\n<\/p>\n
Saving for your first rental property<\/strong><\/a> can take a while, but adding side hustle income <\/strong>could help you stockpile enough cash<\/strong> to buy much sooner. Today\u2019s guest discovered the PERFECT side hustle to pair with his W2 income<\/strong>\u2014allowing him to fast-track his savings<\/strong> and close on his first two investment properties<\/strong> in no time!<\/p>\n Welcome back to the Real Estate Rookie<\/em> podcast<\/strong>! Today, we\u2019re joined by Dan McDonald<\/strong>, an investor who house hacks<\/strong> to help cover his mortgage<\/strong> in an expensive market. Dan\u2019s goal? To reach <\/strong>financial freedom<\/strong><\/a> by the age of forty<\/strong>. And, with two newly renovated duplexes<\/strong> that should not only cash flow<\/strong><\/a> but also appreciate <\/strong>in value, he\u2019s well on his way to achieving that lofty goal!<\/p>\n If you don\u2019t quite have enough cash to invest in real estate<\/strong>, don\u2019t worry\u2014Dan, Ashley, and Tony are here to offer some timely advice on how to increase your income<\/strong> with side hustles<\/strong><\/a>. You\u2019ll also learn how to get started with <\/strong>house hacking<\/strong><\/a> (and how to convince your spouse<\/strong> that it\u2019s the right move). Stay tuned until the very end to hear Dan\u2019s top house hacking tips<\/strong> that ALL rookies must know!<\/p>\n Ashley: Tony: Ashley: Ashley: Tony: Ashley: Ashley: Dan: Ashley: Dan: Ashley: Dan: Tony: Dan: Tony: Dan: Dan: Ashley: Dan: Ashley: Dan: Tony: Dan: Dan: Dan: Tony: Tony: Ashley: Ashley: Tony: Tony: Ashley: Dan: Dan: Dan: Dan: Dan: Ashley: Ashley: Ashley: Ashley: Dan: Dan: Tony: Dan: Dan: Dan: Tony: Tony: Ashley: Dan: Dan: Ashley: Dan: Dan: Tony: Dan: Tony: Dan: Tony: Dan: Dan: Ashley: Tony: Dan: Tony: Dan: Dan: Ashley: Dan: Dan: Tony: Dan: Dan: Ashley: Tony: Dan: Ashley: Dan: Ashley: Dan: Dan: Ashley: Dan: Ashley: Tony: Dan: Dan: Ashley: Dan: Dan: Dan: Tony: Tony: Dan: Ashley: Tony: Dan: Tony: Dan: Ashley: Dan: Dan: Ashley: Tony: Dan: Tony: Tony: Ashley: Dan: Ashley: \u00a0<\/p>\n<\/div>\n Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here<\/a>. Thanks! We really appreciate it!<\/p>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Email <\/em>[email\u00a0protected]<\/span><\/em><\/a>.<\/em><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
This is Real Estate Rookie, Episode 341. My name is Ashley Kehr, and I\u2019m here with my co-host, Tony J. Robinson.<\/p>\n
And welcome to the Real Estate Rookie Podcast, where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And today, you\u2019re definitely going to get a kick to help you get started. We\u2019ve got Dan McDonald coming onto to the podcast, and Dan, I think, is a great example of how to get started as a real estate investor with a low risk strategy in an expensive market. So if you want to check either of those boxes, you\u2019ll really love today\u2019s episode.<\/p>\n
Dan will go into how he was open with communication and involving his then-girlfriend, now wife, into the house hacking experience as they toured different properties and finally purchased their first house hack. And so as of this recording, they have had two house hacks, so he\u2019s going to share how he was able to make that possible within two years of purchasing those two properties. He also talks about the renovation on them, how he funded them, how he found them, and other things that you need to know if you are going to house hack.<\/p>\n
At the very end of the episode, one of the last questions we ask him is, what are the tips that you would advise someone who wants to get started in house hacking? That, if anything, is the must-listen-to of this episode.<\/p>\n
Last thing I love about Dan, and you\u2019ll hear this, is why he\u2019s not necessarily planning to quit his job anytime soon and maybe what you can learn from that. So really great episode. Excited to get to it with you guys. Now, if you guys haven\u2019t yet, please do just take a few minutes out of your day and leave us an honest rating and review on whatever platform it is you listen to the podcast, if you\u2019re on YouTube, if you\u2019re on Apple Podcasts. The more reviews we get, the more folks we\u2019re able to reach. And honestly, the more folks we can reach, the more folks we can help find deals just like Dan did, right? He listened to Craig\u2019s podcast episode, then he read Craig\u2019s books, and now he\u2019s doing this thing himself. So the work that we\u2019re doing here on the Rookie show really is changing lives, and we can reach more people when you leave that rating and review. So take a few minutes, do that for us, please.<\/p>\n
And also something else really exciting for Tony and I, our Real Estate Partnerships book has released on Amazon and Barnes and Noble and other bookstores throughout the world. So if you have purchased our book, we would love for you to leave us a review on whichever platform you bought it from, the BiggerPockets bookstore, or from Amazon, Barnes and Noble, et cetera. And thank you to all that have purchased it. We\u2019ve heard great feedback so far and really, really appreciate it when you guys share that with us.<\/p>\n
Dan, welcome to the show. Thank you so much for joining us today on Real Estate Rookie. Can you start off telling us a little bit about yourself and how you got started in real estate?<\/p>\n
Yeah. Well, thank you both so much for having me. Definitely excited to be here. So yeah, my name is Dan. I currently live about 30 minutes north of Boston, so pretty expensive market, to say the least. But yeah, I\u2019ve been house hacking for almost four years at this point. Had two duplexes appear, and it\u2019s just been a great experience so far. I still have my W2. I\u2019m not really in any immediate rush to leave that, honestly. I\u2019m one of the few that kind of seems like I want to reach FI, for sure, but I want to reach it while I\u2019m at my W2 and hopefully still happy with that, and then just kind of pile it all on.<\/p>\n
Dan, what is your W2? Does it translate to real estate at all?<\/p>\n
Unfortunately, it doesn\u2019t really. So I have my master\u2019s in marketing research, and it gets confused a lot with actual marketing, but it\u2019s legit the studies behind it more. So I don\u2019t create any campaigns or anything. Everyone will do that for me, or design something, and then I\u2019m getting the research on it. So I\u2019m the guy with the surveys and data analysis and stuff like that. So, it helps to look at numbers.<\/p>\n
Yeah, find information on property, analyze a market. I feel like it\u2019d probably be pretty useful with your skillset.<\/p>\n
Yeah, I do work with one company, I\u2019m not allowed to say which one, but a pretty big home improvement company that I get to, I definitely spend a lot of time myself there, so it\u2019s like, oh, I kind of know why you guys are thinking this stuff, or man, I should suggest something else. So yeah, it is helpful.<\/p>\n
Dan, I want to ask, you said that you house hack and this is the Rookie Podcast. So for folks that maybe aren\u2019t familiar with the phrase house hacking, what is that strategy, and maybe give some insights into why you chose that as your investment vehicle.<\/p>\n
