This “Hybrid” Rental Strategy Is a No-Brainer for Rookies in 2026 (Rookie Reply)

0:01Tony:Every week we see the same thing happen in the forums. New investors are motivated, they're consuming all the content, but they're stuck because they're afraid of making the wrong first move.

0:13Ashley:So today we're answering three real questions from beginners. We're talking about how much money you actually need to start investing, whether you should invest locally or out of state, and how to get over the fear of pulling the trigger on your first deal.

0:32Tony:This is the Real Estate Rookie Podcast. I'm Ashley Kerr.

0:35Ashley:And I'm Tony J. Robinson. And with that, let's get into today's first question. So our first question comes from the BiggerPockets forums and it says, I've spent the last few years doing light research on house hacking, on flipping properties and the BRRRR strategy, but I've never mustered the courage to enter the market. After all of this time, I realized that I just can't wait anymore. I've graduated it from college and wants to try to do something with my first year out of it. I don't want to live a life of mediocrity. Any advice for potential ways to get started now? Well, first kudos to you for realizing that you can't just keep waiting.

1:12Ashley:I think that's probably the first big step is realizing that at a certain point, we have to move out of the information gathering stage and move into the action taking stage. Because if we don't do that, then yeah, days turn to weeks, weeks turn to months, months turns to years, and years turns into never doing it at all. So I think that's the first step is just realizing that it is important to finally take action. But I think the advice that I would start with, and we echo this thought a lot, but my first thing is understanding what your motivation is for investing in real estate. Sounds like you're early in your career, so you just graduated from college.

1:48Ashley:So for you, it's understanding what's important to you right now as someone who's a new working professional. Are you doing this because you want to reduce your living expenses? Okay, then house hacking maybe makes a ton of sense. Are you doing this because you want to quickly supplement the income you're making from your day job? Then maybe something more active like flipping makes more sense. Do you want the long-term appreciation? Then maybe just some buy and hold properties where you're plopping down 20 % once every three to five years. So I think first just understanding what your motivation is and why you want to invest in real estate is where I would start.

2:20Tony:This would be my plan. I would house hack, first of all, but I would actually incorporate house hacking, flipping, and burying into this strategy. If you are just starting out and you're maybe renting and you have the opportunity to house hack, this is what I would do. I would purchase a property and I would do a single family home with extra bedrooms and bathrooms and rent out by the room. Okay. And then I'm going to live in this property for two years, renting out the other rooms. At the end of two years, I'm going to move out and purchase another property. And then I'm going to continue to rent the house out for three more years.

3:00Tony:I'm going to fill my bedroom, rent it out. At the end of five years or before the five-year mark, I'm going to sell the property. So this will satisfy the property has been your primary residence for two of the last five years. and you'll be able to sell it for tax-free gain and not pay any taxes on the profit of this property. And how I would incorporate kind of the BRRRR strategy into this is I would buy a property that needs to be rehabbed. And I would slowly do work on it over the course of the two years that I'm living there. Maybe you don't have a roommate right away or someone else living in the bedrooms because you're renovating part of the room.

3:43Tony:But I would do that strategy. And by renovating it, you're adding value to the property. Over those five years, those tenants are going to pay down your mortgage. You're going to have, hopefully, you're buying in an area that sees some appreciation over five years. And then I would go ahead and cash out. But at the same time, you're already another three years into your next property. So I would just keep recycling this method, property to property. So for five years, you're getting rental income on these properties. Two of the five years, you're getting a house to live in. And then you're getting a big gain tax free.

4:20Tony:So that's what I would do. If I was starting over and no kids, no family, just me, and I was renting and buying my first property, that is the plan that I would do for even like 10 years. Do it for all your 20s and by your 30s. you could rack up quite a bit of money that way.

4:42Ashley:I love that approach, Ash, and you gave something super tactical. I think the only thing that I would change if I were to implement a plan similar to that is that I don't think I'd sell all of them. I feel like I would try and maybe sell one, keep one, sell one, keep one. That way, at the end of that decade, not only do you have these big chunks of cash you've been able to make, but at least you've got some that you've kept for the cash flow. And we, you know, we've interviewed quite a few people who have used this strategy, but Matt Kruger was the most recent. And, you know, I think he did every year for like two years, every two years for like a decade, he did this and, you know, ended up with seven properties or so that were cash flowing really well, all with these really low debts and really low out of pocket expenses.

