Sleeping at Work to Build an 8-Unit Portfolio in America’s Most Expensive City

Dave:
Do you assume dwelling in an enormous costly market means you may’t put money into actual property? Suppose once more. At the moment’s visitor works at demanding journey heavy day job, so he’s constructing a rental property portfolio as a backup plan and he’s doing it in and round New York Metropolis. This isn’t a narrative of an already wealthy individual shopping for properties in money. It’s about utilizing hustle and persistence to construct in direction of monetary freedom, even in one of many nation’s costliest markets, Ben was even keen to sleep within the workplace he was working in to kickstart his investing profession. And though that kind of sacrifice isn’t for everybody, it would simply be for you.
Hey everybody, I’m Dave Meyer, housing market analyst and head of actual property investing at BiggerPockets, and at this time we’re bringing you the story of an investor named Ben Chester and I’m tremendous excited to speak to Ben as a result of he’s one of many only a few individuals I’ve ever met who’s doing primary rental property investing in New York Metropolis. Ben isn’t shopping for large residence buildings for thousands and thousands of {dollars}. He’s additionally not shopping for actually dangerous properties in suspect areas. He’s discovered a technique to purchase one bed room residences that cashflow in a few of America’s costliest zip codes. So on at this time’s episode, Ben’s going to inform us the precise formulation he discovered that makes these offers work even when beginning with six figures of debt personally that he had. He’ll inform us the story of how he turned Billy Joel’s home. Sure, really Billy Joel’s home right into a money flowing funding property, how he can offset nearly all of the taxes from his W2 profession with actual property investments and he’ll give us his recommendation for different buyers who need to keep native however dwell in hyper costly markets. Let’s welcome Ben. Ben, welcome to the BiggerPockets podcast. Thanks for being right here.

Ben:
Thanks a lot for having me.

Dave:
Alright, effectively let’s bounce into your backstory a bit of bit. Inform us a bit of bit in regards to the circumstances that led to you getting began as an actual property investor.

Ben:
So lots of people I graduated faculty didn’t get. The very best job was making $30,000 a yr, which in New York Metropolis is mainly the poverty line and I used to be spending all my time on the workplace, however all my cash was going in direction of hire. So making an attempt to run this experiment the place I really determined to secretly transfer into my workplace full time. Maintain on. The place had been you working? So I imply after I say workplace, it wasn’t too dangerous. It was really a sleep clinic. I used to be doing medical analysis for pharmaceutical trials.

Dave:
Oh, okay. So there have been beds in these?

Ben:
There have been beds and the beds weren’t all the time one hundred percent occupied. So there’s plenty of nights the place I really had a reasonably cozy resort room in midtown Manhattan.

Dave:
Wait, had been your employers conscious of this experiment?

Ben:
No, they thought I used to be a tough employee. So that is 2012, so shortly after I received the job Hurricane Sandy hit and I used to be the one one that really confirmed up on the workplace that day, so that they thought I used to be a brilliant arduous employee. They’re like, oh my god, Ben got here in Armageddon and the hurricane, it seems I used to be simply dwelling there so I had nowhere else to go, however I received promoted and type of moved up fairly fast after that, which was superior.

Dave:
So far as I do know, that’s the first time listening to this on the present. I really feel like that’s one thing you see on TV or in a film the place somebody strikes into the workplace to economize on hire, however you actually did it. Say you gave up your residence, that you must know the way you pulled this off.

Ben:
I used to be in a lease so I couldn’t really simply pack up and depart, which it was my unique want to do, however as a result of I used to be on the hook for that hire, I really put it up on Craigslist and began renting it out. Furnace rental, keep so long as you need. I assumed I wanted to solid a large web to get somebody within the hire, however there was loopy demand really for a furnace, versatile housing there

Dave:
I think about.

Ben:
And so I type of hung onto the job so long as I may on the sleep clinic, however that experiment type of ballooned into an precise full-time huge enterprise the place we received enterprise capital funding for it and we had been making an attempt to pitch it as a tech firm to get the higher valuation, however what ended up occurring was we had been getting loopy strain to develop tremendous quick and so we had been taking over heaps and plenty of stock, however these of you which are in medium time period leases or any seasonal leases, it’s very ebbs and flows when it comes to demand. So we might develop loopy fast after which have these massive troughs of emptiness, which finally killed the enterprise. I really left that enterprise with over $120,000 price of personally assured debt that I put underneath that enterprise and it was gone. So I used to be mainly ranging from nothing with, I imply lower than nothing. I had 120 ok of debt that I needed to get well from.