Yeah, so house hacking, the reason I love it so much is it\u2019s basically taking a property and essentially living in part of it and renting out the other part, but you can be so creative on what that actually means. So for me, it means a duplex. My wife and I live in a unit, rent the other side, but you could buy single family, rent by the room. You could buy a single family and build a detached garage apartment or something. There\u2019s just so many options. It really depends on how creative you want to be and how uncomfortable you want to be sometimes, too, but my wife and I definitely took the traditional route of duplex. We completely live in one unit with no roommates, and then downstairs is a rental unit, so we feel like we kind of have our own space, which was a big important factor for convincing her.<\/p>\n
Just one follow-up for you, Dan. I guess why was house hacking maybe the strategy that you chose? Because there are pros and cons to it, and you touched on it a little bit. What are some of the pros you see? What are some of the cons you see? And ultimately, what made you choose house hacking as a strategy for you?<\/p>\n
Yeah, so I definitely got to give credit where credit\u2019s due. I originally heard of house hacking through Craig Curelop. I was actually in Craig\u2019s fraternity in college. So we both went to school in Boston and knew him for a little while before he graduated. And like you do with all kind of people in your fraternity or whatever from college, you follow them on Facebook and you see what they\u2019re doing and stuff. And I could see Craig starting to build up this real estate empire. And then I saw him working for BiggerPockets and I\u2019m like, what is this company? And then I just went right into the rabbit hole and was like, oh, man, and started to hear more and more about it and then read his book and stuff. So for me, it was really like, and I still really believe this, that it is the easiest point of entry for rookie real estate investors.<\/p>\n
It\u2019s like, for me, the prices are just insane around here, so it\u2019s very hard for me to come up with 20% on a quarter-of-a-million-dollar house or more is going to take me some serious time. So for this, it was, okay, how do I get something? How do I stop paying rent and build an asset and start to build this business without literally waiting 20 years or something to save up the 150 or $200,000? So for me, that was really the main focus was I need a place to live no matter what. So I\u2019m already paying expensive rent. Why can\u2019t I be paying myself? Why can\u2019t someone else be paying me? So it was really just that point of entry that I think is, to this day, is definitely the easiest route to start off.<\/p>\n
I just want to mention real quick that Craig Curelop was a guest on here, too, the Rookie Podcast. He was Episode 195, and you did mention his book, Dan, which is the House Hacking Strategy, which is available on biggerpockets.com and in the bookstore, if anyone wants to check that out after they hear Dan talk about all the amazing benefits of house hacking and want to get started themselves. So let\u2019s kind of go into that first deal of, okay, you\u2019ve decided you want to do house hacking. What are the next initial steps you took? What made you actually start investing compared to maybe somebody who says, yes, I want to start house hacking and then never takes action? Explain those steps for us.<\/p>\n
Yeah, I think what\u2019s really important, well, for me, one of the biggest first steps was convincing my wife, well, my now-wife. Back then, she was my fiance or girlfriend at the time. I can\u2019t exactly remember, but she was definitely close to me.<\/p>\n
Your girl.<\/p>\n
She was my girl. So yeah, that was definitely set in stone. So convincing her, for sure, because we both grew up the same way, but she\u2019d never heard of this. Real estate wasn\u2019t like her go-to. She sees the benefits, but she\u2019s not obsessive like I am. So convincing her this is what we would do for here and this is why it\u2019s better versus that traditional starter home that everyone wants to buy and then they become house poor and it just seems to drag on and on. So that was definitely step one for me, but really, two, I had to understand my finances. I had to understand what it looked like for me to house hack around here, because obviously if you\u2019re house hacking north of Boston or in Boston or whatever, Massachusetts in general, it\u2019s a much different ball game than maybe Tennessee or Georgia or whatever. So I really had to study my surroundings and understand, okay, what markets should I be focused in? What\u2019s actually realistic for me? Because obviously I would love to house hack and get paid to do so, but is that realistic around Boston?<\/p>\n
Dan, you hit on something that I\u2019m sure caught the attention of many of our listeners, and you said that you were able to get your fiance on board with this idea of house hacking. Me personally, I think house hacking is probably one of the hardest strategies to get a spouse on board with because at least with non-house-hacking type investments, you\u2019re not sharing walls with your real estate investment itself. There\u2019s a little bit of separation there, but with house hacking, you\u2019ve got one side, your tenants are on the other side. So what steps did you take, Dan, and what was that journey like for you and your fiance at the time to get her from maybe knowing nothing about real estate investing to saying, yes, let\u2019s move in next door to our tenants. What was that conversation like?<\/p>\n
Yeah, so one of the bigger things, not to make it a marriage podcast, but definitely compromise. I mean, definitely realize that, because she\u2019s putting up her money, too, and there is a little bit of that trust there that\u2019s a little bit of blind trust, and she\u2019ll admit it, too. She will support me, she will trust me. She trusts that I have put in all this effort to study this and listen to a million podcasts, and I can run the numbers and stuff. So definitely, definitely show her you\u2019re serious, show him or her you\u2019re serious about this, and then bring them along for as much as they want to be. So I brought her to every open house. I wasn\u2019t going to buy a house without her ever seeing it. We went to every open house together. I communicated with her the types of things we need to look for, the types of things we need.<\/p>\n
And to be completely honest, I don\u2019t know if she ever really was 100% there until we got our first duplex, and we were able to see, A, the numbers and how much sense it made financially, but also build a place that was actually better for us. We essentially had to do a lot of cosmetic stuff to it, and it was nicer than what we were living in before.<\/p>\n
