📉 Market dynamics shifting, when SDIRAs make sense, and Tallo

The Benefits of a Self-Directed IRA

For control freaks who think they can outsmart the market and earn higher returns by putting their savings in alternative investments, a self-directed IRA (SDIRA) can serve as a tax-free funding source for those investments.

And for those who fear a bumpy ride in the stock market in the coming months and years, an SDIRA can diversify a retirement portfolio so it’s not so dependent on stocks and bonds.

Kermit Walder felt that way about a decade ago, after taking a beating in the market. He decided to set up an SDIRA so that he could buy a property outright, figuring the income from the rent roll would be more secure than equities.

“I did not want to have all my money in the market,” Walder said, so he put several hundred thousand dollars in the SDIRA that he could use for real estate investments. “My intent was that this was a retirement fund and this was a retirement investment, as opposed to buying and flipping.” 

The upside is he could access that money without paying taxes on it, which he would have incurred if he took a standard withdrawal. The process cost about $2,000 and he had to go through two companies to set up the fund, one that would act as a custodian to be sure he followed all the rules associated with an SDIRA. (These days this is handled by contacting a single company; the blog WallStreetZen recommends six different custodians for an SDIRA.)

The Internal Revenue Service also publishes a list of 70 approved nonbank trustees and custodians.  As part of the due diligence process, investors are encouraged to review the licensing and registration of custodians using SEC, Financial Industry Regulatory Authority and state regulatory resources. And check reports from the Better Business Bureau. The SEC also recommends consulting an investing professional or lawyer who may know about the reputation of certain custodians.

Limitations for SDIRA and Tax advantages

Loss of tax deductions: Depreciation allows real estate investors to deduct a portion of the property's value each year as a non-cash expense.. This deduction can offset rental income, potentially reducing or eliminating taxes on that income. In an SDIRA, this benefit is lost because the account is already tax-deferred.

Reduced cash flow advantage: When investing in real estate personally, depreciation often allows investors to show a paper loss while still generating positive cash flow. This means they can receive rental income without paying taxes on it. In an SDIRA, this advantage is nullified.

Inability to shelter other income: Real estate investors who qualify for Real Estate Professional Status (REPS) can use paper losses from depreciation to offset their W2 or 1099 income. This strategy is not available when the property is held in an SDIRA.

Impact on overall returns: The tax benefits of depreciation can significantly enhance the overall returns of a real estate investment. Without this benefit, the effective return on investment in an SDIRA may be lower compared to personally owned properties.

Loss of step-up in basis: When real estate is passed on to heirs, it typically receives a step-up in basis, which can eliminate the impact of depreciation recapture. This benefit is lost when the property is held in an SDIRA.

The prop.text take: 

In essence, while SDIRAs offer tax-deferred growth, they negate one of the primary tax advantages of real estate investing, potentially making them less attractive for investors who could benefit significantly from depreciation in their personal tax situations. SDIRAs might be more trouble than it’s worth. 

Tides Changing on Housing Markets

The gravitational pull of the Moon creates tides across the world. So do interest rates. The interest rate’s gravitational pull on the real estate market might mean the tides are going out.

For what seems like five years sellers have had the golden market to sell above market and at record speed. Now it seems like inventory is making its way into the market, homebuilders have record unsold inventory, and price cuts are starting to show up. The tide is indeed turning. This shift is characterized by:

1. Homebuilders growing inventory of new homes 

2. Increased inventory of existing homes

3. Price cuts in certain metros 

Homebuilders Unsold Inventory Drags Down Sector

The stock price of major home builders has priced in the margin compression from unsold inventory. The larger index of home builders is down 11.31% compared to the S&P 500, which has seen a gain of 6.52% in the past six months. Toll Brothers, one of the largest homebuilders in the US known for its upscale communities, has been hit the hardest, with its stock down 20%. On March 3, its stock hit a 52-week low of $108.79, leaving it with a market capitalization of $10.95 billion and a P/E ratio of 7.49.

