From Corporate Cog to 10-Unit Landlord in Just 2 Years!

Ashley:
This is Real Estate Rookie Episode 221.

Brandon:
Just realizing life is one big lagging effect. Everything that you have today is a result of what you did five, 10 years ago. So you’re not going to get anything immediately, so start taking small actions to make a difference in your life five, 10 years from now. Just suck it up, realize it’s not going to be easy, or it could be fun, but it’s not going to be easy to get where we are if you want to put in the time. Not to say we’ve fully made it, but I personally think we’ve done really well.

Ashley:
My name is Ashley Kehr, and I’m here with my co-host Tony Robinson.

Tony:
And welcome to the Real Estate Rookie podcast, where every week twice a week we bring you the inspiration, information, and amazing stories you need to hear to kickstart your investing journey. And I oftentimes like to start our episodes with some kind reviews the other listeners have left for us, so this review comes from Maryanne. And Maryanne says, “Great show,” all caps, exclamation marks, and goes on to say, “I really enjoy the show. After listening to a few episodes, I was totally hooked. It has great direction. It deals with very instructive and interesting topics. I really love this program.” So Maryanne, we appreciate you.
And for all of you that are listening and have listened, if you haven’t yet, please do leave an honest rating and review on whatever platform it is you’re listening to. The more reviews we get, the more folks we can help and help them kickstart their investing journey.
So with that out of the way Ashley Kehr, let’s get into some boring banter. Let me know what’s going on in your life these days.

Ashley:
Well first of all, I want to say thank you to everyone that has left us a great review. It really does warm our hearts and make us feel so happy and motivate us to bring you guys even more great content. So thank you to everyone who has taken the time to leave a review for us, we appreciate it.
So we are actually recording this the end of June, so this is not going to air for a while. So I feel like things are going to change so much over the summer, but Tony is going overseas for a while so we’ve had to stock up on our recordings. I’m going to a lake house this summer for a weekend. Tony’s traveling the world. So Tony, back to you.

Tony:
Yeah. So we actually take off, I think we have one more recording and then I’ll be gone for almost two weeks. We’re going to Italy for the first time. My son graduated from junior high, we thought it’ll be a cool trip to take before he starts high school. So we’re landing in Rome, then we’re going to Venice, and then we’re finished off in the Amalfi Coast area. So we’ll see a little bit of everything in Italy. It’ll be fun.

Ashley:
I’ve already sent some stills and some headshot so I can be photoshopped into every family group photo on this trip.

Tony:
Yeah, Ashley’s going to be photoshopped along with us everywhere we go.

Ashley:
Well, today we have Brandon Rush on the show. Brandon is a house hacker currently out of Connecticut, and he is going to talk to you guys about how he did his research and how he got started into house hacking. But most importantly, why he chose house hacking. We’ll go into the numbers of how he made it work and how it has benefited him and his wife and completely changed their lives.

Tony:
And Brandon lives in Portland, which is not Portland, Oregon, or Portland, Maine. I just learned today there’s a Portland, Connecticut, but he’s got a really cool story about how he was willing to move almost an hour away and then pretty much just upend his life to start his real estate investing journey.
And everyone always talks about the units and there’s a lot of sexiness around how big your portfolio is, but people always often overlook the hard work that goes into getting there. And I thought Brandon did a really good job of highlighting some of the sacrifice his wife has made to put themselves in a position so that he actually just recently left his job a month ago. And that’s because of the sacrifice he was willing to make.

Ashley:
Brandon, welcome to the show. Thank you so much for joining us. Can you tell us a little bit about yourself and how you got started in real estate?

Brandon:
Yeah, sure. So name is Brandon Rush. Actually, I currently reside in Portland. Connecticut. Started out life in New York City in Queens, New York. Long story short, lived a fun life growing up, very active, sports all over the place. Very somewhat early entrepreneurial skills that I had within myself, such as shoveling snow, packing bags, doing whatever I can to make a dollar without having asked my parents for it was my thing when I was a kid, and that carried over through life.
Started IT career. Typical thing, went to school, started IT career, did that for about 12 years. And kind of the summary of it, my wife and I decided at one point that we found out about real estate, dug into the books like everyone else, bigger pockets went deep and decided that house hacking was how we’re going to start. So it all got started with that first house hack in Connecticut, and since then we acquired a few more properties and here we are now house hacking in our fourth family here in Portland.

Ashley:
Brandon, before we go too much further, can you just tell us what those other properties are and just a brief overview of your portfolio?

Brandon:
Sure. So currently my wife and I, we own three multis, two triplexes and a quad. All three are located in Connecticut, and we’ve house hacked two of them, so a total of 10 units.

Ashley:
Well first of off, congratulations. That’s amazing. I want to know why did you choose house hacking? Why was that the first real estate strategy that you’re going to do? What made you make that decision?

Tony:
And Brandon if you can, for those that aren’t familiar with house hacking, just define that phrase for us as well?

