Small Multi-Family House Hacking with David Pere:
Today our guest is a good friend and an even greater American, David Pere. David joined the Marine Corps in August of 2008. Since that time, he has lived in or traveled to many unique places around the world, including a combat tour in Afghanistan. David got started in real estate investing in 2015 when he house-hacked a duplex with the FHA loan and lived in it for a little while until getting married to his beautiful wife, Kimberly, and receiving orders to Hawaii. Listen in to hear how David went from military to millionaire through small multifamily house hacking!
Jessie Itzler https://jesseitzler.com/
Rich Dad, Poor Dad by Robert Kiyosaki https://www.richdad.com/
Brandon Turner https://www.biggerpockets.com/users/brandonatbp
Set For Life by Scott Trench https://www.biggerpockets.com/store/set-for-life-paperback-ultimate
Long-Distance Real Estate Investing by David Green https://www.biggerpockets.com/store/long-distance-real-estate-investing-ultimate
Furnished Finder https://www.furnishedfinder.com/
Phillips Sunlight Alarm Clock https://www.usa.philips.com/c-m-pe/light-therapy
How to get in touch with today's guest:
David Pere's website: https://www.frommilitarytomillionaire.com/
David Pere's Facebook: https://www.facebook.com/frommilitarytomillionaire
David Pere's YouTube page: https://www.youtube.com/channel/UCQElNqStWjEBDFNVnXkh1ng?sub_confirmation=1
David Pere's Instagram: https://www.instagram.com/frommilitarytomillionaire/
Transcript of the show:
Intro: 00:03 Across the world. People have their housing costs taken away as much as half of their income. Have you ever thought of trying to change that? The good news is there is a way house hacking is real and we are here to show you how other people just like you have made it happen. Welcome to the house hacking podcast and here is your host house hacking expert, Andrew Kerr.
Andrew Kerr: 00:28 I think I feel like I say this on every single podcast that I'm excited about the guest, but today I'm actually really, really excited about the guest. I had heard about David in this sort of blogosphere for quite a while and then I really briefly bumped into him at FinCon in DC this past September when he was running around with his shirt on for his website. And I followed up with him and I told him, I look, I gotta get you on this podcast. I'd love to hear your story. So David is an active duty Marine who devotes his free time to teaching service members and veterans, how to build wealth through real estate investing, entrepreneurship and personal finance. And he started and runs the website From Military to Millionaire. So with that, David, thanks for coming on. I really appreciate you being here.
David: 01:13 Thanks for having me brother.
Andrew Kerr: 01:14 Yeah. And one of the first things I want to say is just thank you for your service. I have a huge appreciation for what the military does for our country. So thank you so much for that.
David: 01:22 Thanks for the support. I usually enjoy my job
Andrew Kerr: 01:25 Well that always makes life a little easier when we enjoy what we do right? So where, where are you at? Give us just a quick update. I mean, how's life where you live and where are you calling in from? Just give us a little bit on your sort of current situation where you're at.
David: 01:38 Yeah. Most people know me as the Hawaiian shirt dude, but I just moved to San Diego so no longer in Hawaii. Uh, and I am just living the life out here. Life is, it hasn't rained in like two months. So it's not bad.
Andrew Kerr: 01:49 Yeah, not, not bad at all. Well, I think a really good place to get us started is can you just give us this high level summary of your house hacking experience? Sort of when this was, are you single, were you married, location, age, all that sort of stuff. Wrapped up in a nice little summary for us.
David: 02:05 Yeah. Quick summary. In 2015 I was handed the book rich dad, poor dad. I told the guy I don't read, he gave it to me on a disc and told me to listen to it. So I figured it out because I was kind of being pumped out. Within three months of that and a bunch of other reading and podcasts and stuff, I bought a house hack, so I bought a duplex. I lived in one side, rented the other at the time of purchase I was single. I got married shortly after and about seven months after closing I was got orders and moved out of state. So I really only lived in the house, hack for just a little bit under a year and it was honestly probably my best living situation. And then I'm currently doing another version where I am renting in San Diego, but I'm Airbnbing all the bedrooms, so.
Andrew Kerr: 02:51 Oh cool. Well we'll definitely dig into both parts of those. I'm really curious about the Airbnb part as well, but let's sort of start with that house hack, I love how you said a, gave you a book, the rich dad poor dad book, which I think anyone in the personal finance community has heard of. But I loved your reaction was like I don't read. And then he turned around and was like, here's the audio version.
David: 03:08 Yeah. And I was a recruiter at the time, so he knew how much time I spent driving between high schools and I couldn't really turn him down on that. And thank God he changed my life.
Andrew Kerr: 03:16 And was he a fellow servicemen in the Marines or who is this guy? And why did he decide to give you a book?
David: 03:23 No, uh, I won't give his name, but he was not a military guy. He, I think he wanted to be in the military at one point. I'm not sure. But he wasn't. Um, he was trying to get me into Amway. Amway stuff, which honestly, I mean, I signed up for it cause it's not a great and whatever. Um, and I did it for like a month before I was like, this isn't what I want to do with my life, but I got the book out of it. And that changed the trajectory of my life forever. Honestly, him giving me the book is probably what told me, wow, Amway is not where I want to be. I like real estate. This sounds cool.
