Small Multi-Family House Hacking with Even Steven Money:
This week, we have a very special episode with financial coach Even Steven Money! Around 2011, Steven was in search of a house in Chicago for him and his soon to be wife. He soon realized that why not invest in a multi-family type of property that can potentially generate some income. After making offers on different properties for about a year, Steven finally found a three-unit house. Steven and his wife lived in one of the units while getting renovations done to the other units. After getting renovations and having tenants move in, Steven realized how much money house hacking generated. Steven and his wife decided to take the money they were earning and pay off debts and other payments. This house hack become a huge stepping stone towards his journey in reaching the debt free and financial freedom community. Listen to how Steven completed his house hack here:
You Can Listen On:
BiggerPockets – www.biggerpockets.com
Coach Carson – https://www.coachcarson.com/
Rental Application – https://www.rentapplication.net/
TransUnion SmartMove Tenant Screening – https://www.mysmartmove.com/
Cozy Tenant Screening & Property Management – https://cozy.co/
Richest Man in Babylon – A book by George Samuel Clason
How to get in touch with today’s guest:
Even Steven Money: https://evenstevenmoney.com/
Transcript of the show:
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 (00:29):
All right, Steven, thank you so much for being on the show. I’m excited to hear your story. I mean how you doing today?
Hey, pretty good. Just getting over a little bit of the cold and flu, but uh, I’m here, I’m here and ready.
Andrew Kerr (00:39):
Well I appreciate you pushing through and doing the call for us. Where are you actually calling in? I know you’re somewhere in the States, but what we’re actually, are you?
Yeah, I’m down in Miami, Florida, so sunshine and uh, and humidity probably.
Andrew Kerr (00:52):
Yeah. Well I’m over in New Orleans, so we’ve got a ton of heat and humidity, so I definitely understand what you’re talking about there. You know, I know a little bit of background about your house hacking story, but maybe a great place to start off with is just, can you give us this high level summary of your house hacking experience?
Yeah I was actually living in Chicago back in uh, right around 2011. I had just gotten married and we’re living in this small one bedroom was actually two bedroom, if you could call it that, apartment. And we were looking for a place in the Chicago area, kind of visited every single neighborhood in Chicago and ended up buying a house hack or buying, not a house hack, but buying a house. And it was a multiunit, it ended up being a two flat that we turned into really a three flat and we lived on the top floor, rented the first floor and turn the basement into a garden apartment. And we own that house from 2012 to 2018. It was a big part of our life, a big part of kind of figuring out who we are, uh, in our marriage and in our lives. And uh, you know, in our careers even. And it brought me to where we are today, which is actually in Miami, Florida. We ended up transitioning selling the house in 2018 for a profit and moving down to Florida. And that’s kind of, you know, at the high level, quick summary with definitely some, uh, some details in between there. But that’s where we are today.
Andrew Kerr (02:25):
Cool. Well thanks for that. And let’s actually dig into those details. So your 2011, you’re in Chicago, you just got married and you know, what was the process here? Were you specifically wanting to do a house hack? Had you heard about it or was it you and your wife or just we’re newlyweds, let’s go on with their life, you know, the big next step is to buy a house together. Like what was the rationale? Were you both on board? What were you actually thinking at that time?
Yeah, so it was pretty crazy. So there was a lot of moving parts at that time. So I was in Chicago at the time and my soon to be wife was actually Miami. So I was looking at different places for us to live. Well we are also, we wanted to buy a house. Well we didn’t really have enough time to do it. So we were looking at everything from single family homes to multi-units to duplexes to, you know, a little bit of everything. And kind of didn’t have enough time is what it came down to in that initial, in 2011 we were moving up, so we made the kind of split split second split, maybe a couple of week decision to rent a place for that year. Well, we knew that we wanted to buy a house together and kind of throughout that year we ended up looking at places throughout the year but with a realtor. But really it came down to our research and finding out what works for us and our price range, we really felt like the smart decision was to live in one live in one part of the house and rent out the other. And we were both okay with it and it involved a lot of research and a lot of different homes. Uh, I’ll say we visited a lot of different places in Chicago just to put it nicely. Our realtor, I honestly, I feel like that man is a saint because we, we saw all sorts of Chicago and it’s not the smallest city in the world, you know, it’s not like you’re checking out some little, little place in, in Wisconsin or anything. But yeah. So we ended up going with, uh, you know, with the house hack, uh, in Chicago.