Brandon:
Sure, for sure. So house hacking is basically using your residents to make money. It could be either renting out rooms to other individuals. It could be as we’re doing, renting out multi-families, renting out the other apartments. It could also be utilizing the space that you have in your yard for storage or space in your … It’s really just utilizing the space that you have to make money.
And how we got started with house hacking, what made us decide, it was really a numbers thing to be honest. When we first got started out, I read a book by Chip and Joanna Gaines, and that’s kind of how it got started. I believe it was called Magnolia Story, and that kind of got me started with buying properties. Chip was talking about buying properties on a street. And I said, “This is very interesting. I think this is going to be how we do it.”
And deep down inside. I’ve been looking up a way out of the rat race to be honest, that was really my motivation. And it just clicked. Once I read that book, I ran back home and just started running the numbers. And then I started getting deeper into Rich Dad Poor Dad, the book on house hacking. And then once you do the numbers and once you realize it’s so much cheaper just to just multi-family house hack or house hack in general than to own a single family. So that’s kind of how we got started, sorry it’s a little bit all over the place, but yeah.

Ashley:
No, that’s great. I just love to hear as to why people make the decision as to what strategy they’re going to start with.

Brandon:
Sure.

Ashley:
So with your house hacking, what was the first property that you purchased and what did that look like? Did you have any kind of analysis paralysis? Was it like okay day one, we’re doing this, we’re buying a duplex, and day two you have the duplex?

Brandon:
Yeah, sure. So to be honest, it took us about eight months from beginning to end to acquire that first multifamily. It first started actually, to kind of take it back, we owned a single family prior to moving into our triplex. So we lived in a single family for three years. So the first hurdle was us coming to terms that we need to get out of this house and sell it. The second part was us then deciding where we’re going to move. That was hard because of the market we were in. It was Upper Fairfield County, Connecticut, so it’s relatively expensive and we were looking at cash flow numbers and they didn’t quite work for what we wanted to do. But we were committed. We had to do something. There was no stopping us.
So we decided we’re going to move an hour away and commute back and forth to work at that point in a three family. In terms of numbers, after that the properties got significantly cheaper. The first property was listed for $223,000. I think they did that just to get prices running. This is 2020. We offered $286,000 for it. We didn’t get it at first, but we followed up with our agent and said, “Hey, could you check back in?” And turns out we were able to get that property after a month or two after they went under contract with someone else, so we lucked out just by following up. And that was our first house hack $223,000, $286,000 offer, got accepted, and the rest is history.

Tony:
So if I can dive in a little bit Brandon, so you guys, you’re saying a lot of things but I feel like you’re kind of glossing over some of the sacrifices that you guys made, right?

Brandon:
Yeah.

Tony:
So you move an hour away. You decide to do this house hack. You give up this single family space that’s just yours. Talk us through why you felt that was the right decision and how you were able to overcome any, I don’t know, hesitation you guys might have felt with up heaving this life that you’ve already built, this house you already had and going ahead. That’s a big sacrifice, so just walk us through your psyche in that moment.

Brandon:
I would say for me, it was a bit easier. For my wife, not as much, but she came to terms. A lot of it is just thinking about if we had started 10 years ago, where would we be now? That always circles back in my head. If you had done this 10 years ago, where would you be? And I reminded myself 10 years from now, if you don’t do this, what’s going to be the excuse for not starting?
And it was really as simple as that. And you look at the path in life. All right, my options are to sit here, stay in my W2, continue to make money. It’s great, but where’s the end of the tunnel on this? And I didn’t see the end of the tunnel for me personally, me working to 65 and retiring off of that just was not an option. So we said you know what? Age is not a factor. We’re just going to do this now. And we will reap the rewards of this in 10 years, whatever it may be. So let’s just get started now. And that’s really what it was, is just me pushing myself and just moving forward.

Tony:
Yeah Brandon, that’s really amazing man. And I think so many people who have the idea of wanting to become a real estate investor, they’re not always willing to make maybe the sacrifices that are necessary to really kickstart that journey that they want to go on. But for you, I don’t want to say … I guess the idea of being this kind of corporate slave for the next 30, 40 years was impetus enough to make you make that decision. So can you tell us right now Brandon, what are you doing for work? Are you still working in a W2 job? What does your day to day look like on the work side?

Brandon:
All right. So I don’t want to go too deep into it, but long story short, I left my full-time role of 13 years in IT a little over a month ago actually. So now I’m a full-time real estate agent.

Tony:
Congratulations.

Brandon:
Yeah. Thank you.

Ashley:
Yeah, that’s awesome Brandon.

Brandon:
And I would say 90% of it comes from what we decided two years ago that allowed me to be in this position. Now, if I had stayed with the house, with the car payment, it would’ve just been too heavy to afford to do what we’re doing now. So I want to say we’ve reached financial freedom level 0.5 is where we are now based on the changes that we made. And this is honestly with us making less money. It’s crazy, we’ve making less money, but we’ve made sacrifices that it just balances out. It’s all numbers, and we’re in a much better place than we were two years ago.

Tony:
Brandon, one other thing you mentioned that I really want to drill down on that I thought was really insightful. You said you and your wife kept saying, “What if we had started 10 years ago, how different would things be?” And I think that’s a question that a lot of people ask, a lot of adults will ask that question like, “Man, why didn’t I start this 10 years ago?”
But on the flip side you said, “Well, where will we be if we don’t start today 10 years from now?” And I think flipping the question around that way, it was just really cool because it kind of eliminates all the beating yourself up for not doing it. And it’s like, “Okay, but today is today. We still have the next 10 years, let’s make the most of it.” So man, I really, really love your frame of mind there.
So one other sacrifice I want to point out, and you kind of glossed over this as well, you said that you guys have had three different house hacks.