Dave:
Oh wow. What a curler coaster. I imply what do you do at that time?

Ben:
Yeah, so I imply it was fairly devastating. Not solely that, it was the debt, but additionally I had spent years of my life constructing this enterprise and it mainly imploded so wanted to mainly work out the way to survive and I didn’t need to depart New York, which was like my dream was all the time to dwell there within the first place. So I positively didn’t need to depart town, which I feel lots of people find yourself having to do.
And so what I do is I received a W2 job. I actually had no different selection. I needed to do it simply to repay this debt over time. After which I additionally received an residence. I had this entire ability set of the way to hire residences. I knew the way to work with landlords within the metropolis from that have. So I discovered a one bed room residence with my girlfriend on the time. We moved right into a one mattress after which we had the owner reconfigure it to mainly flip it into 4. It was like, I’ll name them rooms, however I used

Dave:
Areas in New York

Ben:
After which we rented, we had received three roommates, so it was my girlfriend and I after which three roommates and so we’ve got 5 individuals in a one mattress, one bathtub. However what was nice about that and we did that for a few yr and a half, what was nice is it lined all of our housing bills, so we actually weren’t having to pay to be there, we simply needed to coordinate roommates, which might type of be a ache, but it surely was price it. After which all my W2 earnings was mainly going in direction of paying off debt and likewise a bit of bit in direction of retirement and stuff like that.

Dave:
I grew up within the New York Metropolis space. I perceive what you’re speaking about while you stated a one bed room simply magically turns into 4 bedrooms, however possibly you possibly can clarify that to individuals who aren’t conversant in that

Ben:
Specific one. We had really the tremendous was additionally a contractor and he constructed short-term partitions mainly, so it felt good. It was really sound privateness and stuff a bit of small, but it surely was livable. After which there’s different conditions the place there’s one the place I actually lived in a walk-in closet with my co-founder. This was previous to that, however once we had been launching the primary enterprise, we lived in a duplex on fifth Avenue, which was wonderful, stunning be place, however we rented the remainder of it out after which we stayed within the walk-in closet collectively. Unbelievable. I adore it.

Dave:
Alright, so that you kind of received again in your toes doing this technique. It feels like one thing you knew from the enterprise you had began type of replicating that for your self personally. Did you then at any level scale to a conventional actual property portfolio or did you simply preserve doing this sort of hustle mentality going ahead?

Ben:
Properly, the purpose all alongside was to mainly do that simply to get out of debt and mainly graduate to the subsequent stage, which was going to be possession. And so I saved up a few yr and a half of saving and paying off debt aggressively to get to the down fee. One factor that’s actually useful, while you talked about discovering a job you can dwell in, one model of that lots of people have entry to is a journey job. So in case you’re in a job the place you’re getting put up in accommodations they usually’re paying your bills, which that was, I used to be capable of not solely get my hire cowl, but additionally I used to be capable of get meals and I wasn’t spending quite a bit after I was on the street. So mixture of that, I mainly aggressively put near all the pieces in direction of saving for an residence, received my first down fee, moved right into a New York Metropolis, which isn’t simple to do, received rejected from just a few as a result of that they had seen my historical past with all these residences I had and the press from having this enterprise.
They’re like, are you going to do that on this residence? I used to be like, no, no, no. Which wasn’t making an attempt to construct a brand new tech enterprise there and bringing strangers and all that. However what I did do is I discovered a one bed room residence in and I say one mattress. It was mainly a closet in Hell’s Kitchen. You most likely comprehend it in one of many grungier areas. In 2019, my girlfriend moved in, additionally my brother transfer in. So we’ve got three individuals now, which felt like luxurious. We had our personal place. We’re spending most likely $750 every to dwell there, which is tremendous low-cost for New York. That’s remarkable. The principal fee on each single mortgage was in regards to the 700. So I used to be just about from a web wealth perspective breaking despite the fact that I used to be paying into it now, I used to be paying off that mortgage. I used to be at the least impartial on