As of October 2024, the number of unsold completed new single-family homes reached 113,000, the highest level since August 2009. This surge in inventory puts downward pressure on home prices as builders seek to move completed properties. With substantial capital tied up in these houses, builders have a strong incentive to sell quickly, potentially leading to more competitive pricing.  Some metropolitan areas, especially former pandemic hotspots like Austin and Tampa, may see slower price increases or even price drops throughout 2025.

As of late 2024, available unsold inventory of homes on the market was nearly 27% greater than the previous year, with projections suggesting a further 15% increase by the end of 2025.

Increased Inventory of Existing Homes

Inventory of existing homes has been on the rise as well, with listings up 27.5% year over year across all markets. Inventory is projected to continue to grow, with expectations of a 15% increase by the end of 2025. Florida and Texas markets are facing the highest levels of unsold inventory. In Dallas, 63% of listings sat on the market for at least 30 days in June 2024, up from 52% a year earlier. Florida metros like Tampa, Fort Lauderdale, Jacksonville, and Orlando have seen substantial increases in inventory.

The impact of rising unsold inventories on home prices varies significantly by region, with the Sun Belt and Gulf Region experiencing the most pressure on prices, while the Midwest and Northeast remain relatively unaffected. This trend is reshaping the housing market landscape and may present opportunities for buyers in certain areas as the market continues to evolve through 2025.

Demand: Homebuyers Aren’t Lining Up

Supply is only one side of the equation. Even if homes listed increased, if there is a ready pool of buyers on the other side, then prices likely wouldn’t change. However, we’re now seeing more evidence buyers aren’t showing up. 

Redfin reported in December that over half the home listings last month sat on the market for 60 days or longer, the highest percentage since November of 2019. Though America is some three or five or seven million homes short of demand — depending on the source — demand has not been robust enough to gobble up this inventory. Buyers, it seems, are holding off until either prices or mortgage rates fall, or preferably, both. 

The National Association of Realtors (NAR) reported a significant decline in pending home sales for January 2025, reaching a historic low. Key points from the report include:

• The Pending Home Sales Index (PHSI) fell 4.6% to 70.6 in January, marking the lowest level on record.

• Year-over-year, pending transactions decreased by 5.2%.

• The index uses a baseline of 100, which represents the average contract activity in 2001.

This sharp decline in pending home sales indicates a challenging start to the year for the US housing market, with implications for future closed sales. The drop was observed across most regions, with the South experiencing the most significant decrease.

NAR Chief Economist Lawrence Yun suggested that the unusually cold January weather might have contributed to the decline, but also noted that high home prices and elevated mortgage rates continue to strain affordability.

2025 Market Outlook

With supply increasing and demand disappearing, proptext.co team is joining the chorus that is forming that sings about the growing opportunities that we believe are going to arrive in 2025 and 2026.

We are still proponents of the Top 10 Markets in 2025 from Issue #20 of our newsletter, and you can read about Charlottesville, Virg., this week; Shelby, NC, two weeks ago; Harrisonburg, Virg., in early February; and Valdosta, Ga., in January. We believe these tertiary markets offer the best value for real estate investors and a more balanced upside over time.

Charlottesville, Virginia

Charlottesville's combination of a diversified employment base and current housing market trends presents a noteworthy opportunity for real estate investors interested in single-family residences with several factors contributing to its appeal:

1. Median Sale Price: As of January 2025, the median sale price for homes in Charlottesville was $433,000

2. Economic Stability: The presence of major employers, particularly in stable sectors like education, healthcare, and government, suggests a steady demand for housing, which is beneficial for long-term real estate investments.

3. Undervalued Market: Using the median income compared to the median sell price of homes, Charlottesville provides investors an undervalued market compared to other metros across the US.

