Brad:
Because it’s not about hitting a homerun. A lot of people come to me talking about, I can’t find great deals. I don’t know. In my opinion, I don’t think it’s about finding a homerun deal. Why do I say that? My first deal, I lost every single penny that I put into it as a 20-year-old. It was a crazy experience. My tenant got murdered. It was a nightmare. Me getting involved in real estate, just everything about that deal actually helped me even though it was not, obviously, ideal outcome.
Speaker 2:
This is Start FM. Now, here’s your host, active real estate investor and entrepreneur, Chad Duval.
Chad Duval:
Hey, guys. I ask this question on almost every episode. How do you get started in real estate? I ask it to almost every guest. The most common answer is to try and get a house hack. If you’re a fan of the show, you know that I like to refer to house hacking as real estate with training wheels. It’s a great way to get into real estate with a low down payment and basically, live for free. Everything sounds awesome. A lot of you guys are busy, especially now with everything going on in the world.
Chad Duval:
Everybody knows, spent hours and hours searching for info in multiple places and listen to podcasts. Most people just don’t have that time. Most people try to juggle kids right now, especially transitioning and working from home because of COVID, and just trying to keep track everything, eating, exercise. I know, it’s a struggle. I struggle with them too almost every day. That’s why I reached out to my friends over at House Hacking Success, Drew and Brad, their awesome guys over there. They become the go-to resource online for everything house hacking.
Chad Duval:
I reached out to them this week to try and get you guys a discount on any of their courses that they have over there. They were kind enough to give you guys 10% off anything on their website. They do have a lot of free resources. They have a free eBook and a podcast. They also have a course that puts everything you need to know about house hacking into a 42-episode course, all video content, which is really awesome. Because if you decide to have something on in the background while you’re doing your 9:00 to 5:00 at home, you just pop in one video or a couple of videos on your TV in the background.
Chad Duval:
I know, I do that every day with a bunch of other resources that I use to continually sharpen my knowledge in the real estate game. Head over to househackingsuccess.com. Use the discount code Start FM, and you’ll definitely get 10% off anything on the site. If you decide to buy, again, there is plenty of free resources on there. Their podcast is awesome. I was just recently on it. Hope this helps you guys, use discount code Start FM, get 10% off now, and enjoy the show. [inaudible 00:02:55] a background of where you come from, who you are, and then we should dive into a little bit more of the psychology of getting started in real estate.
Brad:
For sure, Chad. Well, I appreciate you having me on. I’m sure some listeners are familiar with the House Hacking Success podcast, is something my cohost, Drew, and I have developed over the last really just year. It’s been really fun developing relationships with people like yourself, having you on the podcast, and just a lot of people around the country learning things that we never really intended to set out to learn, learning people’s backgrounds and stories, which is my favorite. It’s something I really enjoy, is getting to know people on a story level. I’m really excited to be on the show.
Chad Duval:
Perfect, perfect. It’s awesome. You’re right, I have a similar path just starting. I guess it’s been a little over a year-and-a-half now with this. As you progress, you’re slowly learning different techniques and new things and things you didn’t ever plan on learning. Yeah, definitely. Again, everybody got to go check out House Hacking Success. They are masters at house hacking. That’s why we brought him on the show today to dive deep into Brad’s story, how he started this journey, and then we can progress into more of the psychology and help as many people as possible take that leap and understand how to get that first real estate deal.
Brad:
For sure. For sure. Kicking it off with the why behind house hacking, beyond, of course, buying a property. Our model with the show is teaching people to live rent free, so to speak, finding properties where you don’t have to pay a mortgage payment in potentially good markets or no matter where you’re at in the country. Even beyond that, most people that I meet that are younger tell me that they want to do something in real estate. No matter what that is. I think the challenge with real estate is, of course, the barrier to entry, house hacking.
Brad:
I meet a lot of people that want to become agents. They asked me a lot, because I, myself, I’m an agent, sold several million dollars and things like that. They asked me like, how do I do it? The thing that I always try to portray is people need to know you as a real estate guy. It’s really a challenging thing being younger, being known as somebody that’s in real estate daily. That can be a challenging thing. House hacking allows you to develop that reputation, I think, quickly, no matter what you want to do within the industry. That’s something that I’ve really started to learn with a lot of the people that are successful, that they just developed a name around real estate and house hacking helps you do that.
Chad Duval:
Yeah. You’re 100% right as far as credibility goes. Because you could go to agents or start putting in offers to all these properties that you’re seeing or taking all the steps. Until you get that first house, even a house hack, it’s like that … I mean, I’ve said it multiple times, I’m sure you’ve used the term, basically, like real estate on training wheels. It gets you in the door, then you can officially call yourself a real estate investor and start promoting yourself.