Andrew Kerr: 03:54 I've never heard that way as an Amway pitch before of like, here read this book, rich dad, poor dad, and then I'm going to come back and hit you up to join. But yeah, I mean if you got rich dad, poor dad a out of it and it started you on this path, I'd say it's well worth the one month of being an Amway salesperson.
David: 04:09 Yeah, 100%.
Andrew Kerr: 04:11 all right. So you were single at the time and you bought this house hack. Did you know what house hacking was? Or did you just sort of have this like, Hey, I want, I need to buy a place to live, I'm going to go buy this place and I stumbled upon a duplex? Or how did it all sort of come about?
David: 04:25 Yeah, after rich dad, poor dad I was, I was Googling a bunch of questions. Like every time I had a question from the book, I'd go and Google it in my office and I just kept stumbling upon, there was one website that we're all familiar with the bigger pockets that just kept coming up with answers to my questions and as I dug into that rabbit hole and finally it was like just going to bigger pockets to look for my answers. That's where I stumbled across a house hacking, so I read the book on rental property investing and the book on a low or buying properties with no and low money down both Brandon Turner books and I wish audible timestamped when you finished books because I swear I read those three books in like a month and I had closed within three months on the property. But I wish I could show that timeline because somewhere in there I was like, I just gotta do it. And then I did, um, cause my lease on my apartment was coming up and I was like, screw it. Let's see what happens.
Andrew Kerr: 05:16 That is awesome that all of a sudden this three month period you made this huge, drastic change of like my finances. I need to get a hold of this. I learned what house hacking was and now I'm actually going to go do it and closing on a property. I mean like talk about taking massive action really, really quickly.
David: 05:31 It's a pretty crazy, uh, period of time. Yeah.
Andrew Kerr: 05:35 All right. So where were you living at the time? What part of the country were you in or were you deployed overseas at that point?
David: 05:41 No, I was a recruiter in Springfield, Missouri. So Southwest Missouri, uh, probably about two hours. It probably about halfway between Fayetteville, Arkansas and Kansas City, Missouri, a little bit off center, but
Andrew Kerr: 05:51 yup, I'm actually really familiar with it. I traveled there pretty often there between Kansas city, St. Louis and Northwest Arkansas, like the Bentonville areas all stop in Springfield pretty often.
David: 06:01 Yeah, huge fan of that area.
Andrew Kerr: 06:03 All right, so you knew you wanted to do house hacking. Did you specifically want to go after like a duplex triplex or were you looking at more of the room rental house hacking and what made this property, I guess how'd you find the property and how'd you decide on what type of property that you wanted to look at?
David: 06:21 I was leaning towards the duplex, triplex, fourplex. I don't know that I'd dug into the less traditional like room hacking, uh, methods of the house hack at the early stages. I just kind of like, I heard, Oh wow, duplex, this makes sense. And I realized like, well I'm paying 500 and he's like 550 a month to live in a two bedroom, one bath apartment and I can find two bedroom, one bath apartments around this area that are less than a hundred thousand dollars. And I was like, the mortgage on that can't be much more than what I'm paying in rent right now. So even if I don't have a tenant, I'm not going to be paying much more to own this thing. And if you factor in a principal pay down, I'm probably going to be paying around the same to own something rather than live in this apartment. And then it's assuming you have a tenant in the one side, even every now and then you're doing much better. So I was like, I just can't lose. Like what's the worst that happens? I pay an extra hundred bucks a month to own this thing. All right. And, uh, Springfield's just not a very expensive market. So I was able to look around on the MLS and found an agent who was okay. Uh, I actually haven't used her again. She was just mediocre. Um, but she did the job and I looked at 10, 15, 20 properties with my now wife and we both kind of had the same feeling on one. It was a pretty clean cut, two bed, one bath, 900 square feet on each side with a little parking area. And uh, it just made sense. And the mortgage came out to like 615 a month when we started this down to like 585 now. But you know, this is like for a what, what is the math on that? Like $65 a month more than my rent. I can have the mortgage payment for this thing and I was paying utilities and the apartment anyways. So yeah, it wasn't much of a difference.
Andrew Kerr: 08:02 Yeah, it was a really, seemed like a very clear win. So you're obviously married now. You said you were dating her at the time. Did you guys buy this together or what was her thoughts of this new idea that you just came up with? Like, I'm going to go do this house hacking thing. You obviously had this revelation in a really quick period of time. What was her thought process with it?
David: 08:22 I lucked out. My wife, well, so I bought it solo and then later transferred it into a LLC that we both have. Um, she had done a live in flip kind of, I didn't know that that's what she was doing. Um, the house across the street from her dad's house was right around the time she was, I think coming back from college or something. I don't know , she was moving back to the area and the house right across the street and her dad's house, someone OD'd, like in the living room, they didn't die, but they ODed and that they were like a mud mush brain or whatever from drugs, and they were uh, trying to sell it because he's the mush brain and nobody wanted to buy this place. In fact, it's funny, my wife tells me that she would like stand out in the front yard and yell at the realtor where they were like showing the house. Like someone died in that house, but no one wanted to buy the place. And so she got it for, I don't remember the exact numbers, but dirt cheap, like $65,000, something like that on a, you know, it was at the time, I think it was a, a three one or a three one and a half. And now it's a three, two and a half. It didn't have a garage. Now it does have a garage, a two car. Uh, so they, they upped the square footage, did some renovations to it. It's on five acres and it's now worth like one, shoot is probably worth about 200 now. But at the time it was like worth one 60. So she did kind of live in flip. And so she was familiar with real estate numbers and the way they work and equity and everything. Uh, so when I started talking about it, she was like, Oh yeah. And then I find out her dad like builds houses by hand for like 25, 30 years. Um, so he was all about it too. Didn't really own rentals, but his mother owned a ton of rentals and he'd been around it his whole life. Uh, and he's, he's a cattle farmer, but, um, so they were very supportive and that was great. And what I realized is as I told people about this crazy idea, I'd had plenty of crazy investment and entrepreneur ideas and been shot down by like all my friends millions of times. I didn't really have anyone telling me this was a bad idea. There wasn't anyone that I was like, I'm going to do this. That was like, Oh no, real estate's terrible. Don't do that. Like that. It's like, huh, I guess I should just go for this one.