Employment & Economic Drivers

Charlottesville's combination of a stable economy, projected growth in key sectors, and ongoing development initiatives make it an attractive option for real estate investors. Charlottesville boasts a diverse and robust economy, anchored by major employers and growing industries:

• University of Virginia (UVA): As the largest employer in Charlottesville, UVA provides a stable base of employment and a constant influx of students, creating steady demand for housing.

• Healthcare Sector: The UVA Health System and Martha Jefferson Hospital are significant employers, contributing to the city's economic stability

• Technology and Innovation: Companies like Northrop Grumman, S&P Global, and Perrone Robotics have a presence in Charlottesville, indicating a growing tech sector

• Renewable Energy: Firms such as Apex Clean Energy and Sun Tribe are expanding in Charlottesville, reflecting the city's commitment to sustainability and creating new job opportunities

• The GO Virginia Region 9 Council recently approved $613,570 in funding for the Rivanna Futures project, which aims to support infrastructure investments and potentially attract higher-paying jobs and out-of-state investment

217 Barnsdale Rd

Check out this 4 BR 3 Bath home located just a few minutes from downtown Charlottesville. Nice storage area off of the upstairs bedrooms as well as a shed in the back yard and a one car garage.

The Investment Thesis

→ 4 bedroom home for only $349,000
→ $2,723 / month estimated rent
→ Undervalued market

 Property Details

 Financial Projections

Interested in Learning More?

*Appreciation based on 4% growth rate. 

Buying Low & Learning Fast: Two Investors Turn Chaos Into Cash Flow

When Brendon Meyer and his childhood friend and real estate partner Rane Shaub bought a 5-unit multifamily in 2012 in the Hilltop neighborhood of Tacoma, Wash., he quickly realized that they were in over their heads.

“As we pull up to the building, two cop cars pulled up and said we need to talk to you and they gave us a breakdown,” Meyer said, and the police told them about drug dealers and prostitutes who were living there. 

One of the officers handed them his card and said: “It’s not if you have problems, it’s when. Just call me.” 

Hilltop was notorious for its gang activity and drug sales in the 1980s and 90s. It has gradually gentrified, but was still an area known for crime a decade ago.

“We never managed tenants and we didn’t know the law,” Meyer said. “We needed two of the five units to be rented out to pay the bills. It took us a year to get the problem tenants out.”

The police were helpful, at one point telling a drug dealer to vacate the premises. Eventually, they had a tenant roll that included students from the University of Washington’s Tacoma campus. They bought the building for $227,000 in 2012 and sold it for $689,000 in 2017, after making a number of improvements. 

The childhood friends, and second-grade classmates, graduated in 2009 into the teeth of the great recession, and the job market was bleak. Meyer was selling used Toyotas and Shaub was changing tires at his family’s tire shop when they scraped together $40,000 in 2011 for a down payment on a single family in Tacoma, what Meyer called a “crappy house.”

“We did all the work — scraped the popcorn ceiling and sanded the floors, and hung drywall,” he said. “We stayed in it for two years while we fixed it up, and we probably invested $50,000 plus our own labor.” They bought the house for $164,000 and sold it six years later for $435,000. 

Their strategy is to find properties where they can add value, buy and hold for five to seven years and then trade up. “We always roll the capital gains over into new properties and trade up with a 1031,” Meyer said.

“Rane and I are incredibly blessed and really lucky,” he said “We got our teeth kicked in with the real jobs but we were able to learn and make mistakes and we bought when prices were depressed.”

He credits a college course, and an unusual professor, for lighting a fire in him about real estate.

Meyer went to Point Loma Nazarene University in San Diego, where he was awarded a scholarship to play soccer. One of the most in-demand courses there was principles of real estate, taught by George Fermanian, well-known alumni of Point Loma who became a big real estate developer in San Diego. (The business school is named after him.)

“He was a massive inspiration for me,” he said. “He would take us on field trips to development sites and show us how to fix leaking toilets.”