Chad Duval:
Then it becomes, I think, going back to the psychology of it, once you’ve done that first house hack, you become more confident. Then, I don’t know, you seem to operate differently because you come from more of a place of confidence than instead of this fear side of things. You know what I mean? These [crosstalk 00:06:42] …
Brad:
There’s no doubt about it. I tell people all the time, you could read 1000 books, you could listen to 1000 podcasts, and you’ll never replicate a single deal. You look at why so many people, like Brandon Turner and others in the industry, talk about just doing that first deal. I think Brandon Turner even says, “As long as it just an average deal.” What you’ll learn from it of a confidence based off of that will exponentially propel you. Because it’s not about hitting a homerun. A lot of people come to me talking about, I can’t find great deals. I don’t know.
Brad:
In my opinion, I don’t think it’s about finding a homerun deal. Why do I say that? My first deal, I lost every single penny that I put into it as a 20-year-old. It was a crazy experience. My tenant got murdered. It was a nightmare. Me getting involved in real estate, just everything about that deal, actually, helped me even though it was not, obviously, ideal outcome.
Chad Duval:
Yeah, I try to get … What do you think why do … Because I look back at myself too. I was always thinking the same thing, like this first deal, it’s got to be a homerun. I was so enthusiastic. I think that enthusiasm pulled me through to actually get that first deal done. Similar to a lot of people, and you as well, is that first deal, I ended up … I think I just broke even basically after lots of, I guess, like probably add your own personal time and that sort of thing. I probably lost a ton of money, but the same type of thing.
Chad Duval:
How do you think people could restructure their mindset to go into that, knowing that? Because you do, again, you have that enthusiasm and you want that homerun. Even if you just get in there and even if you lose a little bit of money, I just look at it as education instead of going to school.
Brad:
Yeah, for sure. I think first of all, most of the listeners, probably of this show and certainly, my show, are younger. I put myself in my shoes when I was a 20 or 21-year-old. 21 to 22 felt like an eternity. I felt like one year to a younger individual feels like forever. The concept of long-term thinking is really challenging for younger people. Something I see all the time is like wholesaling is a hot thing these days, buzzword. A lot of people talk about it. I get a lot of wholesalers that are younger come to me talking about it. They’re pumped up.
Brad:
They buy a couple subscriptions to some of the popular wholesaling apps and things like that. Then six months later, they realize it’s a lot of work to become actually really good wholesaler and they end up giving up because it’s tough to do something consistently for a long period of time without a high level of payoff. That’s why like the turnover in the real estate agent game is incredibly high. I think less than 20% of real estate agents last more than two years in my industry believe that.
Chad Duval:
Because I think a lot of people, again, go back to the expectations of what it is between wholesaling and being an agent is. Those are very similar jobs. You’re just doing basically sales jobs. That’s just sales and you happen to be in real estate doing that. Doing 100% commission based sales is … I mean, that’s not an easy thing to just jump into.
Brad:
Yeah. The practical side of house hacking is that it gets you into a property, it’s a low level barrier to entry. You, yourself, start out with a USDA loan, if my memory serves me correct. That’s 0% down.
Chad Duval:
Correct, yeah.
Brad:
There are other 0% down programs. There are also programs like FHA or conventional that are maybe 3.5% or 5% down or 10% down, certainly. There are a lot of like … It lowers that barrier to entry. Because now my wife and I are purchasing property as traditional landlords. 20% to 25%, plus closing cost, plus reserves, especially now with COVID, the banks are a little bit more jittery. You have to have more reserves and things like that. That’s a high level barrier to entry to come up with, especially in a lot of markets.
Brad:
Where property values are at least a median, which is a little over 200,000. That’s a lot of cash to have on hand for younger investors. House hacking allows you to get in there. Then it teaches you long term, that long-term mindset. I guess, to tie it back into what I was trying to say there, like house hacking allows you. You get into a property, it forces you to think more than one year. First of all, you have to live in the property for a year. You gain that confidence. I can’t promote enough, the level of confidence you’ll gain within that year of house hacking.
Brad:
No matter if you decide to do it again. Even one property, if you place it on a graph and if you did nothing else and acquire one property and in a good market over 30 years and you match that with a little bit of traditional retirement account investing, that’ll exponentially increase your ability to retire early. Your tenants will pay down your mortgage over time. Some people want to do it like you and I, they’re progressively building a portfolio. Some people just like the idea of living for free in a good market close to work. We found a lot of people have really embraced house hacking for a lot of different reasons. It helps with lifestyle. It helps with retirement. Obviously, I’m a big, big fan of it.
Chad Duval:
Me too. I try to preach that as much as possible as far as getting into real estate. I think we could keep going as far as how many positives there are to house hacking. Can you think of any negatives to actually getting into a house hack other than maybe some tenant issues or that sort of thing?