Brandon:
Two house hacks. Sorry. We bought one in between. I’m sorry, we bought one investment property out.

Tony:
Okay. Oh, gotcha. Okay, so one of them was an investment property. The other two were house hacks.

Brandon:
Right.

Tony:
Still, that’s a lot of moving, right, because you guys had your single family house, then you went to your first house hack, then you went to your second house hack. Talk us through picking up and packing and moving your life. I mean how much time is in between those moves and what has that been like?

Brandon:
Yeah. So one thing we learned quickly is having a single family, you collect a lot of junk. Just straight up, it’s junk. So it’s funny. One of our last pictures before we left our single family was us sitting with our little outdoor table with our two seats because that’s all we had left to eat dinner on.
And it’s really about traveling lightly to be honest. A lot of people, one of the hesitations they’ll have with house hacking is, “What am I going to do with all this stuff?” And we realized that quickly, we have so much stuff. And to make our lives easy, we literally just put it on the lawn, posted in Facebook Marketplace, anything worth under 50 bucks we just gave it away, which was a lot of our stuff.
And we sold a lot, and we purchased a lot of lightweight furniture to make it easier for the moves, or the moves. And yeah, so we just knew … Having a lot of stuff, it makes it mentally heavy on you when you have lots of just stuff to think about, and we had a lot to think about at the time. So getting rid of stuff kind of freed up our minds to think about the bigger picture and where we were going with our lives.

Ashley:
Brandon, now that you’ve invested a little bit, you are in a sense financially free, what would be some advice that you would give to someone who is you on day one, somebody who wants to have what you have, be able to leave their W2 job, house hack, have an investment property? What would be your action items, things that they can do today to prepare themselves to get to your point maybe even faster than you did?

Brandon:
Sure. I would say start to surround yourselves with like-minded individuals. One of the biggest challenges with doing what I do is talking to people who don’t understand the reason why we’re doing it. You will easily get talked about to anyone you walk down the street and say what you’re doing, “Oh my God, how do you deal with tenants? I can never live with tenants.” And it’s just mumbles, but these same people are the ones that are in severe debt and barely making it but they don’t want to give up these small comforts that they have. So I would say one, surround yourself with like-minded individuals.
Another I would say is delayed gratification, like just realize in life, life is one big lagging effect. Everything that you have today is a result of what you did five, 10 years ago. So you’re not going to get anything immediately, so start taking small actions to make a difference in your life five, 10 years from now. Just suck it up, realize it’s not going to be easy, or it could be fun, but it’s not going to be easy to get where we are if you want to put in the time. Not to say we’ve fully made it, but I personally think we’ve done really well.
And the last tip I would have is watch your finances. A lot of times … We’re very diligent with our finances on a monthly basis, and we literally have family meetings and we look at where are we this month? How come we’re down five grand or up five grand, what made that change? And I forgot what the term is, but what you track, you … You know the term. Basically, if you track it-

Tony:
Yeah, yeah.

Brandon:
Yeah, you know the term, but it gets better if you track your expenses. You realize that there’s something you’re doing that’s bringing them down or there’s something you’re doing that’s bringing them up and maybe you need to do more of that, whatever that may be. So definitely the third one I’d say is track your expenses.

Tony:
Brandon, one of the things you mentioned was that it’s hard to find people that understand what you’re doing and why you’re doing it, especially the idea of living with tenants. And for me when I think about house hacking, that’s always one of my biggest concerns is living next door to my tenant, what kind of quality of life am I signing myself up for? So have you been self-managing your units? And if so, walk us through what that journey’s been like for you and maybe some of the lessons you learned there as well.

Brandon:
Yeah. So probably one of the most interesting parts of house hacking, also in classy neighborhoods which is where we started, so it’s definitely a fun dynamic. I would say … I’m trying to think where we start with that.
You’re living with your tenants, you have to have expectations right from the start. The first thing is they’re renters, they’re not going to care for your property the way you care for it. That’s one thing I learned quickly. There’s trash here, there’s trash in the back yard. There’s their friends hanging out. You have to realize these people don’t own this place, and you also have to realize the class of neighborhood you’re in. A lot of it’s a rental market, like where we are, so that’s one thing I would say. I wouldn’t say lower your expectations, but this is not going to be your single family you had or we had where you can walk and say hi to your neighbors, it’s a different dynamic.

Ashley:
Do they know you’re the owner, the tenants?

Brandon:
Yeah. You know, I live on the edge, I’m kind of a risky person so I just straight up say, “I’m the owner,” and end of conversation. “I’ll see you later.” It’s just one of the things I never really thought too much about. Maybe when we grow more, I will hopefully have to stop saying that because I won’t be house hacking at some point, but right now it’s just one of those things I just don’t want to think much about. So I just tell them, “I’m the owner.”
And I also feel like having that relationship with them does help. You being responsible, speaking with them, treating them not necessarily like a friend but like a client of yours that you’re respectful of and giving them what they need, it creates a different level of care for the property as well. A lot of my tenants, they care for the property as if it is truly their property, so I never really have problems with just destruction or anything like that.
I have a really good relationship with my tenants. They do talk a lot when we show up. I give them their time.