Andrew Kerr: 10:24 Yeah, why wife is onboard, wife's parents are onboard. No friends are shooting it down. Yeah, definitely. Sounds like you should've went right into it. And obviously you did. So you mentioned your payment was six 15 a month. Was that with your taxes and insurance, was that included in your mortgage for you? That's all in on the piti. Awesome. And then for folks that don't know, PITY is principal interest, taxes and insurance now, do you remember roughly what you paid for for that duplex when you bought it?
David: 10:51 81 well, sorry, it was listed for 81 I think I got it for 70 well yeah, 81,000 and it was an FHA loan, so the loan was only for 78
Andrew Kerr: 11:00 Awesome. And that that was my next question is, you know, how did you do the finance and you did that FHA, three and a half percent down.
David: 11:07 Yes, I should've done the VA loan. I wish I'd done the VA loan, but my lender talked me out of the VA loan is he didn't really understand what he was. I don't know. I don't, I still don't fully understand the logic behind why I got talked out of it, but it's not that bad. I paid three and a half percent down. I pay a little bit PMI, private mortgage insurance that I wouldn't have paid with the VA loan. But overall it's still cash flows. But I could deal.
Andrew Kerr: 11:31 So when you give advice for folks that want to do house hacking that are in the military, is that your big recommendation is to use a VA loan versus a FHA loan or another type of financing?
David: 11:42 Assuming the numbers workout, the VA loan is one of the best loans that you can possibly get for one is zero down, which creates a great barrier to entry. But for two, uh, interest rates are generally lower and you don't have to pay PMI, which even on my little $80,000 duplex, it's like 50 bucks a month. Um, so you know, you figure like if you're in San Diego, PMI could be three, $400 a month that you're stuck paying. If you go FHA and you're not stuck with that with the VA. now I know if you, without getting way in the weeds on this, if you don't have a disability rating, there is a funding fee that gets pushed into the backend of the VA loan. But I've done the math and it still doesn't even come close to what you pay on PMI and if you refinance or whatever like or sorry if you pay, like once you pay off that funding fee portion, it's gone. Whereas like the PMI is kind of just this thing that just disappears. It just, you just keep throwing money at it for a long time. Yeah.
Andrew Kerr: 12:34 Yeah. All right, so you bought the place. You were paying 550 a month when you're renting, now you're at 615 so you were living in the one side, the other side, you're getting rent out. Did you actually have, Oh, it actually had a tenant when you bought it?
David: 12:49 Yeah. No, they weren't. They were under market rents, but they were paying 425 a month. But I mean, Hey, my, my effective payment there is like a hundred and I don't know, 180 or $190
Andrew Kerr: 13:01 yeah. Yeah. And when you were just paying 550 now you're down to that $190 a month. When you bought the property, did it need any work or was it essentially you can
move in right away or was there just a little bit of work or a lot of work?
David: 13:14 The side with the tenant had been renovated fairly recently. My side realistically didn't need work, but the flooring looked like crap and I didn't want to deal with that. So I replaced the flooring, updated some cabinets. I'd probably put maybe 1500, $1,600 into it to make my side a little bit shinier cause I was going to live in it. But I didn't really need to do that. I just wanted to I suppose.
Andrew Kerr: 13:43 Yeah, just make it a little bit more nicer. So it's comfortable for you and the wife at the time? All right. So you've got the other side rented cause the tenant was in there. Did you end up using a property management? Did you manage the property yourself? Like what, what was your decision there and how'd you do that side of things?
David: 13:59 I went with property management right away because I knew that I was, didn't have too much longer left in Missouri and I wanted to get familiar with my property manager while I was still there. Um, and I really didn't want to deal with my tenants. Unfortunately. I made one fatal mistake there and I told my tenants that I was the owner of the building, so I might as well have still been managing it on my own because they didn't like my property manager telling them no. So they came to me because I, the big old softy that lives there and they know I ultimately control the property manager and I anyway. So as soon as that tenant moved out, I told myself like, never again will the tenant ever have my contact info.
Andrew Kerr: 14:36 Yeah, sort of bypass. Uh, it's, I feel like it was like little kids be like, Oh, if dad says no, I'm going to go to mom. And mom will say yes. It's like, well, I'll just talk to the property manager. Like, Oh no, I see him walking out from his car. I'm going to go out and ask him right then and there. I can imagine how that would be a little bit a headache.