Dave:
Housing. Everybody, we’ve received to take a fast break, however we’ll have extra with Ben proper after this. So I discovered this factor known as the Lennar Investor Market, and truthfully it’s type of genius. It’s constructed by Lennar, one of many prime house builders within the nation, and it’s a brand new platform for buyers who need turnkey new development properties. These are professionally constructed reinspected and hire prepared. From day one, you may browse properties throughout greater than 90 markets. You possibly can see verified rental comps, neighborhood information, and even deal with financing, title and insurance coverage all via Lennar’s in-house community. It’s all the pieces that you must make data-driven funding selections in a single place. Go to biggerpockets.com/lennar and discover the properties obtainable proper now. Welcome again to the BiggerPockets podcast. Let’s bounce again into my dialog with Ben Chester. I’m curious although, it is a widespread query that I get quite a bit and I feel is fairly widespread in the true property investing group, whether or not it’s New York or LA or San Francisco or any of those fairly costly markets. Why did you select to purchase a house versus say, persevering with to hire and investing in both midterm rental, short-term renters, no matter you need some place else in case you needed to get in actual property? What about this strategy made sense to you?

Ben:
I had no thought. I simply knew I simply want to purchase actual property and so first step was I received to dwell someplace. If I can discover a place I can hold onto. I additionally seen as each month or yearly landlords are elevating hire. So there’s all the time this sort of unsettling feeling. If I need to keep in New York perpetually, there’s an opportunity I may get priced out. I gained’t be capable of afford right here if I’m renting. However in case you purchase, you’re just about locked in. In fact co-op charges can go up, but it surely’s not like a landlord elevating hire on you. So if I may simply lock in a spot and have a 30 yr mounted price and at this level it’s nonetheless under 3% too, I knew I’d be set mainly the place I may be sure at a minimal I’d be capable of afford New York so long as I needed to remain there.

Dave:
Oh, that’s nice. Okay. I like that strategy. And so it feels like that labored for you.

Ben:
It was implausible. Once more, that is 2019, the primary residence mainly locked in. I seen it as I’m set, I’m going to have the ability to keep in New York it doesn’t matter what after which COVID hits. In the meantime, I’m nonetheless making W2 earnings. I’m nonetheless touring on a regular basis. I didn’t actually care if my dwelling circumstances had been horrible. I used to be like, so long as I’ve a spot again within the metropolis to remain in, it’s okay. However I began trying, it was just like the world’s altering proper now rates of interest are nonetheless fairly low at this level. I really began trying in Texas and I found that I’d save on taxes if I moved to Texas throughout COVID. I additionally may discover plenty of actually nice quadplexes and homes there that will mainly cashflow if I purchased the quaint home hack, you progress into one unit, hire the opposite three out, you may mainly cowl all bills. However then with the tax financial savings on my W2 earnings, I really would come out forward even when that property solely broke even. So home hacked with a good friend there for a brief time frame throughout COVID. It was like an important expertise.

Dave:
Do you know what you needed to purchase? Have been you in search of a duplex or are you continue to simply doing the roommate factor?

Ben:
I had no cash nonetheless all the pieces was nonetheless going in direction of, I had a few of that debt left and likewise was nonetheless not making any cashflow. So all of the earnings that’s coming in, I used to be saving it for a down fee and at that time I had solely possibly 20, $30,000 saved up and my good friend was in the same boat, which is sufficient for a down fee. So we ended up utilizing an FHA mortgage, which now you are able to do this with a traditional 5% down, which is wonderful. However we use a 3.5 with a better rate of interest FHA mortgage in Dallas. And so we paid, it was like 30 to $40,000 whole to get into this property cashflow from day one with the unit that we had been dwelling in. And it mainly created this springboard the place the tax financial savings, despite the fact that it was making a small quantity of cashflow, it was simply we had been saving on taxes. After which on prime of that, we had been additionally mainly capable of begin to construct fairness in there and get the tax advantages and all the pieces over time.

Dave:
So what was the place? Inform us about

Ben:
It. So it was a quadplex nonetheless have it at this time. It was 4 items all subsequent to one another, mainly 4 townhouses in a way, all mixed underneath one roof. So it was tremendous good. It was an space in northwest Dallas that was appreciated a bit after which grew to become a great supply of earnings and likewise for tapping in for fairness for a number of the later purchases that they ended up making.

Dave:
And what occurred after that? You left Texas or what was the subsequent transfer?