So some of those updates weren\u2019t the most financially savvy thing I\u2019ve ever done, but it was like, okay, what will make her excited about living here? I want to get her into a place that for rental-wise, people are going to love it, but she\u2019s going to love it, too, and she\u2019s going to want to live here. And I think that\u2019s really important. If you\u2019re telling your partner, like you\u2019re going to live in the basement together and then someone\u2019s going to rent out a beautiful upstairs, then good luck. And if you find that person, maybe you should marry them because they\u2019re very, very willing at that point. But my wife, God bless her, she supports me, but she\u2019s not looking to live behind a curtain like Craig did for a while. So you got to tread lightly.<\/p>\n
Dan, you hit on some important things that I want to make sure that we\u2019re highlighting for every single person that\u2019s listening. This is something I\u2019ve been saying for a while now, but if you have a goal of investing in real estate and your spouse is not on board, the first question you need to ask yourself is, have I earned that person\u2019s trust? Have I earned the right to get my spouse to be on board with this desire that I have to invest in real estate? Because if you\u2019ve never really put your mind towards anything in your entire life, why would your spouse or your girlfriend want to get on board, or your boyfriend, want to get on board with this idea? If you\u2019ve jumped around from a different business idea every 30, 60, 90 days and none of them have seen any level of success, why would they think that this one will be any different?<\/p>\n
But what you said, Dan, was she trusted you because she saw that you poured in a bunch of time into educating yourself, listening to the podcast, reading the books. She knows that you have the analytical skillset, so there\u2019s already some natural ability that you have to be successful in this. And then the third thing you did was you involved her in the process. Okay, we went to every single open house together. So you built the foundation of trust by yourself, and then you slowly brought her in. And I think that\u2019s the path that people should take when they\u2019re trying to get their partner or their spouse on board with real estate investing.<\/p>\n
My cousin, she just got engaged yesterday, actually, and when she started dating her boyfriend, he owned a duplex. And after a year dating, she moved in with him, and she was just complaining, \u201cWe need a bigger place. I don\u2019t have a closet,\u201d all this stuff. And I said, \u201cWhat are your plans this weekend?\u201d And she named two places they were going out to dinner, they were going to, I don\u2019t know, a concert something. I was like, \u201cWhat trips do you have planned?\u201d And she\u2019s planning all these trips. And I was like, \u201cDo you enjoy that? Do you love all that?\u201d And she\u2019s like, \u201cYeah, I do.\u201d And I said, \u201cDo you know why you can do that?\u201d And she\u2019s like, \u201cWell, my boyfriend pays for me.\u201d And I said, \u201cYeah, do you think he could pay for that if he has this huge house mortgage now?\u201d<\/p>\n
And she was like, \u201cOh, yeah.\u201d It clicked with her, and now she just got engaged in Scotland, and they just bought this beautiful huge house and everything, and it was that delayed gratification that she had to suffer and live in a small little apartment and have a tenant downstairs for a couple years, but it is remarkable what can actually happen. And it may not seem like that much, but it actually can add up to a lot down the road. It\u2019s almost like you think of compound interest. It\u2019s all these compounding effects of house hacking and be able to cut those living expenses out can really add up in the long run to save for that big beautiful diamond ring she got.<\/p>\n
Yeah, Ashley, I just got to add one thought to that. I feel like part of the reason that delayed gratification is so difficult is it has a lot to do with the community that you find yourself in. So when my son, he\u2019s almost 16 now, but we were one of the late ones to give him a cell phone, like a smartphone. And when we first gave him a cell phone, he had one of those old school Nokias. They still make them, but they\u2019re like newer versions. And he was so embarrassed about using that cell phone that if he had to call us, he would go into the stall in the restroom to make the phone call. I could hear the echo of the bathroom whenever we talked to him. The reason I bring that up is because he was so embarrassed to use that cell phone because everyone else at the school already had the cool iPhone or whatever it was.<\/p>\n
So he was the red herring or the one that was left out in that group. But imagine if everyone in his junior high was also using that same cell phone, it wouldn\u2019t be that big of a deal. So the same thing happens for us as adults. We get so influenced by the people that are around us that if no one else is practicing delayed gratification, if everyone else is spending today and thinking about tomorrow second, it becomes harder for us to develop the right skillset ourselves. So for all of our rookies that are listening, I think a very important next step for all of you is building that community, is integrating yourself with people who are going on the journey that you\u2019re trying to go on. So that way, doing weird things like living, maybe not as weird as Craig about living behind a curtain in the living room, whatever, but doing these weird things that real estate investors do to achieve these long-term goals, it becomes easier when everyone else is doing it with you.<\/p>\n
Okay, so Dan, let\u2019s talk about your why. Why did you want a house hack? What was your end goal? For my cousin, it was the big beautiful house at the end of the road and the diamond ring. For Tony, it was his son to finally get an iPhone.<\/p>\n
So for me, my why, it definitely plays a lot into my background. So I grew up in a small farm town in Connecticut, middle class, two very loving and supportive parents. My dad really instilled this notion in me of a strong worth ethic and all his financial savviness, and he was a great saver and worked extremely hard. And because of that, he was able to retire at 50 years old, but this was after working two jobs for 30 years that he absolutely hated. For him, he had this very admirable work ethic, and I can\u2019t take that away, but it was a lot more working harder versus working smarter.<\/p>\n
And that\u2019s essentially, in his eyes, was the only way to do it. I\u2019ll just work, work, work, and then I\u2019ll be able to save, and then I\u2019ll retire. But he would tell me all the time, too, it\u2019s not what you make, it\u2019s what you save. And up until a few years ago, I was like, I really held onto that idea tightly, that if I just work as hard as I possibly can, if I just save as much as I can, I\u2019ll be fine. And I\u2019m not saying that\u2019s the wrong way, but it wasn\u2019t until he passed away a couple of years ago, and it just was like this total wake up call for me. He died within a year of being diagnosed with cancer, and he was only 60 years old.<\/p>\n
So that\u2019s so young, and I was so thankful for everything that he\u2019d done for my family and me, and I was really happy that he got to experience retirement for as long as he did because most people don\u2019t even retire by 60 anymore, but it was just this eye-opening moment where it was like, okay, how can I work smarter? How can I stop being obsessed with working harder?<\/p>\n
