The Deal Type Ladder
Every real estate strategy priced in two currencies: your hours and your risk.
- Difficulty
- Moderate
- Time to result
- ~months to results
- Steps
- 5
- Confidence
- 85%
Meyer runs the whole deal-type menu through two lenses: how much of your time it takes and how much risk it carries. Long-term rentals are the bread and butter — the index fund of real estate, low risk, good upside, accessible to almost any investor. Short-term rentals are the growth stock: better cash flow potential, but heavy supply right now, so you must operate well and stand out, and furnishing makes them more capital intensive than people expect. Fix and flip is basically a job at 20-30 hours a week, and contractors are their own game — much harder than property managers. Commercial is a more efficient, analytical market but has genuinely crashed (office down up to 50% in some cities) and has ~16 subcategories of nuance. Development is super risky and super lucrative. Lending is the passive outlier. The organizing rule is progression: he tells people to do a small renovation on a rental before flipping a whole house, and to start at six or eight units before touching twenty or thirty — because trying to get big fast is where he actually sees people fail.
Origin
Meyer built the ladder as the deal-matching middle section of Start with Strategy, after fielding endless 'should I flip or should I buy rentals?' questions. It reflects his own path — long-term rentals from 2010, one short-term rental, commercial exposure, land held for future redevelopment, hard money lending, and his first flip only 15 years in, as a passive capital partner.
Core principles
- 01Long-term rentals are the index fund of real estate: low risk, decent upside, low time.
- 02Short-term rentals are the growth stock: better cash flow, more competition, more operating skill, more capital.
- 03Fix and flip isn't an investment, it's a job — 20-30 hours a week and a steep learning curve.
- 04Commercial is dollars-and-cents efficient but has genuinely crashed and demands real education.
- 05Development is very risky and very lucrative; lending is passive and collateralized.
- 06Progress up the ladder — small renovation before a gut rehab, six units before twenty.
How to run it
- 1
Start with long-term rentals
The bread and butter. Low risk with good upside, not much time required, accessible to almost any type of investor. Treat it as the index fund of real estate.
- 2
Consider short-term rentals as the growth-stock rung
Better cash flow potential than long-term rentals but riskier in today's market: supply is heavy, so operating skill and standing out matter. Budget for furnishing.
Pro tip Meyer owns only one and finds the hospitality side fun — treat it as a business, not a listing.
Watch out Cheap Craigslist/Facebook Marketplace furniture will not compete. Set aside proper capital to make the place genuinely nice.
- 3
Build up to fix and flip, don't leap to it
Flipping is a great way to make money and basically a job — 20-30 hours a week with a steep learning curve. Buy a rental and do a small renovation first, then progress to a whole house.
Pro tip You can get flip exposure as the capital partner while an experienced operator does the work.
Watch out Working with contractors is much harder than working with property managers — it's its own business, its own game.
- 4
Enter commercial only with education or a partner
Commercial is a more efficient market — dollars and cents, sophisticated players — versus residential, where ~80% of sales are emotional home buyers. But loans are complicated and there are ~16 subcategories with wildly different fortunes.
Pro tip Start super small: a six-unit or an eight-unit, not twenty or thirty.
Watch out Commercial has crashed — prices down 10-20% over recent years, and office down as much as 50% in some cities. Trying to get big fast is where Meyer sees people take on too much risk and fail.
- 5
Treat development and lending as the far rungs
Development (ground-up building) is super risky but is how you make a ton of money, especially with great land. Lending is the opposite: passive, collateralized, cash-flow generating.
Pro tip Meyer buys hundred-year-old houses in fine shape hoping to redevelop the land one day.
In the wild
Meyer notes commercial real estate has roughly 16 subcategories. Office is getting hammered — down as much as 50% in some cities, a massive valuation crash. Retail, meanwhile, is doing great.
→ Illustrates why 'commercial real estate' as a single label is useless for decision-making, and why the nuance makes it a later rung on the ladder.
Fifteen years into real estate, Meyer signed up for his first-ever flip — and isn't managing it. His partner brought the deal, the construction company, the design, and the agent licence.
→ He gets flip returns as pure capital, staying inside his 20-hour-a-month rule while respecting that flipping is a job he doesn't want.
Common mistakes
Trying to get really big really quickly
Meyer names this explicitly as where he sees people take on too much risk and potentially fail — jumping to 20 or 30 unit commercial deals instead of starting at six or eight.
Underestimating short-term rental capital needs
Meyer learned this the hard way: furnishing is expensive, and with today's supply, a cheaply furnished unit won't stand out enough to work.
Confusing arbitrage with investing
Subletting is legally questionable in many places and, in Meyer's view, isn't investing — it's an arbitrage game and effectively a job. Nothing wrong with it, but don't mistake it for building a business with capital in it.
Is it for you?
Best for
Investors deciding which lane to enter or which lane to graduate to next
Not ideal for
Someone who has already found a lane that fits their vision and just needs to execute
From the transcript
“Rental property is the bread and butter. It's like an index fund for real estate investing. It's very low risk, but has a good upside…”
“Short-term rentals are sort of like a growth stock. They're kind of a little bit exciting, and they have better cash flow potential than long-term…”
“Fix and flip is a great way to make money, but it's basically a job... it can be 20 hours a week, it could be…”
“Do not just like jump to 20 units, 30 units. That's where I actually see people take on too much risk, and potentially fail in…”
From the episode
Dave Meyer: Build Your Real Estate Empire with Smart Investing
Dave Meyer