Ben:
So now charges are beginning to transfer again up at this level. So I had mainly acquired a pair properties I had with this one in New York that had a rule the place you possibly can hire it out after a sure time frame. So I received it as a long-term rental after which I used to be going again to New York and in search of one other place to dwell, and so acquired one other co-op via the same technique. This time I used to be with my brother who was going to maneuver to New York for residency and likewise one other one who’s an architect, two of them. So we’re all going to mainly dwell in a spot that I may discover collectively and type of home hack, which we did. And now the snowballs are actually beginning to take off. And so each couple of years I’m getting a brand new residence in New York after which I’m additionally beginning to get sufficient money the place I can begin fascinated about down funds exterior of town for extra standard leases. You’re pulling off one thing

Dave:
That’s fairly robust, which is by most individuals battle to only pull off a single acquisition in New York, however you’re pulling off a number of. So while you transfer again from Texas, what’s your monetary scenario? Are you making plenty of cashflow off the opposite two leases? Is that serving to you with the down fee or how did you really finance this third buy?

Ben:
Yeah, so the principle factor I’m all the time in search of is simply I would like the property to interrupt even as a result of take note, I’m planning to maintain this W2 job, so I find the money for coming from that. If I can break even on the properties with conservative underwriting, I don’t need to count on me or kohl or something, however so long as a conservative will break even with the tax advantages of appreciation, I’m joyful. So at this level there’s probably not a lot cashflow spinning off the properties. Every part’s breaking even and there’s sufficient for reserves, so lose a water heater or stuff. I may deal with that with out flinching, however I wasn’t dwelling off of it in any respect. What was good although is I had this W2 job, so I used to be having sufficient the place I used to be getting a bit of little bit of financial savings beginning to go. So there have been some artistic methods I later used to faucet into these retirement funds, however mainly I used to be coming again to New York with sufficient to place down a down fee on one other co-op primarily.

Dave:
Do you thoughts sharing us with us the value level of those new co-ops?

Ben:
Yeah, so at this level I’m nonetheless taking a look at it about entry stage, so half one million greenback vary, which is entry stage for New York.

Dave:
Okay, that’s not as dangerous as I assumed you had been going to say. I imply that’s near the median house worth within the US proper now. That’s not like loopy New York pricing the place all the pieces’s $2,000 a sq. foot.

Ben:
That is true. However take note these are one bed room residences with one thing improper with them at that time. So in the event that they’re

Dave:
Proper, you’re not getting the luxurious residence at 500 grand

Ben:
Just like the bathrooms in the lounge. Yeah, precisely. There’s one thing not fairly proper in regards to the place.

Dave:
All proper. So that you’re again in New York, you had your stint in Dallas. Now three properties feels like six items. The place do you go from there? Nonetheless shopping for extra in New York Metropolis,

Ben:
Mainly in search of something. So once more, I don’t actually have a type technique but. I type of dabbled in New York and the multifamily, so I used to be type of trying in every single place to see what would stick. The issue was in New York Metropolis was getting more durable and more durable to seek out these items that will make sense. Not unattainable nonetheless. And I really did find yourself shopping for one other one we may speak about later, however I used to be nonetheless simply trying round New York at this level. One factor that occurred too is I received my license as a realtor to attempt to mainly stretch the cash additional. I used to be like, if I can receives a commission a fee on the similar time of buying these, it type of offsets the acquisition prices. It might be a great technique. And I began to go searching MLS after which additionally simply on Zillow, in every single place round Manhattan, Manhattan wasn’t making plenty of sense. And in addition the cashflow, it’s not very attention-grabbing. Even in case you may discover one thing that is smart, it’s nonetheless simply breakeven. So I began to broaden my search and one hour radius of town and I discovered plenty of actually attention-grabbing waterfront properties, significantly the place they’d be similar worth level, half one million greenback homes wanted work. In order that they’re not stunning, able to go homes, however they’re on wonderful items of land.

Dave:
Are these removed from town or they trip locations? What sort of places had been you trying in?

Ben:
So I knew that the property themselves, so long as they’re near town, I felt like individuals would most likely go so long as the home was a vacation spot in and of itself. So to me, I used to be like my buddies and the individuals I do know, they most likely would journey an hour to go to a lake home and it doesn’t essentially matter the place that lake home is, so long as it’s good sufficient and it’s accessible, you’ll most likely get eyeballs there. And it was type of only a intestine factor. There weren’t any comps on the time. There wasn’t actually any kind of clear information that it was a great choice. I used to be identical to, I feel we are able to make this work.

