How to Keep Tariffs from Derailing Your Renovations (Rookie Reply)

The economic landscape is shifting fastWelcome to another episode of Rookie Reply. Today we’re diving into the changing economic landscape from weighing the viability of the Burr strategy in today’s tariff environment to navigating last minute purchase agreement surprises that could cost you thousands of dollars right before closing. Welcome to the Real Estate Rookie podcast. I am Ashley Kehr. Tony’s out for the day, but Garrett Brown from Bigger Stays is here to help out. Thanks so much for joining us today, Garrett.Always excited to be here. I have some big shoes to fill with the man, the myth, the legend, Tony being gone, but I’m happy to be in this episode and talking about everything going on. Today’s questions, we are highlighting the real challenges that are happening for real estate investors all over the US and we’ll talk through how rising material costs are transforming real estate investing going forward and what to do if a seller wants to change the contract three days after it comes up for you. So it is going to be a good one today.Yeah, so let’s start with our first question, and this is from Mark Young and this question was pulled from the BiggerPockets forums. So Garrett, this is a great question for you as BiggerPockets, short-term rental expert. His question is, I’m buying my first short-term rental vacation home, should I use rabu? Okay, so it goes on to say I’m looking to buy a short-term rental vacation home around Destin 30 A. Has anyone had experience with using rabu? What was your experience? Do the numbers work on their site? I have $100,000 to put down. Any advice would be appreciated. Okay. Well, Garrett, coming from the world of long-term rentals, what is rabu?Rabu is, I’m sure there’s quite a few of them out there, but there’s pretty much three or four main short-term rental data sites out there that you’re able to see what kind of numbers some properties can make for you, what different markets and areas are doing. Rabu is one of the good and prominent ones that have been out there. There’s also Air DNA Price Labs is one that I particularly like a lot, and then there’s Mash Pfizer as well. Those are probably the big core four, but there’s a lot of data out there and I highly recommend researching ’em. I think a few of the things to unpack there because a lot to think about as you’re doing that. I always Avery Carl, who is one of the queens of short-term rentals out there, she loves the 30 A market. She’s a great resource to probably learn a little more about that particular market.I don’t know as much about it, but I have heard strong headwinds over there. It’s something that you definitely need to be aware of your insurance costs before you even consider that market because Florida is known to be kind of the insurance desert at times. Now you can use something like the Steadily insurance calculator that is on BiggerPockets as well, that you can type in your address and see what those potential costs may be. That’s a big factor in Florida. And then as you’re kind of penciling out some of these numbers, I even helped create a BiggerPockets STR calculator. It’s essentially a very robust spreadsheet that’s going to have all the expenses you could expect for different short-term rentals, how to calculate your long-term growth within it like 10 years from now, how that investment’s going to play out for you. And you can get that at BiggerPockets as well under their STR calculator section.Those are going to be two really good resources that live on BiggerPockets to help you kind of refine some of these numbers. I’ve heard great things about 30 A, but if you have a hundred K to put down, that’s a pretty substantial chunk of money that you probably can find some good investments out there in a few different markets. So you have to think about your lifestyle and with this as well, do you live near 30 A? Is this going to be a completely remote rental that you’re managing or is this a market that you like to visit? And you’ll be able to get some value for that from your family as well while having an investment that is paying for itself and giving you that lifestyle benefit. It’s kind of tough to say, but my rule, if you’re thinking you have a hundred K, you probably should be looking for a market that you’re probably going to be able to get into for about 300 to 400,000 because you’re going to probably have to put about 20 to 25% down on that and you’re still going to need some leftover to do some of the furnishings and things like that.So if you’re not seeing anything in the 30 a market, there’s a few other markets out there too that in a beach area might be able to suit your needs so you can dive into a lot of different ones. Things like Corpus Christi, Texas is a market that I’m a little bit bullish on for having an affordable place, but still having a lot of guests traveling there. Texas has some of the biggest feeder cities in the country. There’s even other ones like Charlottesville, Virginia is another really good one that I’ve seen coming up a lot too. So I would just weigh some different options and use those tools in BiggerPockets and decide what your actual goals are. That’s the cool thing about real estate is it really comes down to what you desire and what you can make out of it and what works best for you.Yeah, that last statement you just said is it really comes down to you because so many people could tell you that, yeah, this is a great market or no, it’s not. And just in the example of dust, Dustin, Florida, you said Avery Carl Investor. I literally saw a reel this morning where she was being interviewed by Mikey Taylor and he was asking