4 Overlooked Real Estate Investments That Pay Big in 2025

0:00Everyone's heard of rentals, house hacking, and even fix and flips. But what if I told you there are four niche strategies outperforming in 2025 that most rookies don't even know exist? And look, these aren't just buzzwords. We're talking about real deals where rookies can create values in ways the average investor is simply overlooking. So if you're a rookie and you want strategies that are working right now in 2025, not the same old stuff we talked about before, this episode is for you.

0:31This is the Real Estate Rookie Podcast. I'm Ashley Kerr. And I'm Tony J. Robinson. And with that, let's jump into our first niche strategy. So this first one is a Section 8 overhang. And this brings into account low-income housing, and specifically the low-income housing tax credit. So a lot of people have heard of Section 8. And And if you haven't, it is when a person qualifies for financial assistance to pay for their rent from an organization such as your local housing authority. So here in Buffalo, it is Belmont Housing. And a Section 8 voucher is somebody applies. And most often the rule is that their income has to be less than the medium income for that county, things like that.

1:20There's different rules. You can Google your local housing authority to see actually what the amount is that qualifies for somebody for low income. But usually your tenant will go ahead and do that themselves. You really don't have to be involved until they want to move into your property. And that's where Section 8 will come in and do an inspection of your property and make sure it is rent ready. and then you will actually sign a lease agreement with them to actually pay you part of their rent income. So it could be a portion of it and it will be different based on what the person can qualify for.

1:59And then your tenant pays the additional portion. So you can do a lease agreement with your tenant. Some of the housing authorities do it different ways depending on what organization you go through to do this. But if you just search Section 8 vouchers in Buffalo, New York, or whatever your city is, you'll be able to find the housing authority that actually handles them. And they usually have a landlord tab, and it will tell you everything you need to know about becoming a landlord that accepts Section 8 tenants. And they even have their own listings there where you can list your property for rent.

2:36So all of the like counselors there that help people get placements, they can look at your listing and maybe they'll already have somebody that can, it's waiting for an apartment to move into there. Okay. So that's section eight. One pro of section eight is that people can consider it guaranteed income because it's the government paying the income and not necessarily relying on the tenant if they lose their job or different things come up. So during COVID, people really liked Section 8 because you still got paid that portion of it. Another thing that I've seen from the Section 8 tenants I have is that they are more likely to pay also because if they stop paying, they lose that Section 8 voucher and now they get no funding at all.

3:26So those are some of the benefits. I've actually never had a bad experience with Section 8 resident, but there are people that have and people that stay away from it. But one advantage that isn't often talked about is the low-income housing tax credit. So this is actually where you can get the tax credit and you have to comply, of course, with rules and regulations and your property has to fit the bill. but this is an additional benefit that can put more money back into your pocket. And Tony and I recently did an episode on what we're doing for tax planning and tax advantages. And this is another way to save money from these tax advantages that are available out there for real estate investors.

4:15So, Tony, when you had your properties in Louisiana, did you have any Section 8 tenants? No, no Section 8 experience on my side. That's why this strategy, I think, is even more interesting to me because it's all new and foreign. But I guess, help me understand. So Section 8 is obviously subsidized rent, rent being subsidized by the government. But the low-income housing tax credit, just walk me through, how does that work? So basically, if I'm a landlord and I buy a property that satisfies the conditions for this low-income housing tax credit, Am I getting some kind of tax benefit that offsets the income of that property?

4:57How does it actually work, the credit? So when you would file your tax return, you would get the tax credit savings on your tax return. You would report your income and expenses for it. And I honestly don't know exactly how it's calculated for the tax return when you're reporting the rental income. But I do know there are some restrictions as to even how much you can charge, and it has to be under that certain amount in order to fit the low-income housing tax credit cap that they have. So some of the reasons I think this is actually worth looking into for rookie investors is because affordable housing demand is actually exploding.

5:44And with higher interest rates and rental rates increasing, it's getting harder and harder for people to find affordable housing. And if we do start to shift into a recession, this actually can be a recession-proof income for you because Section 8 will still pay most of the bill for these renters that you have in place. Or, you know, if somebody is living in a luxury unit and all of a sudden they lost their job, affordable housing may be what they need. So one thing that I did want to share is how to actually find out if a property is actually eligible for this. And this is one of the nice things about this strategy is looking for properties is that you can most of the time find out if it qualifies before you even purchase the property.