Dave:
And your plan was to renovate them although it sounds such as you hadn’t actually finished that but at scale, you’ve finished type of placing up these partitions, however now you’re speaking about taking one thing that’s not very good and turning it right into a vacation spot that’s like a fairly large

Ben:
Shift. It was huge. It was far more than I anticipated too. And at this level I began listening to BiggerPockets the place it’s all the time about worth add and persons are coping with contractors and stuff. So I’m like, okay, it appears doable, however oh my god, it’s means more durable than you assume. And in addition I had no thought the way to worth out properties both like renovations and rehabs, however I did know that this was a lovely lot. I discovered this lake home that was on a double lot on a lake that was inside an hour of town and it’s identical to, okay, it wants a brand new rest room, most likely wants some updates to normal updates to the surface and a few security stuff, electrical far more than you’d usually get for a standard home. Nevertheless it was lendable. I may mainly finance it and I used to be like, you already know what? Worst case situation, now I’ve sufficient W2 earnings coming in that even when it takes longer and it implodes, I can at the least maintain the mortgage on this and have it. Worst case situation, I may simply hire it as a long-term hire.

Dave:
How about financing the furnishing? As a result of that, I joke about this on the present, however I feel the worst underwriting mistake I’ve ever made in actual property is simply completely lacking how a lot it was going to value to furnish

Ben:
Brief-term

Dave:
Rental, particularly if it’s an enormous one that you simply’re making an attempt to make a vacation spot, you bought to spend cash to make it cool. You possibly can’t simply throw Fb market stuff in there. How do you pay for that a part of it?

Ben:
Yeah, so really that is one other artistic financing that I discovered alongside the best way nearly accidentally. I do know you’ve talked about earlier than on earlier exhibits, the 0% bank card hack with you may get a 0% intro a PR on a enterprise bank card. Properly, so I mainly did that and I used to be pondering I received a 20 ok restrict on the cardboard. So I used to be like, okay, that’s nice. At that time, I had a brand new LLC for each single property that I had acquired. So I had a pair LLCs with playing cards that I by no means used 0% intro on, however that they had credit score strains. And a cool hack that you need to use, at the least with Amex and Chase is you may really take credit score strains from these different companies and put them onto the 0% card and it’s free. They allow you to do that, you simply name ’em up, it takes like six minutes. So I turbocharge that intro 0% card to mainly fund the complete rehab. And so I didn’t pay any, I feel between 12 and 18 months I didn’t pay something in any respect when it comes to curiosity and I simply paid it off by the tip.

Dave:
Alright, time for the disclaimer although. This can be a nice thought. If you happen to pays this off. Utilizing this sort of mortgage generally is a very efficient technique. I hear individuals do that mostly in short-term leases. I feel that is type of a standard strategy to doing this, getting the 0% curiosity. It’s a technique to get just about free financing, however in case you don’t have a plan for repaying that again and it’s received to be a great plan, this might be actually harmful. So it’s a type of issues the place you type of need to use these while you don’t actually need it. If you’re like, I’m banking all the pieces on utilizing this 0% rate of interest bank card, I wouldn’t do this personally if I had been you. Ben has a W2 job, he has different sources, he has different belongings in order that if one thing goes improper, he can deal with that. We speak about this quite a bit on the present, there are completely different sorts of money owed. There’s good debt, there’s dangerous debt. Bank card debt is dangerous debt. If you happen to’re not paying it off, that’s tremendous costly debt. It may well actually snowball right into a lure. So that you simply need to watch out with that. However once more, if you already know what you’re doing and also you do it fastidiously, it may be a great possibility for you. So how’d this one work out? Massive shift in

Ben:
Technique. So I purchased the property for a bit of over 500 Ok, ended up anticipating 30 Ok, 40 Ok whole to place into it. That was a brand new rest room, electrical updates that I didn’t even notice had been that extreme. That ended up being extra difficult than I assumed. After which I put in new HVAC system in it ended up costing extra like 150 Ok for all of the rehab plus the holding prices plus additionally the furnishings as a result of I overbuilt it greater than I wanted to. And in addition I most likely did extra work than I actually needed to, however because of this it ended up being, and once more, my purpose was simply to interrupt even, but it surely ended up money flowing a ton and it ended up being a extremely wonderful entry level into the Airbnb market round New York Metropolis.

Dave:
How are you managing it? Did you do all these items your self?