Tony:
Can you talk us through that? So you say they talk a lot. Well, I guess first let me ask this Brandon. Were they inherited tenants?

Brandon:
I would say about half of my tenants that I have now were inherited and half were not, half were new that we brought in.

Tony:
Okay. So the ones that you inherited, can you walk us through that initial conversation? Like you say, “Hi, I’m Brandon. I’m the new owner,” and where does the conversation go from there?

Brandon:
Sure. So I grabbed all the information from the previous owner, phone numbers, their leases and whatnot. And it started with a phone call from me personally saying, “Hey, this is Brandon Rush. I’m the new owner. I’m going to be onsite next week. I could be there whenever you’re there. I’d love to meet with you just to introduce myself and go over,” not the ground rules but I always say things in a nice way but, “Just the ground rules of how things are going to operate moving forward.”
And generally, they’ll be okay. When you meet with them, they’re a bit hesitant. They’re very quiet. They kind of don’t know what to expect. I think a lot of them think we’re just going to tell them, “Hey, I’m kicking you out,” or, “I’m raising your rent $3,000,” but it was really none of that.
And it’s just in a respectful but authoritative way I tell them, “This is what’s going on. I have purchased the property, I’m the new owner. This is how you contact me. This will be your new rent,” assuming that they were a month-to-month, “This will be your new rent moving forward. I’ll give you a month or two to think about it.” I never want to make it so immediate and scary to them that they feel like they have to run away from it, so I give them a little bit of time.
And I tell them, “We’re going to sign a new lease,” so I never really talk about rules too much because a lot of that will be in the lease. I just kind of set general expectations to keep the place safe and to let them know where they could reach me, and I leave it at that.
Really it’s when we get to the lease is where we get down to business and we say, “These are the rules, so you’re signing or you’re not signing.”

Ashley:
How do you keep the tenants from knocking on your bedroom window saying, “My toilet is not working.”

Tony:
Not even on the door, but on the bedroom window.

Ashley:
The bedroom window. I remember we had a guest on a long time ago that bought a mobile home park and it had an apartment complex on it. And he was moving into one of the units, and the person that owned it previously had lived there. And the tenants would come knock on his window if they had a maintenance request. That was the old owner’s procedure, so he had to train the tenants to not do that for him. But Brandon, how do you prevent that and do you have a procedure in place that they know to follow so it doesn’t come to that?

Brandon:
Yeah. So we do use … You asked the question before. So for our property management, we do use Tenant Cloud as our property management platform. But the way I eliminate that is I set expectations from the start. I say, “These are the ways to communicate with me only. It’s either through a text message or a voicemail. Please do not knock on my door. I am not going to answer the door. If I do answer the door and you’re there, I’m going to close the door and text you and say, “Please text me your problem.” And they get it from the start.
And if they do do it, which I actually have never had anyone … Maybe one time, there was an emergency and someone did knock on the door, which was warranted. But you just set the expectations from the start, and you stick to them. If they do it, you don’t just give up and just walk downstairs and help them out.

Tony:
Brandon, I always wonder with the house hacks about creating the lease agreement because I feel like if it’s a property where I’m sharing walls with tenants, I feel like I would be even more strict with what my lease is and how I’m screening these tenants, so two questions for you. Did you create your own lease or did you find something floating online or maybe from bigger pockets? And then B, what was your tenant screening process like to make sure you weren’t living next to maniacs?

Brandon:
Yeah. So I guess the first part with the lease, so my lease is basically a mishmash of my own personal what I want because you’re the boss so you can … I mean within the law. So a lot of it is what do we want, so if there’s any kind of parking restrictions, we want to give ourselves more spots or anything like that, we put that in first. And then after that, I have a pretty good network so I’ve reached out and said, “Hey, could you send me a lease?” [inaudible 00:22:52] property management sent me theirs, this person sent me theirs. I kind of took time to mesh it up to what makes the most sense and what’s fair and also relatively strict at the same time that would eliminate any kind of problems?
And then I passed it to an attorney to review it, just to make sure that it’s legit and I’m not breaking any laws. And that’s how we did it. And I’m sorry, what was your second question? I’m sorry about that.

Tony:
No, no, that’s totally fine because one more followup on the lease agreement. So you mentioned the additional parking spaces that you’d like. Are there any other things you’ve added in that have made it easier for you as the landlord?

Brandon:
I would say anything that could make my life easier, like methods of payment. I only allow payment electronically or through personal check. There’s no cash, there’s no money orders. I would say quiet hours, things like that within the law, after 9:00 or 10:00, whatever the law is. Things like that, things that make me and my wife comfortable living there and make our lives easy is really what I’m trying to put in the lease.

Tony:
Trying to accomplish. So then the followup question was what’s your screening process? How are you making sure you don’t have Jack Nicholson from … What’s the movie where he went crazy? What can’t I think of it right now? The Shining, moving in next to you.