And real estate was always something he wanted to do. And he got his license when he was my age, but he never did anything with it. He\u2019d always look at listings on Zillow, always make us drive by every house for sale on vacation. Even when he had the means to, he didn\u2019t do it. He never took that initial step. So for me, it was like I swore to myself that I wasn\u2019t going to let all the lessons I\u2019d learned from him passing away be for nothing and result in nothing. So I swore I would take that and make it, the lowest point of my life, turn it into the escalator for my success and really just focus on, okay, I want do all the things he did for his family.<\/p>\n
I want give them education. I want to be there, I want to support them, I want to help them, but I want to change it up a little bit and just focus more on working smarter and not necessarily harder. And I struggled with that my entire life. I still do. I\u2019m still trying to get away from this mentality that if I just work harder, it\u2019ll automatically lead to more success, but I know that\u2019s not the case. It doesn\u2019t always work out that way. So that\u2019s for me has really been like, I love my job. I don\u2019t have any plans to leave it, but how do I still get all the things I want without relying on any one source of income and just focusing on working smarter and not harder?<\/p>\n
Yeah, that\u2019s great. I think that people get caught up in, I have to leave my job because that means you\u2019re financially free and you made it in real estate, but that\u2019s not really the case. What the goal is oftentimes, and you may not even realize it, but it\u2019s that you have the freedom to do whatever you want. So if you all of a sudden wake up one day and decide you want to leave your W2, you can do that. But it\u2019s that freedom that allows you to make these life decisions day to day that aren\u2019t based on money, is that your real estate is funding your life that you can make those decisions and not have to worry about money, which for a lot of Americans, that is a huge impact on every decision they make every day, what their finances are, leads to a lot of the decision-making.<\/p>\n
And imagine taking that factor out, where there\u2019s so many day-to-day decisions that you can now make without even having to think of the financial impact. For example, here\u2019s just something that is a very small realm. Your son is sick. You have to take off the day of work to go pick up your son from school. Maybe you have a job where you\u2019re a waitress, you get paid from tips, and now you are missing a full day\u2019s pay where you\u2019re not making anything, or there\u2019s a lot of jobs where you don\u2019t have sick time or paid time off or things like that. And you really have to, and even if you do, you really have to pick and choose which days you\u2019re going to use those, that certain time off, and things like that.<\/p>\n
But imagine not having to even think about that implication and just being like, oh, okay, I\u2019m not going to do any work today. I\u2019m just going to go get my son from school, or maybe you can work from home, whatever that may be. But that is just a huge revelation, is once you realize that you can make decisions not based on money, how much freedom you actually have to kind of pursue the life that you want.<\/p>\n
So Dan, let\u2019s get into your first property then. So you and your girl are out touring houses and everything, and you finally pick one out. Run us through the numbers on that.<\/p>\n
Yeah, so the first property was a duplex. It was a two-one on each unit upstairs and downstairs, and we actually didn\u2019t get it the first time. So this was listed for 475, and we went in at 501, and we didn\u2019t get it. This was literally a couple weeks before the world shut down for COVID. We\u2019d been searching and hunting for months now, putting in offers and getting blown out of the water.<\/p>\n
And we get a call literally as the world shut down that week, March 2020, that the guy who actually got accepted lost his job and that he was pulling out of the deal and if we wanted it, it was ours. So it was a very scary decision. I was like, well, it doesn\u2019t look too great right now to own something, or we don\u2019t know, we could lose our jobs tomorrow. Do we really want to buy something for half a million dollars? But I knew the numbers, I knew I needed to just jump in and that I just had to jump in. There was no other option for me, just get after it, and I would figure it out no matter what.<\/p>\n
So I guess a couple questions to drill down on there. This property, it was 475, but you initially offered 501. Why was that? Why go over asking price? The reason I ask this question, Dan, is because I think for a lot of rookies, anytime that they think of going over asking, they feel that they\u2019re overpaying, and it\u2019s a common misconception. But I\u2019m just curious, why did you come in at 501 when the asking price was 475?<\/p>\n
Yeah, so I was going for the Price is Right style, just putting that one extra dollar than the person on my left and hoping it worked out. But for all I know, that guy could have put 502, but for me, it wasn\u2019t\u2026 We knew, I had spent the time running the numbers and knowing what would work, and obviously if I got it for less, of course, the numbers would\u2019ve been better, but I knew exactly what I could offer, and I also had a lot of trust in my agent, and I definitely think that\u2019s super important. Find an agent who\u2019s house hacking or has house hacked or knows that stuff very well because my agent not only knew the area, knew the market, knew what was realistic. He wasn\u2019t going to say, \u201cPut in 450.\u201d You don\u2019t stand a chance. We had known, we had seen the market been playing out for very\u2026 Everyone was going over asking price.<\/p>\n
It was impossible. One of the houses we looked at went 100,000 over asking price, not something I was going to bid on, but we just knew what to expect. Our expectations were more realistic than some people who just assumed that they can get in a house and like, oh, that asking price, I can totally get it for 50 grand less or whatever. And that wasn\u2019t the case. And for me, my strategy, 100%, is buy and hold. So even if I overpaid, which, yeah, I mean I could have, it didn\u2019t matter as much. I don\u2019t do anything for the short term. My portfolio in real estate, my portfolio in the market, my 401k, all that stuff. I am thinking about it long term. So I don\u2019t care. I\u2019m focused. I know this is an expensive market. I\u2019m focused on appreciation. The cash flow here is not amazing.<\/p>\n