6:38So HUD, they actually maintain a property database. So this is the LIHTC database. And this is where you can search by city, county, or even zip code. And it will tell you if the property is already part of the program. The next thing you could do is also contact your local state housing finance agency, commonly referred to as HFA. and you can tell them the property address and they will actually just tell you if it's already approved and also when the compliance period ends. So some of these tax credits, these programs, like there's also one for like timber that I've learned about too. They have an end period where you can get these tax credits, but they end after so many years.

7:35So you have to like commit. And this one is usually 15 years you commit to being the low-income housing, 15 years. And then after that, you can decide if you want to re-enroll or if you'd like to do something else with the property, which I think gives it flexibility that it's not like something you have to do forever with the property. You can also go ahead and get your property approved if you already own a property too, and you maybe already have a Section 8 person in place there, and you're not enrolled into this program, but you want your property approved, you can go ahead and actually go through the process to get it approved, to get that tax credit too.

8:20So Ash, if I'm tracking correctly, really what we're talking about here is just stacking two strategies together because not every Section 8 property also qualifies for this low-income housing tax credit. And not every property that qualifies for low-income housing tax credit is also being filled with Section 8 tenants. But you're saying if you combine both of those, you get the certainty of the Section 8 voucher and the government backing up their rent payment. But then you also get the tax benefit that comes along with this credit. So we're really putting kind of two strategies together focused on affordable housing.

8:54Yeah, and I think this is also another way to stabilize a property you already have. So if you already have a property, you could go ahead and do these two different things, these two different strategies, and implement it into that property to be able to get these benefits and maybe make it a better performing property. So I actually went and looked up what Section 8 actually pays in my area. And so I looked at one of the – like it breaks it down very, very specific by zip code. And so I looked at one of the properties that I have, and I'll tell you the market rent first. So the market rent – and this is based off of my properties I have there, and my friend manages two 40-unit apartment complexes there.

9:42and I know some other units and what they're going for or whatever. So the market rent for a two-bedroom is around$950 for just middle of the road, no luxuries, nothing, just your regular standard apartment,$950 for a two-bedroom. For a Section 8, in that area, they would pay up to$1 ,300 for a two-bedroom apartment. So in some cases, you may be able to raise your rent, even if the market rent isn't there, you still can list it for that with Section 8. And they will pay up to that amount as long as the tenant they have is, you know, qualified for their portion. Like we've had circumstances where, you know, Section 8 would pay it, but then the person, you know, was only approved for$1 ,000.

10:39that they would get and they couldn't afford the extra 300 or whatever it would be. So, but yeah, so that's just, you know, something to look into if you're not looking for a new property is just seeing what you can do to maximize your rent now with a property you already have too. All right. But what if you don't want to deal with tenants like at all? That's the beauty of land flipping. No late night maintenance calls, no lease agreements, just dirt that you can actually buy. So we'll cover what this is right after a quick word from today's show sponsors. Here's the thing about traveling. If you buy food at the airport, a burrito, salad, bag of peanuts, you start wondering if you should have opened a savings account for snacks.

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13:41What mid-range land flipping is, I guess most land flippers focus on super cheap pieces of land, like$1 ,000 to$5 ,000, or on huge development lots where there's going to be like a subdivision of a bunch of homes, and that's in the millions of dollars. But there's this mid-range land flip that's, I don't know, call it like$50 ,000 to maybe$250 ,000 that's turned into a bit of a sweet spot for folks who are looking to do this. And you can buy a parcel with kind of good underlying fundamentals, and that's, is there access? Can you actually get to the property? It's not landlocked. Are utilities nearby zoning?

14:23Is placement good if you need to put like a well or septic or any of those things? You hold it for, call it six months, maybe a year and a half. And then you resell this after making some small improvements and you get to keep the difference. I've never personally land flipped. Have you ever flipped land, Ash? No, I don't think that I have. I mean, I guess I would know if I did. But yeah, if I did, it was like accidentally with another property or something. But I do have 10 acres under contract that I did nothing with. And I'm selling it for, let's see,$5 ,000 more than I bought it for. Definitely not covering my holding costs.

15:03But I really like this strategy because in my market, I am seeing every single week on Facebook. And like the local group says to like looking for, you know, two acres to build a home. Does anyone have anything available? And all across the U.S. right now are builder incentives, like crazy incentives to purchase a house. But a lot of times builders already have their own lots that you can pick and choose from. And most of the time they're in developments, like they're in, you know, a cul-de-sac, you know, you're right next to each other. So for the people that don't want to be right next to each other, you can go and, you know, buy 10 acres and parcel it off into five two acre lots.