Ben:
Yeah, so I used to be doing it myself simply by default. I used to be like possibly I’ll put a supervisor in ultimately. And I began interviewing property administration corporations, however via BiggerPockets I really stumbled upon this short-term rental loophole and I used to be like, you bought to be kidding me. This may’t be actual. That is unbelievable. And so I learn the books on it. I went via three or 4 completely different accounting companies till I discovered one which was like, yeah, effectively let’s do that. And so mainly, so long as you’re working a W2 job and also you’re self-managing your Airbnb, you may take the losses together with depreciation, together with any bonus depreciation that you simply’re utilizing, which might be substantial. Take all that and apply it as a loss towards your W2 and are available to successfully, you may get near paying no taxes, which is insane. That’s after I was like, oh my God, that is the brand new technique.
It is smart. I’m going to maintain my W2 job. I’m going to accumulate as many Airbnbs as doable and simply to make it possible for I’m maxing out these losses each single yr on paper so I can mainly offset my taxes. Keep in mind, I’d began out pondering, I need to management my housing prices. I assumed that was the most important expense that an individual would have, however actually the most important expense nobody thinks about is definitely the tax facet. I’m like, it is a recreation changer. Not solely am I probably not paying for housing, I may additionally utterly undo my taxes or not should pay them and offset them if I do that the suitable means.

Dave:
Stick with us as we take a fast break. We’ll have extra with Ben proper after this. Welcome again to the BiggerPockets podcast. Let’s get again into my dialog with investor Ben Chester. I feel the kind of journey and evolution of philosophy and technique about investing is widespread, that you simply don’t actually begin for the tax advantages, however ultimately you get to a degree the place you notice that in case you maximize your tax advantages, it will possibly considerably enhance your returns. I’m not speaking about 1% or 2%. It may well make 5 10% distinction in your price of return every year, which is wonderful. That’s higher than shopping for bonds generally. That might be higher than investing within the inventory market simply from the tax advantages that you simply get.

Ben:
It’s insane. And I give it some thought, my job is fee primarily based largely sub in a tech gross sales job the place I can put extra effort in and get extra pay. And the quantity of effort I put into getting extra pay is means more durable than simply saving on the tax facet. So you may find yourself going quite a bit additional by saving on taxes and having to go get a second job or simply work 40 extra hours every week or one thing like that.

Dave:
Are you able to give us a quantity? How a lot do you assume considered one of these saves you in taxes per yr?

Ben:
So there’s a restrict. If you happen to’re single in taxes, you are able to do as much as $305,000 of tax offset per yr. That’s the restrict you can’t do anymore in that towards your W2. I’ve maxed it out yearly with much more carrying over.

Dave:
Yeah, only for everybody understanding what Ben’s saying is that if your wage, I’m simply going to make this up, Ben, is 250,000, however you had that $305,000 of losses, you may carry over $55,000 in losses into the subsequent yr.

Ben:
Precisely.

Dave:
Yeah, it’s fairly wonderful. Yeah, it’s nice.

Ben:
It’s insane. You are able to do that.

Dave:
Yeah. So that you’re primarily offsetting your entire W2 earnings?

Ben:
Yeah, primarily,

Dave:
Simply so everybody understands, to get 100 grand in depreciation offset, what sort of property do that you must purchase?

Ben:
So it’s really not that loopy. 100 grand in depreciation offset. Now once more, there’s the tax deduction and there’s precise, with the tax financial savings you’re making, so you really want to determine your efficient tax price. Most individuals are most likely between 30, 40% in case you’re in that vary. And you should buy, let’s say one million greenback property with a price segregation examine. You bought to separate land, you bought to ensure it’s the suitable kind of report that you simply construct. So there’s a complete factor that goes on the place it’s a must to rent an engineer to do it and be sure you have the suitable kind of separation of the asset to determine what’s bonus depreciable. Typically, you may get at the least 20, 30% of the acquisition worth again is a straight eligible for bonus depreciation. So in case you simply need a hundred Ok, you purchase a 300 Ok property, you’re trying fairly good at getting 100 Ok write off.

Dave:
And in order that’s providing you with 100 Ok write off. And in case your tax price is let’s say 33%, you’re saving $33,000 in taxes by shopping for a property. I’m curious, what’s your learn on short-term leases as a method proper now as we’re coming into 2026?