It\u2019s not enough to retire off of unless I get quite a few properties, but I know that house that I paid 501 for is now worth about 700, and that\u2019s just in three years. So it\u2019s like, I knew that going into it, and I was like, okay, if I got overpay a little bit, this isn\u2019t\u2026 And people do need to do the math, too. By then, you\u2019re probably talking to a lender, and they can tell you. It\u2019s not a crazy difference in your mortgage if it\u2019s a couple grand over or even 25 over. It wasn\u2019t like a night and day difference. So that\u2019s just math, too. It\u2019s just like, okay, can I afford this for a couple, 200 extra a month or something, or 300 extra? And if you can, then you got to kind of know there.<\/p>\n
I guess one point I want to make, and I totally agree with you, Dan, but what a lot of new investors make the mistake of confusing purchase price with the actual value of the property. Those are two separate things. I could list a million dollar property for $300,000, and say you buy it for $400,000, you went $100,000 over asking, but it\u2019s a million dollar property. Was that a bad buy? Absolutely not.<\/p>\n
And the inverse is true as well, where I could list a $200,000 property for a million bucks and someone might buy it for six. Is that a good deal because they got a $400,000 discount on the purchase price? Absolutely not because the property\u2019s only worth 200. So as a real estate investor, at times, you have to separate, I think, your emotion from the purchase price and instead fall back on your numbers. What is the purchase price that makes this specific deal meet my investment criteria? What does the purchase price that allows me to get the return or appreciation or tax benefit or whatever my goals are? What is the purchase price I need to be to achieve those goals? So as a rookie, if you can separate your emotion from the purchase price and instead focus on your numbers, it\u2019s an easier way to make decisions about investing.<\/p>\n
So Dan, now that you\u2019ve got this property, moved into it, was it vacant when you purchased it?<\/p>\n
Yes. The downstairs actually had been vacant for a while. I don\u2019t think anyone had lived in it for a while. And the upstairs was an older woman who was actually moving out to a nursing home anyway. She\u2019d been in there for 18 years and been paying nothing, so we didn\u2019t even get to see it. Also, too, unfortunately because of COVID, she could technically not let us in. So luckily I had an agent I trusted, like I said, and he made sure that he put in the clause that we will not actually close on this house until we get in upstairs at one point.<\/p>\n
And they tried to call the cops and force her to let us in, but it wasn\u2019t happening. So luckily she was moving out relatively around the same time anyway. So we just had to wait. It delayed it a little bit, two or three weeks, and we had to wait until she got out so we could actually go upstairs and see. And of course ,I was like, okay, what is this going to be like? This could be the worst ever, but we still had that option to pull out even if it was, so they knew that. So yeah, it was completely vacant, which was awesome. We knew we were going to live in the bottom floor, rent the upstairs, but it did need a lot. It was definitely a light fixer upper, for sure.<\/p>\n
So did you guys move in and then how long did it take to do that rehab? Did you guys do it yourself? Did you hire contractors?<\/p>\n
The rehab was, luckily, there was nothing major-major except for some water issues, which we can talk about, but it was mainly cosmetic. So I\u2019m talking like it needed new kitchens. It needed new bathrooms. Every single thing needed to be painted, every single thing. Nothing crazy, but it was still very expensive, and especially up here, too, it\u2019s crazy how much you can spend on basic stuff. I was doing Home Depot cabinets and stuff. I was not doing custom-made, anything like that, and it was still very, very costly renovation. But we knew that, and we wanted that. We were looking for that, whereas my wife definitely had a hard time getting past that because we also saw a lot of turnkey duplexes and stuff, but we\u2019d be paying top dollar. And I was really, and I tell people this all the time, too, really focused on how you can add value to it as quick as possible so that when it does come time to refinance, you\u2019re so much closer than where you were.<\/p>\n
Because we were putting down 3.5%, so we didn\u2019t have a lot of equity. So it did take about $50,000 to completely renovate it, but it got it to that point where my wife was like, wow, a bathtub that I\u2019m the first person using it. That\u2019s insane. We were coming from a old duplex in Boston that was not glamorous by any means. It was a good deal for rental in terms of price, but it was like, I don\u2019t know why everyone tiles the ceiling in Boston. So if you go to these old places, tile, floor, wall, ceiling, yellow, blues, greens, not normal colors. It\u2019s the weirdest thing.<\/p>\n
That\u2019s crazy. I don\u2019t think I\u2019ve ever seen tile on the ceiling in a residential property before. That\u2019s crazy.<\/p>\n
Yeah, it\u2019s pretty common. I don\u2019t know if it was cheap back then, so people thought\u2026 These are also bathrooms that don\u2019t get renovated ever, but I don\u2019t know if people were like, wow, this tile\u2019s so cheap. Let\u2019s stick it everywhere we can.<\/p>\n
Let\u2019s put it everywhere.<\/p>\n
Yeah, literally.<\/p>\n
You got tile in the closets. Well, one question from me, Dan. You said the renovation was $50,000. How did you fund that? Was that out of pocket? Did you have an additional loan? Did you have a partner to bring that? How did you guys fund the $50,000?<\/p>\n
Yeah, so it was definitely a mix of everything. When I came back to Boston, I went to grad school in Georgia, I came back to Boston. I knew I wanted a house hack as soon as possible. I saved as much as I could. I got as many side hustles as I could, focused on that, knew that I would only be able to cover that 3.5% down for sure between my wife and I, which luckily, that\u2019s the thing that people don\u2019t get is. When something\u2019s $500,000, 3.5% is less than 20K. I think it\u2019s like 17,000 or something. That\u2019s not terrible to save. 120,000 or a 100,000 is rough. So we did that grinding there for a couple months, and then I actually got, a small portion of my dad\u2019s life insurance, my mom gave to me to do the renovations and stuff.<\/p>\n
So that was honestly 100% the thing that really got me going there. And I know there are plenty of people that kind of discredit that and everything, but for me, it\u2019s all about just don\u2019t waste any opportunity to get. So for me, yes, I knew that that 50K was a blessing and anyone would be lucky to have it. I would\u2019ve easily given it back a million times over for my dad, but this was something I was not going to waste, and I knew he always wanted to do real estate. So I loved it. I was like, this is much, much better for me to really get in, essentially.<\/p>\n