Brandon:
To speak on that, the first thing is unfortunately we’re all crazy. You never know who’s going to walk in the door. They could have the best credit. So it kind of sucks, but you can still vet to hopefully eliminate that.
I would say, again, Bigger Pockets, listen to podcasts. I’ve kind of collected all these different criteria that others have used, such as three times the rent is what you bring in monthly. That’s definitely a big one. Credit scores? A lot of times in my criteria I put preferable, not necessarily required, just to cover myself because a lot of times in classy neighborhoods, you won’t get somebody with 650 credit score but they may fall into that 625 or a 600.
And it’s all the general stuff. Landlord checks from previous landlords, verification of income is definitely what I require. And a lot of it is just visually watching the tenants as they’re walking through your … That’s one of my criteria, I don’t know if that’s illegal or not but I do it. And it’s not discriminating, it’s just seeing the vibe when they do open houses. So I only allow people to apply if they come through my open house, and you just want to watch out for the ones that are just very needy right from the start and they’re just like, “Oh, what about this? What about this? Oh, that’s ugly.” This is not going to work because you’re going to be a super needy tenant and I just don’t have time.

Ashley:
Brandon, are you rehabbing any of these properties, or are they pretty much turnkey that you’re purchasing?

Brandon:
All have been relatively turnkey. We have one that … I’d say they’re all early 1900s houses, so they’re not renovated so there’s still small rehab that we’ve had to do like turn a unit, but nothing significant. We kind of knew what we were getting into from the start with a lot of these properties, and they’re small projects like replacement of deck boards and replacement of doors and things like that that we’ve kind of hired out little by little over time but nothing significant.

Tony:
Got you. So one other thing I want to hit Brandon, and you’ve mentioned this a couple times, is how your network has played a role. You talked about getting your lease, you leaned on some other investors and there’s some people in your life you can’t talk to about why you’re doing this house hacking but you have other investors that know why and can see it. So I’m just curious what steps have you taken to kind of build your network?

Brandon:
Yeah. It all started honestly with I would say my local REIA. When we were back in our single family, we started out by driving an hour out to those meetings once a month and just getting submerged in the business and how it all works. And from there, I just realized your network is your net worth as they say. So started to collect cards from these people, and then realizing even from the start I have this problem, I need an attorney. Oh, I have this attorney’s card from this meetup I went to, I could reach out.
And it clicked with me just start networking like crazy because all the resources you need are all out there. You just got to be out there, and after a while it’ll become so easy that all you have to do is … I label all my contacts like agent, lawyer, plumber. So literally I just jump in my contacts and say, “Oh, I got a leak, plumber,” in my contacts. You get five of them, knock it out, and it just becomes so easy after you know so many people.

Ashley:
Can you just say what a REIA meetup is and how would someone find one?

Brandon:
Got it. So REIA, I believe it stands for Real Estate … Oh my God, I should know what REIA stands for. Real Estate IA, I don’t know.

Ashley:
Investment Association?

Brandon:
There we go, sorry. I just …

Ashley:
I don’t know, I’m guessing. I’ve heard of REIA, but I don’t know for sure.

Brandon:
That sounds about right. I’ve never actually from the start … But yeah, so REIA is a local organization, definitely every state I believe has a REIA and then there may be small localities that have REIAs as well. But a REIA is an organization that basically teaches you about real estate, provides the fundamentals on real estate, provides the network opportunities on real estate, within your market. So it’s very common to have REIAs of 50 to 100 people, it’s one of the most common meetup platforms or organizations you should have in your localities wherever you are.

Ashley:
Okay, awesome. I want to get into our deal review, so do you have a property that you want to share with us?

Brandon:
Sure. Honestly, I think the first one is probably the best. It’ll always be the best.

Ashley:
Okay. Well, I’m going to ask you some rapid fire questions, and then we can kind of go into the story of it. So what type of property was this?

Brandon:
So this was a three family in New Britain, Connecticut.

Ashley:
And what was the strategy you were using with it?

Brandon:
Just use our savings. Go 20% down and live in it. It was really straightforward for this one. We had to find a property that we could live in, that was the hardest part because there were no properties at the time when COVID kicked in.

Ashley:
And the plan was to hold this property, even after you were no longer living in it?

Brandon:
Correct, yeah. The plan was to live in it for one year and move on to the next.

Ashley:
And what was the purchase price?

Brandon:
The purchase was $286,000.

Ashley:
Okay, and did you do any rehab, put any money into it?

Brandon:
We did have to turn one unit. We did it ourselves, so it was cheap money-wise but it was very expensive time-wise.

Ashley:
Yeah. And did you go and get this property refinanced at all, or have you cut the original loan on it with the 20% down?

Brandon:
Yeah, so we haven’t pulled a refinance, but we did pull a HELOC. A buddy of mine through my network said, “Hey, your property probably appreciated a bit over the last year and a half. You should consider a HELOC while you can.” It turns out there was I think a little over 40 or 50 grand in equity in the property, and we now have a HELOC. So yeah.

Ashley:
Well, do you want to kind of go into the story, starting off with how you actually found the deal?

