Sleeping at Work to Construct an 8-Unit Portfolio in America’s Most Costly Metropolis

Dave:
Do you suppose residing in a giant costly market means you’ll be able to’t put money into actual property? Assume once more. Right now’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 particular person shopping for properties in money. It’s about utilizing hustle and persistence to construct in the direction of monetary freedom, even in one of many nation’s most costly markets, Ben was even prepared to sleep within the workplace he was working in to kickstart his investing profession. And though that sort of sacrifice isn’t for everybody, it’d simply be for you.
Hey everybody, I’m Dave Meyer, housing market analyst and head of actual property investing at BiggerPockets, and immediately 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 folks I’ve ever met who’s doing fundamental rental property investing in New York Metropolis. Ben isn’t shopping for big residence buildings for tens of millions of {dollars}. He’s additionally not shopping for actually dangerous properties in suspect areas. He’s discovered a method to purchase one bed room flats that cashflow in a few of America’s most costly zip codes. So on immediately’s episode, Ben’s going to inform us the precise method 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 virtually 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 stay 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, nicely let’s bounce into your backstory a bit bit. Inform us a bit bit concerning the circumstances that led to you getting began as an actual property investor.

Ben:
So lots of people I graduated college didn’t get. The perfect 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 the direction of hire. So attempting 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 once 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 at all times one hundred percent occupied. So there’s a number 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 truly confirmed up on the workplace that day, in order that they thought I used to be an excellent onerous employee. They’re like, oh my god, Ben got here in Armageddon and the hurricane, it seems I used to be simply residing there so I had nowhere else to go, however I received promoted and form 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 save cash on hire, however you actually did it. Say you gave up your residence, it’s worthwhile to know the way you pulled this off.

Ben:
I used to be in a lease so I couldn’t really simply pack up and go away, which it was my unique need 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 believed 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 form of hung onto the job so long as I might on the sleep clinic, however that experiment form of ballooned into an precise full-time large enterprise the place we received enterprise capital funding for it and we had been attempting to pitch it as a tech firm to get the higher valuation, however what ended up taking place was we had been getting loopy stress to develop tremendous quick and so we had been taking over tons and many stock, however these of you which might be in medium time period leases or any seasonal leases, it’s very ebbs and flows when it comes to demand. So we’d develop loopy fast after which have these large 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 beneath 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 better 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 determine the way to survive and I didn’t need to go away New York, which was like my dream was at all times to stay there within the first place. So I positively didn’t need to go away 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 flats. 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 now we have 5 folks 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 form of be a ache, but it surely was price it. After which all my W2 revenue was mainly going in the direction of paying off debt and in addition a bit bit in the direction of retirement and stuff like that.

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

Ben:
Explicit one. We had really the tremendous was additionally a contractor and he constructed momentary partitions mainly, so it felt good. It was really sound privateness and stuff a bit 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, lovely 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 form of replicating that for your self personally. Did you then at any level scale to a conventional actual property portfolio or did you simply hold doing this type of hustle mentality going ahead?

Ben:
Nicely, 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, if you talked about discovering a job that you would be able to stay in, one model of that lots of people have entry to is a journey job. So if you happen to’re in a job the place you’re getting put up in accommodations and so they’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 loads once I was on the street. So mixture of that, I mainly aggressively put near all the things in the 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 they’d seen my historical past with all these flats 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 attempting 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 now we have three folks now, which felt like luxurious. We had our personal place. We’re spending most likely $750 every to stay there, which is tremendous low cost for New York. That’s remarkable. The principal fee on each single mortgage was concerning the 700. So I used to be just about from a web wealth perspective breaking though I used to be paying into it now, I used to be paying off that mortgage. I used to be not less than 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 referred to as the Lennar Investor Market, and actually it’s form of genius. It’s constructed by Lennar, one of many high dwelling builders within the nation, and it’s a brand new platform for buyers who need turnkey new building houses. These are professionally constructed reinspected and hire prepared. From day one, you’ll be able to 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 things it’s worthwhile to make data-driven funding selections in a single place. Go to biggerpockets.com/lennar and discover the houses obtainable proper now. Welcome again to the BiggerPockets podcast. Let’s bounce again into my dialog with Ben Chester. I’m curious although, this can be a widespread query that I get loads and I feel is fairly widespread in the actual property investing neighborhood, 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 someplace else if you happen to wished to get in actual property? What about this method made sense to you?

Ben:
I had no concept. I simply knew I simply want to purchase actual property and so first step was I received to stay someplace. If I can discover a place I can dangle onto. I additionally seen as each month or yearly landlords are elevating hire. So there’s at all times this type of unsettling feeling. If I need to keep in New York eternally, there’s an opportunity I might get priced out. I received’t be capable to afford right here if I’m renting. However if you happen to 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 might simply lock in a spot and have a 30 yr fastened charge and at this level it’s nonetheless beneath 3% too, I knew I’d be set mainly the place I might be certain that at a minimal I’d be capable to afford New York so long as I wished to remain there.

