House Hacking His Way Out Of $30K Debt & Into Financial Freedom

this is real estate rookie episode 195. and so you need to look at the house with the proper layout so that you can separate the upstairs and downstairs for example there's many houses in the denver area where the side door that is like right where the stairs are to go downstairs so all you have to do is like put a little wall up or put a little door up and you've got the set you've got two separate units and that would be perfect to airbnb the downstairs we do that like i've got many properties that that are just that and i think that's the most efficient way and the way i like to househack now my name is ashley care and i'm here with my co-host tony robinson and welcome to the real estate rookie podcast where every week twice a week we give you the inspiration information and motivation you need to kick-start your real estate investing career ashley care my co-host what's going on what's new in your neck of the woods well i'm currently in a stretch position trying to get my knee to stop being painful right now the six-month never-ending complaining of me with my knee problems but hopefully i just had my last surgery and hopefully i'm on the mend but i avoided my pain pill today which i probably should not have but um i wanted to be a sound mind for the podcast recording but i feel like that's not even possible even without me on drugs so yeah um but yeah other than that uh everything's good i'm going to look at a property tonight um that could potentially just be a long-term buying hold and getting excited um i think when this airs this has already happened but i'm going to boise idaho to uh a conference that i'm going to be the mcat and speaking at for aj osborne and it is his uh cru circle um event so it's a mostly about commercial real estate investing yeah that's exciting there's like a loaded uh lineup of speakers for that one i think that should speak in there brandon speaking there so quite a few number of people up when is it again like june what through the what uh june 14th to the 17th uh okay i think we're at another conference like overlaps with that but yeah i saw this i saw the lineup i thought it was really cool i wanted to to attend so you have to give us the full download once you get back don't worry follow my instagram stories and you'll be able to see all these plenty of things nothing about the conference it's just the afternoon [Laughter] yeah the last time i went to an aj osborne conference it was in coeur d'alene idaho and it was a self storage conference and i remember the first night he's like oh i'm having just like a small vip little cocktail hour it's just going to be you know some hors d'oeuvres and cocktails just join us and it was like oysters uh fresh cut prime rib like i'm like wait what this is cocktails and hors d'oeuvres this is like a meal a 10 course meal so the food is what i'm most looking forward to there you go all right not not the networking not the not the amazing content so what's new with you tony um actually while we were recording this podcast i got an email that we just closed on another one of our our flips so that's always exciting um this one's cool because like all of our other flips we've been using that money towards the purchase of more short-term rentals but this will be the first flip that's not like earmarked for like another purchase so we'll actually get to spend some of it um so that's always exciting you know so we we started flipping houses late last year and we've rehabbed that i don't know like like quite a few in joshua tree now so really really excited that we can continue to grow that part of our business and we're flipping these properties as turnkey short-term rentals so even though it's technically a different type of real estate investing it pretty much is still what we're doing but instead of us keeping the property we're just selling to someone else at the end so um it's been cool to kind of learn this this other side of real estate investing and you know the properties turning out like we get better every single time so if you guys want to see the flips or you guys want to like maybe buy them from us you guys can follow us on instagram it's at tony j robinson i usually post all the all the flips we're selling there i think that is so cool that you are taking exactly what you're doing and learning how to have a different exit strategy based off of it but also helping other people get started like having a turnkey property is a great way to get started in real estate investing if you know nothing about rehab and especially if you want to get into short-term rentals i mean a lot of the properties that you have bought purchased out in um and even joshua tree but in the smoky mountains too a lot of them were pretty much turnkey correct pretty much every everything we bought in the smokies has been turnkey it was an existing short-term rental it came fully furnished and we spent like you know a couple thousand bucks like replacing linens and you know missing silverware and stuff like that but yeah there's definitely a gap right now i think in the short-term rental industry in terms of turnkey opportunities in a lot of markets like if you look at long-term rentals there's you know turnkey operators in almost every major location but that same thing hasn't happened yet for the short-term rental so we feel like we're filling a void there well today we're talking about a specific topic and that is house hacking not short-term rentals and we have an expert on today craig curlap who wrote the book the house hacking strategy so craig joins us um from denver where he has his real estate team but also recently we found out just moved to idaho so craig is coming on today to talk about house asking what it is is it still possible to do in today's market what are the advantages the disadvantages of it and i'm glad we brought craig on because you know in my mind house hacking is one of the lowest risk ways i think to get started as a real estate investor and craig really breaks down kind of his five-year blueprint that most people can probably achieve financial freedom by following or using house hacking as a strategy so overall just craig is like a wealth of information when it comes to house hacking and we hear a little bit about his story how he got started how he was sleeping in a cardboard box in his own living room and how that led to him achieving financial freedom so overall just a really cool conversation with craig craig welcome to the show thank you so much for joining us since last time we tried to record with you you ditched us