Andrew Kerr (04:31):
So did you actually know what you’re doing? Was a house hack at the time or was it more of, Hey, we think buying a small multifamily is just a good financial decision?
Yeah, it ended up being more of, we thought it was a good financial decision because we were looking at places that were, at first we were looking at places near near Chicago that were closer to the suburbs and the prices were, they’re kind of expensive and we didn’t think we were getting a lot of value, uh, or our money. And then we look at some of these same places that were multi-units. Let’s say the house was $300,000 we would then find a multiunit or 300 or $350,000 and we were like, wait a minute. So we’re going to pay almost the same amount and we’re also going to get rent from someone. So it just made a lot of financial sense to us.
Andrew Kerr (05:19):
So was it your wife’s idea first or your idea to start looking at the multifamily?
So it was mine. I’m a little bit of the personal finance nerd of the, of the, of the couples. Of course being on the podcast, it makes sense, but she is kind of the, I say she’s the smarter, more beautiful one. When she, when she heard about this, she essentially was on board almost immediately and said, okay, you know, now that we start to understand some of the, you know, what to look for, let’s dive into this even more. And you know, now we also, because we wanted it to be an investment, well we also wanted it to be a place for us to live, which you know, which can be tough, especially when you’re, you’re essentially going to have someone in our case, you know, living right next door to you or in the same building as you.
Andrew Kerr (06:09):
Absolutely. Yeah. I’m working on my fourth hack, fourth house hack right now. When my wife and I got married, we actually did a house act together and that’s our, my third house hack and her first one. And I mean it was just a world of difference looking at those two different things. Like, you know, I’d owned dozens and dozens of properties at this point. And this was my wife’s first ever property. So you know, there’s this like dichotomy of like I’m like longterm investment. She’s like, I’m going to make a home for us. And you know, the one thing that cracked me up, I specifically remember we walked into the tile store, I go to the dollar to $2 square foot section, I turn around and I can’t find her. And all of a sudden she’s looking at the like $20 a square foot marble and she’s like, “Oh, this looks really pretty. I really liked this one.” And I, it was just this rub where we each had to figure out like, okay, what do you want? What I want, let’s realize this is an investment. So I completely understand where you’re trying to find like investment, but it still needs to be a home for us.
Yeah. And that’s, you know what that’s really was a challenge throughout the entire house hack to you know, kind of with that mindset, you know, you have to remember that part of it is your home, and part of it is an investment as well.
Andrew Kerr (07:13):
Yeah, absolutely. So you started looking in single family and then you lean towards multifamily. How long did it actually take you to find it from when you started looking at houses to when you actually close. How long was that process of you running your realtor ragged of looking at everything and all the different suburbs?
Yeah, no technically so it was before we got married. So that would have been, would have been like early 2011 and probably took a little bit over a year. So actually for, uh, and I can’t get like the exact, you know, 17 months, three days or anything. But yeah, it was a little bit over a year. I would say 12 to 15 months at least. We ended up closing on the house in June. Uh, excuse me. Uh, August of 2012.
Andrew Kerr (08:00):
Okay. Yeah, I think it’s really an interesting point. The fact that you took, you know, this 12, 15 month period, you know right after the financial crisis in ’08 ’09, it was a lot easier to find real estate deals. And I know when I talk with folks now, they simply say, Oh, there’s no good deals out. Then I said, well, you just got to look like I just closed on my fourth house hack. I’m still buying rental property. But you know, you have to look at three, four, five, 10 times as many deals to find the one. And I think that’s really encouraging that you said, yeah, it just took us, you know, well over a year to find the right situation for our, our thought process to involve. So anyone that’s listening, if you’ve been looking for two or three months, don’t get discouraged. You know, here’s a great example of someone that it took them a year to find the right piece of it.
