is not a comfortable thing to do. So just, is it worth two years of your life to try and get ahead and be able to build a portfolio from here for the next eight to 15 years? And then you're going to be out of the situation in a low-risk, reliable, proven way, I think it's totally worth it. So these are your options. You can do a house hack or live and flip. Those are the two owner occupied strategy. We actually live there, or you go the traditional route where you can either use your own savings and target a low cost property or try and partner to get a more average price property.

29:06Those, any of these will work. These are all options for the middle class that will help you get started in real estate and will set the foundation for building your portfolio. We got to take one more quick break, but when we come back, I'll share the steps that you should be taking to actually execute on these strategies. Stick with us. There's a point where basically every investor realizes traditional financing stops scaling with you. At first it works. You qualify with your income, your job, your tax returns. But as you grow, that model starts to break. Now, it's not really about your personal income.

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33:56Welcome back to the BiggerPockets podcast. I'm Dave Meyer. Talking about how you can get started investing in real estate on a middle-class salary. Yes, even here in 2025. So what are the steps you gotta take? We've done a lot of episodes on this, So I'm not going to go in depth into every single step, but I'm going to give you a high level overview. So if you're taking notes or anything like that, write down these things that you should be doing. And then we have other podcast episodes and resources on BiggerPockets that can help you with each of these steps. So I'd say like first step is identify which of these four strategies that you want to do.

34:29I went into more detail of step one here today because I want to show what works for middle class today. So I personally would pick one of these four strategies. There are other things that you can do, but I think these are the most reliable, low risk, go hit a double, get your foot in the door, get in the game kind of approach. So pick which four of these that you want to do. That is step one. The second step is if you are not going to do one of the owner-occupied strategies, you need to go out and pick which market you're going to be in. Because like I said, if you're not partnering and you need to go target these properties that are$150 ,000 to$200 ,000, it's going to be in a limited number of markets.

35:11And so I recommend, you know, we have some of these on BiggerPockets, but go do some research into which one of these markets you want to actually invest in. I think a great place to start is look at the Great Lakes region. There are markets like Pittsburgh. I didn't mention that one earlier. I think Pittsburgh is a great market you can consider. There are markets like Tulsa, Oklahoma that you can potentially. In the Midwest, these are places that you can go look at. And do your research. Again, there are other resources that will go into detail that you should follow on finding a market. But some things that you want to look for is one price point.

35:46Cash flow potential is the second thing. So you got to get that cash flow potential. And then you don't want to be in a market just because it's cheap. You don't want it to be in a market where prices are going to stagnate or decline. And so you want to check and make sure that the economy is good. The best way to look at this, I would say there's two numbers that you really want to look at is household growth or population growth. So make sure that's at least stable or going up. And then jobs. You just want to look at the unemployment rate. Are there more jobs coming into that market? Those are going to be really good indicators of markets that aren't just cheap because they're not desirable places to live.

36:18But there are other reasons markets are cheap and you want to be in one that's cheap, but also has the potential to grow. And so you want to check that out. That is step two. Step three and step four. You can do these in either order. I don't really care. People have different preferences on this. But step three and step four are go to talk to a lender and find a great agent. I'm going to start with lender because I think this is one that people skip often, but especially if you're in this situation where you're in the middle class, you have this, you know, a solid amount of savings, but it's not like obvious that you can go out and buy real estate.

36:51Talking to a lender is one of the most freeing and helpful things that you can do because so many people spend their time thinking, oh my God, can I afford this? Am I going to get a loan? Can I buy that property? Well, just go talk to a lender. They will tell you that for sure, one way or another. Yes, you can buy that property. No, you can't buy that one. Here's your exact budget. Here's how long it's going to take for you to close. Lenders will give you this information for free. So you can go on BiggerPockets and find a lender. You can go to a local community bank. That's a great place to find lenders.

37:21You can go to a meetup and meet a lender. There's tons of different ways. You can go call whatever bank you bank with. Go talk to a lender. See what you will qualify for. It does take a tiny bit of work. It will take you an hour of work, but it will allow you to really understand which things are available to you and allow you to put you in a position that when you go out and find a deal that you're going to be able to execute on it quickly. And that's really important because you're going to want to negotiate in this market and you want to be able to close when you find a good deal and you need to have your financing lined up.

37:54And so go talk to a lender. Step four, again, you can do this earlier if you want, but go find a great agent. That's the other thing, because once you find a market and pick a strategy, you're going to want to talk to an agent who can validate that your approach is going to work in your market. Because I'm giving you broad generalizations and averages, but you might want to do a traditional rental in Tulsa and you call an agent. They said, actually, you know, you're going to need more money. Sorry, this just isn't going to work. Okay. That's disappointing, but you can move on to another market.