Brad:
Yeah, for sure. Obviously, there are a lot of issues with properties, things go wrong with them. For instance, issues that I’ve seen come up like just foundation issues, of course, sewer issues. Sewer line issues are a big problem especially in big, older cities. I believe you’re near Boston, correct?
Chad Duval:
Correct, yup.
Brad:
Yeah, yeah. I’m sure Boston is similar to Detroit where we’re basically I’m at. Metro Detroit area has a lot of infrastructure issues with sewer lines and things like that. A lot of them, a lot of these suburb areas of Detroit were built in the ’40s and ’50s. Their cycles are really coming up. A lot of people have issues. That can be a problem that if you don’t do a thorough inspection. That goes back to what my thesis was earlier. If somebody were to want to house hack, if you hit a single and you make sure that you get a really good inspector, you pay for the things that matter like a sewer scope.
Brad:
You make sure there’s no foundation issues and no structural issues, no roof issues, no plumbing issues, no electrical wiring issues, things like that. Those are things that are really important to do due diligence upfront and hire a professional to do for you. Beyond that, there are tenant issues that come into play. Sometimes after a little while, life happens. One objection is that, at some point, people may settle down and start a family and things like that. Sometimes they aren’t conducive.
Brad:
Something that my wife and I do now, my wife is pregnant, we’re starting a family, but we’ve embraced the idea of lifestyle house hacking, where you get more of like a condo style situation side by side. Everything separate. You don’t feel like your house hack. You don’t feel like you have tenants next door. For the most part, I think, if you find a deal that doesn’t cost you tens of thousands of dollars as far as major issues happening, it’s an incredible benefit. Because this year has been, obviously, a crazy year for a lot of people. Man, the mental benefits of not needing to worry about a mortgage payment, continue to save, this has been the single best year of my wife and I’s financial life so far. Almost exclusive, house hacking has just helped us tremendously.
Chad Duval:
I see. Actually, I want to go talk about that condo situation. You own a condo and you own one and the same complex, so that way, all the maintenance and all that stuff is all being managed by the HOA, basically?
Brad:
Ours is not an HOA. It’s not necessarily a condo. It’s zoned RS-1. It’s not a duplex, but it’s a residential plus one. They allow a second … We have separate meters and everything. It’s not exactly a condo, but I’ve helped clients buy condos, side by side condos. My point is that there’s a luxury house hack model as well, where you’re in a good … Some people want a life where they don’t feel like they actually have tenants. That’s an objection from clients and also people within our community that come to me and say, “Listen, I like the idea of living for free.
Brad:
I don’t know if I want to … ” All the duplexes that I know of in my area, the rundown, landlords don’t take care of them as well, yada, yada. My point to them is, “Listen, we don’t have to go through the traditional duplex or triplex that you’re maybe familiar of in the part of town that you don’t really want to go live in. Here’s an alternative.”
Chad Duval:
Usually, like an in-law, like your style, but basic in-law [crosstalk 00:17:03].
Brad:
Yeah, it can be an in-law, it can be a side by side condo. I just got done closing this past week for a client with a situation like that. There are different solutions. Different markets have different models for that. Some have side by side condos, some don’t. There’s a solution to that in almost every market, and certainly, my market. My wife and I have embraced that.
Chad Duval:
I thought the same thing until I stumbled upon my first one that was not in the rough part of the area of Connecticut that I was. The same thing, it was just a house with a full walkout basement that we converted into an in-law.
Brad:
Nice.
Chad Duval:
You can do that as well. I tried to tell people, if you have that competitive advantage where you have access to contractors or you’re more of a hands-on kind of person, that can be an option as well.
Brad:
My understanding of like Brandon Turner’s situation right now, he’s house hacking in Hawaii, is that he found a property with three separate buildings on it overlooking the ocean.
Chad Duval:
Man, that’s perfect.
Brad:
We’ve met a lot of people and a lot of different unique situations where it’s not the prototypical duplex that people think of that tend to be zoned in certain areas of town that maybe are a little bit more industrialized and maybe a little bit less conducive to a high level of living. My point is that there are opportunities within different areas, you just got to go find them. We’ve been able to find a lot of good situations for not only myself, but for clients and such. I know that there are around the country, because I talk to people all the time about it.
Chad Duval:
Yeah, yeah, totally, totally. I wanted to ask you, because of what’s going on right now in the world and with COVID and everything, how has that affected you guys in your business of late? I know we’re about … What? Eight months into this now. How is it affecting your number now?
Brad:
Well, I’m currently in a self-made bunker as I tested positive this week. I’ve isolated myself to my office area. I got a little bed on the floor. This week has been the most unique of all of them in these 8 or 10 months. As far as the agent side, back in April, here in the state of Michigan, we shut down for … I think it actually might have been March, but we shut down for about a month or two. We had a lot of Zoom calls within the industry in the state of Michigan. We were trying to put together what the summer was actually going to look like.