Ben:
The issue with short-term leases that you simply don’t get with the long-term stuff is it’s good. You possibly can nonetheless pair in lengthy 30 yr mounted price debt, which is the one kind of debt I exploit apart from the intro to bank cards and stuff like that. However actually the substantial mortgages, I’m solely taking a look at 30 yr mounted price. I feel it de-risks the long-term horizon. However the issue with short-term leases is you’re additionally locked in not simply to regular long-term rents, however you’re actually relying quite a bit on the financial system. Folks having disposable earnings to journey. The area can change quite a bit, lot extra dynamically than 12 month leases have a tendency to alter. So one factor I have a look at, and that is partly why it makes plenty of sense round New York Metropolis, is I would like an space that folks will journey to my home, to not the realm.
A great instance is the newest buy I made was, that is unbelievable, again to maximizing buy worth and discovering one thing that will make sense inside an hour radius in Manhattan. On Zillow. I child you not Billy Joel’s home was listed on Zillow and it was listed for $2 million. And I’m like, effectively, that’s quite a bit. I did the mathematics. I’m like, that’s plenty of bonus depreciation and I may get plenty of write offs for that. So I underwrote it, checked out it and dug into the historical past. It seems it was owned by JP Morgan. There’s this large historical past round the home and tremendous attention-grabbing, actually distinctive factor on Hudson River, fairly near Manhattan. And so I purchased it.

Dave:
Wait, you got Billy Joel’s home?

Ben:
I purchased Billy Joel’s home. It’s actually up on Airbnb. That’s superior.

Dave:
How did we not get to that scooter on this episode? That’s the best factor I’ve

Ben:
Heard. So that is what it culminated in, which is nice. So I purchased Billy Joel’s home, it’s like up on Airbnb once more. I did a fairly large rehab challenge on it, however I used to be in a position to make use of, once more, intro bank cards. So I used that to ensure I may entrance the rehab on it, purchased it for two million, put about 300 Ok into it. That’s now price about 2.6. That is solely a yr later. And with the tax financial savings that I received, it was near one million {dollars} in tax financial savings which are going to

Dave:
Carry over for a number of years. Oh my God, that’s

Ben:
Unbelievable. That was from final yr. That was nonetheless 60% of the bonus appreciation. So if it was even six months later, it could’ve one hundred percent have been much more. However

Dave:
Wow. That’s unbelievable. Ben, congratulations. You actually discovered a really artistic technique. You’ve clearly gone and brought what you realized from your online business, which isn’t precisely short-term leases, however I’m positive you realized quite a bit about simply maximizing house, extracting worth out of properties and utilized it to a extremely cool means of being profitable in an space of the nation the place individuals always say, you can’t be an actual property investor. And I simply need to commend you for being so artistic and clearly hustling very arduous to determining the suitable means to do that.

Ben:
Thanks. I feel every deal is type of in a vacuum. It doesn’t matter the place it essentially is. If it will possibly pencil out, it is smart. And I feel New York, you bought to be a bit of bit artistic. It’s not all the time one dimension matches all. It’s not going to be a print and repeat kind of a spot, however you may positively discover distinctive properties and distinctive offers. And even on the residence facet, there’s nonetheless tons of issues yow will discover to restrict down funds, to determine how you need to use leverage or work with the owner vendor financing. There’s issues you may nonetheless do to just remember to’re shopping for into the market you’re all for.

Dave:
So earlier than we get out of right here, Ben, as we enter 2026, what does your portfolio seem like at this time?

Ben:
So proper now I’ve about eight properties. Most of these are within the state of New York, three Airbnbs together with Billy Joel’s home, which is the large one. It’s

Dave:
Superior.

Ben:
It’s the

Dave:
Coolest factor you possibly can say. That’s such a great bragging level.

Ben:
Thanks. And I held on to my W2 jobs, so nonetheless deal with that and type of constructing that firm on the similar time. Additionally in search of extra Airbnbs. So

Dave:
Superior

Ben:
Technique out into future years is to maintain maximizing this loophole. It appears to be like prefer it’s going to be round for some time longer, so I’ll preserve exploiting it so long as I can and simply preserve constructing the empire.

Dave:
All proper. Properly, subsequent time I’m within the northeast to go to family and friends, I need to keep at Billy Joel’s home.

Ben:
You’re welcome. Anytime it’s known as Craig’s.

Dave:
Craig’s an property. Thanks. Superior. All proper. Properly Ben, thanks a lot for being right here. We admire it.

Ben:
Thanks a lot for having me. It’s been a dream to be right here.

Dave:
And thanks all a lot for listening to this episode of the BiggerPockets podcast. I’m Dave Meyer. We’ll see you subsequent time.