38:27or you might call an agent and say, I want to do a house hack. My budget is$400 ,000. I want to buy a duplex. They might say, you know what? You might actually be able to buy three units at that price. You need that agent. You need that industry expert to go out and validate the market you're looking at, the strategy you're looking at, and your buy box, basically, the price point that you are willing to pay and the amount that you want to put out. These two people, having an agent, having a lender is going to be extremely helpful to you in navigating your first purchase. And I get the idea that people are sometimes shy about going out there.

39:05Maybe you don't know that much about real estate investing yet. That's fine. This is these people's jobs is to go out and help you find what works for you with your personal circumstances. So go and talk to them. And if they don't want to work with you, fine. Go find someone who will. You know, if there's a lender who's uninterested in work with you, move on. If an agent doesn't want to show you houses because they think your price point's too low, I promise you there are dozens of other agents who do want to work with you. So go find a great one who is excited about you as a customer. We have tons of those people on BiggerPockets.

39:38Go to biggerpockets.com slash agent, but keep finding, keep talking to them until you find the one who's going to work with you. Once you've done that, you got to drill down into the numbers. That is the next step. You need to be analyzing deals. This is sort of the key to being a real estate investor. You need to be able to spot the good ones. You need to be able to ignore the bad ones. That is particularly important in the buyer's market that we're in right now. Buyer's market means there's opportunity. It also means that there is risk and there's going to be a lot of garbage out there. And so analyzing deals is the way you filter through the garbage and you find the good ones.

40:13And we have tons of resources. I've made myself dozens, maybe hundreds of videos, webinars, written articles about how to analyze deals. I have a whole book called Real Estate by the Numbers, different ways to do that, but you want to get good at this, right? And what you're looking for, you know, I'm not going to get into all the math here today. You can look this up, but I'll just give you some rules of thumb that you could be looking for. If you're going the traditional route, like, you know, putting 25 % down, not living in the unit, what you want to look for is cashflow and low maintenance.

40:43When I'm analyzing the deals for a first deal, you want to hit a double, look for positive cash. So I'd say 3 % to 5 % cash on cash return would be great if you do better than that. Amazing. But 3 % to 5%, I think, is going to give you a really solid place to start from. Because remember, that's not your only return. You're also getting amortization. You're hopefully getting at least keeping up with inflation appreciation. You're getting the tax benefits. All in all, if you're getting a 3%, 5 % cash on cash return, when you look at the big picture, you're beating the stock market. You're beating almost any other investment out there, and your cash on cash return will grow over time.

41:18Rents grow up. And so I think if you're trying to get in at this price point, 3 % to 5 % is a good rule of thumb to look for. You also want to look for low maintenance. Don't just go chase the best cash flow. Chase something that has decent cash flow but is not going to be a huge headache and going to cost you a lot of money. So you want something that's probably built at least in the 1950s, 1960s. You can find something that was built before that, but it has to have been renovated. You need it to have new systems, right? You can't be buying something with old plumbing, old electrical, super old HVAC, a faulty roof.

41:52None of that. You got to find something that has some updates and has cash flow. Those are the things I would target in my analysis. For house hacking, number one thing is reducing your living expenses. You still want to buy a great asset. Don't buy something that's just, that stinks just because it's going to, you know, reduce your living expenses. Find something that you feel like is going to grow over time, that you're proud to live in, that you're going to enjoy living in it. Like that matters, right? Somewhere that you are okay living in that reduces your living expenses, or maybe even gives you positive cashflow.

42:21That's what's going to, you know, the analysis, focus your analysis on that. And you are going to find a great deal. If you're willing to house hack, highly recommend it. You're trying to identify a property that has a very big difference between what you can buy it for and what the fixed up value is going to be. In real estate, we call that the after repair value. And so what you're looking for is, you know, I could buy this for 200. I can put$20 ,000 into it. I could sell it for 280. That's going to build you$60 ,000 in equity. That's awesome. That's a great flip. I'm just making those numbers up, but that's what you're looking for.

42:53It's like, can I buy it for 250, put 20 grand into it, sell it for 310. Still a good flip. You're getting a good return on your investment. And remember, a live-in flip, all of that equity you gain is tax-free. So that is a cherry on top for that strategy. So again, we have plenty of other resources on BiggerPockets where you can go and learn sort of the tactics, the nuts and bolts of how to analyze these deals. But that is step five here, is to make sure you analyze deals. Moving on to step six, go make offers. You need to get a little comfortable low-balling in this kind of market. And it's actually not low-balling.