Brad:
Common wisdom at the time was that, with so many people out of jobs and being forced to shut down, that would halt the economy and the real estate market because less people would be approved from … Less buyers probably, because of people being out of jobs and such. I had lost, I think, a little over a million dollars just from people not being able to execute loans because of COVID and the lockdowns and losing jobs. Just overnight, every like USDA loan, I got somebody, we were 24 hours away from blocking the loan and getting a clear to close on a USDA.
Chad Duval:
[crosstalk 00:20:24].
Brad:
Got cut just like that. Just the whole mortgage industry, they just shriveled up. They doubled, I think, FHA at one point. I think I’ve heard similar things at some companies are still around that point. They went from 580 credit score to a 640 credit score overnight to get qualified.
Chad Duval:
Yeah, I heard the same thing, yeah.
Brad:
Just a lot of situation like that. We were all sitting there like, “Man, this is probably not going to be great for the industry.” In saying all that, since, basically, June 1st to now, the real estate industry across the country has just exploded. As far as the agent side of things, this has been an incredible year. The market remains incredibly high. At the same time, things are feeling good for a lot of areas around the country. You have the Census Bureau putting out data today that they anticipate over 33% of homeowners and tenants to face eviction or lose their home in the next two months. There’s a lot coming at us. The court systems backed up. Just in my one market, there’s set to be 80,000 tenants to receive eviction notices in the first year if they don’t extend it. I’m not …
Chad Duval:
Are you guys in still lockdown then with all that? You can’t do any evictions or anything, however, in Michigan?
Brad:
Yeah. Well, in one particularly county.
Chad Duval:
I got you.
Brad:
We do have a state level and they do have a moratorium, but some areas are a little bit easier than others. For one particular county, they are not allowing evictions. December 31st, that expires, we’ll see what happens. My point is that we have issues on the horizon. At least on the agent side, we are a little bit optimistic that we can help a lot of people this coming year, especially people that are losing their house and the fact that one difference in this particular time versus a decade ago, is people have a lot more equity within their home.
Brad:
There’s a lot more solutions, I think, to be able to get out and not need to go into foreclosure, at least that’s the hope. Still, we’re not really sure what’s going to happen. There are a lot of people that are going to get hurt in the coming year and years. It’s been an incredible year for me, personally. Obviously, there are a lot of worries for people around the country as far as holding on to their home and tenants as well. There are a lot of industries that are still out of work.
Chad Duval:
Right, right. How are you guys … I mean, because you guys are doing pretty good. How are you guys finding deals right now? If somebody is listening to this and they were like, listen to everything Brad saying. I like what he’s saying. I’ve been looking at this house hacking idea for a long time. I see some blood in the water right now. It seems like a turbulent time, but everybody tells me now is the time to buy. How are they going to find these good opportunities to find a house hack?
Brad:
Yeah. There are a couple different competing thoughts here, depending on what you want to do. Do you want to find more of a prototypical duplex, triplex, fourplex? Are you looking for more of a luxury house hack situation? One thing that has helped a lot of my luxury house hacking type individuals is the fact that rates are so incredibly low right now. For instance, this condo situation. We ran the numbers. Had he closed on this property December 2019 versus December 2020, he would have been paying about $300 more last year than this year.
Chad Duval:
Wow.
Brad:
As far as just the payment overall. Did he pay a little bit more for the property sure? Overall, that was about probably $9,000 or $10,000 price difference for the payment situation and I think condo situations in really good areas where this particular individual bought is probably going to be a little bit more resilient during challenging times than perhaps other areas. There’s one way. Like in the luxury market, we’re still at historic lows. It’s continuing to drop. This person got in the twos as far as the interest rate for this condo.
Brad:
There are a lot of benefits having these lower payment. I think these higher end areas, especially when they get hit with tough times, we’re seeing that the B plus and the A areas are continuing to work because they’re working a little bit more remotely. Where some of the C class areas are getting hit the hardest, because they’re the ones that are out of work. Then if you’re looking for the more prototypical side, I am about to close on a property this coming week. I found this particular one on the MLS, it was from a landlord that had neglected the property.
Brad:
He hadn’t been out there in a while. Tenant started to take advantage of them. Especially during this time of COVID, he wasn’t getting any payment. I stepped in and was able to meet a need to where he didn’t know what he was going to be able to do. He knew he wouldn’t be able to sell the property in the current condition and the way that the tenant situation was. We structure it in a way that we help the tenants get out. We got a severely reduced price. The property is a mess, but the equity opportunity is there.