David: 14:52 Yeah. And you know something else I noticed in that property that is why I tell people property managers are the best is when I lived in that house even though I wasn't like directly responsible for the maintenance, having been being able to see the other tenant and like what they were doing with the property is nerve wrecking because you're like, Oh man, why are they hanging that tarp that looks gross. Why? Like realistically who cares if they hang a tarp over their balcony or whatever. Like it sure it doesn't look great but like who cares? But you live in it and you're like, Oh that's an eyesore. I don't want that on my property. And you stress out about little things that don't matter. So as soon as I moved out of state it was like, Oh man, this is so much better. Our tenants don't know I own the place anymore cause I got new tenants. My property manager only calls me if something actually matters. Like level of stress went so far down. So I would tell people like if you're going to house hack, even if you live in the dang thing, definitely worth looking at a property manager, not telling them you own the place. And then just don't stress about cosmetic crap. As long as they're not destroying your house, like just let it go. It doesn't matter.
Andrew Kerr: 15:54 Yeah, it's nice having that filter of a property manager between you and your tenants. So speaking with the property manager, you obviously right away knew you wanted to use a property manager. How'd you pick one out? How'd you decide on one? Like what'd you actually look for in a good property manager?
David: 16:09 good question. I have, I actually have a list on my, on my site, uh, 20 questions that I was asking. I basically went online and compiled like 15 different lists of what people said. You should ask the property manager into like 20 questions. And I went to three different managers and ran through that list with them, which I'm really glad I did because there was one property manager who was the shiniest, had the best office, had the most attractive secretary, had the best looking operation, gave me the best tour of his place. And if I had not known what I was asking, I would have been totally screwed on fees. He was so much more expensive. He might've been a little bit better. I don't think it would've made up for the fees. So my property manager is great and I pay like 7% no crazy fees, can't complain.
David: 16:54 So the number one piece of advice out of all those 20 questions that I can say is don't sign anything when you meet with a property manager, take the dang lease home. Like take their lease agreement with you home and read every stinking line of that thing. Especially all the fees, portions and the one thing, the huge things that you want to look for. One you want to confirm they're not getting paid if it's vacant. Cause I've seen property managers that they just get like 10% of what the place should be regardless. And you're like, no, no, I am not paying you if it's vacant because you need an incentive to rent my place out. Um, and then also you want to know like what the fees are when someone in some people take an entire month's rent, which is just nuts cause it's like, well that's great if I lose a tenant, I'm now out like almost an entire year's cash flow depending on your market. Um, so not ideal. So yeah, I don't pay kinds of fees. I pay a little bit of marketing stuff and I pay for background checks or whatever. Like the difference, but not, not much at all. So it hidden fees and whether or not they're getting paid, those are the biggest ones for me. There's a whole lot of other stuff that is important, but those are the biggest for me because you will not be profitable if your property manager's taking all your money.
Andrew Kerr: 18:07 Well, we'll be sure to link in the show notes to that article that you wrote. But I think that's the biggest piece of advice you just gave is actually read through that agreement when you sign with the property manager because those fees do kill you. Even if you have a really good attractive 7% rate that they take of the gross rents, if they have those lease up fees taken half of a rent or to a full month's worth of rent. When they place a tenant, like you said, it just kills your cashflow for the whole year. So if your property is empty for two or three weeks while I find a tenant, then they move in and that whole first months goes to the property management, you're essentially had zero income for two months and then if that tenant only lasts a year, that it starting all over again. So I'm glad you brought that up and reading it line by line and really look in at those fees. And that was one of my questions too was what did they end up charging? And you covered that there. So it was a flat seven, 7% cool. And then with that property manager, you still had that same property manager the whole time period?
David: 19:01 I do. She is, I guess I got lucky. I don't know. Um, I hear all the horror stories, but mine is awesome. I mean I have, so I set a dollar amount and said, Hey, if it's not above this dollar amount for a single instance, don't bug me about it. And I mean I kid you not. There was a month where I got my income and expense report and it wasn't until I got my income expense report at the end of the month that I realized that there had been an eviction and a turnover and a new tenant. But because none of those individual instances had broken that dollar amount, no idea. Like she just, I got it at the end and I'm like, what is this? Oh, I like called her. She was like, Oh yeah, we evicted someone, but we've got someone else in like two and a half weeks later they're paying. It's all good. Like, Oh thanks. So it's been a lifesaver
Andrew Kerr: 19:44 Talk about pretty low stress. And I love the fact that you set that hurdle. So w with your property manager, what did you actually set that dollar amount at?
David: 19:52 500.
Andrew Kerr: 19:53 And then is that something you'd recommend for someone new in real estate? I know you've got more real estate experience than probably your average person. Do you think that's a good threshold to start at or would you recommend something a bit lower?
David: 20:05 It really depends on how much in the weeds you want to be. Some people want to know everything and some people are worried about every individual penny. I trust them. I think at first I was at like 300. Um, so I would say maybe like 250, 300 like basically base. I mean you and you could probably be as simple as just saying, Hey look, if it's not a routine maintenance thing, like I'd like to know just so I know what's going on. Um, and you, you can set those guidelines with them. But yeah, I upped it to 500 cause I knew that was just over the price of an eviction. And I liked not knowing that cause that's stressful. If you're like, cause then you sit around and go, Oh, I wonder if they found someone. How's turnover going? Oh man, I hope they figured it out.