43:27I shouldn't call it that. It's offering what the real value is. Because right now in the market in 2025, one of the unique elements is that a lot of sellers are anchored on prices from 2022. They still think that they have all the power and that prices haven't come down. But in a lot of markets, they have come down, especially for distressed homes that need a little bit of love. Those prices have come down in a lot of markets. And so you need to protect yourself to maximize your returns. You need to buy a little, oftentimes below list price. There are sometimes properties go on the MLS and they are listed appropriately.

44:02Sometimes they're even listed low. That happens. I've bought deals that I am surprised why they have listed it so low. That happens. But more common right now, people are listing above what you should actually be paying for it. That's why you should have a great agent. And you need to be able to be comfortable offering below list price because a lot of times the value to you as an investor is lower than what the seller thinks it is. Not every seller is going to accept that. And that's okay. They are entitled to sell it for what they want to sell it for, to hold out. It might sit on the market.

44:31Who knows? But you have to stick to your numbers. When you analyze your deal, you need to figure out, this is the amount I am willing to pay for this property. I'm going to offer that amount. And if I don't get it, so be it. That's fine. So that is something that you need to just get comfortable. That's step six. And that's making offers. Hopefully, if you do enough, it might take you five offers. It might take you 10 offers. You might get on the first try. I don't know. Right now, it's easier to get offers accepted. You might get on the first try. Once you get one of those done, you close, which is easy.

45:00Your agent, your escrow officer are going to help you with that. Then you got it. Step seven, this is just executing your business plan. I gave you different strategies, whether it's a traditional approach, live and flip, house hack. But each of them, you got to go execute your strategy and start to build for your next property. Because remember, that first deal is just to get in the door, learn, and start building towards the next one. And so you need to execute for the next year or two on what's next. So for a house hack, that's going to be saving money so that you can go and get your next house hack, ideally in one year or maybe up to two years if you're saving money enough.

45:40That's your business plan. Run your deal well. Learn to be a great landlord. Learn to take care of your tenants and to create mutual benefit. it, learn to keep costs down, to be efficient and save money. That's what you do as a house hack. Execute on that. And you're going to get your second property in one to two years. You're going to be well on your way to financial freedom. If you are a live and flip, move into that house, start renovations. And over the course of two years, complete that renovation so that right when you get to two years in one day, you can go sell that property, get all that tax-free equity and invest it into the next deal.

46:13That's your business plan. Go execute that. If you're going to do the traditional route, it's a little bit harder business plan because you're going to be earning cashflow. Yes, a couple bucks a month, but you're going to have to figure out how to get that next deal. The ways to do that are either do value out on the first deal. So again, try and partner, buy something that's in decent shape, but you can do a cosmetic rehab and boost your equity so that when you refinance or sell, you have money to invest in your next deal. Or in the next year or two, as you're running and learning to execute, to manage your first property, go find a partner for the second deal.

46:49And it will be easier to find a partner on the second deal because you have experience and you've done this yourself. And so maybe you go and look for a partner, a down payment partner, or someone who wants to partner with you to fund a renovation on your next deal. That's sort of the business plan you need to go out and execute. If you're going to go the traditional route, then step eight is to repeat these things. Do your next deal in one to three years. Now I know that so many people on social media are like, Oh, go buy nine deals in the first year. I have seven units in six minutes. Like that is not the goal here.

47:23At least for me, I built my portfolio over 15 years and I have a rock solid real estate portfolio because I've taken the slow and steady approach. I try and hit doubles. Some of them have hurt hit, turned into home run. Some of them have turned into grand slams, but I didn't go out there taking on extra risk, trying to, you know, do every little thing, trying to invest all my reserves, do risky strategies. I just try and hit doubles. And sometimes it just, things work out and you wind up hitting a home run. That is the approach I recommend to anyone in the middle class trying to get in real estate.

47:59And if you do this, you can retire. You can have financial independence in eight to 12 years. So just remember that the goal is to get in the game, try these things, learn and then do it again in one to three years and you're going to be well on their way and i just want to call out one last thing here is that these strategies will work for people in the middle class but they are not just strategies for people in the middle class these are really common things that almost everyone does i started with three partners on my first deal my next deal was a house hack i'm doing a live and flip right now these are great strategies and they start and build momentum.

48:37And if you want to keep doing them, you can keep doing them as long as you want, because they are proven ways, low risk ways that you can get into real estate, get out of the middle-class trap and pursue financial independence. All right. That's what we got for you guys today. Thank you so much for listening to this episode of the BiggerPockets podcast. I'm Dave Meyer. I'll see you next time.

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