i know i know well you know i i kind of missed the memo i thought we were doing this podcast on in the grand canyon in the river in the grand canyon on the colorado river so you guys didn't show up i was waiting for you you know what i think that is the best excuse uh to not show up to a podcast recording and you know what you've definitely left your mark because you're the first person to not show up to a rookie podcast really after the record books your books now yeah oh all right put me down so craig tell us a little bit about yourself for people who don't know you you've written the book the house hacking strategy you've been a big part of bigger pockets and you're a real estate agent so just kind of give us a brief backstory on you yeah i mean really it all started like a lot of people started out in this industry just absolutely hating my w-2 job uh before i worked at bigger pockets it was i was gonna say i was like yeah scott's like in the background there like yeah um no so it was when i was in california working uh like a venture capital job being an analyst and just working hundreds of hours a week and and looking down the hallway and seeing that my progression would be moving 30 feet down the hall to being my boss and he worked you know maybe i worked 100 hours a week maybe he worked 80 hours a week right so it really wasn't a good life and um and so i started getting the idea about passive income after reading tim ferriss's book the four hour work week and after reading that book i was like oh i should start thinking of my my expenses on a monthly basis my salary on a monthly basis and i can just get enough passive income on a monthly basis to cover my expenses well i'm financially free and i no longer have to work and that sounds like a lot of fun right i get to travel spend time with friends kind of do whatever i want and live on my own time and so being in silicon valley i was trying to think of my startup idea after dumb startup idea and uh if you didn't know silicon valley is filled with dumb startup ideas and so none of those just worked right and so then i went back to my house and i looked around and i was living in like a 20 unit apartment building and i was like this little this little spanish lady who comes to collect rent every month is probably collecting 100 grand on the first of every month and all she has to do is drive her car here i was like that sounds pretty cool and so then i started kind of diving into real estate obviously i found bigger pockets not long after that and then i went down the rabbit hole and so within six months of finding bigger pockets i found myself working at bigger pockets moving to denver purchased my first house hack and that's kind of where where it all started craig i love that that you made that observation of i'm working 100 hours a week once i get promoted i get to look forward to 80 hours a week right which is you know it's such a weird dynamic but it's what so many of us are are accustomed to um and it was kind of that light bulb that made things go off for you and so funny man like the four-hour workweek was one of the first books i read about like entrepreneurship as well so for me it was rich dad poor dad and the four-hour work week came shortly there afterwards and that's when i i went down the rabbit hole too man um but but craig what makes you unique man is that you you've kind of built a name for yourself around one specific strategy within the world of real estate investing so break down for us exactly what house hacking is and why you felt it was a good place for you to you to kind of start your investing career yeah so i think anyone who's young or any anyone really in general the house hacking is probably the best place to start and so what house hacking is it's the idea that you're going to purchase a one to four unit property with a low percent down typically three to five percent down you have to because you're doing a low percent down loan you're required to live there for one year and while you're living there you're able to rent out the extra bedrooms or the extra units so the rent uh the rent that you're gathering covers your mortgage and you're able to live rent free and i would bet that ninety percent of the people listening right now their largest expense is their living expense unless their house hacking of course and so then right so you're eliminating your largest expense you're investing in a property you're gonna you're living in your investment and so things aren't gonna go bad when you're living there because you're seeing it every single day so it's kind of like landlording on training wheels and you're able to you're able to do this year after year after year until you have a pretty sizable portfolio and you can easily achieve financial independence just through house hacking correct thanks for thanks for that breakdown man so i just want to recap it to make sure that our listeners are following so essentially you go out you buy a property and then you rent out the extra space in that property to help offset your cost of owning that home that i wrap that up the right way yeah you got it man so so craig let's talk about like why why do you feel this strategy is a great way for newer investors to start and especially given where the market is at today there's a lot of fear i think of a lot of people who want to get into investing why is house hacking a great place to start yeah it's a great place to start because you don't need a lot of money to get started simple as that right you need three to five percent down so if you're in denver buying a 500 000 property you need between 15 and maybe 30 000 down that is a lot less than what it would typically cost to buy a 500 000 property over 100 grand right and so you're not putting a whole lot of money down because of that your returns on investment are massive um you're it's like i said prior it's you're landlording on training wheels right you're living in your investment so you're seeing your tenants come in and out you can stop things and dip them in the bud before they get too bad and so i think those are two really big reasons why house hacking is a great way to get started now you talk about that half a million dollar house that somebody is going to go purchase and maybe they're buying that because it has four bedrooms so they can live in one rent out the other three how do you get approved for these higher purchase price instead of having to buy a two bedroom one bath because that's what you can afford but if you're house hacking this bigger property with more rooms does the bank actually look at that income that you're going