The class was not easy to get into, but Meyer had a leg up, so to speak. Fermanian was a big soccer fan and had seen Meyer running around the pitch.

Fermanian urged his students to start early on their real estate careers so if they made a mistake they could go bankrupt. “If you make a mistake and if you are in your 40s you don’t want to go bankrupt,” Meyer remembers Fermanian advising.

He has spent most of his career in real estate sales and proptech, including stints at Zillow and Compass. He is currently national sales director at SmartRent, which offers home automation solutions for landlords.

When he and his partner started their side hustle, they had no outside help financially, nor did they grow up learning the construction trade.

“We watched a lot of youtube videos and made a lot of mistakes,” Meyer said.

He does recall his father visiting one of their job sites and he could barely shake hands with him because he was so stiff from painting. 

“My dad went out and bought us a $400 paint gun,” Meyer said. “It was huge”

Around 2013, they realized they could not handle the renovations for management any longer, so they partnered with McNally Property Management out of Gig Harbor, Wash. They now have about 50 doors in seven multifamily properties, along with a couple commercial spaces and two self-storage properties.

“We’ve alway tried to be the Toyota Camry of rental properties — safe, reliable and clean,” Meyer said.

What is your special real estate superpower?

My real estate superpower is my ability to quickly make strong and lasting relationships with people. I have a genuine curiosity about people and I love building new relationships. Real estate is about relationships — my mom always tells me people will always remember how you make them feel. That idea extends to tenants and clients. Going into a negotiation table I can’t tell you how many times I’ve got a deal done when I got in a room with people — brokers don’t like it when you do that. We now own the Tacoma shared housing services building and we pushed to sit down with the people and it was supposed to be half hour long meeting and it went on for two hours.

What was the hardest lesson you learned early on in your real estate journey, and how did you overcome that and persevere?

The hardest lesson I learned is that it is better to have a unit sit vacant for six months than it is to put the wrong tenant into the unit. I’d rather wait to get a quality tenant than to put somebody in there who is going to cause problems. Early on we needed the money and we didn’t think about that as much. People who will take care of the place is a really important thing to think about. 

What advice would you offer to somebody looking to get into real estate or grow a portfolio?

Number one, it’s tough to go alone. If you want to go fast, go alone. If you want to go far, go with a team. With my partner Rane it works well because our skills and knowledge are very complementary. Number two, just do it. Don’t wait. If you put yourself in the right position you will make money over a long period of time. One thing Rane has always pushed me on, actually he’s hammered me on — there’s never a bad time to get into a piece of real estate if that asset is correct and is at the right price.

Among the strategies a property owner could pursue — long-term rental, mid-term rental or short term, (Airbnb), co-living — what works best for you, and why?

We’ve certainly explored other avenues in our business — we’ve looked at flips, we’ve looked at Airbnbs and we always come back to long-term rentals. A big part of that is that this is a side hustle for us. A long-term rental buy and hold strategy is pretty easy from the perspective of time management. I will say that Airbnb and short-term rentals have been heavily romanticized by social media and it’s disgusting. If you go on Instagram and see these Airbnb photos, it’s heavily romanticized and they are very rarely talking about the dark parts.

What do you think is the biggest issue investors face in 2025 and beyond?

Right now it’s the cost of money. We talk about our typical time frame is five to seven years to buy, hold and then trade up. We want to trade up and no one’s willing to meet us. We’re far apart, often by a few hundred thousand dollars, and the cost of capital is a big piece of that. There is still some uncertainty about the next four years. The return to office stuff is opening up a lot of doors from a commercial perspective but we do mostly multifamily.

Tallo

Leasing is one of the most time-consuming and frustrating parts of managing rental properties. Whether you’re an independent real estate investor managing your own units or a professional property manager overseeing a larger portfolio, the process is often a grind, dealing with lead inquiries, scheduling, and chasing down information from prospective renters. Every hour spent sorting through unqualified leads is an hour taken away from higher-value work. Even better, Tallo’s AI is trained to follow fair housing laws, ensuring every interaction is consistent, compliant, and free from bias.