Brad:
There are a lot of opportunities I’m finding now on the MLS, especially at least in my market in the multifamily, in the residential multifamily. Because there are a lot of properties that have been taken for granted by landlords. This year, a lot of tenants, especially self-managed ones, have really taken advantage of them. They want to figure a solution to get out of it. It’s really challenging in the condition that they have with tenants not paying for several months and not really taking care of the place while they’re not paying so.
Chad Duval:
Are you coming in, basically, as somebody with cash and saying, hey, we’ll do like a cash for keys. Let’s get rid of these tenants. We’ll pay you a severely discounted price because the property is in rough shape. You’re not going to have any tenants. That sort of thing. Is that kind of a strategy you’re doing?
Brad:
This particular one is three-unit. I came to them and said, “Listen, there’s no way this one particular tenant who hadn’t been paying and the property was … I mean, this place was just absolutely trash.” I’m like, “There’s no way I’m going to take over without a relationship with this tenant. We need to figure out a way to help them move on.” I was able to help them with a local … Just a program that we have locally for tenants to need to find a place and able to help her out. It wasn’t actually cash for keys. I was open to the idea of doing that as a last case resort.
Brad:
We were able to help her move. I said, “Listen, you don’t have to take a thing.” This place was just absolutely just packrat. There’s just stuff everywhere. Like I said, I’m closing Tuesday. I got a dumpster ready. It’s going to be a completely full dumpster. There’s just opportunities. We wrote it within the contract that this particular tenant, we need to find a solution to help get her out before closing. We’re able to do that. There’s a lot of deferred maintenance, but it’s a great area. I’m getting a severely discounted property because of the problems with it.
Brad:
This particular area has appreciated over time. I’m buying it for less than this particular landlord did four years ago. Obviously, the market is a lot different than it was four years ago. There’s a lot of opportunity, because this landlord had self-managed. He had taken for granted the fact that this place had cash flowed for him for so long. He wasn’t showing up to the property. He had no idea that this was actually the niece of the person that actually was on the contract. He had left. He had no idea. The niece had moved in. She’s the one that destroyed the place.
Brad:
Long story short, there are opportunities. I see these often, just depending on what you actually want. They’re off-market deals. I come across them all the time. I help people get in touch with particular people that are selling them off-market, like wholesalers like we talked about earlier. Just a couple of my flipping clients, I put them in touch with wholesalers. They found off-market deals and things like that. There’s a lot in my market. Right now, a lot of opportunities still. I think I have my doubts that anything is going to happen to the low interest rate environment anytime soon. Even with the challenges we face, I think it’s just going to be artificially inflated for a long time.
Chad Duval:
Yeah, I agree. What I think you’re saying kind of when you’re looking for deals, is to explore different channels, wholesalers, maybe even some yellow letter campaigns, things that are off the MLS, but go into it with the mindset of trying to solve a problem. Don’t go in there thinking, hey, I got this property, I’m just going to offer a lower price and try and get a deal. You got to go into it with a mindset shift. Is that the thing that you’re doing?
Brad:
Absolutely, yeah, yeah. I love people that do off-market mailers and all those sorts of things. I just don’t have time. I literally just don’t have time to do that. I have good friends that I’ve developed within the industry that attempt to do that. They’ll ask me questions how I would do this, how I would do that. I have personally found deals off-market that I’ve purchased, did some seller financing. I think to people, especially in this environment that win, are the people that are able to be creative and meet needs. Everyone is a little bit different.
Brad:
My most recent seller financing deal was someone that wanted to build a retail facility just down the road from this particular property. I had a relationship with them. I had flipped some properties with them. He needed 40,000 to start this development project. I raised private money for that, gave him the down payment, he gave me seller financing, zero payment, zero interest for several months. It was about a year. There are opportunities. You just have to be creative and meet needs.
Chad Duval:
I agree. I’ll give an example as well. Because right now, we’re in the process of trying to buy a property that we’re thinking about either Airbnb and/or flipping because it’s in a great area. It’s way overpriced, but we just went in there, just lowballed them. Then as time has progressed, we’ve completely changed the way that we framed our offers, because of actually understanding a little bit more of the seller’s need. It’s been in the family for 70 something years. They really have no desire to sell. They’re unmotivated.
Chad Duval:
Then we found out that they’re concerned about the capital gains tax. Then again, we changed our offer to maybe incorporate some seller financing to mitigate some of that risk. These are all things that happen as the deal starts. Again, this shows called start. You just have to start doing start moving forward to actually start developing a plan. Every deal is completely different. I have never done a single deal that’s done, come out the exact same way. I’m sure you’re the same way with that.