her, what are your favorite markets of 2025 for short term rentals? And that was one of them that she listed, but I was just on a podcast with Henry Washington and Dave Meyer and Henry Washington went, okay, I’m three. Me and Dave are going to say what market we would never ever invest in or what state we would never invest in. They go 1, 2, 3, and both said Florida, they wouldn’t buy anything in Florida, but also they’re not really short-term rental investors. They do have short-term rentals, but that’s not their primary investment.So I think it definitely does depend on your goals like Garrett said. One other thing to add, thanks so much for including that short-term rental analysis calculator. We will add those into the show notes for you guys, or if you’re watching on YouTube, we’ll put it into the description so you guys can get access to that. Also, go into the BiggerPockets forums and set up keyword alerts. So you can put a keyword in for Destin. You can put in a keyword alert for Florida. Every time somebody mentions that market, you’ll get an alert and you can go and see what people are talking about. Is it positive things, is it negative things? So I do that for the markets that I invest into, and so I have buffalo in there and once in a while is actually somebody talking about the animal buffalo, but most of the time it is about the market. So that’s just another tip that you can add in there.Yeah, those are great resources. I have Houston as one of mine too, and people will pop up things all the time. That necessarily isn’t for me, but I am the first one there when I see that word. So it’s good practice for you for sure.Okay, well we’re going to take a short break, but we’llBe right back after this. Okay, welcomeBack. So Garrett, what is our second question today?So the second question comes from the BiggerPockets forums. Should I rethink using the Burr strategy as my entrant strategy given the tariff environment? And she basically says, hello, I’m the rookies of rookies having joined the community last week, I’m currently saving to invest in my first property. I work, so all cashflow will be in reinvested to build my portfolio. I would like to purchase a multi-family property for long-term rental market, still undecided as I’m learning. I’m very interested in the burr method, but I’m wondering if that strategy will be unrealistic in the next six months given the cost of materials and possibly labor that is projected to increase. Should I be rethinking my strategy as a family of five? We aren’t interested in house hacking, so I’m interested in learning how other investors are approaching this new economic landscape. It’s a lot to unpack there and she definitely puts out some valid points. So I’m kind of curious of what you think of that question and where your head kind of went with that. Ashley, as you heard it,First of all, Danil, welcome to the Ricky community. We’re so glad to have you a part of this and one of the best things you can do as a rookie is actually host in the forums and tell people what you’re looking to do and ask questions. It’s one of the fastest ways to get your questions asked by other investors. So yeah, make sure you’re not, if you’re not already, make sure you’re on biggerpockets.com in the forums. So with this question, the first thing that I actually thought of is, okay, what are other ways to save money? So if repairs are going to cost more because of the material cost from tariffs, what are other ways that you can make your deal more creative? So one way is to use a 0% interest credit card where you’re not using your own capital, you’re using the credit card or you’re not using a hard money lender, you’re not using private money where you’re paying interest on it and you’re saving money in the deal as a whole.So that way you have more room to spend more on materials because of that, the next thing is to get multiple bids because the labor cost, you’ll be able to control more material costs are harder to fluctuate, but labor, I just got a quote for siding on a property. The first quote I got was $21,000. The second quote I got was $12,000. Literally a drastic difference and I nitpicked both quotes I went through to make sure they were comparable apples to apples and that I wasn’t getting this cheap off a market brand of siding or whatever. But that’s another thing you can do is make sure that you are really getting a lot of quotes and that you are getting the best price for labor and materials too. One of my favorite things to do and especially when I’m doing a big rehab like a flip or maybe even just a turnover in an apartment is use a bid room.So I use Lowe’s primarily just because it’s closer to most of my properties, but Home Depot also has this where you go in and you create your shopping list and you can email it or you can take it right into Lowe’s and say, these are the items I want to buy, and they’ll actually go in there and they will kind of work through the numbers and give you a discounted price. So they take it and they shop other places to make sure that they’re giving you the best price. So for example, the last turnover we did, we were spending about $4,000 and when we brought it into Lowe’s of what the materials were, we got $800 taken off of it. That is a significant amount of savings. So make sure you’re doing some of these strategies to get the best deal on your materials, on your labor and the deal as a whole.The best way to save money is the purchase price. If you don’t think the numbers will work out because of tariffs and the increase in materials, that means you’re going to have a larger budget that you will need to rehab the property. So that means you cannot offer as