David: 20:44 And it's so much nicer to just know, Oh it happened. So to put to, here's the huge thing, right? Like this is where it gets super crazy with a good property manager. I had someone die in our property a month and a half ago and sad story, right. I don't want to say this is like this is a good thing, but dying the property I guess didn't really have any family. I don't know. They didn't know he died in the property until two weeks later when he wasn't paying rent and they had to go knock on his door. So two weeks dead guy in August, September in Missouri. Not ideal conditions for the apartment. So I have like an entire environmental company coming in. It's going to cost me like 4 or $5,000. Basically his entire year's rent out the window for like environmental, pulling out carpet and redoing all the flooring and all this other crazy stuff and all of that. The only thing I've done is talk on the phone for five minutes and say, yeah, let's not do an insurance claim. And she's just going to do everything. Awesome.
Andrew Kerr: 21:41 That's a good property manager that handles all of that for you. So I know you said when you bought it, the existing tenant in there was sort of below market rent 400 and some change. What are both sides running for now?
David: 21:54 I have, it's a total of 1050 I think it's 530 and 520. I don't think they're even, but are 515 and 525 or something, something like that. However that math works out. Um, but yeah, 1,050 total now. So,
Andrew Kerr: 22:08 awesome. So you're, you said, did you refinance at some point in there cause you, you mentioned your mortgage drop.
David: 22:13 Yeah. So I don't, um, Oh no, I do know what happened. I remember that, uh, I switched insurance companies when I bought a 10 unit. I was no longer able to insure through USAA for that property cause they don't do commercial properties. So I moved to state farm and when I moved to State farm, I just have them quote everything else and they were like super cheap. And so I moved everything over. And so yeah, I pay, uh, I dropped $30 off my, uh, principal interest in all that other good stuff on my property.
Andrew Kerr: 22:41 That's awesome. So you're sub 600, you're over $1,000 a month in gross rents. The property manager's taking 7%. What do you actually do with that cashflow now that you have that?
David: 22:52 I would love to tell you that it just goes into a fund and it just sits there and collects interest while I wait to dump it into the next property. Um, but the reality is that it probably goes into all of my crazy, I think most of my real estate profits are currently just getting dumped into equipment for podcasting and YouTubing and whatever. Um, which eventually will spin back up and create money and then that will go all of it back into the, uh, world of investing land. But, uh, yeah, that duplex is basically funding my podcast, YouTube channel and website hosting right now.
Andrew Kerr: 23:24 Awesome. Awesome. Well, investing in a future business is better than, like I went out and bought a brand new big truck in buying, bought this depreciation asset that's maybe worth 30 grand now in, you know, five, 10 years is going to be worth three grand. So, uh, I can't knock you for that one. I also appreciate you being honest about how you're moving the money around. Uh, it's, it's definitely a good thing.
David: 23:45 So it's a hobby. It's good for you.
Andrew Kerr: 23:47 Yeah. So you were roughly there for about seven months. You got your papers to transfer out to Hawaii and then that was sort of it for that property, is that right?
David: 23:57 Yeah, it's been just a normal rental property now for the last two and a half, three years.
Andrew Kerr: 24:02 Yeah. That's great. So you alluded to earlier that you also are now doing, you're in Hawaii. Did you do any sort of house hacking in Hawaii or was that just sort of normal rent housing and now you're in San Diego where you're back to doing that sort of house hacking situation?
David: 24:18 I tried, we made a bunch of offers in Hawaii. That market is nuts and the cap on the VA loan is pretty high. So for me to have been able to purchase where I wanted to, I would have had to put a bunch down on top of my VA loan and in order to be able to use a VA loan, I would have had to commute like an hour to work 45 minutes to work. Uh, and my wife was pregnant. That was just not, it wasn't really ideal. So I did not buy anything in Hawaii. But while I was in Hawaii, I bought stuff in Missouri. I continue to build there. Um, and then I moved to San Diego, yeah, in July. And I was looking to buy here and there. Honestly, I probably could have made it work. There were a couple of reasons I didn't, I don't want to say I think there's a recession.
David: 25:01 I don't think that's the word. I don't think any of that is really magical. Uh, it terrible. Like I'm not into that. Fearmongering um, but I didn't believe the market. So the market price now is like $80,000 median home price over what it was in 2007, 2008 peak. And so I did not think there was enough room. I'm only going to be here for two years. I was not confident it was going to appreciate enough cover all of my expenses when I sell the place. And I knew that I did not want to have a longterm property in San Diego on its own. I didn't want to have to build a whole infrastructure here and I'm really not a huge fan of the tenant laws here, so I just didn't want to, it just wasn't really my cup of tea. So I was like, okay, well I'm going to rent, but how am I going to, so I was, I was actually, it's funny, I was having this conversation out loud.
David: 25:49 I was hanging out with Brandon Turner and a couple other people and I'm having this conversation out loud and Brandon was like, dude, why don't you just like find someone to let you Airbnb it when you're renting? I was like, Oh, this is like the perfect solution. And uh, I probably had to message like 50 or 60 different people before I got someone to agree to that. Um, and yeah, so I got someone who, and it's funny, this house is like some foreign guy bought it in cash. I'm guessing, I haven't got the full deal story, but I'm the first person ever live in this house in a new development, so new that I got to pick if I wanted grass or fake grass. So I got fake grass, I don't have to mow it. I'm super new, super nice big place under market rents, whatever.