Brad:
Yeah, for sure. From my experience, that takes developing the right relationships. I love to tell the story about the first time I partnered and flipped a property. I’ve met this individual. I just wanted to get some advice. He said, “Listen, we’ve developed a relationship over time. Let’s partner on the deal.” He taught me that … We took a two-bedroom, one bath. We turned it into a three-bed, two-bath, and flipped it and made a ton of money. It absolutely changed my entire perspective.
Brad:
Because I had never even considered the fact that you can alter the entire layout of a property. It’s the same way when I figured out you could alter the terms of a contract. I didn’t come up with that. I didn’t learn about it on a podcast, because I’m somebody that needs to actually see it and feel it. I’m hands on. That was learned from great relationships.
Chad Duval:
Yes, just basically staying out there. It’s tough for people that are listening who never done a deal. Because here we’re telling them you need relationships to have all these different tools in your toolbox. It’s the chicken and egg situation. I don’t know. It’s tough. I sympathize with people that are trying to get started. Because the relationships do help as you progress in the real estate journey. Again, you don’t get those until you start, actually, getting that first deal. I love your guys’ story.
Chad Duval:
I love that you guys teach house hacking, because I really do believe that it’s the easiest way. It keeps you focused. It mitigates a lot of risk. Then also teaches you almost just as much as any other deal does between managing tenants and property management and everything, how to even purchase a property. There’s actual steps in buying a property that people … It’s tough to understand if you’ve never done a deal before. I love what you guys are doing. I guess I want to go back to, can you give a little bit of details about how you actually got started and what maybe your first deal look like, maybe that can bring some tips to some of the listeners.
Brad:
For sure. Just to touch on that real quick. You talked about developing relationships. That is really challenging for a newbie. From my perspective, obviously, I’m biased. The way that I learned about those contract situations was from the agent that I had on my first couple of deals. I like to tell people often, whether you want to get into real estate and sell or something like that, you can never replicate somebody’s experiences, like partnering or having a great agent. Somebody that teaches somebody in the mortgage industry, it’s so important to have a great team.
Brad:
That way, you can leverage that kind of experience, initially, from agents, spend a lot of time with them. I know I did. I spent a lot of time with my clients now. That’s a way to develop those relationships without needing to go out and just … Because a lot of people talk about mentors and stuff. I think it’s a lot of phooey. Because I’ve never asked anyone to be a mentor of mine. I just added value for people. I think that’s how you develop mentorships, but …
Chad Duval:
By buying that first property, make sure you’re finding … My advice and the way I would change your thought process with buying that first house hack too is even if you lose money on it, all this stuff, the fact that you’re basically buying a relationship with a real estate agent …
Brad:
For sure.
Chad Duval:
… or a broker or whoever, that’s why it’s so important to find somebody that’s good. Ask around. Figure out who’s doing the most deals in your town. Buy your way into that relationship. Because I know a lot of the stuff that I’m doing now is coming through my broker. It would never have happened if I never had used him in the future or in the past. Because now, he knows that I’m for real. He knows that I can close. If you don’t do that, no realtor is going to give you the light of day and to actually close a deal with them.
Brad:
That’s for sure. That’s a whole another topic, of actually being a developer or a reputation of closing. Doing what you’re saying, you’re going to do it. Because those are the people that get the best deals to begin with, no matter where you find them. Back to your original question, how I started. I like to tell people, there are a lot of people out there that figure it all out when they’re younger. They go to college. They get into a great career, doctors, lawyers, engineers, accountants, just get into great industries and start out making the average or above as far as income and salary and all that.
Brad:
I didn’t. I went to college to play football, that was my only focus. I had accomplished that. I figured out real quick that I didn’t like college. I was just there for football. Then I just decided, screw it, I don’t want to do this at all. I dropped out of college. Never held a high paying job. I started out in a construction as a laborer when I moved back. Then I got into manufacturing. In my early years, I never really made a whole lot of money. I just knew that a lot of people made money in real estate. I bought my first deal. It was a really inexpensive house. I had to pay back taxes.
Brad:
I traded a crappy truck for it. It’s not a whole lot of money invested. I had to redo the entire place because they got broken into, they had taken everything because I had to do all the wiring, plumbing, and all that. I probably had 10 or 15,000 into this place in a renovation, because I did a lot of the work myself. Long story short, as 20 years old, and my tenant got murdered. He got murdered by his … What we believed to be his girlfriend at the time. That was a crazy scenario. Long story short, I lost every penny on that.
Brad:
Because after that experience, they broke back in and stole everything. I was like, screw it, it’s not even worth it. I end up handing it back to the local municipality. I learned a lot from it. I really learned that I need to develop relationships with people, and that I just wasn’t good enough for real estate. A lot of people internalize bad situations as like, it doesn’t work. This real estate might be for some people, but it was not for me. I just realized that I needed to get better. I did. I spent a lot of time learning, reading.