Yeah. And that’s not even to mention that that’s the, that’s the house that we actually closed on. That’s not the house that the other houses that we actually bid on and lost multiple times. Because that time it was, it wasn’t, it ended up being a bidding war for a lot of houses. Even even at that time where we would look at a house and say, okay, that’s worth $200,000 the market says it’s $200,000 and then someone would put in a bid for $220,000 and we just, it wasn’t for us and it happened multiple times.
Andrew Kerr (09:17):
Yeah, it’s definitely tough at times. But I think the perseverance, which you guys had and then you ended up getting this a really cool property. So let’s, let’s actually talk about that. So you found it, you close there in August. What’d you actually buy it for?
Yeah, so we bought the house for, well we put an interesting story about that. So we put in, I believe the asking price was like 189 or something like that. And we ended up, as I mentioned, we actually had lost multiple bids before and we kind of had come to the point where we, we got fed up like we were going to win this one. Like we were, it was like, I’m going to bid more, I’m going to win. Like what would be the amount that you would, that I would feel comfortable with where I wouldn’t, I guess I wouldn’t feel bad if I lost that property for that amount. And we ended up getting like 200, and I want to say it was like 210. So it was like, well over asking. I felt like no one’s going to bid this high.
Um, and they didn’t, um, they, they, uh, they accepted our bid and it was, again, it was like 210 to 15. What was interesting was like the day before or two days before that everything was going to finally be accepted. There was this huge rainstorm and it ended up actually causing water to come through. So on the day that I went and looked at the property, there had rain had actually come through the roof. We ended up, yeah. So it was like a good thing, bad thing. Oh the good thing was I took pictures, took a couple of videos and I sent it to them. This is actually a, it was a Wells Fargo, a foreclosure. So this is one of those, you know, submit your deal. They’re, you know, they’re not changing anything type of deals and sent them all this and ended up getting a, you know, rehab estimate, et cetera.
And that ended up saving us, I believe it was like 15 to $20,000. And they ended up accepting that newer bid because the water that had come through and you know, cause it was gonna the roof needed to either be repaired or replaced or what have you. And our, I think our final almost exacted was right around $200,000 is what we ended up closing on the house for. But we got a 203K FHA loan. So we ended up then including a right around $50,000 in rehab into our mortgage. So it was right around right around $250,000.
Andrew Kerr (11:41):
So you’re all in about 250,000 and then that, that walkthrough that you’re doing, was that actually your final walkthrough before closing or were you still in due diligence at that point?
I believe it was in due diligence because was, I think I just kind of went in type of thing. It was like I want to take a look at everything, make sure everything is right. Um, cause it wasn’t anything official. Honestly. It just like blessing, lucky, whatever term you want to use. It saved us $20,000
Andrew Kerr (12:09):
yeah, PR problem for them and a discount for you. So it works out well. All right, so you’re all in on this property about 250,000 do you remember roughly what she actually had to put down as a down payment for that?
Yeah, so the FHA, I believe we put down 3.5% and I am not doing the math but so what? 7 to $10,000.
Andrew Kerr (12:31):
And then do you remember the house obviously need to work cause he did the 203K loan. Did that scare you or your wife off at all? I mean I know sometimes folks walk into a property and there’s like, Oh my goodness, it just rained and it’s leaking and the properties, you know needs a new kitchen, a new bathroom. That immediately turned some folks off. Like did you guys just stumble across it and you’re like, Hey, we see some potential here or did you have to convince your wife or did your wife have to convince you?
No, we kind of looked at it as it would be an advantage because we could then take what was there and make it our own, and then we could also take some of the things that just needed some upgrades or what have you and improve the property as well. So we looked at it as, you know, kind of big picture, like we’re going to take this, we’re going to put that quote unquote sweat equity into it and make it better. And for us it worked out really well. Uh, we’re not, you know, we’re not very handy per se. We’re not mr. Fix it. I, you know, I hadn’t, uh, I mean I’ve swung a hammer before, but I’m not anyone who’s going to go to rehab a toilet or excuse me, a bathroom or a kitchen or anything. So it was for us, I think it worked out really well.
