Do THIS Before Buying any Real Estate - Dave Meyer, Bigger Pockets Interview

We've got a really exciting guest here today. Those of you who have been crunching around online and going deep in the rabbit holes, I'm sure you've seen bigger pockets. We got the man. This is Dave Meyer from Biggerpockets and he's here to talk to us all things real estate. Dave, an honor to have you on the show. Thanks for being here, buddy.

Absolutely. Thank you so much for having me. I'm excited to be here.

What are the things you should be looking at and what are the most important aspects of understanding how the real estate market works? Just, just to get your feet in the water.

If it were for me, I would do the simplest thing. I tell people this all the time who are maybe a little hesitant or just unsure about getting into real estate, whether it's at as an investment or as a first time home buyer, is just to go Google the median home price in the United States over time and just look at the trends there. I'm a millennial and I think a lot of people in my generation really remember what happened in 2008 and they have a lot of hesitancy or fear around the real estate market and that's totally understandable. But when you zoom out in real estate, the picture becomes quite clear that it's a very stable asset class that if you are in it for the long term, offers really predictable great returns, whether again as an investor or as a, as a primary home buyer. So I think just getting that truth into your mind is like a really good place to start before you start figuring out exactly what tactics and approach you want to personally take to getting into the market.

So on the show I always talk to people. It's, it's not trying to time the market, it's your time in the market. Stealing that from whoever said it first.

Yeah, we all steal that.

That's everything that you just spoke about. The, the basis is. But you have to start. So we don't want people to jump into something blind. We don't want people to gamble. How do you communicate to people the difference between taking action and doing your research and over researching before you take action. And because that starting point, you only get it once and that's what makes you the most money.

This is not surprising. I'm a data person. So my, my answer to people is always to just do the math. And it's not that hard. Like there are calculators. You can go Google right now. Biggerpockets, we have someone but some. But like literally if you just Google like buy Verse rent calculator. You'll see that it's a function of time. And I just did this for myself actually, because I've moved quite a few times in the last couple of years and I've actually been renting since 2020 because I lived abroad and I didn't know how long I was going to stay and then I just moved back to the United States and I'm actually doing this live and flip, but I was debating whether I should rent or buy. So I've done this math quite a few times recently and for me it's usually come out to about five years as a break even. It's basically if you plan to stay in your home for five years or longer, it's usually beneficial to buy a home for every year. After that. It just becomes gravy. Right? You know, if you're going to stay for nine years, 10 for sure. So that's how I recommend people look at this. It's that it's not, you know, you bought at the exact right time. It's like, I just lived in this house for five years. And the reason for that, you've probably talked about this on the show many times, but you know, real estate, the what one of the, you know, considerations, it's not all rainbows and butterflies. There are downsides. One of the downsides is that there's significant transaction costs in real estate. And so even though you probably your property value most likely will be flat or go up in any given year, when you go to sell, you know, it can cost anywhere between 6 to 10% of the purchase price to sell the property. And so you need to wait like five years for the property to appreciate, to pay down your mortgage a little bit to overcome those transaction costs. And that's the main reason you need to like stay in your house. And again, that's just a function of time. So if you start the clock now, regardless of market cycles, you know, it's probably going to be about four or five years. If you buy and the market goes down, that stinks. No one wants that. It happens. I bought my first deal in 2010 and everyone's like, oh my God, that was so lucky. It's like, yeah, but my property value went down for two years until the market bottomed. And you know, people tend to forget that, to forget that part. But yeah, if, if that happens to you, it stinks. But like, then your break even is probably six years, you know, or seven years. And so it's still a relatively cost efficient thing to do unless you plan to move every couple of years. So I think that's how I would recommend people look into it. The other option, though, I should mention, because I am a real estate investor, is the way to get around that is, if you live in a property for three years and you want to move, hold onto it as a rental and then buy another one, if you have the capital to do that. But a lot of times you can refinance, take some money out, or get a new FHA loan. So there's a lot of ways to do that. And so that's another way that people if you're not ready to sell, you haven't held onto it long enough, or you just like the idea of owning rental properties, you could just do it again.