“I was searching for a way out. How can I escape this life I don’t want to be in.”

Discussed In This Episode

Show Notes

Sean started house hacking by accident five years ago. He bought his mom’s house after graduating college in 2015 and rented rooms to college friends. The rent pays his mortgage and utilities and sparked a desire to have more properties and generate more income.

Growing up frugal, his mom saved money to pay for three years of college. Sean got an internship with Boeing which paid for his last year of college. They sponsored him to get his Master’s Degree under the provision that he work for them for two years.

During this internship he saw how unhappy his coworkers were, he used his downtime at work to build up financial education. He bought Rich Dad, Poor Dad and listened to podcasts.

When he graduated, Boeing couldn’t offer Sean a competitive package. He accepted an offer from Northrop Grumman and negotiated a bonus so he could pay back Boeing.  

Sean’s House Hack

Sean bought his mom’s house a 3 bedroom, 2 bath single family residence with a converted garage area for below market value, using a conventional loan with 20% down. The closing took longer than normal because the first mortgage lender had an issue because it was not an arm’s length transaction. 

His monthly costs were $1,800 ($1,600 mortgage and $200 for flood insurance). At the time of purchase, his house was valued at $750,000. The house is worth $1.15 million. 

Sean had planned to rent out the home. After spending $30,000 on renovations he decided to live in it and rent out the extra rooms. Not wanting to live alone, Sean only charged his roommate $600 a month, $300 to $400 below market value. 

He added a second roommate six months later, also charging him $600 in rent. With the $1,200 rent from his roommates, he only had to pay $800 a month towards his mortgage and flood insurance. This is a bargain in Northern California and Sean was getting appreciation, equity paydown, and a tax write-off.

Four months later, Sean rented out the garage for $600. The rent covered his mortgage and flood insurance and he was living for free within a year. 

Sean’s Next Move

He and his first tenant started going to real estate events and Sean bought his first rental property in Jacksonville, Florida in late 2016.

Sean chose out-of-state investing because the prices were better in Florida. If he bought a $750,000 home in California, the 1% rule wouldn’t apply. Because he wouldn’t be able to charge $7,500 a month in rent.

Renting out of state is different than house hacking because you have to rely on people you’ve never met.  

What Sean’s Doing Now

House hacking gave Sean freedom to do what he wanted. He found more value in going to real estate meetups than in his electrical engineering career. When the project he was working on ended in 2019, Northrup wanted him to move to Southern California. 

By then Sean had flipped houses and owned additional rental properties that brought in enough cash flow to pay his bills so he left, started a podcast, YouTube channel, and Meetup group. He now works as a hard money lender. 

He’s been buying more out-of-state rental properties, duplexes, and fourplexes, and is considering buying 10 or 20 unit complexes. 

What He Did Right and What He’d Do Differently

Sean started early and was exposed to coworkers who hated their job which drove him to find a different path. He wished he hadn’t gotten overzealous and overleveraged and went into contract on four properties at the same time and lost money.

Resources

•  My First Million Podcast
• Sean’s girlfriend, Sharon Tseung’s blog – Digital Nomad Quest
• Guide to house hacking
• What is the 1% Rule in Real Estate Investing

More From Sean

You can reach out email at sean@everythingrei.com or his website https://www.everythingrei.com, Instagram @im_seanpan, YouTube Channel https://www.youtube.com/c/SeanPanREI, or his Meetup group https://www.meetup.com/everythingrei/.