Brad:
I started to improve myself because I experienced, real estate just helped with self-improvement. I got around better people, got into a great environment. Then I decided to start flipping. I did a live and flip my first time, my second property. Made quite a bit of money, developed a relationship and a partnership, started flipping some more. Then at a certain point, I just decided that the numbers were getting a little bit thinner with flipping properties. The risk was a little bit higher.
Brad:
I didn’t have the systems in place nor the money to scale, and that I need to figure out a better way. I ended up coming across that 2K or 3K loan. Somebody had mentioned a book. I read it. It had mentioned house hacking and burning at the same time, although that wasn’t the way they put it. That was the concept that you could do a 2K or 3K loan, which is a renovation loan on a two, three, four unit. I stepped back and was like, man, I can essentially flip properties. Then hold them long term and have little money into the property. I did that.
Brad:
I took a three-unit, turned it into a four-unit, did about a $65,000 renovation, and just dramatically increased the ARV of the property, the after repair value. Then the cash flow numbers were just ridiculous on something like that, because owner occupied loan. I think that places something like $3,200 a month. Our payment on it with tax and insurance is just under 1300.
Chad Duval:
Wow.
Brad:
That was an incredible opportunity, which led me into getting the house hacking, going hardcore into it. Those were the origins, because I didn’t have a whole lot of money. I just needed to work harder than everyone else. I ended up getting a decent job for a Fortune 500 company during that first flip. I ended up moving to third shift, night shift, which I currently still work at this company, worked my way up. It was just about working harder than people. I knew I had to work 12, 16 hour days. I’ve done that ever since. That’s been my formula, just working harder than others and house hacking.
Chad Duval:
Yeah, that’s so awesome. I love your story too, because it’s not … Like when you have never done a deal or you’re just starting to learn about real estate, you think that your real estate portfolio and your real estate career is linear. It’s really not, it’s up, it’s down. Some years you might sell off your whole portfolio, then you might come back and just do a house hack or a flip. I love that about your story. Because it’s I think most people, that’s how it goes. It’s not just like this, hey, we’re going to jump in, we’re going to buy 1, then we’re going to buy 5, then we’re going to buy 50, then we’re going to buy 150. It never really goes like that, unless you’re a big … Doing private money or something like that. I don’t see a lot of people doing that.
Brad:
Yeah, for sure. Something I adapted when I switched to flipping was, my motto is always been … I don’t know what it was. It was definitely football. We just had Hakeem who was a NFL tied in. He house sacked in a couple cities, including Detroit, where I’m at, as well as Arizona while he’s playing in the league. His story is incredible. We just released that episode. We talked about the parallels that him and I took from the sport of football without even really realizing it. There’s just so much to what him and I do that traces directly back to it.
Brad:
One of it is that we realize instinctively that it takes a ton of work to set foundation in the sport. We’ll sit there and we’ll practice for nine months to play for, in his case, 16 games in the league, which is 16 Sundays. He’ll sit there and practice year round to play 16 games. There’s just something about that in the sport where it takes a long time. You have to make a lot of mistakes. You have to give yourself the leeway to make mistakes. If you give yourself a big enough leeway, no matter what mistake you’ll make, you’ll still be able to rebound. That was my motto.
Brad:
I knew I didn’t know enough. That first experience taught me that, that I lost every penny. I increase my cushion with every opportunity. I’ve been presented with a lot of opportunities to go into private money and hard money and things like that. That’s something I have dabbled with a little bit. I always knew that I needed to give myself a bigger leeway than I thought necessary, only because there are things that I thought I knew that I didn’t know. There’s always something new that I’m learning every single day within the industry, within being a landlord and things like that.
Brad:
I just always gave myself a larger and larger cushion to take bigger and bigger risks. Now my wife and I finally feel like we have set that platform to be able to take on multiple deals at a time, to be able to take on a higher percentage of leverage and such. Just the things …
Chad Duval:
How long did that take? What was the first year you started all of this? How long was your journey?
Brad:
Yeah. 2014, I believe I bought my first property. It’s been several years now. It’s been an incredible seven years. Our just net worth is just continued year over year, progress at a very good rate. We’ve just done it without taking incredible risks. That’s because we’ve just … Every deal we put, we found a way to may add some type of value. That’s what flipping taught me. We’ve taken that motto into house hacking.
Chad Duval:
Yeah. After that first property sold it off, you jumped into flipping. What drew you to flipping? Was it the fact that you were a laborer and you had some of those skills?
Brad:
Probably.
Chad Duval:
Or was it something that you just desired and that just piqued your interest the most?
Brad:
Yeah. Well, first of all, I had no idea you could buy multifamilies low down. I knew everyone on real estate. Something was instinctive about that. I was already working in construction. I had a little bit of a knowledge. I figured out a way to buy this incredibly rundown property for a little money down. In a …
Chad Duval:
That was [crosstalk 00:46:25], right?