to be bringing in on the property so this seems to change by the month it feels um sometimes the bank will look at prospective prospective rents and take 75 percent of border income is what they call it um they were doing that at one point i think they stopped doing that as of this recording by the time this releases they may start doing it again so i my recommendation would just be that talk to a bunch of different lenders and see if they can use any of the expected rent to offset uh the the debt payment to increase your debt to income ratio now you can definitely do that if you use an fha loan on a two three or four unit property i'm just not sure how that works with the bedrooms at this point in time so now kind of how you talked about things change going on um with lenders and definitely everything in the market is changing right now than what we've seen the past several years so has that affected house hacking at all and is it still possible to house hack a property so i truly think that house there there will never be a time where house hacking is not advantageous i just don't see a time the reason is is one there's many different types of house hacks and so if you're buying a four or five bedroom house you're living in one unit renting out the other right in a bad economy you're offsetting your mortgage payment which will only help you you're offering cheaper housing to people who need cheaper housing because obviously people pay less for a room than they will for a full unit so i don't see the necessity for house hacking really going away i thought i legitimately thought i was nervous when kobit hit that people may not want to be living in a room with four strangers that they don't know where they are or how dirty they are but honestly it's like it wasn't even the case so because i mean house hacking persisted through covid lasted through kovit i just don't see any scenario where people wouldn't want to do that so quick you also mentioned there's like multiple ways that you can house hack so i just want to break down some of those and tell me if if these different scenarios work with house hacking so you already mentioned like you can go out and buy a big house right by like a five bedroom house where you rent out the other four bedrooms what if i want to rent out my basement can i house hack my basement oh yeah we do that all day uh so it depends obviously you have to know what the houses look like in your area many houses in the south don't have basements in denver a lot of houses do and so you need to look at the house with the proper layout so that you can separate the upstairs and downstairs for example there's many houses in the denver area where the side door that is like right where the stairs are to go downstairs so all you have to do is like put a little wall up or put a little door up and you've got the set you've got two separate units and that would be perfect to airbnb the downstairs we do that like i've got many properties that that are just that and i think that's the most efficient way and the way i like to househack now um now that i'd like to kind of have my own space now that i'm a few years in what about like i don't know say i have a detached garage or an adu in the back can i house hack those sure i mean you can house hack anything right um you can put a tent in your backyard you can add storage units and have there's so many ways you could like get money out of your house um but people ask me a lot should i like renovate my garage and add plumbing and add electrical and add all of these different things honestly i think it's going to cost you 75 to 100 grand to do all that you might as well just buy another house it's kind of like my thought it'd be less work less stress less permits and less time so if you've got 75 to 100 grand i would say like and you get to keep your garage so my two cents i don't love the like garage conversion thing but you know it all depends on where you live yeah and i'm asking these questions kind of like facetiously right the point i want listen to understand is that whatever extra space you have whether it's a basement an adu in the back or you buy like a multi-family where you live in one unit and you rent out the other three units whatever extra space you have on your property you can turn that into an income generating space as opposed to a liability like it is for most people 100 um also uh parking for rvs and boats that's really big in our areas a lot of people have these in over the winter they need somewhere to store it and their you know driveway in the suburb might not be big enough to actually store it and so uh they need somewhere else to store it and a little side note here our producer also uh chimed in with a studio space in your kid's closet which is how i recorded for the last three years if you guys don't know about my kitchen though yeah but if you guys don't know ashley's kids they're actually ruthless landlords so ashley pays like a premium for recording in that studio every single month so she taught them well actually they did they my one child has a really nice big walk-in closet and i'm forced to take the small bare minimum closet for my studio oh my gosh i love that the thing is with my knee with hurting my knee my knee has been straight for so long so i haven't been able to bend it enough to get into the studio so i should be able to move back in shortly so craig we talked about you know some of the benefits of house hacking some of the different ways you can do it what do you think are some of maybe the the disadvantages that come along with house hacking like why maybe why is it a bad approach for someone you know it is a little bit more work obviously right you are maintaining a house and you need to get tenants and you need to sign leases and do your diligence and all that so it doesn't come without a cost is that cost large relative to what you're getting out of it i would say not at all right i mean my story is i went from a negative thirty thousand dollar net worth to financially free in like two and a half years mainly through house hacking right and so it's not like get rich super quick but it's get rich pretty darn quick if you want to do it the right way and you want to really like be scrappy and i was really scrappy for those first few years and so uh yeah i think i just think that i think it's for anyone that wants to again expedite their path towards financial independence all right so so craig appreciate you kind of breaking down some of the disadvantages as what i think it's important for for new investors to kind of hear both the the good side and the bad side