This is actually a huge pet peeve of mine is how you said that people may discredit it because you got that money from the life insurance. I can\u2019t stand when people do that. It was like, oh, this person inherited this money or this person, their parents were really well off, gave them this money, or whatever that opportunity is that they took advantage of. How many people are out there that get those same opportunities, get ahold of that same money, and just blow it? I almost think sometimes it\u2019s harder when you come into money like that, so easily, that it\u2019s way easier to just blow it and not use it, where your hard-earned money, you\u2019ve had to scrape and save forever. It\u2019s easier to go and use that to build your future or whatever. Yeah, so definitely don\u2019t discredit yourself because I think there are probably a lot more people who get these kind of opportunities and they don\u2019t take advantage of it by investing or using it to build their future, for sure.<\/p>\n
The statistic is wealth is gone by the third generation or something crazy like that. Most people can\u2019t handle wealth that\u2019s passed down to them.<\/p>\n
Yeah.<\/p>\n
I also want to touch on the side hustle piece, Dan, because you said you kind of side hustled your way into saving up for that down payment. We had an entire show on side hustles. It was, gosh, I can\u2019t remember the episode number. Maybe our producers going to help us out here, but what were the side hustles that you worked on, Dan, or that you leveraged to save up that 3.5%?<\/p>\n
Yeah, so I mean, I\u2019ve definitely been a bit of a serial side hustler. I have tried everything, DoorDash, Uber Eats, building stuff, literally selling stuff, whatever I get my hands on. I did retail. I worked at Banana Republic for a while, which wasn\u2019t fun. Literally, I\u2019ve tried it all, and I never really stopped. So when I graduated undergrad, my first job was $38,000 a year in Boston, and I was living with my girl, who was making I think 60 maybe then or whatever. So she wanted a little bit bougier of an apartment.<\/p>\n
She didn\u2019t understand that literally\u2026 We\u2019re young. We should just be spending it all anyway, but me trying to keep up with that, making 38K a year in an apartment that it was like 1100 for each of us, I was like, all right, dude, you got to do something. It doesn\u2019t matter. This can\u2019t be your only job. And then I went back to grad school and luckily got a raise and stuff, but I\u2019ve tried it all. Honestly, the one that has really stuck with me is called TaskRabbit, and I don\u2019t know if you guys are familiar with it or not. It\u2019s not in everywhere.<\/p>\n
We don\u2019t have it in Buffalo, but I\u2019ve heard a lot of people talk about it, because I\u2019ve looked to see, and yeah, we don\u2019t have it yet.<\/p>\n
So for me, I like to try to, and this goes back to my problem with just working harder and not smarter. I have been doing TaskRabbit for a couple years. I\u2019m finally at the point where I\u2019m actually retiring from my clients, even though I should have done it already. I should have done it probably two years ago. It served its purpose, and now I\u2019m just dragging it on, but it has been super beneficial, and I definitely encourage people to think of what stage of side hustling they\u2019re in. Are they in the I need cash now, or I need it in a month, or I need it in a year? Because I do regret spending so much time doing that.<\/p>\n
And yeah, sure, I can go out and make 50 bucks tonight, but it\u2019s not scalable. I\u2019m trading my time for money. I\u2019m doing awful stuff, mowing lawns, moving furniture, doing essentially whatever. I\u2019ve had some pretty interesting tasks on it, but it\u2019s like that one has definitely been enough to really, and that also helped, too. We did get into a little debt when we got the house, the first one, and that helped us really kind of get out of it. So I do essentially owe it a thanks, but I definitely think it\u2019s time to retire and focus on stuff that\u2019s a little more like, A, I enjoy, and scalable.<\/p>\n
So our episode was 294 where we interviewed two of our previous guys who came back for a second episode to talk about how they side hustled their ways into some of their deals. But Dan, just really quickly, what is TaskRabbit, maybe for those that aren\u2019t familiar, and just ballpark, how much would you say someone could project to earn on a monthly basis using TaskRabbit as a side hustle?<\/p>\n
Yeah, so TaskRabbit, I will say, is great for the I need cash right now stage, and I recommend it. If it\u2019s in your area and you\u2019re comfortable, I totally recommend it over an Uber Eats or DoorDash or something. But essentially what it is it\u2019s kind of like a handyman app. And I say that and I definitely don\u2019t want women to get discouraged or anything because there\u2019s so many tasks on it that you can do anything. If you feel comfortable with it, whatever. If you want to mow lawn, cool. If you want to, they have literally mowing, moving, getting rid of stuff, cleaning, organizing. They have rental property management, which I\u2019ve never actually been picked up for, but I am open for it. They have a list, a pretty big list of essentially anything you could do. So if you feel comfortable going to these people\u2019s houses, doing whatever, and you set your own hours, you set your own pay.<\/p>\n
So I do think it\u2019s great. I\u2019ve done it for three years. And for me, it\u2019s always been after my 9:00 to 5:00. So doing it nights and weekends, I\u2019ve probably made about $12,000 doing it and honestly could have realistically made more. I started off being a little too obsessive with it. The first month I made $1,600 or something because I was just like, I\u2019m going to fill up every hour I possibly can, but you\u2019re trading time for money. You\u2019re working your butt off for sure. You\u2019re literally doing stuff that no one wants to do, like build IKEA furniture and stuff. So that\u2019s why you\u2019re getting hired all the time super easily. And then the clients, realistically, once they know you\u2019re pretty much that guy or person who will just do help with this or that or whatever, they just essentially keep your number there. So I built a small list of clients that keep me busy enough and stayed off the app for the past probably two years.<\/p>\n
We had Honey Money Rachel on an episode, and she actually talked about how she uses it when she furnishes her short-term rentals to put all the furniture together, that she found a great guy off TaskRabbit that comes to do it, does all these little things for her when she puts together her short-term rentals.<\/p>\n
I actually just opened up the app just to kind of see what are the options. so you can get help moving, general mounting, TV mounting, furniture assembly, furniture removal, minor home repairs, yard work, indoor painting, cleaning, plumbing, errands, light carpentry, packing and unpacking, organization, even personal assistant work. So there\u2019s a lot of different things you can do in TaskRabbit. So I just wanted to highlight there because I think a lot of folks are in the boat of like, man, I just need to hustle up some extra cash to get this first deal done. And there are so many options out there, guys, so many options out there. So do what Dan did, find a side hustle, grind it out after work, weekends, and there\u2019s no excuse not to save up, what was it, 17.5 is what you had to save for that first deal? You guys can make it work.<\/p>\n