Andrew Kerr (13:45):
Cool. All right, so you bought it, you closed on it. How long did it actually take you to get all the work done?
Yeah, so we closed and I actually have to switch my timeline and I used, I used August. It was actually, cause I remember it was like one of the hottest days in Chicago and that’s when you moved in and all that good stuff. But uh, it was June 30th. We actually ended up moving in July 1st. Uh, our first renter was in as of October 1st, so July, August, September. Uh, so it took three months to get everything all, you know, as much as possible. I’m sure there was some loose ends but enough for someone to move in and feel calm.
Andrew Kerr (14:27):
And so you were actually living there while the work was being done?
We were, yeah.
Andrew Kerr (14:32):
Oh, fun. Fun. That can sometimes be challenging. How would that actually work out with the relationship? Here you are. Newlyweds just bought a multifamily. You’re getting a mortgage payment for the first time and there’s work going on.
Yeah, lots of multitasking. Um, that was, that was, that was part of it. But you know, I think we, we handled quite well because we felt like our place was kind of a, as long as we could get everything done with our place right away where the first floor right away to get someone rented in there, we felt like we were good. So there wasn’t anything that I didn’t think that we couldn’t handle.
Andrew Kerr (15:07):
All right. So you, you had bought it, you had closed on it, it took you about three months to do the work. Now you mentioned that it was a two flat but you’re trying to change it into a three flat. So were you actually able to use that 50,000 or so that was included in the loan to convert it to a three flat or did you have to sort of do all the work and then come back and sort of divided up after the loan?
Yeah, so we ended up taking care of the first floor and our floor and pretty much anything that was on the outside of the, of the building. Cause we ended up actually tearing down the garage that was there, which was the craziest thing. Wells Fargo came in and they, you know, they did their kind of upkeep where they painted everything and they actually redid the, like the roof on the garage with like the garage was ready to fall apart. Like I, I’ll never understand that. We had to tear down the entire garage so they wasted whatever money they put into it I guess. But in terms of the basement, uh, we did wait a little bit and we didn’t do that through our two or three K loan. Uh, so what we ended up doing is Chicago is, let’s say they don’t have, you’ll see a lot of units that are considered a mother-in-law or in-laws suites that are quote unquote legal, you know, they kind of say as is when they’re selling them. And that was the way ours was. We ended up going through and we ended up having a family member come to Chicago and help us out with just some flooring and putting up some, you know, some of the walls and finishing everything off. Just so it was, you know, had the exits and the windows and all that good stuff. But yeah, we ended up doing that later on. Uh, not as soon as that October, I believe. We ended up going into the following year and ended up renting an out that one and I believe in April.
Andrew Kerr (16:51):
Okay. All right. So it was basically you’re living on the first floor and you had this basement that you could also use. And then it was the upper floor. That second floor is where you put the tenant in around the October timeframe.
Well, switching that around. So we were on the top floor, second floor, and the tent was on the first floor and then you had that basement.
Andrew Kerr (17:09):
Okay. So do you remember roughly what your, your mortgage was at that time?
Yeah, so with the including escrow, uh, and it varied throughout our time that we were there because of lovely, uh, Chicago taxes. Uh, but it was anywhere from 1800 to 21.
Andrew Kerr (17:24):
Okay. And then you know for that year or so when you move to Chicago and you rented, do you remember what you were paying in rent?
Yeah, so we were paying right around $1,200, not including any utilities.
Andrew Kerr (17:37):
Okay. So 1200 for the apartment and now here you are sort of right from the get go. Your mortgage was around 1800. Then over the years it stepped up a little bit as taxes increased. So you’re in the house, you got that first tenant, how big was that? Was that a two bedroom, three bedroom. And then what, what was the makeup of your unit as well?