of of real estate investment because no every every type of real estate investing comes with some type of downside and you you've just got to make sure that if you choose this strategy that it aligns or that you can stomach what those downsides are i guess um now for me craig like one of the biggest things that that i'd be concerned with uh from house hacking is having to share my personal space with with strangers so what what tips or advice do you have for someone that might be worried about the same thing yeah so we talk in the book about the comfort continuum right on one side is comfort and on the other side is profit and you know on the far side of that continuum the profit side it's yeah you're living in your on the couch in your living room and renting out every other room in your house right so understandable if you don't want to do that so you just kind of move move along the continuum towards the comfort side which is kind of what you mentioned before tony about having a house where you just rent the basement so that way you have your own space sure you may hear them come in and out but honestly when we've done this i don't think i've ever even seen my airbnb i've i've heard them like walking down the stairs and stuff but you really don't see them that much and so that usually is enough privacy so that you can still make some money you can still cover your mortgage or at least get pretty darn close and you can still make serious leaps towards financial independence so are there a lot of properties out there that have the basements redone or what are some things that you know me or anybody could look for when they're looking for a house hack what do you look for when you're searching for a property yeah so in denver there are a lot of basements that are completed and so those are really easy to airbnb especially if you don't care to add a kitchen or anything like that obviously if you add a kitchen it will get you a little bit more and you have some more flexibility with maybe splitting it up into two units later on but if you're just looking airbnb all you really need is like a microwave and a mini fridge and you're good to go i personally like to add kitchens because i like to have that flexibility in case airbnb ever goes away or anything like that and so what i like to look for is um big utility rooms with you know you've got the washer and dryer in there but you've got all the exposed pipes you've got the electrical you so it's really easy to add a kitchen down there and usually it's about the space that you'd want for a kitchen and so you know it may cost 15 or 20 grand to add that kitchen and now you've got a house with two kitchens maybe two laundries and so you've got like this true single-family house with a mother-in-law suite that you could rent out both sides so it's kind of like a duplex but not technically a duplex okay so if you purchase one of these properties are there zoning requirements to say you're just doing house hacking where you're just putting you know maybe a person in each bedroom there's zoning requirements for that and we can talk about the short-term rental side too but just for having somebody do long-term rental in rooms does that matter at all so each like city or each town has a different rules for the um the maximum unrelated people living in a house so you'll need to know those rules and my recommendation would be not not to break those rules um there are i would say that most of the time those rules aren't super enforced but again it's up to you whether you want to take that risk or not i know plenty of people that have taken the risk they have not gotten caught but it just takes one annoying neighbor to catch you so my recommendation is is figure out what your jurisdictions laws are surrounding maximum unrelated tenants and then you can buy the four or five or six bedroom houses based on what that number is that's interesting i i did not know that that was like even an ordinance or like a law that cities had but interesting as you kind of go narrow and deep on some of these different strategies you start to uncover all these different like weird weird nuances um craig i want to go back right because you said you started off by renting out rooms in your house right is that that was your first house hack and you've kind of graduated to this this basement strategy so my first house hack was where i was living in the living room behind a curtain and a cardboard box and then i went and then i went to rent by then i discovered that i could have my own bedroom there was a step up above that that's hilarious man yeah yeah having my own room was a luxury so so talk us through that right like what are what are maybe some rules people can i think it's a little bit easier if you have like separate units right like if you're living in the upstairs unit someone else is living in the downstairs unit or you've got like a triplex where there's you know two other units but if you're in the same house and you're renting out spare bedrooms what are some ground rules you should set in place for your tenants how do you screen people to make sure you don't get some kind of you know maniac living with you how do you set yourself up for success first craig before you answer that this is bringing you back to college days where this is house hacking is very common where you get your group of friends together you rent a house each person pays by the bedroom and i but i think this is very different is because you're going and getting your friends to live with you so there may not be as many set rules in the house but you also have that other person as the landlord that you know make collects the rent from everybody make sure the utilities paid things like that where now you are responsible to make sure that everybody is paying and you know choosing the people to live in those rooms you may have never have met them before so yeah i'm curious as to what do you have like a rules list that's you know posted on the fridge uh how do you kind of share the common area you know i did have that rules list but i can tell you i don't think people can read um so this is obviously it is it is a thing but honestly it's not as bad as people make it out to be there's this common misconception that when you think of rent by the room you always think first thing is college living in a five bedroom place with your buddies but the thing is is you're not living with your buddies and so no one really cares to interact with each other so there's not really much like living room people aren't really hanging out in their common areas most of the time people are throwing