Brandon:
Sure. It was an MLS deal actually, so no off-market, nothing special. Just my wife and I looking every day at the realtor.com alerts that come in. And this one popped up. I think for us, leaving the single family it would’ve been hard for us to take a property that needed a significant amount of work. So the balance was finding something that needed not a lot of work that was still relatively nice to live in.
So we did find a property that was relatively nice to live in on the MLS. It was a three bed … I mean it’s a triplex, but our specific apartment that we were in was a three bed, one bath so it gave us the space that we needed to kind of feel like it’s kind of a home instead of a one bed crunched in the corner. So it was a triplex that we basically found on the MLS, paid 286 for it. Yeah, three beds per floor. That was the first purchase.

Ashley:
How was your excitement the day you closed on that? Making this transition, going from single family to house hacking and you already know you are just going to accelerate your financial freedom, what was that like for you and your wife?

Brandon:
It was exciting. Knowing that next month, that $1,500 mortgage we were paying is pretty much gone was like I don’t care what else happens, we are saving 1,500 bucks a month now. To me, it’s like freedom. It was freedom immediately. It’s the most free I felt in my life in a long time without the weight of these obligations of a mortgage and all the other stuff that comes with a house.
And then I would say a little bit of that quickly went away with realizing there’s people living here with us that we have to kind of manage, so we forgot about that part. But it all worked out. It all worked out.

Ashley:
Hey, I would manage two tenants for 1,500 bucks a month.

Brandon:
Yeah, exactly.

Tony:
One followup question to that Brandon. In terms of choosing the right property, what does your analysis process look like? And what was it about this specific triplex that made you say okay this house is worth $280,000?

Brandon:
Sure. So the analysis involved Bigger Pockets Calculator. I still to this day have 100s of them at this point done. That was probably number 101 because they say do 100 before you get into it.

Tony:
Yeah.

Brandon:
Based on comps is how we came up to our valuation of the property. We looked at what other triplexes in that area sold for roughly, and we kind of stuck to our numbers. We offered maybe six grand over what others appraised for, we felt it was worth just to kind of give us an edge, and it worked.
And the other part of the valuation was what the rents would bring in for that property. And looking at what the rents were bringing in, we weren’t too concerned with we’re going to cash flow $2,000, $3,000, whatever dollars. We were more concerned with how do we get rid of that $1,500 mortgage that we’re paying every month, and also making sure the property’s covered once we leave. Those were our two main criteria. And this property did that and a little bit more. Once you ran the numbers truly, $82 a month we were profiting and netting.

Tony:
There you go.

Brandon:
I can’t complain.

Tony:
So was this one of the properties where you inherited tenants, or did you have to go out and screen folks to fill those other two units?

Brandon:
On this property, we inherited tenants. Today, we actually have two new tenants in that building, one still remaining that’s inherited. But we had to bring in two new tenants since having that building. We had an issue with one of the tenants. It was COVID, not paying, low income tenant, couldn’t afford to keep up. And we worked it out. That was the first tenant who left, and we were able to go through the process like we talked about with vetting a new tenant and bringing a new tenant in. And after we left, we were able to bring a new tenant into our unit.

Ashley:
Brandon, knowing what you know now, what would you have done differently negotiating with that tenant that stopped paying? Or would you have done the exact same thing, and what was that process?

Brandon:
Honestly, I think I would’ve done the exact same thing I did, which was when you get into these situations you can’t fight it because your control is limited. The options are very limited. Someone who can’t pay rent, you can’t force them to pay rent, so the next best case is how can work with them to get them out in a very nice way versus a forceful way, which a lot of people would kind of go that route.
What we did basically is rental assistance. Through my network, I put it out there and said, “Hey, I’m having trouble with a tenant who’s not paying. What would you guys do?” And right away someone said, “There’s a rental assistance program in Connecticut. You should apply and work with the tenant.” And we got paid out four months of advance rent. And at the end of that four months, I worked with her in that case and she left on month four, so everything worked out.

Ashley:
Did you have an agreement for that where she knew that she was going to be leaving at the end of four months, or was that something you guys had worked out at the end of those four months?

Brandon:
It was a whole situation, and this is where I’m glancing over what really went on. I would say it was a bit of me pushing in a nice way like, “All right. You can’t afford to live here. Bad things may happen to you if you stay here, not physically but I may have to evict you.”

Ashley:
An eviction.

Brandon:
Yeah.

Ashley:
Yeah, yeah.

Brandon:
She had a social worker, so I started working with the social worker to kind of see what route we can go to get her out. Are there any programs for people having the issues that she was having? And month four, she just said, “I’m leaving.” And I was like, “Holy crap.” I don’t know exactly what I did, but I think just the continuing conversation. I had just let it go and not said anything for four months, then we definitely would’ve been sitting here … That’s one of those things that make you quit landlording. It was rough, but it all worked out.

Tony:
Ashley I wanted to ask you, I know we’ve chatted about this on the show before, but did any of your tenants stop paying during COVID?