Yeah, so everything was pretty close to identical, but they ended up, we actually ended up giving the first floor, which I thought was the nicer unit and we kind of agreed. We ended up giving that to tenants. I say giving it to them. That’s what we ended up renting out. And it was a three bedroom, one bath, and our unit up top was two bedroom, one bath. But then instead of where the bedroom would have been, uh, we actually had like a dining room area.
Andrew Kerr (18:20):
Oh, okay. Yeah. I mean it’s sort of smart though when you’re thinking about it of like we’re newlywed couple do we really need a full three bedrooms and a three bedroom, we’ll get more rent than the two bedrooms. I think what you actually did, whether it’s intentional or not, was this the right and smart dishes decision where live in the two. So what were you getting in rent from that three bedroom?
We started out as it was going to be rent and then the, they would also be responsible for utilities separate. Uh, so at that time we thought everything was fine, but because this was an old house, a very old Chicago house, I believe it was built in like 1913. Uh, so old brick building. What ended up happening is we ended up including the utilities in there because we had like one gas line also being connected to uh,
Andrew Kerr (19:07):
Yeah, ma multiple units. Uh, and then was the water, was it one water meter for the whole building? And then what about electric? Was that, did you have two meters or was it one meter for the whole building as well?
That was ended up being that actually was three. The electricity was three, but the gas was two. So what we ended up doing is saying, okay, everything’s all included. Uh, so that kind of varied and that’s the reason I bring that up. But we didn’t know that originally we thought everything was completely separate.
Andrew Kerr (19:38):
I feel like you’re going about to get a giant gas bill that you weren’t quite expecting or a really high utility bill.
Yeah, yeah. Something like that. Our, our, um, our first floor tenant was like, Hey, this seems really high. I’m like, you know what? It sure does. So we ended up fixing everything, but I believe it was right in the, I think we started out at, it was like 1100 or, well, actually it was 1200 for the first floor and then with utilities ended up pumping up a little bit more I think. I think at that time we were adding anywhere from 150 to $200. So it was probably all in right around there.
Andrew Kerr (20:14):
So basically you, you get the utility bill and you go back and say like, Hey, it was 200 bucks, you know, you owe a hundred and we’ll pay the other a hundred.
Yeah, we ended up prorating it. We tried to keep it as we took last year’s, I believe we took last year’s gas or what have you. We asked the gas company and said, Hey, what was it for last year? What was the electricity? And then we ended up prorating it through the whole year and then we just kinda, uh, said, Hey, we’ll figure it out moving forward.
Andrew Kerr (20:41):
Okay, cool. So you’re, you were paying 1200 in rent for your apartment and now you moved into this place, you’ve got an 1800 mortgage and you’re collecting 1200 in rent, not counting utilities, maybe bring you up to 1300. So I mean, literally this is like $600 a month to live in this two flats and to be a three flat place. So you’re sort of in Chicago, a generally higher cost of living area. I mean you just basically cut your housing costs in half just from apartment to the two flat scenario.
Yeah, and we were, you know, the proud owners of a, you know, a multiunit family home in Chicago. So we were pretty pumped about it and you know, a big learning curve or I shouldn’t even say big learning curve. It was a learning curve. Where do you add us? Figure some stuff out. But it wasn’t anything that we wouldn’t had to have figured out if we would have bought a single family home is the way we looked at it.
Andrew Kerr (21:29):
yeah, you would have had to figure out utilities and maintenance and stuff like that. Really the only extra thing you added in was now a tenant. So you’ve got him in there, you’re saving some money on your housing. All those renovations were included in the loan. Now was the original plan to renovate that basement until like a garden apartment or was it this, as you’re going on you’re like, Oh, you know, we’ve been in here a couple months. This space isn’t being used. Let’s convert this into another apartment.