a digiornose pizza in the toaster oven or the oven whatever and bringing it back to their room and that's it right like you're not and then they so really the rules we set them right in the beginning so i think you always want to make sure that they're in the beginning and it's you know clean your dishes wipe up after yourself you know and then look once a month we'll get a cleaner to clean like the bathroom and the kitchen in like those main areas like that craig did you ever have any instances where people your tenants weren't following those those house rules that you set up and if so how did you go about correcting that yeah tenants i mean they're they're not usually that bad i guess in my experience they just haven't been that bad maybe i've done a decent job at um at just screening them but you know in the event that something would happen really you have to address it soon and address it often before it becomes a habit for them right like habits take a long time to break and so if they have a habit of like leaving that coffee stir spoon in the sink and that annoys somebody you say hey you might just like rinsing that off and whatever throw in the dishwasher and just tell them every single time that it happens so that way they don't fall back into their habit and so if you tell them just once though you can't get all mad at them if they do it again a second time they're in a habit you're helping them break this habit so you have to like realize that it's just you know it's going to take time for them to adjust out of that but to continue adjust to asking them and asking them nicely so there's no hostility in the house come on craig the the answer we wanted to hear is that you laid down the law you came out you had your mustache you had a sword attached to you and walked around the house make sure all the rules are followed yeah i just walked around with a shotgun yeah that's right correct executioner um so so so you talked about the screening piece man so help us understand like for me i would probably be a lot more stringent for house hacking tenants that i would be for a traditional tenant because i have to share the space with them so what did your screening process look like yeah so you know we would send out an application and that application would basically make sure that they gave us their credit score and a background check my personal um personally what i looked for was 650 or higher credit score and a clean background check if there was like a dui like a few years ago or something like that i would let that go but obviously nothing drug related or nothing like violent related that's an automatic pass and then you have the landlord references the employer references the the pay stubs and all that kind of stuff and so try to gather as much information as you can about the tenant verify that information and then you can go ahead and accept them and craig there are separate rules for screening a tenant if you are going to be living in the same property correct yes that's right so if you're living in the property you know there's the the fair housing laws which you know you can't discriminate based on race or sex or family or whatever but if you're living in the house you can basically say any reason that you want i recommend you know just make just make your life easy and don't you know don't deny somebody because of their race or their religion or something like that but it could be like you know he looked like a high school bully of mine and i didn't like that and so that is like a perfectly valid reason to not want to live with somebody and so craig was that a real reason did you really turn somebody away i got afraid of one guy i was afraid he was going to steal my lunch so those are like you can't you're right ashley you you can be a little a lot more um stringent and have kind of like weirder answers if you just don't want to live with somebody it's fine but i would try to stick to the fair housing laws as best as you can and then what are what's a good way to make sure that you stay in landlord mode and you treat this like a business so that you know maybe you're having everybody pay online or something it's just automatically deposited into your account versus first kind of getting like oh well you know having the person next door to you knocking on your door and be like hey here's a hundred dollars i'll deposit the rest later and stuff how do you kind of keep that like focus on your business and those systems and processes and it doesn't get too relaxed into like a friendship mode yeah no that's great so i i use a system called rent ready um i think i'm sure i think they were on the bigger pockets podcast and all that and so that's just a software that allows the tenants to submit maintenance requests it allows them to do automatic rent payments and all that and so basically you just make sure they set that up in the first month and then you never have to ask for rent ever again which i think is amazing um as for not getting too friendly with your tenants like that's a really easy thing to slide into especially if you're if you're very friendly what i would do is like you know i would be civil and cordial with them in the house but i would never really ask them to like hang out go somewhere to hang out like i would never ask them to go to a restaurant or go to a bar or go snowboarding or anything like that but that's just like the culture of my house one way that a lot of people get their houses filled is that they niche out their house so they say like snowboarders paradise or like rock climber heaven or so then they get a bunch of snowboarders then they go and they become friends and and that's actually a really good way to get tenants so it really just depends on how your how you marketed your house hack and what your house hack what how kind of house like you want it to be that's cool i've never heard of that before like picking a niche and trying to get people that have common um interest into a house yeah it works really well ashes would be must have cool hip-hop t-shirts to to live in this house really bad knees yeah good she's got some penny chesney on there now yeah so so craig one follow-up question to that so the other thing that always kind of gets me stuck on the house hack strategy is how do you split up like utilities um you know maybe common things like toiletries and paper towels and dish soap like how did you account for all those things was it just one flat rate was it variable switching off month by month what was your strategy for managing those yeah so when i had these um i would just charge a 75 utility fee on top of the