Ashley:
Oh yeah. I had a couple, and then the other investor that I do asset management for, he did the same thing. Our property management company applied for these rental assistance programs that were available because of COVID. The problem was that they only paid back rent, and it was you had to apply and then you wouldn’t get funded for three months. So by that time, another three months had gone by of them not paying rent, and then … Yeah. So we’ve gotten paid for the people that haven’t paid, but then the whole thing would start again.
And I think there’s been two programs that have come out, so I’ve gotten two lump sum payments from each of these programs. But there has been one tenant that hasn’t paid since March 2020 and had been relying on these programs, and so we’re actually in the middle of the eviction for them finally because it’s only maybe been six months since evictions have been allowed in New York State. So just a huge backlog of evictions that are being processed.

Tony:
Man. Yeah, I had to evict all of my short-term rental tenants too, so I totally feel you.

Ashley:
Stab to the heart.

Tony:
Wait, so Brandon, I want to go back to your deal if we can finish things off here. I want to talk through the numbers just a little bit. So you initially bought it with three units.

Brandon:
Correct.

Tony:
You were living in one of them.

Brandon:
Correct.

Tony:
You were profiting like 82 bucks a month.

Brandon:
Yes.

Tony:
What does that property look like now that you’ve moved on to your second house hack?

Brandon:
Yeah, sure. So since then, obviously COVID has resulted in rent increases. We have paying tenants now, good paying tenants in that property. So now I would say a true net after expenses on that property, we probably pull about $900 to $1,000 a month after all expenses. Net is hard to explain because when you get into real estate, you realize you have your up month, you have your down months, and that number fluctuates. But yeah, I’d say roughly around $1,000 is what it’s netting.

Ashley:
That’s awesome.

Brandon:
Yeah.

Ashley:
Great job on that.

Tony:
Yeah. I’m trying to do the math really quickly. So say you’re netting even on the low end 900 bucks a month, and you do that over 12 months, that’s almost 11,000 bucks. And you said you put down what, 20% on this property?

Brandon:
Yes, I believe it was around 60-something.

Tony:
Okay, so divide that by 60, and you’re at almost a 20% cash on cash return, which is phenomenal, right, for a long-term rental. So congratulations man, that’s amazing.

Brandon:
Yeah, thank you. Thank you. I didn’t expect that, but things just worked out. They just started to go.

Tony:
So if I can ask one followup question to that. So the house hack that you’re in right now, is that one the threeplex or the fourplex?

Brandon:
Four family.

Tony:
So that one’s a four family, so can you just really quickly walk us through the numbers on that one, like how much you’ll think you’ll cash flow on that property per month?

Brandon:
Yeah, sure. So this was more of … Somebody in my REIA mentioned, “Don’t get I want unit-itis,” and it basically means don’t rush to get units, which is what we did to this property. So long story short, we paid I want to say about 425 on this property. On this one, we don’t necessarily live for … I guess you could you say live for free, but we still really truly factor in expenses so we’re paying a couple hundred bucks out of pocket on this property. But it’s a much more expensive property in a much better neighborhood than where we were before, so with better neighborhoods comes more expensive properties. But yeah, that’s where we are right now.

Ashley:
What would your unit rent for? So if you were going to rent the unit you’re living in right now, what would it rent for?

Brandon:
I would say somewhere between $1,200 to $1,300 a month.

Ashley:
And you’re living there for a couple hundred?

Brandon:
Yep, oh yeah.

Ashley:
Awesome.

Brandon:
Yeah. And in the end to be honest, the other units kind of cover that rent anyway, but we still pay it because it’s numbers. I’m very black and white like this is what this property demands, this is what we must pay. I don’t care about how the other properties are performing, but it all works out.

Ashley:
Do you have a certain buy box or criteria for the properties that you’re purchasing?

Brandon:
It’s changed since we first started. When we first started, it was all cash flow. We want cash flow, we want cash flow. But as I’ve become a seasoned investor or learning, we’re thinking more the big picture long-term, so for us it’s more of being able to acquire properties for little to no down money. And I would prefer a more turnkey property that doesn’t need a ton of repairs. The cash flow may not be there now on them, but again I’m thinking 10 years from now honestly with everything that we purchase.
We put ourselves in a place where our living expenses are so low that we don’t need to chase after a ton of cash flow. Would it be nice? Definitely, but I’m more concerned with just acquiring properties over the next 10, 15 years.

Ashley:
I want to take us to our mindset segment Brandon, so are there any expectations you had getting into real estate that now that you are an investor you realized are not even reality?

Brandon:
Yes. I would I don’t know if it’s necessarily mindset, but cash flow. It’s not what you think it is. As a beginning investor, especially buying older properties you realize that a lot of that is absorbed through old property stuff. Old pipes, leaky roofs, all that stuff. So I would say cash flow is definitely one of those things that it’s not as real as it seems, so just be careful getting into real estate thinking that you’re going to cash flow significantly because you may not when you really factor in the true cost of ownership of a property.

Ashley:
That’s such a good point. I completely agree with you, yeah.

Tony:
All right Brandon, I want to take us to our next segment, which is our Rookie Request Line. So for all of you that are listening, if you’d like to get your question featured on the show, you can give us a call at 888-5ROOKIE and we might pick your question for the show. So Brandon, are you ready for today’s question?

Brandon:
I’m ready.