Yeah. We were originally going to kind of take our sweet time and see how, uh, see how we liked being landlords and you know, the tenants and what have you. And then just an opportunity arose that we had family that was able to help us out with some tile work and that was one of the big things that needed to be done. And he had some free time with, uh, you know, being able to help with, with walls and plastering. Um, we dry wall, et cetera. And they said, Hey, we can come up and help out. So we were like, well, let’s just do it now. Um, and it wasn’t, it wasn’t some insane amount of money that we had to part with. So we figured the faster we can get it done the fast we can get someone in there renting it as well.
Andrew Kerr (22:35):
Awesome. So you got that apartment, what was the makeup of that one? Was that a one bedroom or two bedroom as well?
Yeah, so that was a two bedroom, one bath as well. And then really the way it worked is so that each floor was right around 1300 square feet. Uh, but that one ended up being closer to 800, 850 because the remaining was four. It was like a laundry storage, uh, type type area.
Andrew Kerr (23:02):
Okay. And then what were you getting in rent from that two bedroom?
That was 800.
Andrew Kerr (23:06):
okay. So if I’m doing my math right, you’re getting 1200 and then 800 you’re bringing in two grand. Your mortgage initially was 1800 and then moved up to the two grand range. So you’re essentially living costs just went to zero. Yeah. That’s awesome. That’s really crazy. And living in Chicago. Yeah, I mean that’s just absolutely nuts. And then, you know, at that point you’re hoping you’re going to get appreciation, your tenants are paying down your mortgage, so now you’re getting growth in your equity just from that principal pay down. I mean, that’s just so, yeah, that, that blows me away. That’s an awesome thing that you, you’re living in Chicago and have zero housing costs.
Yeah. Not only was it so, I mean it’s a great opportunity where, you know, getting our mortgage paid down. We have, you know, people, people again paying our mortgage at that time. And then also like we really were learning a ton of stuff. So you’re figuring out, you know, who should be, who should be living in your, you know, in your apartment or in your house. Uh, you know, you’re screening tenants, you’re doing property management. Uh, cause we handled everything, you know, we’re figuring out what we can fix, what we know how to fix, what we need to have someone else do, what, uh, you know, we need to negotiate with that. So we ended up learning just a ton and if, you know, deciding if it was, you know, the right moves. If it was an investment, you know, it was an investment move or we were doing this as a personal property. So there was, it was just a ton of really like an opportunity row. And then yes, financial is where we’re really, it worked out.
Andrew Kerr (24:42):
So you mentioned you’re, you’re managing this place for yourself. So let’s actually talk about that for a little bit. So how’d you actually find your tenants and what’d you do for screening?
Yeah, so when we started out, a lot of my research, the way we did it was I was in charge of Chicago and what I ended up doing is, so a lot of my research came from, you know, really I’ll say Google, but uh, you know, anyone who had a, a Bigger Pockets would’ve been one that was probably my main resource. And then, you know, just personal finance websites, you know, when something came up and I needed to learn a little bit more about it, I would throw it on Google and, you know, check out those trusted websites. Yeah, exactly. Uh, but no, so I ended up doing all my tenant, uh, if I knew my tenants through at that time it was through Zillow and then they had a package where it ended up being, I think it was four or five websites that they ended up kind of putting a, I guess, package together. But that was free of charge.
Andrew Kerr (25:37):
Yeah. You posted on Zillow, they disseminate it out to a couple of different websites. That way you’re getting a little bit of a broader reach.
Yup, exactly. And then I took that and then for whatever reason, that didn’t link specifically the Craigslist, but I believe they gave you like a some sort of HTML that you could grab and put it in Craigslist. And that’s exactly what I did. And most of our showings came from either right directly from Zillow or Craigslist and those were all free of charge. And you know, over time it got better with it. Of course, as tenants came through. But I ended up, you know, kind of setting up a for a like a one stop shop. I said, okay, we’re having an open house on Saturday from whatever, from 10 to noon, make it there and let me write down your name, you know your name and your number and you’ll be here from 10 to 10:15 even though we kind of had a slot open from 10 to noon. Of course I didn’t start out that way.