rent um and that would just kind of and that was like for and that would change based on how many bedrooms it was if it was like a four bedroom would probably be a hundred um and nowadays i would actually increase that to a hundred dollars because things are prices are rising and so um but so you just have a flat fee right in the in the winter months your utility bill is a little bit higher and so you're going to lose a little bit but in the summer it's a little bit lower so you're going to win a little bit and it kind of like nets out within 100 bucks over the course of the year and so that is infinitely easier than going in splitting it up five ways every single month adding it all up it's just it's a pain i did that too and i would just never do that again uh and so that's usually like the that's what i would suggest flat fee split it that many ways and you're good to go does that include like all the household items craig so like you know the dish soap the paper towels the toilet paper everything that's needed just for like the common areas too so when i would furnish a house i would purchase i'll go to costco and i'd buy a big thing of toilet paper a big thing of paper towels a big thing like all that stuff it would maybe cost 100 to 200 bucks and that would be really good for the year right and so i i don't know if it includes it or not like sure but also if things ran out and i wasn't around people would replace it it's not like you know we wouldn't there's never been a time where we went without toilet paper or anything like that last question what about like the food piece the delight did everyone have their own section in the fridge to say hey this is craig stuff don't touch it this is ashley's this is tony's how was the the food kind of handled yeah so there's uh specific places in the fridge and also everyone has their own cabinet and so you've got your dry goods and your your stuff you need to refrigerate um i there were sections for sure like section-ish but sometimes you like you know you put the milk together and you kind of just like remember which milk is yours and all that kind of stuff and i just we never really had an issue with that if you are gonna have i forgot to say this if you are going to have like five or six people living in the same house i would probably suggest getting two refrigerators um we have always had one upstairs and one downstairs and that way they can like store their stuff in the fridge and less time coming upstairs and just more room for everybody interesting yeah i don't know if i could ever go back to uh house hacking and sharing my seats because i know tony would yell at me because i'd steal his food all the time we went to uh tennessee together we stayed at a a cabin a bunch of us and tony was meal prepping for his fitness competition and he brought you know it's from california to tennessee all of his meals in his little container and that was the only thing in the fridge i think did you eat one of them or something you know i was so starving when i got there i was so tempted to but tell me you know how nice him and sarah are they actually brought me back some chicken all worked out so craig what uh other tips and advice do you have for rookies that are looking uh to get started in their house hack who are some of the people they should have on their team maybe i mean do they need to find an agent who is friendly to house hacking and knows what that is do they need to go to certain mortgage lenders what does their team kind of look like that they should be building yeah so i think the first and probably the maybe i'm biased but um the first and probably the most important person on your team is going to be a real estate agent because your real estate agent is that node that knows everybody else right and so if you find a good investor from the agent that has worked with house hackers before in your area then make sure that you know make sure make sure they are house hackers make sure they they you know make sure they're make sure you get along with them obviously but if they pass all your criteria they'll introduce you to their house second friendly lender and their house hack and their contractors and accountants and everything you really need and so you don't need all that stuff up front right get an agent find an agent is like the first step after that they'll introduce you to everybody else let them do the work and so i think that's just the most crucial piece i would say take your time finding a really high quality investor-friendly real estate agent and let the rest fall into place what about the landlord piece i mean is it common for if you're house hacking to get a property manager or do you recommend that you self-manage i think at first it's best to self-manage just so you know how to do it and just so you know like if your property manager is messing up or not so the way i did it was i did i i managed my first two properties myself once i got to my third one is when i started having property management and i even hired a property manager for the house i was living in for like to rent out those other bedrooms and the reason for that was because i just didn't want to i i was becoming a real estate agent at the time and it just became way more my time was better served showing people houses versus waiting in the house having people not show up to see a room right and so you just have to figure out what your time is worth and then you'll you'll know when it's time to hire property manager it is very obvious so craig you you mentioned earlier that um you you essentially achieved financial independence within less than three years through the house acting strategy so what i want to do is you know if you can maybe open up the kimono a little bit and let us you know give us the behind the scenes if someone today you know they're working a nine to five that maybe they're not crazy about how can they use house hacking to maybe not two and a half years i might be a little bit aggressive but say they had five years if someone wanted to achieve financial independence with house hacking over the next five years what kind of blueprint can you give our listeners to be able to do that yeah so i mean the way that a lot of people in denver are here doing it is each house act they buy is going to cash flow them between 500 and a thousand dollars a month and so you're able to buy one of those a year every year for five years and so if you you know get great deals and you can get five thousand dollars a month in five years well that's financial independence right there and that of course assumes that your rents don't increase