5:22Ashley:So I think I would probably make that one small tweak. So that way I'd still get some of the upside in the portfolio that I'm building, but couldn't agree with you more that if I were in my early twenties with no kids, no wife, no responsibilities aside for myself, um, I would probably choose to make my life as uncomfortable as possible during that timeframe. Um, so that way my thirties could be significantly more comfortable.

5:43Tony:And I'm not talking about sleeping on the couch. I'm still having a bedroom and an on-suit.

5:49Ashley:You know, we, I, we laugh, but, um, Craig Curlop, who we interviewed, uh, I can't remember the, the episode number, but his first house hack, that's exactly what he did. He slept on the couch and he rented out all of the other rooms in his house. So if you want to get that uncomfortable, you can. And Craig's obviously going to be a really successful real estate investor, so it's worked out for him. But to Ashi's point, you can still have a little bit of comfort if you choose to.

6:10Tony:Before we jump into the next question, let's take a quick break. Getting started as hard enough and having the right tools in place early can save you from a lot of rookie mistakes, especially when it comes to staying organized from day one. We'll be right back.

6:23Ashley:Billion-dollar investors don't typically park their cash in high-yield savings accounts. Instead, they often use one of the premier passive income strategies for institutional investors, private credit. Now, the same passive income strategy is available to investors of all sizes, thanks to the Fundrise Income Fund, which is more than$600 million invested and a 7.97 % distribution rate. With traditional savings yields falling, it's no wonder private credit has grown to be a trillion dollar asset class in the last few years. Visit fundrise.com slash pockets to invest in the Fundrise Income Fund in just minutes.

7:01Ashley:The fund's total return in 2025 was 8 % and the average annual total return since inception is 7.8%. Past performance does not guarantee future results. Current distribution rate as of 12-31-2025. Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the Income Fund's Perspectus at fundrise.com slash income. This is a paid advertisement. Okay, we're going to shift gears for a minute to cover something important, especially for new landlords. The shows often talk about getting stuck doing everything ourselves and the cost of sweat equity.

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8:54Tony:Okay, welcome back. We have our second question from the BiggerPockets forums. This one says, hello, everyone. I live in LA and I have been saving aggressively to try and buy a house for myself. I've recently decided to start looking into investing in rentals out of state instead. I have$100 ,000 in cash and as of now, thinking of trying to buy a single family rental in cash if possible. looking for some advice, tips on which markets I should be researching, and if it's a good idea to buy my first investment property in cash, or should I consider financing something that would be more turnkey?

9:28Tony:Thanks in advance for all the help and words of encouragement. Finding this community has really got me excited and motivated. Well, first of all, we love to hear that, and welcome to the BiggerPockets community. So$100 ,000 in cash, a great chunk of money to be able to get started in real estate. So advice or tips on markets to research in. You definitely could buy a property in cash in Buffalo, New York, Syracuse, New York. It won't be the best property, but you could definitely get a decent property and then do some rehab and add some value to the property. but those are at least two markets I know of.

10:14Tony:But I think your first step should really be using the BiggerPockets Market Finder. And you basically go through the steps of looking through markets that kind of fit your criteria. It's a really great tool that you can find, biggerpockets.com, right at the top there is the Market Finder.

10:30Ashley:I think my first question, though, is why the feeling that buying in cash is necessary for that first deal? Is it because you just don't want the, maybe the risk associated with getting debt on your first property? Or they mentioned at the end here, or would buying something turnkey make more sense? Maybe the person asking this question is assuming that they're buying like a really rough rehab and that's why they want to buy in cash. So I think just answering that question first would be important. Because mathematically, you're going to get a better return on your investment if you include leverage in the purchase.

11:07Ashley:Because if you've got$100 ,000, you could spend$100 ,000 to buy that property, or you could spend maybe$25 ,000 to get that same property. And obviously, your cash flow will be a little bit less, but your return on that property would be significantly more. So you could go get four properties at$25 ,000 down each or one property in cash at$100 ,000. And in theory, those four properties at$25 ,000 down each would generate more than the one property paid off. So I think just asking yourself or trying to get an understanding of like, why are you focused on the cash perspective? I think for me, if I were paying cash for a property, it would only work for me if it was a value add opportunity, meaning I could buy something, invest the money to renovate it, and then refinance that property and hopefully recoup some of that cash that I put into that deal.

11:57Ashley:And that's what the BRRRR strategy is. So 100K in cash can get you into a lot of markets across the country. Like Ash said, it's going to be maybe smaller markets. But it is an entry point in a lot of places. So I think that's where I would start is if you do want to go cash, look for a value add opportunity where then you can buy it, renovate it, refinance it, rent it, repeat it all over again.