15:57You know, you have to, you know, there's lots of things you have to check on this as to make sure there's enough frontage so that everybody can have a driveway to their house. You know, make sure that the town will let you parcel it off. Speak with the code enforcement there that that won't be an issue to parcel. And then you could even go as far as putting utilities there. Or maybe there's already utilities at the road where it's not a big deal to actually bring them to the house. So, you know, if you're getting pretty rural, you might, you know, you could put in a septic or a well, have, you know, electric run under there.

16:34But that also can change how when someone's building their house, wherever you put the well, well, maybe that's where they wanted the bedroom because it has a view of this tree or something like that. And now they're not going to buy it. So that's just taking it an extra further step is having the actual infrastructure in. but just this morning I drove by a property that I remembered being for sale. I had to take my car to the dealership so I took a different route on the way back from school and I remember this property being for sale and it was a single family ranch home and there was about I don't remember how much land but a lot of land with it and the house was very dilapidated and just old and it It was just like a crazy amount of money.

17:17I don't know what it ended up selling for, but the person that bought it, when I drove by, I saw that the single family home had been fixed up, but they also had subdivided the land on the other side of the street. And they had driveways put in. Some of them already had like contractor sign up front that people were coming in to do the foundation, put in the wells, things like that. So they had actually gone and subdivided this land. And what ended up with the single family house, I don't know. Like maybe they moved into that or maybe they rented out, but selling the lots paid for the whole thing, you know.

17:53So that's what I like about the opportunity of land and this subdividing is like you can go ahead and buy it and then parcel it off. And then maybe you keep a parcel for yourself to build, put a rental on, you know, do whatever with, keep for the future for you to build a house or something like that. But I think that mid-range is really key because you're going to get the developers, the house builders that are going to buy up those bigger lots where they can put a whole paved road through, create the cul-de-sac, and have 20 to 30 lots right on there. And then smaller lots, you can only fit one house and sell it to one person and not be able to subdivide there.

18:37And I think that's why this one's kind of like that sweet spot, right? Because you think about the cheap land. those homeowners are getting bombarded with people trying to solicit to buy their lots of land. And the big parcels, right? Like that's where all the big institutional builders are going. But it's like that mid-range, it's maybe a little less crowded. You know, you got less folks going after that. And then from an affordability perspective, I think you brought up a good point, Ash, if I want to build my own home, sometimes, well, first, just sometimes it's cheaper to build right now than it is to even buy like a resale home in certain markets, right?

19:14Like we know that that's definitely a shift that's happening. But what about the financing portion? I think all of us understand that to go out and buy a traditional single-family home, we go to a bank, we get a loan 10%, 20%, 30 % down. What's this process like if someone wants to do this mid-range land flipping? Yeah, and that is the difficult piece because it is harder to get a loan on raw land that doesn't have a property on it, the first thing to do is to check with the small local banks to look at getting a loan on the land through them. And some banks will do it if you put like 30 % down or a larger amount down.

19:56The way that most people, when they build a house, their contractor or their builder, if they're not buying a lot directly from the builder, some people will have their builder buy the lot and then wrap it into their home loan so then they're not even owning the lot yet the builder is building their house and when they close on their house they're buying it all in one from the builder okay so you don't have that luxury if you're going to go and do land flipping on this property of doing that so talk to the small local banks see if they would lend it on but still that's a lot of cash to have up front to put 30 percent down on one of those lots and you most likely have to have some credibility or some kind of experience that they're just going to lend to you on this raw land.

20:46The best way is to get seller financing. Find somebody who will seller finance a property for you for a year or give yourself a cushion of how long you think you need to actually parcel it off and sell each of those lots. The next thing is partnerships. Bring somebody in that has the capital. You have the lot, you have the land. There's not a lot of things that you need to do to, you know, get to this ready besides doing a survey to do the parcels and maybe putting in driveways to the lots. And sometimes you don't even need to go that far. But yeah, you could bring a partner in. And then I think the last thing that you could do is what that house I drove by today did.

21:32They bought land with a single-family home on it. So they could have gotten financing on that property because there was a single-family home. So now the difficult piece of that is, though, once you purchase it, you can't go and just sell and parcel off pieces of land because that land is part of the collateral of all the loan. So when I worked with this other investor, something he would do is go to the bank and ask the bank, can I parcel off this five-acre lot? And the bank would basically evaluate what the value of the land was. Some may do an appraisal. Some may just do book value, whatever.