And I also know that, I follow Rachel on Instagram, and I know that at one point, she literally hired someone off TaskRabbit and then mentored them. They were like, \u201cOh, I\u2019ll help you, I\u2019ll help you,\u201d I think it was like bushes or something, \u201cif you help me talk me through how you buy all these houses and stuff.\u201d And I\u2019ve tried to do the same thing with clients. I have a client who I work for his whole family, and he\u2019s got some rental properties in the area. So I\u2019ve definitely built up the relationship to be like, \u201cJust so you know, I\u2019m an agent, I am an investor. I want to buy more properties. If you ever want to dump off any of these, shoot me a text, happy to talk.\u201d So it does also help, too, to build those connections.<\/p>\n
So do you want to tell us real quick about your second property that you got and just kind of run through that?<\/p>\n
Yeah, absolutely. So the second one was a duplex, which was essentially two streets over, and it was a four bed, two bath is the unit I\u2019m actually in. And the first floor is a two bed, one bath. So that one was, we purchased that last September.<\/p>\n
So is you lived in the first one for a year, that year occupancy?<\/p>\n
We lived in it for closer to two. Yeah. So I will say, too, obviously being in inexpensive area, and something I\u2019ve definitely struggled with is just the comparison. You go out there and you see everyone else buying a million properties, or people telling you should house hack every year on the dot and stuff. And it was really hard for us. I couldn\u2019t save that fast. I just couldn\u2019t save what we needed for the prices continuing to go up, and it was like it wasn\u2019t in the cards, so it took us a year and a half or something, but it worked out very well because this house, which I had at first written off, and it was my agent who kind of came back and said, \u201cDo you know this is literally two streets over to you? Your life would be much easier.\u201d<\/p>\n
I was like, you\u2019re totally right. I\u2019m going to self-manage these. I was like, why am I not thinking of that? We wanted a bigger place anyway, and this was definitely bigger. It was like, okay, we weren\u2019t as obsessed with the second one as kind of the best deal possible. We really were like, we want the next one to be five years. We want to start a family in this house. We want to be comfortable. And that\u2019s the thing, too. Again, it\u2019s as much as you want it to be, you don\u2019t need to be so gung-ho on, I need a $500,000 a month in cashflow. What if you just want to live in this area? I can\u2019t afford this area right now with a single family, four bed, two bath. I\u2019m in a four bed, two bath right now, so why not?<\/p>\n
Okay, so you moved into that one and now you have, was that one vacant, too? And did you have to do any rehab with that?<\/p>\n
Yeah, yeah. So unfortunately where I live, both of our properties are actually 1940, which is babies compared to the rest of Boston and the area. Everything was born when the British were invading. It\u2019s crazy how everything is so old here.<\/p>\n
Tony just can\u2019t even imagine houses like that.<\/p>\n
My whole neighborhood didn\u2019t even exist until 2017.<\/p>\n
Oh, man, you can\u2019t even. The stuff, you see the basements, it\u2019s straight out of horror movies. But literally, this one was 1940, but it still needed some definitely, again, cosmetic, but unfortunately it was bigger. So it was like, okay, it needed a little more, but they had actually, the previous owners had done a little bit more. So our first one, it was smaller, but it needed every little thing. This one, we didn\u2019t have to paint every single room. We had to paint most of them, but not every single room. So it was like, yeah, it definitely needed some love. And that was like 55,000.<\/p>\n
So we\u2019re right around the same. And I use the same contractor, built a good relationship with him. My wife and I try to DIY everything we can. Like last summer, I replaced the deck boards. We did that together at my first one, paint what we can, we try to do what we can to save. Tried to give my upstairs bathroom a little more love. We ran out of money to do the tiling in the shower and all that, but I was like, all right, let me see how I can actually make this a very nice place to live on a bit more of a DIY budget.<\/p>\n
So Dan, before we wrap up here, what are your best tips for people who want to start house hacking?<\/p>\n
I\u2019m going to make the assumption, I could absolutely be wrong, but I\u2019m going to make the assumption that most people listening to this want to start house hacking are relatively new and younger, maybe in their mid-20s, early 20s or whatever, which likely means that they probably need some help financially. So I definitely think that side hustle, I think do it as smart as you can, though. Ask yourself, like I said, do I need cash now, next month, or in a year? And really focus on what\u2019s going to be best for you. And for me, I just needed the money immediately. So I found the one that could get me the most immediately. Don\u2019t mess around there. Definitely spend some time researching that, but obviously know when to get out. And then really, you got to be a pro at analyzing these deals. And I really tell people, so I\u2019m an agent now, and I primarily like to help people house hack, but I tell them, try to analyze 100 deals before you even talk to an agent because it\u2019s so easy.<\/p>\n
Everyone wants help house hacking and stuff. And then, like you guys were saying before, there\u2019s a chance they never ever do it. So I think that gets you serious. I think that sets those realistic expectations and helps you build kind of a buy box. And I think that\u2019ll just, once you do talk to an agent, you\u2019re going to look serious. You\u2019re going to be like, I know this. I know the area. Help me get to that finish line. Help me kind of tweak some things, but really focus on that. And then that\u2019s super important. That plays into you really needing to work with someone who understands house hacking. I tell people, \u201cInterview three to five agents,\u201d and I don\u2019t tell people, if I talk to someone, I say, \u201cGo out, go out, talk to other people. You need to see what else is out there. You need to know what realistically type of relationship and vibe you have with someone.\u201d<\/p>\n
And there\u2019s so many options out there. It\u2019s a little challenging. So definitely kind of build that up, and then leverage your W2 as much as you can. Like I said, I\u2019m not trying to escape the rat race tomorrow. My goal has always been by 40 to reach financial independence, but just to have options. If I still like my W2, I\u2019m still going to ride that out. I don\u2019t care. Literally, I just want the options. So I\u2019m setting that goal. I\u2019m setting it not close enough that I have to just sprint, but enough to build the momentum. So ask yourself, how can you leverage that? How can you make those connections there?<\/p>\n