Tony:
So today’s question is from Alex, who’s in the San Francisco Bay area. And Alex says, “I have about $350,000 for a down payment for a small multi-family, which is barely enough to really cover a down payment in the Bay Area. I was thinking about house hacking, but my question is should I go that route and find something to house hack here in the Bay Area, or maybe go a cheaper route and rent and use that money to invest out of state where my money might go a little further. Thank you so much.” What are your thoughts on that Brandon?

Brandon:
Good question, good question. I would say do both to be honest. It’s very feasible to do both. Assuming this is his first purchase, buy a house hack with a low down payment. Lower your expenses. Don’t start with trying to acquire 100 units. Start by lowering your living expenses. And then go from there because at that point, you have a property, you are an investor. It’s not like you’re just doing it and lowering expenses. It’s two-sided, you save expenses and you get a property whether it’s a single or a multi-family.
And then from there, you can then save all that money you were paying in rent or on the mortgage and then reinvest that somewhere else into another state. So at least in the meantime you’re looking for cheap while you’re banking so much more than you would if you weren’t. And then give yourself six months, a year, come up with your future plan, and then buy property out of state.

Ashley:
Yeah. I think Brandon you have a very valid point is it doesn’t mean that you can’t do both, maybe just doing one first and then the other. And either one you do will be a good opportunity for you to get into the next one. And I think that Alex, you should look at the numbers on each of these scenarios.
So if you do a house hack, how much will you be saving compared to paying rent? And then also look at if you buy out of state, how much cash flow are you going to get? So which number is higher? Are you going to be saving $2,000 a month if you house hack, but are you going to be making $2,000 a month in cash flow if you buy an out of state property with that same dollar amount? So I think look at those scenarios too.
And if you get appreciation, take that into factor too. The Bay Area, you may get more appreciation than if you’re going and buying these cash flowing duplexes in Detroit too. So I think it’s important to not just take into account the cash flow, but also appreciation too.
Okay Brandon, now onto the toughest part of the interview, the Rookie Exam. What is one actionable thing rookies should do after listening to this episode?

Brandon:
I would say if you currently don’t have properties and you’re a rookie and you have nothing yet, think about what your life would look like if you didn’t have to pay your current rent? Or if you do have a property, a single family, you have a mortgage, what would your life look like? How much more would that add on to what’s possible for you? And then take action from there.
Really just explore your finances after that and see how much of a difference it would make. It would allow you to buy that first investment property just like we just talked about. It would allow for a lot, even if you don’t want to move so fast it would just free you up and allow for mental freedom to think about your next steps.

Tony:
Next question for you Brandon. What is one tool, software app, or system that you use in your business?

Brandon:
My wife and I, we use Tenant Cloud for our property management currently.

Ashley:
Okay. And where do you plan on being in five years?

Brandon:
That is a good question. I would say we may be in a single family, I’m not sure yet. My life is so dynamic, I just kind of go with the flow at this point. Still acquiring properties. We may not necessarily be in the multi-family space because as I’m learning, there’s multiple streams of different types of income you can have. So definitely being in a place of multiple streams of income. We’re exploring the Airbnb route now for our next house hack, so we’ll see how that goes. If we enjoy that, we may go that route. So I’d say having at least two to three streams of income is kind of where we want to head moving forward into the future.

Ashley:
That’s awesome. And I don’t think we asked this, but is your wife in a W2 job right now?

Brandon:
She still is, yes. She still is.

Ashley:
Yeah, so maybe she’s the next one …

Brandon:
I’m telling her like-

Ashley:
-To get out of her job in five years? Yeah.

Brandon:
Definitely, for sure. For sure.

Ashley:
Yeah, yeah. Awesome. Okay, well before we end the show, I want to give a shout out to this week’s Rookie Rockstar, who is Ryan Burnham. He just closed on a fourplex in Minnesota on Friday, and it is house hack number two. Three and a half percent down for the down payment at 4.625% on the mortgage. And the total income is going to be $2,680 to $2,700 monthly, and that includes the coin-operated laundry that is on premise. So Ryan said, “Living almost for free in one of the units.” Congratulations Ryan, that’s really awesome, and thank you so much for sharing.
If you guys want to be featured as our Rookie Rockstar, make sure you join our Real Estate Rookie Facebook group, and leave your win for us on there. Or you can also message Tony or I on Instagram at @welcomerentals or @tonyjrobinson.
So Brandon, thank you so much. We’ve appreciated you coming on her and sharing your house hacking journey. Can you please let everyone know where they can reach out to you and find out some more information about you?

Brandon:
Sure. I would say the best place to reach me is probably Facebook, I believe my tag is rushdpi, R-U-S-H-D as in dog-P as in Paul-I as in the letter I. Yeah, just hit me there. My website is dartmouthpi.com, so dartmouthpi.com, and you can message me through there. That’s probably it.

Ashley:
Okay, well thank you so much. We really enjoyed having you, and we can’t wait to see your journey across the next five years and beyond, so thank you for joining us. I’m Ashley, @welcomerentals, and he’s Tony, @tonyjrobinson on Instagram, and we will be back on Saturday with the Rookie Reply.
If you guys loved this episode, please leave us a five star review on your favorite podcast platform, and we’ll see you guys next time.

Speaker 4:
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