12:20Tony:And another option too, especially like being out of state, it can be more difficult, not impossible and definitely doable to build your own team and have your maintenance guy and your property manager and all the vendors that you need and your boots on the ground, your agent, things like that. But another option, if you don't have a team and you're looking at a market is looking at a brand new build. We're seeing so many builder incentives, like buying down your interest rates, giving you seller credits, upgrading your home appliances, different things like that, where that may be a great option when investing out of, say, If you don't have a team built, you know, a lot of the properties I buy, they're older properties.

13:04Tony:And, you know, sometimes we're not doing a full, complete gut renovation on them. And, you know, you're going to have older plumbing. You're going to have older exteriors, different things where, you know, you need to have a boots on the ground handyman that's going to go in and make those repairs and stuff like that. So maybe looking at a new build in an out-of-state market is also an option for you. So obviously it's going to have to be if you do decide to get financing because I don't know of any new builds unless you're buying maybe a tiny home that's 200 square feet. You could get a new build for$100 ,000.

13:42Ashley:Yeah, the builder incentives, they've been pretty crazy, I think, these past couple of years as builders have fought with climbing interest rates and squeezed budgets of buyers to make sure they can keep moving inventory. So yeah, definitely a unique thing to try and take advantage of, given where we're at right now in the cycle of the market. All right, we're going to take a quick break before our last question. But while we're gone, be sure that you are subscribed to the Real Estate Rookie YouTube channel. You can find us at Real Estate Rookie if you haven't subscribed yet. And we'll be back with more right after this.

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14:52Ashley:The fund's total return in 2025 was 8%, and the average annual total return since inception is 7.8%. Past performance does not guarantee future results. Current distribution rate as of 12-31-2025. Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the income fund's prospectus at fundrise.com slash income. This is a paid advertisement. The rise of the tech-savvy investor is here. You don't need a huge team or tons of overhead to manage rental properties. Just the right tools. So I want to tell you about how I use RentReady to get ahead.

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17:36Ashley:Now, they're the fastest, too. They just launched 10-day DSCR closing. That's right, 10 days. And they're still the only lender with a DSCR price beat guarantee. That means faster closing, the best terms, zero guesswork. That's Dominion Financial. Check them out at biggerpockets.com slash Dominion. Again, that's biggerpockets.com slash Dominion. All right, welcome back. Our final question for the day also comes from the BiggerPockets forums, and it says, I'm a 28-year-old beginning investor, and I've been more than ready intellectually, financially, et cetera, for almost a year now to buy my first property.

18:12Ashley:I'm going to be the one finding and managing the deal, and my parents will help with half of the purchase or potentially even more. The problem is I'm looking at such a low price point in my area that when I actually get up and close to the house and meet the tenants, I get freaked out. How am I going to deal with these people, especially some of the section eight people I meet, even if I outsource to property management, who knows what repairs and other surprises are in store for me in some of these places. Does anyone have experience with this? Would you say you have to approach some like investments as a semi slum Lord, just because that's the reality.

18:47Ashley:Um, so great question. Um, I think the first thing that I'll say is there's definitely truth in the idea that, But we talk about class neighborhoods when it comes to real estate investing that some of the lower class neighborhoods, your C class, your D class, have tenant pools that are a little bit difficult, a little bit more difficult to manage. It doesn't mean, though, that investing in the quote unquote D class neighborhoods is always going to be a bad investment. I think about our friend Steve Rosenberg, and he shared this story on stage a few times and I've heard him speak. but he had this portfolio of single family homes in a D-class neighborhood.

19:26Ashley:And Steve had a lot of experience in property management at that point. And it was the worst part of his portfolio. And he just said, hey, I'm going to bundle these all up and I'm going to try and see if I can sell them off to someone else. And he sold them to a buyer who bought all of those problem properties that he had. And then he ended up seeing that person like a few years later at a conference. He's like, man, hey, how's that portfolio doing? And the guy who bought them was like, man, these are my best performing properties. So same exact homes, same exact neighborhood, same exact tenant pool, but two slightly different approaches in how they manage it.

19:55Ashley:And for one person, it was their worst performing portfolio. For the other person, it was the best part of their portfolio. So I think a lot of it does come down to you as an individual operator and how you manage those tenants. So that's the first piece. The second thing that I'll say is, is that if you're worried about things like additional expenses around repairs or evictions or whatever those surprise costs might be, work those into your underwriting. So maybe you account for the fact that on day one, not only do you want to account for your down payment, your closing costs, whatever, you know, repairs you need to do, but you're also accounting for on day one, maybe six months of reserves.