much. You’ll have to reduce. So in this situation here, if you think in the next six months cost of materials are going to be driven up and labor will increase, what does that estimate now look like and how much do you need to reduce the price that you’re actually offering on the property? By that is one of the best ways that you can manipulate the numbers of your deal is by offering less on the property.Those are great, great details to add because even we’re building a new short-term rental soon and I got three quotes on septic. One came in at 16,000, then I got one at 12,000, then I got one at 10,500. So it’s always shocking the variance in between these different quotes, but definitely one of the best things that you can do to make sure you’re spending the best use of your time and getting the best bang for your buck is get a few extra quotes more than you probably even think, especially if you’re newer because you never know what you may overlook and you never know who you may meet during that process that you really kind of develop a good relationship with and you can have some rapport that builds to build your portfolio even more as she mentioned.Yeah, I couldn’t agree more. I think that in making those connections with different contractors too, so as you build and grow your portfolio, they’ll know that they have your business most of the time and we have a plumber and we give them all of our maintenance on our property, so there’s a plumbing issue at any of ’em. They get the call. It’s not a significant amount of money that they make off of this, but that still we’re giving them business constantly unfortunately. And then so when we do have either emergencies or we do have bigger jobs that need to be completed in a timely manner and for a good price, they are our go-to, but we do still, even though they’ve been so good to us, we do still get second quotes, third quotes, fourth quotes on some of these bigger jobs just to make sure that they’re still staying competitive with us too.Yep, same here. Couldn’t agree more on any of that.Okay, we’re going to take a quick break before our last question, but while we’re gone, make sure you are subscribed to the realestate rookie at YouTube channel. You can find us at realestate rookie on YouTube, but you can also find us on Instagram at BiggerPockets rookie. We’ll be right backWith more after this. Okay, let’s jumpBack in. We have our last question today, and this one is actually pulled from the Reddit forums. Hi everyone. I could really use some advice and want to share my recent home buying roller coaster. My closing is in just three days and today my real estate agent told me that the seller is suddenly increasing our purchase price by $7,000. So here’s the situation. We originally offered $650,000 on a property. The sellers then asked all buyers to submit new. We included an escalation clause saying we’d go up to 680,000 if someone else offered more than 650,000. The seller accepted another buyer’s offer and declined ours. Three days later, the seller came back to us after the other buyer backed out and accepted our offer, the realtor told us that the price is 650,000. Now just days before closing, the seller claims the price should be 657,000 because of our escalation clause saying they have proof another buyer offered around that amount.When I pushed back and told my realtor that the purchase agreement stated 650,000 and the escalation clause applies only before acceptance, my realtor came back with, but if the $655,000 offer was dated before April 8th, which was our acceptance, then the sellers got us, which it was my question is can the seller legally raise the price after we both signed the purchase agreement? What should I do next? I always thought that once both parties sign the purchase agreement, the price is locked in unless both sides agree to a change, any advice or insight would be really appreciated. I actually was shocked when I read this. I was like, oh my God, this would be an awful situation. So be it. First of all, Garrett and I are not attorneys and I really do think an attorney is the best course of action. It’s most likely going to be less expensive, less than $7,000 to have an attorney take a look at this and tell you one way or the other and what are your options. So that would be my first plan of attack. But Garrett, you and I can weigh in and give our opinions. So what are your first thoughts on this?So I have been a realtor for eight years now, somewhere along those lines. And escalation clauses are definitely one of the most tricky things in real estate I’ve seen for a few different reasons. When you go to real estate agent school, they don’t teach you about escalation clauses. There’s a lot of things you learn in the field basically. So it’s a lot to unpack here and it’s hard to really give a full realtor opinion from this. I’m sure there’s a few things I might be missing, but my first step would be if your realtor is not a broker, you need to involve their broker because that’s who the realtor is under basically, that’s who their license is held under. They’re the ones responsible for that realtor and they usually have a much higher level of understanding. If I was the realtor in this situation, the first person I would call is my broker.And so you as the client of the realtor, you need to get this broker involved because they are who you’re actually signed under. It’s not the realtor technically, but say this realtor is the broker, your next best step is anytime there’s anything legal involved. I can’t reiterate enough what Ashley said, like this is going to be the time you need to get a real estate attorney involved because it’s going to be cheaper than that $7,000 because from what it sounds like to me, if I misheard it wrong or read it wrong, if the purchase agreement was signed for that price and they’re coming back right before closing, there’s a lot of red flags around that that they may be in the wrong, but it’s hard to say just reading through a Reddit post about this. So it’s never my favorite answer to give like, oh, go spend more money with a real estate attorney, but this is going to be one of those situations that there is nobody else that you are going to be able to fully trust.Besides the broker is going to be an extremely good resource, but not all brokers are not lawyers either, and not all brokers are made equal. So I don’t know if that advice is going to be fully what you want to hear, but that would be the steps I would take. I would talk to the broker of the realtor you’re working with, and then next go to a real estate attorney, especially if they’re not clear cut on what exactly is going to play out or if they’re still in favor of the 657,000 purchase price. But escalation clauses are always a little tricky with different scenarios just like this. They always tend to pop up it seems like.Yeah, and I mean ultimately it basically comes down to you lose out on the deal, you get sued or you call their bluff. Those probably are the three options that are going to happen is to you say, okay, no, we’re staying at this price and the seller backs out of the contract. I mean, you could have the option to sue them for that and see if you have a case for that, or you could say, no, I’m not paying the 6 57, and you could back out of the deal and then they could potentially sue you for that. So I think that’s really what it comes down to. And I will say in New York State, you have to have an attorney to close on a property, and that is one benefit of the very few benefits of being an investor in New York State is that you already have the legal counsel assisting you along the way.So it’s not, this question wouldn’t be an additional expense really, but I think that you have to kind of look at the pros and cons of if you are, how much do you really want this deal? And I think there is some risk into saying, no, we want to stay at the six 50. That’s the agreed upon, and we will take you to court if you say not. We have a signed contract that states the purchase price on it. In my experience, anytime a purchase price has changed for any reason or there’s a credit or anything that happens, the contract is always updated to reflect that. And so that’s where I think you do have an advantage where it was never updated on the contract and that’s where maybe this seller has to go after their own agent because their agent did not do that. In New York State. I’m completely hands off with title companies, the attorneys handled that. So I have very little knowledge on title companies, but I am curious, Garrett, if you don’t have real estate attorneys, you have title companies. Yeah. Do you think the title company would have any involvement? Like they’re writing the title, they’re putting it together and they know the purchase price. I mean, would they be a resource for you at all? No,The title tries to stay, and it’s always funny hearing how different, it always reminds me of how states all deal with things differently because hilarious to hear that you have to go through an attorney and it’s like out here, it’s the Wild West in Texas, just show up at the title and hope it’s a lot on the realtor. But yeah, title companies usually are, they try to be as hands off as they can be because that’s not their job. So to me, everything you just outlined, which is completely true, all the options that are going to happen, it sounds like you’re going to have to get an attorney involved almost no matter what if even if you’re thinking about backing out or you want to sue them or so, unfortunately, that’s probably going to be your best, your only resource that’s really truly going to be looking after you in this situation.Because even in the end, I am a realtor and I will tell you that even on for the seller’s side, realtors mess up on little things like that all the time, and their job is to probably protect themselves in that case, and that’s what the broker’s going to do too. So it’s definitely something that you’re just going to need to possibly bring this to an attorney and spend that money if this is truly what the deal you want to go with. And I have a feeling that the agent on the other side is the one that possibly dropped the ball on this situation, but you don’t find out until you dig a little more into the contracts. And that’s just kind of the scope of things over here. So yeah, it’s always interesting here how each state is kind of similar but still kind of different in everything too. So work with trust your agents that are there, but then trust an attorney that knows those contracts in that state even more than anybody else you’re going to deal with.I think this person has another little advantage too, is that somebody else already backed out. So if this person backs out and says, I’m not paying that seven grand extra, that’s two people that have backed out of this deal, which when browsing the MLS and you see something went pending and then backup for sale, something went pending, the backup for sale, that is a huge red flag, even if it could be is wrong with the property, was just literally something like this, a disagreement. They decided to borrow ways, but it does really draw a red flag on the property. Who wants their property sitting days on market longer, especially going pending and then back on the market. I’ve been in a couple circumstances where agents won’t even mark the property as