and and right and property values don't increase because once you start getting more and more properties that are increasing you're able to take the equity from those properties through a heloc or whatever else and you can buy more and you can acquire more and so you know i think brandon has talked about the stack right where everybody thinks linearly but really doesn't work that way right you once you start getting one two three properties you'll have more money to then buy four five six seven eight nine and i guarantee you if you kind of put your head down and buy a property a year you'll be very close to financial independence within that five year timeline yeah you kind of have my my head spin a little bit craig so you know i live in southern california which is historically a pretty expensive market and you know a lot of cities here just buying a long-term rental wouldn't make sense and it's not necessarily house hacking but just the idea of of renting by the room um and maybe a more expensive market could be a way to really un unlock a different level of profitability because if i could rent you know maybe a house by itself for like twenty seven hundred dollars if you rent the whole house but if it's a five bedroom and i can rent each one for maybe eight hundred dollars a month that's a big difference in profitability there so um yeah no no just thinking out loud maybe i'll go out and buy a house hack or you like a multi-family run it out by the room now so we'll see yes i already texted sarah she said no [Laughter] no more deals so in in in more expensive markets right like it's people always are kind of baffled that you know like i think anyone would say oh my gosh i can get a property in denver which appreciates 20 the last two years right and still get a thousand dollars of cash flow like i think anyone would take that all day and i don't do that by just buying a house and renting it out traditionally right like those are for midwestern markets and in those markets where you can buy houses for under 100 grand you have to get a little bit creative in these markets like denver austin seattle i'm not too sure about southern california but you know there's kind of like tier two cities maybe not like the las and san francisco's but what you do right is and so there's many ways you can do it right whether it's rent by the room whether it's i've been doing this thing now with airbnb arbitrage and so i think a lot of people get excited about finding landlords to uh to rent from and then put it on airbnb and keep the difference well i'm just that landlord right and so someone comes to me and they want to airbnb my place out they pay me four five hundred dollars a month premium and i'm like and they take on the management of it and so i'm saving i'm making 400 a month more plus i'm saving on the property management fee which is about a 600 to 700 difference than i would just traditionally and so i'm like all day i will do that craig you're going to have so many people like who are fans of short-term rentals reaching out to now saying please let me arbitrage your units in denver so yeah okay let me dig into that so you're not paying a property manager for these fees that the operator is taking over so are they taking care of all the maintenance then is that included in your lease agreement that they're in charge of that so they'll take care of this at least with my agreement i think every agreement will be different with my migraine they take care of the small stuff that the guests will probably do um you know like little leaks here little stuff there if there's something big the ac goes the furnace goes the roof needs to be replaced like that's on me of course and so think like most of my maintenance is taken care of in some and i'm like a pretty nice dude and i don't want to spoil a relationship so am i going to let 200 once every four months really like like destroy a relationship i have with this person who's giving me say help me save 600 a month of course not right and so i'm fairly lenient but yeah but the agreement usually is as they pay for kind of like the small things i pay for the big things okay so you're they would still contact you directly instead of the property manager yeah if it only needs to be replaced yep yeah but so you have the you have the arbitrage str operator and you also have a property manager or did you remove the property manager all together i removed the property manager because those i mean for me like those things just don't break that often like maybe once a year i have to call a plumber um and oftentimes i just i have an assistant too i just have them do it and so it's not really like it's sure it's me managing it but it really doesn't take much time at all cool well thank you for that breakdown yeah would you want to go through just the numbers of a house hack for us real quick um you did you showed you said maybe like 500 to a thousand dollars on average someone can get from the denver market but can you maybe like show what the purchase price would be how much you'd have to put down what maybe your interest rate would be and then what they should charge per room and you know how much you'd get back in your pocket uh yeah i can i can go through my most recent one back in july of 2021 i bought this property in a pretty up-and-coming area of denver it was a it was actually a seven bed three bath um and it was um and it's in this it's called virginia vale it's like right next to cherry creek it's a really up and coming area it's really nice and it's got that top what i liked about it's got that top bottom set up with that big utility room that i described earlier and so i bought this for 585 000. i can't remember the interest of my mortgage it was like three point something so you know interest rates were lower back then my mortgage on that was is like three thousand dollars a month so that was my mortgage um i ended up running i ended up making one of the bedrooms downstairs into a living room and so now it's a six bed three bath with a living room and i converted that downstairs to an airbnb i really did not like managing the airbnb and so i had that's when i got the idea of like doing the arbitrage with somebody else and so somebody's renting that downstairs from me for 2400 a month and she's putting on airbnb and i think she's making a lot of money because i haven't heard any complaints so uh that works and then i actually went to the so in denver uh you really can only have one airbnb per residence and so that was kind of an issue in denver metro and this one is in denver metro versus like in the suburbs the rules are different