David: 26:30 And then they agreed in the lease in writing to, I was basically like, Hey, do you mind if I Airbnb this when my wife's out of town? And they were like, yeah, that's okay. Then I just didn't tell them that my wife is going to be working out of town for a majority of the year, so I, oops. But um, yeah, so I have a, I have a bedroom bathroom downstairs that I can Airbnb, Airbnb and I have a bedroom bathroom upstairs that I can Airbnb and I've been kind of doing them together. I'm kind of tempted to split it, put a different queen bed up here cause it's been like downstairs with parents and upstairs if they bring kids, I think I'm going to split and make the upstairs want a queen bed as well and do two separate rooms for up to two people and just have them go on at the same time, um, with two different guests. But anyway, I've been able to make up, I think my best month was like 2200 in gross. Uh, and I'm still cleaning on my own and my mortgages or my rent here is 3000 but I get 3,100 in housing allowance. So long story short, I'm able to save two thirds of my housing allowance from the military, which is not bad.
Andrew Kerr: 27:32 I mean I would probably say that's a little bit more than Not bad. You're, you're saving that housing allowance, you're making some cashflow on there. You know, one of the things I just wanted to touch on, you mentioned you actually, you know, a lot of people try to do Airbnb for renting a place and don't tell their landlord which as a landlord I would be pissed off if a tenant did that. But I like how you basically said, look, I want to do this. This is what approach I want to take. And then I just went and messaged a ton of people and I finally found one that said yes. So I really liked the fact that you took that approach versus, you know, doing it behind the landlord's back where there could ended up in legal ramifications for, for doing that.
David: 28:09 You know, I will say though, um, having done this, if I ever had someone approached me about that, I think my answer would be yes, absolutely. I just want to charge you like an extra hundred bucks, 200 bucks a month, depending on the market. Because I've realized that I take better care of the downstairs room for those tenants than I would like if I was just living in here alone. Like I wouldn't even go in that room ever. It would just be collecting dust. Uh, and now, currently I clean it every week and I clean the bathrooms. I take better care of it right now with tenants than I would otherwise. I mean, I understand why people would not want you to Airbnb, but I think that you get the right tenant in there and it's probably a better tenant than some of the horror stories you hear because people vacationing and using Airbnbs are generally not trashing your house.
Andrew Kerr: 28:58 Yeah, absolutely. I mean I think it's, there's this debate online quite a bit of like, Oh, who takes care of a unit better, a longterm tenant or Airbnb. And I think you can get bad tenants in either situation, but at least with the Airbnb it's getting cleaned every single week. Sometimes multiple times a week. Yeah. You might have to add or change out towels and linen more frequently but in reality, I've noticed I, I have a short term Airbnb that I do as well where it's, they're gone most of the time, you know, they come in at the end of the day to crash, they'll be there in the morning for breakfast, but then they're gone the whole day. So I actually feel like he gets less use and it gets cleaned more frequently. So I'm right there with you and I, one of the things I noticed with Airbnb a little while back is they added this like co hosting revenue share option in there for if you're a big developer you can actually take buildings and say, great, I'm going to rent out these apartments.
Andrew Kerr: 29:52 People can do Airbnb if they want. And then it has this revenue share where like I'll take a portion, a small portion of the revenue, you do all the management and you get a lot more work than you would, which I think is a really cool, cool way to look at it. But, so one of the questions I had is when you're looking at that Airbnb, you know, do you only do Airbnb, do you do any of the other sort of how sharing platforms and you know, how'd you decide on market rent and sort of all, all those basics?
David: 30:18 I do VRBO as well, which is just vacation rentals by owner. Uh, I've looked at, they have a, it's called like furnished finder, which would be for like traveling nurses like three months days. Uh, I haven't used that yet. I've heard good things. I actually just got approached by my next door neighbor who wants to know if this upstairs room, if I'd rented to a friend of theirs for 800 bucks a month, which sounds great. So I might do that. And then just move the downstairs, the only two people, um, and drop the price a little bit. But uh, that would give me some consistency. So I might, I might do that. I just depends on who the, who the tenant is I suppose. But I haven't done a whole lot with the other platforms as far as right rent pricing. Uh, I just kind of looked at what other people were charging and went with.
David: 31:04 I went with the same amount. Honestly, I should be able to charge more because I'm much nicer than most of those. My house, every guest I've had has been like, Oh my God, this house are nice. It's huge. Um, so I could probably charge a little bit more, but I'm trying to get some decent reviews first and then I, uh, yeah, um, I'll probably tweak it from there. There's a couple platforms that you can use to like compare your property to others for rent. I haven't really used any of them yet. Some of my friends do all that. I really am not, not nearly as technical with this as I should be. I'm like, we'll set that price and if I get people in then we'll leave it at that price and I'll clean it. And I haven't even hired a cleaning person yet, which I need to. But
Andrew Kerr: 31:44 I mean that's a really great way to start is just sort of start testing out. If you ever do want to start looking at data. I really like, especially for short term rental is air DNA. They pull it by a broader city and then also look at, you can plug in specific zip codes. Um, it's really great. And then it shows sort of the top listings in a one bedroom, two bedroom, three bedroom size, and shows the pictures. So it really breaks it down to by the different seasons for you, what the average nightly rent is, what the occupancy rate and at those different sort of price points. So I think that's a wonderful tool and I'll put that in the show notes for folks to look at. Ah, you can see a lot of the data for free. And then if you pay for the market report, I can't even remember what it was.