Dan, what a great way to wrap your story there, man. I think that\u2019s a nice little bow to put on it and perspective, I think, for a lot of rookies that are listening. So I want to take us into our next segment here, which is the Rookie Request Line. And for all of our rookies that are listening, if you liked your question featured on the show, head over to biggerpockets.com\/reply and we just might use your question for the show.<\/p>\n
So today\u2019s question comes from Mel Sims, and Mel Sims, would an umbrella policy be beneficial or necessary if I were to house hack a multifamily or a single family home? Or is an umbrella policy mainly used for investments where you are not a resident? So I guess to add on another piece of the question there, Dan, I guess, how are you protecting yourself from a liability perspective with your house hacks?<\/p>\n
Yeah, so I will say for sure, I haven\u2019t. I probably will eventually, but I\u2019m not in an LLC yet. Both of them are in me and my wife\u2019s name. And that being said, yes, I did bundle up on the insurance as much as possible. So I do have an umbrella policy. I had it when I was living in the first house, still have it living in the second house. I personally think that obviously there\u2019s loopholes either way. If someone\u2019s really determined or figures out the right way to get to you, they realistically probably will be able to, but I definitely think that, yeah, having that umbrella policy is pretty crucial. I know mine\u2019s for I think a million dollars or something, and it\u2019s really not that much extra. I don\u2019t really know. My insurance is, I think it\u2019s relatively cheap, so I\u2019m not overly concerned about it there. So I recommend it, personally. I know some people may be a little like, eh, but I recommend it.<\/p>\n
On my personal assets, like my primary house and even our vehicles that are in our personal name that aren\u2019t used at all as investments, we still have an umbrella policy that covers those personal assets and anything that\u2019s in our personal name.<\/p>\n
All right, let\u2019s go to our Rookie Exam. So Dan, these are the three most important questions you\u2019ll ever be asked in your life. Are you ready for question number one?<\/p>\n
Absolutely. Let\u2019s go.<\/p>\n
All right, man. So what is one actionable thing rookies should do after listening to your episode?<\/p>\n
I think they should, if house hacking is the route that they\u2019re going, find five markets that they are potentially interested around them. And I don\u2019t mean Georgia, California, New York, Massachusetts. I mean five towns around them that they could potentially, not meaning this is it and over with, that they could potentially house hack in. Start with that. Try to find those areas.<\/p>\n
What is one tool, software, or app that you use in your business?<\/p>\n
I love RentCast. I definitely am at the point where\u2026 It\u2019s hard because when you\u2019re beginning in house hacking, real estate investing in general, there\u2019s so many things you can spend money on, and it can add up really quickly. For me, I like RentCast because although I\u2019m not going to claim it\u2019s like 100% accurate, but I have found, at least in my area, I haven\u2019t pressure tested it. I did pressure test it a little bit more to an out-of-state area, but I found it to be pretty accurate and free.<\/p>\n
So basically when you\u2019re running, doing that 100 houses, I said, 100 house hacks, I said, to analyze, you\u2019re going to need to know the rents. And after a while, you will become a pro. I just know the rent for a three bed, two bath in my area or whatever. But you\u2019re definitely going to need to start off kind of plugging in, looking at Zillow and all that stuff. And you can totally look at Zillow and do the market research route, or you can use RentCast, which is free. I do like that one. You could get a little more accurate and do Rentometer, which I know you pay for, but I\u2019ve just been doing RentCast. I think once you get to the agent side, they\u2019ll help you figure out the exact price.<\/p>\n
Yeah, that\u2019s interesting. I\u2019ve never heard of that one before.<\/p>\n
Yeah, I was going to ask you, Ash. Yeah, RentCast, it\u2019s a new one. All right, question number three. Where do you plan on being five years from now, Dan?<\/p>\n
Five years from now. So I just turned 30 two weeks ago and like I said, I\u2019ve always been shooting for 40 as my FI target. I\u2019ve got it written next to me on my whiteboard. That\u2019s always my goal. So I\u2019ve been trying lately to figure out what the heck the next 10 years look like and it\u2019s been a struggle because there\u2019s so many options. But for me, five years, I want to hopefully continue to grow in my W2 because I like it, but I want to move from that side hustle stage that I talked about, where I don\u2019t need cash right now. I want to build a business. I want to build a brand. I want to generate revenue as an agent and really focus on helping people house hack. I\u2019m obviously biased towards that way, but just focus on that and build that as a brand as one. So I\u2019d really like to continue to focus on that and hopefully help as many people there, especially people who think that you can\u2019t do it in expensive markets.<\/p>\n
Yeah, you\u2019re lighting the way people like myself. I live in California, another super expensive market, so it\u2019s never about can I invest in this market? The question is always, what strategy makes the most sense to invest in this market? And that\u2019s kind of how you go about it. All right, man. I want to finish things up by giving a highlight or a shout-out to this week\u2019s Rookie Rockstar. And if you guys want to be highlighted as a Rookie Rockstar, get active in the Real Estate Rookie Facebook group, get active in the BiggerPockets forums, leave us a review on the podcast. Those are all places that we go to pull these Rookie Rockstars.<\/p>\n
So this week\u2019s rockstar is Jamie Joseph. And Jamie says, \u201cWe just closed on our second property using the house hacking strategy, bringing us to four doors.\u201d They started this journey back in September of 21, and they\u2019re super grateful for the BP community and all the resources like the books, the podcast, and the forums because it\u2019s given them a wealth of knowledge to invest and create generational wealth. So Jamie, congrats to you on this newest house hack.<\/p>\n
Well, Dan, thank you so much for joining us on today\u2019s Real Estate Rookie Podcast. Can you let everyone know where they can reach out to you and find out some more information about you?<\/p>\n
Yeah, thank you guys so much. Most active on Instagram, househackandhustle is my username there. Also, that\u2019s the website, too, if you want to go househackandhustle.com. But yeah, definitely just feel free to shoot me a DM or whatever. Love connecting with people and, yeah, spreading the good word of house hacking.<\/p>\n
Well, for everyone listening, if you think that you have an amazing story to share and you want to tell everyone how to become a real estate investor and how you did it, you can go to biggerpockets.com\/guest and fill out our guest form to be a guest on an episode. I\u2019m Ashley at wealthfromrentals, and he\u2019s Tony at tonyjrobinson on Instagram, and we will be back with a Rookie Reply.<\/p>\n