22:18And they would say, yes, that's OK. like there's still enough collateral in this property, it will work. So you can go to the bank and do that. Like especially if you're adding value and you're rehabbing the property, then you'll be able to show like I put this property, the house is worth a lot more. Can I go ahead and section off this land? Or you could work it out that those five lots you're selling is actually going to pay off the whole loan. You would just have to time it so that those lots are all pretty much at the same closing time to be able to pay off the loan that you have it. But also if you find buyers for each of those lots, I think that would be a pretty easy way to find a private money lender to pay off your bank financing and they hold the note for three months or whatever it takes to actually close, make some interest off of you or maybe get a cut of the deal during that time until you actually close on the other lots.

23:23I think one other concept too, Ash, is that the cost of this land in a lot of cases might be what you already have saved up for your down payment, what you were thinking to buy as a down payment. So you might be able to just go out here and buy some of this land in cash and then either partner with someone to do the improvements or whatever the cost may be there. But I think because the price point is so much lower, maybe it does open you up just to use in the cash you have sitting around to go out there and take these down. But I guess the last thing that comes to mind for me on this, Ash, is actually choosing the right markets to do this in.

23:55Because I think that maybe this works better in some markets than others, right? I'm in California, one of the most expensive places to buy land, to buy dirt. What do you think are maybe some of the things folks should look for as they think about markets to identify? Yeah, I think looking on the outskirts of the town. So looking where is there growth that's coming out of the town. So like I think of Denver, for example, like if when you're driving to the airport, like just I mean, I've probably started going to Denver four years ago, maybe five. And just since then, how much is slowly coming out towards the airport to like the new development?

24:38Like there is nothing there, nothing. And now there's, you know, things popping up. So I think going and looking at different cities or towns where there's a lot of growth and looking where are they expanding to? Where are the pockets where, you know, people who can't get houses in that area, they're moving out a little bit. So look in those areas. And then I think another thing is to look at where there's rising building permits. So, you know, you can look online in most cities, what how many building permits were filed, what they were filed for. And, you know, the more building permits means there's more demand for land already there.

25:20And you can, you know, look, are these for residential homes? Do a lot of people want to build residential homes in this market? Then that's probably a good area for you to look for land for. And some like really good tools you can use is just like the county GIS mapping system. My dad actually showed this to me. He would use it when he would go hunting to look up who owned land if the deer he was tracking went on someone else's land or whatever. But this was like, I use this religiously for years and it's free to use. There's more advanced options that you can pay for, like PropStream, things like that, resimply.

26:01But the county GIS mapping is free and it will show you who owns a parcel, the mailing address, sometimes what the taxes are. But it will also tell you, like, is it what it's zoned as? It will also tell you, you know, is there frontage? So is there road access? Is it vacant? Is there any properties on it? So that's a really useful tool. And then there's also, like, just looking for properties. You can go to landwatch, land.com. You know, Zillow has a lots and land filter. And then also just even on BiggerPockets, they have the market finder to help you analyze the market too. So obviously the mid-range land flipping, I think, is a concept that more folks should be exploring, especially if it's something that makes sense in your market.

26:52But the third strategy that we want to talk about is bedroom count conversions. So exactly what this sounds like, the idea is taking a property and simply adding more bedrooms to it. It could be taking a two-bedroom home and converting it into a three-bedroom or taking a three-bedroom and converting it to a five-bedroom. And we've actually had several investors on the podcast who have done this in various strategies. We had the Nossums who were leveraging the rent-by-the-room strategy, and they would buy a three-bedroom house and convert it to an eight-bedroom property. So we're talking a massive conversion.

27:31Then we also had Ariel Herrera, who a big part of her strategy was looking for properties that had oversized square footage for the bedroom count so she could go back and add bedrooms. So I think the idea of finding a property that has the footprint, the existing footprint – and this is – obviously, you could do this by doing an addition, but I think we're more so focused on here is like within the current footprint, can you add additional bedrooms? And the reason why this is so valuable is because when you think about both appraised value and rental income, both of those things increase somewhat substantially when you add additional bedrooms.

28:12So the income from a three-bed is substantially higher than the income from a two-bed in most situations. The appraised value on a three-bed is significantly higher than the appraised value on a two-bed, again, in most situations. So finding these properties that give you that opportunity, I think the strategy outperforms because it's a relatively small change, reconfiguring some walls, adding some closets, enclosing maybe a space that's already open to get a pretty fast and high ROI as opposed to doing like a full gut renovation on something else. So one of the things that I really like about this strategy is that I love hidden MLS deals, things that you go to a showing and look at a property and you get excited that you found something that not everyone would see when they're on the MLS.