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

Ben:
It was incredible. 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 revenue. I’m nonetheless touring on a regular basis. I didn’t actually care if my residing 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 wanting, it was just like the world’s altering proper now rates of interest are nonetheless fairly low at this level. I really began wanting in Texas and I found that I’d save on taxes if I moved to Texas throughout COVID. I additionally might discover a number of actually nice quadplexes and homes there that may mainly cashflow if I purchased the quaint home hack, you progress into one unit, hire the opposite three out, you’ll be able to mainly cowl all bills. However then with the tax financial savings on my W2 revenue, I really would come out forward even when that property solely broke even. So home hacked with a buddy there for a brief time frame throughout COVID. It was like an awesome expertise.

Dave:
Do you know what you wished 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 things was nonetheless going in the direction of, I had a few of that debt left and in addition was nonetheless not making any cashflow. So all of the revenue 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 buddy 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 residing in. And it mainly created this springboard the place the tax financial savings, though it was making a small quantity of cashflow, it was simply we had been saving on taxes. After which on high of that, we had been additionally mainly capable of begin to construct fairness in there and get the tax advantages and all the things over time.

Dave:
So what was the place? Inform us about

Ben:
It. So it was a quadplex nonetheless have it immediately. It was 4 items all subsequent to one another, mainly 4 townhouses in a way, all mixed beneath one roof. So it was tremendous good. It was an space in northwest Dallas that was appreciated a bit after which grew to become an excellent supply of revenue and in addition 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 may 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 stay, 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 in addition one other one who’s an architect, two of them. So we’re all going to mainly stay in a spot that I might discover collectively and form 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 eager about down funds outdoors of town for extra typical leases. You’re pulling off one thing

Dave:
That’s fairly powerful, which is by most individuals wrestle to simply pull off a single acquisition in New York, however you’re pulling off a number of. So if you transfer again from Texas, what’s your monetary scenario? Are you making a number 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 primary factor I’m at all times in search of is simply I would like the property to interrupt even as a result of have in mind, I’m planning to maintain this W2 job, so I come up with 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 comfortable. So at this level there’s not likely a lot cashflow spinning off the properties. Every little thing’s breaking even and there’s sufficient for reserves, so lose a water heater or stuff. I might deal with that with out flinching, however I wasn’t residing 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 little bit of financial savings beginning to go. So there have been some inventive 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 believed you had been going to say. I imply that’s near the median dwelling value within the US proper now. That’s not like loopy New York pricing the place all the things’s $2,000 a sq. foot.

Ben:
That is true. However have in mind these are one bed room flats with one thing incorrect 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 concerning 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 form of dabbled in New York and the multifamily, so I used to be form of wanting in every single place to see what would stick. The issue was in New York Metropolis was getting tougher and tougher to seek out these items that may make sense. Not unattainable nonetheless. And I really did find yourself shopping for one other one we might speak about later, however I used to be nonetheless simply wanting 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 identical time of buying these, it form of offsets the acquisition prices. It could possibly be an excellent technique. And I began to go searching MLS after which additionally simply on Zillow, in every single place round Manhattan, Manhattan wasn’t making a number of sense. And likewise the cashflow, it’s not very fascinating. Even if you happen to might discover one thing that is smart, it’s nonetheless simply breakeven. So I began to increase my search and one hour radius of town and I discovered a number of actually fascinating waterfront properties, notably the place they’d be identical value level, half one million greenback homes wanted work. In order that they’re not lovely, 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 areas had been you wanting in?

Ben:
So I knew that the property themselves, so long as they’re near town, I felt like folks 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 mates and the folks 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 form 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 an excellent determination. I used to be similar 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 achieved that but at scale, you’ve achieved form 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 large. It was far more than I anticipated too. And at this level I began listening to BiggerPockets the place it’s at all times 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 manner tougher than you suppose. And likewise I had no concept the way to value out properties both like renovations and rehabs, however I did know that this was a fantastic 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 similar to, okay, it wants a brand new lavatory, most likely wants some updates to normal updates to the skin and a few security stuff, electrical far more than you’d usually get for a standard home. However it was lendable. I might mainly finance it and I used to be like, you realize what? Worst case state of affairs, now I’ve sufficient W2 revenue coming in that even when it takes longer and it implodes, I can not less than maintain the mortgage on this and have it. Worst case state of affairs, I might 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 price to furnish