Brad:
What’s that? No.
Chad Duval:
That was the [crosstalk 00:46:27]. No.
Brad:
No. That was just like a conventional mortgage. This was one of the worst roofs I’ve ever seen. The bank actually allowed me to close with a side escrow. Because roofs like that, you can’t get a conventional loan on. My understanding, that particular loan product doesn’t really exist anymore. I found just happened to be the credit union that I had banked that and they allowed me to close with a side escrow on that roof. I fixed it all myself. Well, most of it myself, outside of plumbing and electric and stuff like that. It took …
Chad Duval:
When you say side escrow, that means they set up like an escrow account that’s not attached to the actual mortgage, but it is a pool of money that you can draw from for the roof?
Brad:
Correct, for the roof, yeah, yeah. That paid off the roof, yeah.
Chad Duval:
I got you. I got you. That’s interesting. That’s interesting. I love diving into these old deals. Because again, there’s nuance to every single one of them. I’ve never even heard of having a side escrow for a roofing project or something like that. That’s really interesting.
Brad:
There are unique situations that I come across now every day. There are a lot of products out there for different situations. Obviously, I’m a lot wiser than I am was back then. Again, that’s why I’m a big proponent. We talked about mentors and stuff. I don’t think you could have … If you find actually somebody that has a heart of a teacher, the agents that I had back then taught me a lot of this, taught me that I could do these kind of situations. I think for somebody that’s just getting started, doing a house hack or even a flip, live and flip like I did, there’s a lot of opportunity. There are ways to attack everything in the right time. If you’re willing to take on properties that no one else wants, there’s a lot of opportunity in that.
Chad Duval:
Yeah, absolutely. Well, then it just dovetails into telling people more about what you guys are working on over at househackingsuccess.com. If anybody is looking for more details, they should definitely check out Brad and Drew’s site over there. With that being said, Brad, I guess, where else can people get a hold of you, or if you want to talk a little bit about your course or book?
Brad:
Yeah. We started this, Drew and I, like I said, about a year ago. Literally, we just thought we might be able to connect with some people in our state. That was the origin. First few episodes was with people that were in the state of Michigan. We’re just trying to develop a little bit of just people around … We just want to meet new people. It’s turned into something we have friends around the country like yourself. We’ve just developed a community. Every day, we’re trying to just grow that community and connect people within industries.
Brad:
Now it’s turned into connecting potential house hackers, whether it’s in L.A. or Miami or Boston. Like if somebody is in Boston, we’ll connect him with Chad and yourself. That’s just what it’s morphed into. We have a lot of different resources, whether it’s a … We have a free book and course and such. The biggest thing is just connecting with other people and growing the community, connecting people within their own industry, to people that are trying to house hack or already have house hacked or are potentially agents that actually understand the concept and understand a good deal from a bad deal and a good situation from a bad situation.
Brad:
That’s what we’re doing over there. It really just exploded, where we have become the go-to people for house hacking. It’s just incredible. Now I’ve partnered with a person that I consider a mentor, Chad Carson, from BiggerPockets. I’m within his course now and helping his students’ house hacking, which is incredibly rewarding. If there’s anyone within the industry of real estate that I promote as a guru, it is Chad Carson, because he has just a heart of a teacher. His book, Retire Early With Real Estate, was probably the most instrumental real estate book I’ve ever read.
Brad:
His story is so closely aligned with mine. He was a college football player at the University of Clemson. That was such a instrumental book. Now being able to help him and his students has been incredible. Whoever is listening, just reach out, join the community. Especially if you want to house hack, there are a lot of opportunities that come from it. The barrier to entry, the thing about real estate that makes it such an incredible investment is the barrier to entry. It’s different than the stock market. Anyone can get in the stock market with a couple of bucks.
Brad:
Not anyone can get into real estate. It takes a certain level of preparation to get in there. You have to meet the criterias, the debt to income ratio criterias. You have to have a little bit of a down payment, generally. It creates that barrier to entry, which makes the fluidity. It’s not as fluid as the stock market, obviously. House hacking allows you to lower that barrier. Usually, in most markets, you can live for free or come close to it. One of our good friends is in L.A., a couple of our good friends that are in L.A., they’re living for essentially free in one of the most expensive markets in the country.
Brad:
We have people like that, just all around. That’s what it’s all about. We just want to connect people. Definitely, if anyone is listening to this and they’re interested in house hacking, just reach out, and we’ll help in any way we can.
Chad Duval:
Perfect. Well, with that, thanks for coming on the show, Brad. I appreciate you being here. Listeners, thanks for listening today. Go check out househackingsuccess.com. With that being said, we’ll get out of here.
Brad:
Appreciate it, Chad.