Andrew Kerr: 32:24 It was less than a hundred bucks. But the way I looked at it was, you know, this small hundred dollar or so investment is going to help me price it right for you know, years and years of income. So that definitely check that out if, if, if you're trying to dig in more. But you know I, the fact that you did this house hack, you went to Hawaii, you tried to do one, their market wasn't right and then you're moving to San Diego and you said, okay, I've got this housing stipend from the military. I could just go use that for housing, getting decent place and just go live my normal life. But you against it. How can I start to think through things just a little bit differently? And I love the fact that you are super persistent and you know, emailed 50 plus people to find one that will let you Airbnb their place. So kudos to you man. That's really cool.
David: 33:08 Yeah, I appreciate it. I think that mindset is very important. The, how can I make this work?
Andrew Kerr: 33:13 So I sorta got three final house hacking related questions for you. You know what that first one is, if you sort of look back at your house hacking experience, what do you think your biggest successes that you've had through those house hacking time periods?
David: 33:28 And I'm nothing special. So I would say my biggest success was that I took action and it worked and that it convinced me that real estate was the right thing to do and that it propelled me to continue investing. And from there I've bought and sold in the last four years, like 54 units, I think. Something like that.
Andrew Kerr: 33:46 Yeah, that's absolutely crazy. All while being in the military full time. Yeah,
David: 33:51 and most of which, while being overseas, in fact, one of those I negotiated and did everything I did go see it because it was the biggest property I bought. But I did go see it before we closed, but I negotiated everything while I was training on a different Island through a cell phone that I was able to use that for like two hours a week. Pretty crazy. That was kind of a rough, rough one. I don't advocate for people doing that, but it's doable.
Andrew Kerr: 34:12 But let's just say if you're listening and you're thinking of a house hack and you're coming up with all these excuses why you shouldn't look if David just did it with that situation, you can do it when you're normal life. Just carve out the time and take action. So that brings me to sort of this second question to wrap up the house I hacking portion. What do you feel like your biggest challenge was or your biggest failure was that if you could go back and do differently, you would?
David: 34:37 uh, I think the loan for one there would probably a better chance, better ways to lend on it. Um, honestly that's probably, I think, I think that, and I think the fact that I should have been looking for fourplexes like I set my mind on duplex and I very easily could have done a fourplex. I think in my head it was probably a limiting belief. Like, Oh man, a duplex will be easy to start to figure this out. And like realistically if I'd done a fourplex it wouldn't have been any different, especially since I decided to hire a property manager. Probably would have been like zero difference and more cashflow and equity now. So uh, definitely think like don't talk yourself out of going a little bit bigger if it's within your reach.
Andrew Kerr: 35:13 And then I think I already know that answer to this third one but would you do it again after you leave San Diego? Would you go do another house hack?
David: 35:20 I plan to hopefully buy a four unit with a VA loan. When I moved back to Missouri actually the neighbor too, like literally on the strip where are other house is across the street from my father in law, the next door or right down the road has neighbor has another five or 10 acre plot and they have a triplex and they mentioned selling at one point and I'm just going to keep bugging them because that would be super convenient to have basically a full 10 acre plot. I think that would make us a 20 acre plot with two houses and four units on it out in the farm. So that'd be cool, but if that doesn't work out either way, house hack for sure.
Andrew Kerr: 35:57 Awesome. Awesome. All right, so at this point in the show, before we wrap up, what we'd like to do is ask all our guests a set of final six questions and we like to call this part the fast six rapid fire questions. And we're going to go ahead and get started with question number one is what is your favorite personal finance blog or book?
David: 36:22 There are so many good blogs out there. You know, I just, well, and it's such a good question. I really liked the book set for life. Um, I think from a financial standpoint, it's by Scott trench. It is a bigger pockets book, but I think just because of the beginning portion, the beginning third of the book talks about your expenses in a different way than a lot of other books and put it in a different light for me. So it talks about, uh, like ways to cut your living expense and uh, commuting expense, but like different, different things like the fact that the different distance from your job adds up very quickly and maybe looking for a place closer to work can save you this much a month or whatever. And it talks about, you know, a lot of people focus on cutting out coffee and stuff from their expenses. But this talks about focusing like, who cares about that focus on, how can you cut $1,000 off your mortgage? I'm like, nah, that makes sense. So
Andrew Kerr: 37:14 yeah, it really took a fresh approach than the typical Dave Ramsey, Susie Orman, which was the sort of old school, very relevant for quite a long time approach. I just loved how he had this fresh approach to it. All right. So that brings me to number two. What is your favorite real estate related book or blog that you've read recently?
David: 37:33 I'm a huge fan of David Green's long distance real estate investing because I've had to invest long distance and that book kind of reaffirmed my, uh, strategies. But I, I think that's probably still going to be my answer. I know those are both bigger pockets books, but they're good and they're simple.
Andrew Kerr: 37:52 I actually haven't read that one, so I'll, I'll add it in the show notes and I might have to add that to my reading list. So, um, I'm glad you, you brought that one up. I do a lot of out-of-state investing as well. Yeah. All right, so going on on number three, what's been your favorite travel destination you've been to so far?
David: 38:08 Marjah, Afghanistan, definitely not. That's a joke. Um, a place is crap. Uh, anyway. Um, you know, I've been, I got stationed in a lot of cool places. I would, I loved living in Okinawa, Japan and a lot of people don't like that, but I loved Okinawa. It's a toss up between Oki and I only spent like three days in Thailand, but it was fun. So I'm probably gonna go with Okinawa though.