Ben:
Quick-term

Dave:
Rental, particularly if it’s a giant one that you simply’re attempting 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 inventive financing that I discovered alongside the best way virtually 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. Nicely, 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 they’d credit score strains. And a cool hack that you should use, not less than with Amex and Chase is you’ll be able to 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 your 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. It is a nice concept. Should you will pay this off. Utilizing this type of mortgage is usually a very efficient technique. I hear folks do that mostly in short-term leases. I feel that is form of a standard method to doing this, getting the 0% curiosity. It’s a method to get just about free financing, however if you happen to don’t have a plan for repaying that again and it’s received to be an excellent plan, this could possibly be actually harmful. So it’s a type of issues the place you form of need to use these if you don’t really want it. If you’re like, I’m banking all the things 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 incorrect, he can maintain that. We speak about this loads on the present, there are totally different sorts of money owed. There’s good debt, there’s dangerous debt. Bank card debt is dangerous debt. Should you’re not paying it off, that’s tremendous costly debt. It could actually snowball right into a lure. So that you simply need to watch out with that. However once more, if you realize what you’re doing and also you do it fastidiously, it may be an excellent choice for you. So how’d this one work out? Massive shift in

Ben:
Technique. So I purchased the property for a bit over 500 Ok, ended up anticipating 30 Ok, 40 Ok whole to place into it. That was a brand new lavatory, electrical updates that I didn’t even notice had been that extreme. That ended up being extra sophisticated than I believed. 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 likewise I most likely did extra work than I actually needed to, however in consequence 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 things 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 will’t be actual. That is unbelievable. And so I learn the books on it. I went via three or 4 totally different accounting corporations till I discovered one which was like, yeah, nicely 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’ll be able to take the losses together with depreciation, together with any bonus depreciation that you simply’re utilizing, which could possibly be substantial. Take all that and apply it as a loss in opposition to your W2 and are available to successfully, you may get near paying no taxes, which is insane. That’s once 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 potential and simply to ensure that 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 believed 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, this can be a recreation changer. Not solely am I not likely paying for housing, I might additionally fully undo my taxes or not must pay them and offset them if I do that the fitting manner.

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 some extent the place you notice that if you happen to maximize your tax advantages, it may possibly considerably enhance your returns. I’m not speaking about 1% or 2%. It could make 5 10% distinction in your charge of return annually, which is wonderful. That’s higher than shopping for bonds generally. That could possibly 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 manner tougher than simply saving on the tax facet. So you’ll be able to find yourself going loads 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 suppose one among these saves you in taxes per yr?

Ben:
So there’s a restrict. Should you’re single in taxes, you are able to do as much as $305,000 of tax offset per yr. That’s the restrict that you would be able to’t do anymore in that in opposition to 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’ll be able to 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 all your W2 revenue?

Ben:
Yeah, primarily,

Dave:
Simply so everybody understands, to get 100 grand in depreciation offset, what sort of property do it’s worthwhile to 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 charge. Most individuals are most likely between 30, 40% if you happen to’re in that vary. And you should purchase, let’s say one million greenback property with a price segregation research. You bought to separate land, you bought to ensure it’s the fitting sort 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 to have the fitting sort of separation of the asset to determine what’s bonus depreciable. Usually, you may get not less than 20, 30% of the acquisition value again is a straight eligible for bonus depreciation. So if you happen to simply desire a hundred Ok, you purchase a 300 Ok property, you’re wanting 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 charge 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 fastened charge debt, which is the one sort 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 fastened charge. 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 loads on the economic system. Individuals having disposable revenue to journey. The area can change loads, 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 a number of sense round New York Metropolis, is I would like an space that folks will journey to my home, to not the world.
A very good instance is the newest buy I made was, that is unbelievable, again to maximizing buy value and discovering one thing that may 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, nicely, that’s loads. I did the mathematics. I’m like, that’s a number of bonus depreciation and I might get a number 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 fascinating, actually distinctive factor on Hudson River, fairly near Manhattan. And so I purchased it.

Dave:
Wait, you acquire 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 good 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 venture on it, however I used to be ready to make use of, once more, intro bank cards. So I used that to ensure I might 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 might be 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 unimaginable. Ben, congratulations. You actually found out a really inventive technique. You’ve clearly gone and brought what you discovered from your corporation, which isn’t precisely short-term leases, however I’m positive you discovered loads about simply maximizing area, extracting worth out of properties and utilized it to a extremely cool manner of earning money in an space of the nation the place folks always say, you can’t be an actual property investor. And I simply need to commend you for being so inventive and clearly hustling very onerous to determining the fitting manner to do that.

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

Dave:
So earlier than we get out of right here, Ben, as we enter 2026, what does your portfolio appear to be immediately?

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 massive one. It’s

Dave:
Superior.

Ben:
It’s the

Dave:
Coolest factor you may say. That’s such an excellent bragging level.

Ben:
Thanks. And I held on to my W2 jobs, so nonetheless give attention to that and form of constructing that firm on the identical time. Additionally in search of extra Airbnbs. So

Dave:
Superior

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

Dave:
All proper. Nicely, 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 referred to as Craig’s.

Dave:
Craig’s an property. Thanks. Superior. All proper. Nicely 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.