Tallo was built to help investors and property managers focus on the most serious, qualified leads, while automating the rest. It’s not designed to replace a leasing team or remove owners from interviewing qualified prospective tenants. Tallo enhances the process with smart automation while leaving the final decisions to the investor.

Founding Team

The team is currently working in stealth, but this group has deep ties in the proptech industry, with a prior exit in the leasing space along with major contributions at the largest venture-backed growth stage proptech companies over the past ten years. This is no fly-by-night group that had an idea and started building. They obsess over customer feedback, understand traditional leasing workflows, and are building what you and your team want for a leasing solution. 

How Tallo Works

Tallo acts as an intelligent lead qualification and scheduling assistant, integrating with major Internet Listing Services (ILSs), including Zillow, Trulia, HotPads, and Rent.com. Once properties are listed, Tallo pulls in inquiries directly, removing the need for manual entry or juggling leads across multiple platforms.

Tallo’s system treats each inquiry as part of a sales funnel, designed to nurture and qualify leads while maintaining natural, conversational engagement. Each lead receives up to three follow-up touches, ensuring that only serious, engaged prospects continue down the funnel.

Tallo prequalifies every lead by asking for self-reported details like:

• Income

• Credit score estimate

• Move-in date

• Pets

• Desired lease duration

Once the lead meets your criteria, Tallo can schedule showings automatically, based on your availability, ensuring coordination between prospective tenants and your team.

After the showing, qualified applicants can be pushed into the formal application process through TransUnion. Prospective tenants pay a one-time $49 application fee, covering credit and background checks, allowing for a frictionless transition from lead to applicant.  This is managed through a clean, simple user interface.

Benefits for Individual Investors and Property Managers

Whether you own a single rental or oversee hundreds, Tallo’s automation delivers real value. On average, users report saving 3-4 hours per lease, time that would otherwise be spent answering repetitive questions, qualifying leads, and coordinating schedules.

For Individual Investors:

Tallo is a game changer for individual investors, many of whom do not want investing to turn into a full time job. With Tallo, owners can outsource the most painful part of the leasing process — vetting tenants — while retaining control over the final screening and in-person decisions. This approach leads to better long-term outcomes for investors and helps maximize ROI.

Layer Tallo into your existing process, with or without a formal property management system. There’s no technical complexity to navigate, just connect, list, and let Tallo handle the rest.

For Property Managers:

Tallo for property managers is a major efficiency upgrade, with the potential to expand gross margins and turn leasing, often a friction point for owners, into a compelling reason for clients to stay with your firm.

With Tallo, you can:

• Handle more leads with fewer staff hours

• Integrate directly with ILSs for seamless lead capture

• Present owners with only the best-qualified prospects

• Scale leasing operations without adding headcount

• Organize leads and showing schedules in one clean dashboard

Tallo doesn’t require complex integrations to get started. You can test the platform with a handful of properties before rolling it out portfolio wide. With an active waitlist feature in development, Tallo is evolving to support long-term pipeline management, allowing property managers to maintain engagement with prospective renters even before a unit becomes available.

How to Get Started

Leasing should never be the bottleneck that slows down portfolio growth or eats away at profitability. By reducing wasted time and ensuring every showing is with a qualified renter, Tallo helps both investors and property managers lease faster and smarter.

With new features on the horizon, including waitlist management and deeper analytics, Tallo isn’t just a tool for today’s leases but a partner in building a more efficient, scalable leasing operation.

Whether you’re a hands-on investor or part of a professional property management team, Tallo is the leasing assistant built for today’s rental market, one that respects your time and filters out the noise.

Experience a smarter, faster, and more profitable way to lease. As a valued prop.text subscriber, you get exclusive access — start your free trial with Tallo today!

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