Andrew Kerr: 38:36 That's a cool one. Am I, I spent a little bit of time in Tokyo, uh, but my wife and I have the cherry blossom festival on our sort of bucket travel list to, to do. Uh, so just love their culture. Yeah, it's pretty amazing. So going on the next question, number four is what's next on your travel vacation list?
David: 38:55 I want to go anywhere in the Swiss Alps.
Andrew Kerr: 38:57 Oh yeah. I love, I don't if, if you're on Instagram at all, but that's gotten really big on Instagram lately where you see all those pictures up in the Alps and it just looks pretty amazing. Alright. Going on to number five, what is your biggest, biggest bucket list item that you haven't accomplished yet?
David: 39:14 I'm glad you asked. I haven't because I don't know what I'd have done. Haven't accomplished. I really like, are you familiar with Jesse Itzler?
Andrew Kerr: 39:24 Oh yeah. Yeah. I really haven't listened to a lot of stuff, but I know of him and I've seen a couple of the YouTube videos and stuff that he's done.
David: 39:32 Yes. So I'm a fan. He spoke at the 10 X growth conference and he, I started following him because I liked what he said, but he does this thing once, twice, three times a year where he gets like a group of guys and just goes off on like an adventure weekend where they just like no cell phones, like mastermind and just hang out and like adventure. And I thought that was a cool idea. And then he did it last year and he posted about it and there's like him and two or three buddies and these guys are all loaded, but they're like living in a snow trench. They dug just chilling out in the wilderness. And I was like, yup, that's it. So my big bucket list item is nothing crazy. It's like go find three, four or five guys that I want to mastermind and grow with and just hang out at a cabin or in the snow for like a weekend or a week with no cell phones and just grow and just adventure and have a, I don't know, a snowmobile and just like be boys again.
Andrew Kerr: 40:23 Yeah, definitely. All right. And then the final and sixth question is what is your favorite life hack?
David: 40:30 I wrestled with this for a long time and because I just, there's a lot of them and I would probably say at this point it's, and this is going to sound like I'm bragging because of when my alarm goes off, but waking up at four in the morning is probably it because I get a lot done before most people get out of bed. The world's quiet. I so it's funny. Today I was, I was whining, I had a call at seven this morning and I was whining at the beginning of the call cause I was like, man I haven't done anything like normal. Like I felt bad in my head. I was like, I felt crappy cause I normally have accomplished a ton by seven in the morning and I hadn't done. I woke up, I was just not in the mood. So I like journaled for a little bit, but I watched a movie and so I'm complaining cause I hadn't done anything.
David: 41:12 And one of the guys on the call was just like, dude, you realize that it's seven in the morning on a Saturday and you've already watched it two and a half hour movie and you're journaling for the day and you're upset about that. It's like that's a good point. Like I was able to relax for two and a half hours before I did something. I didn't want to do all the legal stuff we were talking about earlier, all those documents. And then here it is seven in the morning, I'm jumping on a call with guys and I've already gotten to relax for three hours. Like I guess I shouldn't be complaining about that. So I think that's huge cause I forget the math, but I mean even an hour a day, uh, earlier that you wake up, I mean it saves you like it's something like a whole month worth of productivity throughout the, throughout the year. So it's pretty cool.
Andrew Kerr: 41:54 I agree with you. I'm not 4:00 AM, I'm usually 4:50 to 5:10. I've got one of those alarm clocks that has a light that sort of lights up in this half hour window. So I sort of always wake up there. But yeah, it's so awesome. Like by seven o'clock I've gone to the gym, I've done some meditating, I've done some reading, I've had breakfast, I've showered and then it's like the days getting ready to start and my wife hasn't even gotten out of bed yet and it's just this awesome time period we can get in a lot done. So I'll definitely say early rising is a great life hack. I don't know if I could do the 4:00 AM but I'll, I'll, I'll leave that, that part, that part to you.
David: 42:30 I need to look up your alarm clock. You might be doing it right. So my alarm clock shakes the bed and goes up to the decibel level of a fighter jet. I have it turned down to like the decibel level of a smoke detector, but at like three 55 every morning it's like beep, beep, beep and then the whole bed just pull and like, Oh okay, I'm up. And I wake up with like a heart attack every day for the last like two hours, two years. But it's heavy. It works. But
Andrew Kerr: 42:53 I'll drop you a note with the alarm clock I have. It's pretty awesome. And then it has a birds that start chirping sort of at the end. It's a very like nice peaceful, relaxing and the whole idea is it's supposed to wake you up in that you know, window of when you're not quite in the deep sleep. Uh, so you finish that sleep cycle. I bought it maybe five, six years ago and I love it. I I, I couldn't get by without it. Awesome. David, well thank you so much for being on the show. I really appreciate you taking the time to talk to us and again, thank you for serving in the Marines and serving our country. I'm really grateful for that and thank you one last time for being on the show. Thanks for having me. This has been a lot of fun.
Outro: 43:34 Thank you for listening to the house hacking podcast for more up to date information on house hacking to access links. And resources mentioned in today's show, and connect with the guest and host, head over to www.fibyrei.com that's www.fibyrei.com where you are house hacking journey begins.
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