pending. When they accept an offer, they will say, we are not until all contingencies are cleared. So the property, they’ll stop showings, but it’ll still be listed as on market and they’ll wait until the inspection is done, all the contingencies are clear, then they put it pending so that if the inspection is done, something comes up that people want to walk away, they don’t have to put it back on market because it puts that little stain on the listing.Yeah, I do a lot of, not as many as I used to because I focus on short-term rentals now, but I used to do a lot of buyer’s agents side of it, and that was one thing I would look for is if I’ve seen a house, especially on my investment side, if I had see a house go pending a few times, I was kind of like a shark in the water, like, all right, I know they’re getting antsy and there may not even be anything wrong with the property, but I know everybody else is already thinking that there’s something is, and that’s going to work to your advantage there. But yeah, it is interesting hearing some of the tricks that agents pull, even though I don’t know if that’s, again, in Texas, I don’t know if that’s fully compliant with some of the rules that we are supposed to follow, but people do things like that all the time, so I’m not surprised.I think the last thing on kind of this topic is having things in writing. So you have your purchase agreement, but I don’t like to talk on the phone in general, but also the fact that I like everything in writing really helps me give that excuse of like, oh, can you just send me an email so that I have everything so that I can review all that? And actually, in a very recent eviction, after I did the eviction, the tenant tried to sue me for their security deposit. I had text messages, I had emails. I told me my va, I said, do not take a phone call. Everything must be in writing. And we had everything and he had no case and we won. But it was basically because of those emails that we had the written proof. So that could be something too, if you have the emails saying, talking about this purchase price or there’s no mention at all that the price is now this. I think that can really help your case too.People think, especially in the agent space, people think I’m rude when I’d say, I don’t want to talk on the phone about any of these numbers. Even a couple of weeks ago, we’re buying a new long-term rental nearby and we put in an offer and the agent is just calling me trying to talk on the phone. And I was like, the last thing I want to do is talk contract details over the phone. And then we get off the phone, which has happened. I’ve been an agent forever, I’ve seen all of it. And we get off the phone and then we are emailing back and forth about, well, was this said, oh no, I didn’t say that. And it’s like, this is not 1982. We do not need to talk on the phone to make this transaction happen. So I am a massive advocate of anything that could ever even be contractual numbers, dates, anything at all has to be in an email or text message. I prefer email for a lot of reasons, but I hate talking on the phone and about anything. Numbers and agents sometimes take that as rude, and it is so far from rude that it’s not even in my brain set when I’m thinking of that. So another valid point there for sure.We just hit on Bonnie Glam, a asset protection attorney too, and that was one of the things she mentioned was have everything in writing, especially with tenants. And she said too that text messages are actually harder to submit. So having email is better that it’s kind of harder to submit texts in general to the courts. So yeah,My broker told me that she was like, emails are everything for you. And I pretty much live within my email on any real estate transaction now, so it has saved me quite a few times when somebody will come back and they’ll go, oh, well, I thought it was this. And it’s like, Nope, it is exactly here. I will forward the email to you right now. It’s not a, oh, well, you said this on the phone. It’s like, no, I didn’t say that exactly. So yeah, it’s great advice for any situation you’re in with real estate building rapport is fine on the phone, but if you’re talking any negotiation or even anything very small that you wouldn’t expect to become a big deal, it’s going to save yourself to put it in writing for sure.And if you guys need proof that Garrett and I like to email, you can go to biggerpockets.com/newsletter and you can sign up for the Rookie newsletter. And then what’s your little checkbox? Does it say bigger stays or is it short-term rentals?Yeah, short-term rentals.Okay. Short-term rental. Check those two boxes. Enter your email, hit subscribe, and will, each of us will email you once a week with all things or let’s say that you guys need to know for rookie investors and for short-term rentals.That was the segue of the year from Ashley right there. I loved knowing. That was great.Well, Garrett, thank you so much for joining us today. You guys, if you’re watching on YouTube, you can see that Garrett understood the assignment. I texted him a picture of what I was wearing today. He coordinated so nicely on the podcast today. So Garrett, where can everyone reach out to you and find out more information?You can find me on YouTube at Bigger stays. That is our new short-term rental BiggerPockets YouTube channel. And as Ashley said in her amazing segue that I’ll also be writing Bigger Stay’s weekly newsletter every Wednesday, so I can’t wait to chat on some numbers and details in email with everyone.Thank you guys so much for joining us on this episode of Ricky Reply, and we’ll see you on the next one. I’m Ashley. And he’s Garrett. Thanks so much for watching.