and so the upstairs i have a traditional regular tenant and they pay 2 400 a month as well and so you can kind of see the difference there right it's 2400 for a top unit 3 bed 2 bath it's pretty nice for the backyard versus the same exact amount for a basement unit three bed one bath no backyard and so so that is making me forty eight hundred dollars a month in rent on the three thousand dollar mortgage so i'm making eighteen hundred dollars over the mortgage and um you know i set maybe like four five hundred dollars aside for vacancy util um vacancy i do pay utilities on that one um and all the other you know all the other things you're reserved for and so i'm making a little over a thousand dollars a month on that property right there so and that's not like a home run out of this world deal like i found that very quickly and just went with it and so you can kind of get stuff like that all day that is so cool i love that you looked at that property and you're like okay i want to do short-term rental and then you're like you know what it's not for me let's twist it and turn it and let's do airbnb arbitrage especially i i that's like one of my favorite things is looking at a property and finding different ways to pull revenue off of it and also having those different exit strategies on it where you know if something's not working okay i can do this now with that property and craig just really quick i mean you say you know a thousand dollars pretty nonchalantly but that it's like a pretty healthy amount of cash flow for one property like my my first long-term rental i was making like 150 bucks a month so you you did almost 10x that so don't don't sell yourself too short there um one other thing i want to highlight you talked to ashley about like you know multiple revenue streams like the different opportunities and and from one piece of property and uh episode 107 we had kai andrew on and he talked about land hacking which is similar to house hacking but his was with land and he was making like 10 income trains off of one piece of land so if you guys go back to episode 107 with kai andrew you can hear a little bit more about uh i guess the the cousin to house hacking which is land hacking and how he set that up we have to give that one a listen well craig thank you so much for joining us um we do have a couple segments here to go through um tony you want to take the first one so craig are you ready for the rookie exam oh man i didn't study but let's do it you're the future of your life depends on this exam so luckily for you i think i think you'll think you'll do well man so three questions for you same three questions we have we ask every guest now so the first question is what is one actionable thing rookie should do after listening to this episode i think you should reach out to a real estate investor friendly real estate agent in your area and just start asking questions and start having those conversations so they can help you know if you need some time to prepare they can help you so that you know what to prepare and so that way when it comes time and you've got your down payment saved up you can hit that ground rolling versus getting all the education and getting the team together then so start building your team now the next question is what is one tool software app or system in your business that you use um for the house hacking piece i would say rent ready is gonna be the best the best thing that i've seen uh it used to be cozy but cozy like kind of got crappy once apartments.com bought them so uh i always recommend rent ready now and yeah they do great for the property management side if you're gonna be managing your house hacks yourself awesome last question for you craig where do you plan on being in five years oh man the few my future does depend on this are you gonna check in on me uh you know i that's always a tough question um you know we just bought like kind of like our forever home up in idaho and so i think we're going to be there we're going to be settled in there a little bit more um we're going to continue to grow the real estate team in denver and maybe in a few different other markets and just try to help as many people as we can achieve financial independence through real estate investing and so um similar to bigger pockets mission we have a very similar mission so yeah we're just going to keep taking it day by day and even better i love idaho that would be like my dream place to live out of all the places that i've been to yeah we'll definitely come come by and hang out yeah i'll be in uh boise and coeur d'alene in june we are in coeur d'alene so uh let me know yeah i i love that you're that's even better that's like amazing there so good for you yeah yeah let's at least grab lunch or you can come see the place yeah you can meet grace well um let's give out a shout out to our rookie rockstar who is jason beckett this week closed on units two three and four he purchased a triplex in an incredibly hot and trendy tremendous neighborhood in cleveland and somehow managed to get it below asking with an fha 203 k loan uh list price was 329 000. he got it for 290 000 out of pocket 15 200 the rehab was 70 000 which was built into the loan which is part of the 203k loan and his expected our arv is to be four hundred thousand dollars and the rent potential is going to be between 1500 to 1650 per unit so congratulations uh jason that's awesome well craig uh where can everyone find out some more information about you and reach out to you besides showing up at your doorstep in coeur d'alene uh yeah well you're more than welcome to uh you know uh instagram i'm the phi guy we have a podcast of our own two called investify and you know if you're in denver you can always look at thefyteam.com as well we're always happy to help well craig thank you so much for joining us we enjoyed having an expert on to talk about house hacking i'm ashley at wealth from rentals and he's tony at tony j robinson on instagram and we will be back on saturday with a rookie reply [Music] is

Channel: Real Estate Rookie

Views: 9,977

Keywords: house hacking, financial freedom, house hack, what is house hacking, passive income, financially free, how to live for free, retire early, early retirement, real estate investing, real estate investor, how to retire early, financial independence retire early, fire movement, house hacking real estate, house hacking tutorial, how i live for free, house hacking explained, rent out extra rooms, real estate investing for beginners, biggerpockets, house hacking 2022

Id: 3cESSCvSPqw

Length: 47min 20sec (2840 seconds)

Published: Wed Jun 29 2022