Andrew Kerr (26:35):
Yeah, I think we all started that way. It’s like, Oh, someone’s interested, let’s go meet him right away. And then after a while you’re like, Oh my God, these people don’t show up like I’m doing all random times. And I started doing the same thing once I realized it’s like I’m just going to batch everyone at a time and I’ll just hang out, bring a book to read. And if someone doesn’t show up that’s fine because someone else is supposed to be coming right after them. Um, yeah, I mean that, I’m really glad you mentioned that because for anyone that’s listening, I think that’s a huge time saver is to try to batch people together, filter them a little bit and then say, you know, we’ll do an open house. What I like to do is do like a Thursday from, you know, 6 to 8 and then do like a Saturday morning. So you know, if people want to come in the evening or if they work second shift and they can come in that Saturday, Saturday morning time slot. And that usually works out really well.
Yeah. It, I felt brilliant the first time I did it. Cause because the first time that I, when I was doing it, you know, initially I was like you were saying, it was like, Oh, someone’s here at 5:45 and let me put down my dinner and run downstairs, which I had the luxury that I was in the same building at least. But I still had to stop everything I was doing and you know, follow up. But in terms of once we ended up having a tenant, we, I had them go through a couple of different processes. So I ended up initially, instead of having like a paper application, uh, I believe it was, uh, website, it was called rental application.net and I had them kind of fill out just basic general information. Uh, and again, that was free, but it was just to kind of get their information. So I knew who they were. And kind of had a general understanding, you know, how much money they made and if there was any like red flags that they were willing to kind of share to start out with. Uh, and then once we got people who were generally interested, we took that and then ended up using TransUnion smart move.
Andrew Kerr (28:24):
Oh yeah. You use them for the credit and a background check.
Exactly. And those are the ones that, you know, I basically, I didn’t want anyone to apply that didn’t need to apply. Like I wanted, I didn’t want everyone’s spending 50 bucks just to go through an application process. I kind of, I wanted to say like if I were in their shoes, I felt like this was the best way to do it.
Andrew Kerr (28:48):
Yeah. You, you want to be interested in them. They, you know, you want to vet them a little bit before they go drop 50 bucks on that application and screening and all actually link TransUnion’s smart move in in the show notes for anyone that’s listening you can just go check out the episode and we’ll have it up there for you.
Yeah. And that’s really, you know, other than being, I guess smart with our, you know, decisions, screening, everyone asking the right questions. Uh, if there was, you know, if there was contacts on there to follow up with the people to make sure. And really what it came down to is, you know, how did you feel about that person and were the numbers there if they did it? I believe the, I’m trying to remember, uh, I believe the number we used was 40 times the rent. Well now you got me. I ain’t gotta be double checking myself in my head. It was, their annual income was going be 40 times.
Andrew Kerr (29:42):
Oh, okay. Okay. So you did, okay, great. Yeah. So sometimes folks will use a combination of, you know, if the rent’s us thousand, we want them to make a 4,000 a month. But what you did is say, Hey, if the rent’s a thousand a month, we want them to bring in at least, you know, 40,000 a year to be able to cover that. Yeah. Okay, cool. Yeah, yeah. Either of those routes work.
You had me worried, I was like, wait a minute, did I do the math wrong?
Andrew Kerr (30:06):
But no, I mean I think that’s really good though, that to actually look at that income qualification cause there’s not only like, okay do they have good credit? No issues on the criminal background check. I liked them. I think they’d be a good fit. But you want to make sure that they actually have enough income to cover that rent for you. All right, so you’ve got folks screen, you’re getting tenants in. Did you do leases or how’d you figure out what to do for leases?
Yeah, so we, we ended up using, so the realtor that helped us get the house, he sent us over kind of the boiler plate Chicago lease and we ended up signing one year leases with our, with our tenants.
Andrew Kerr (30:44):
Okay. Yeah that was smart that I luckily he gave you that boiler plate template that you could use because I know I’ve talked with some folks and they’ve just like, Oh we’ll do the room rental and they’ll just pay me and that’ll be it. And yeah, it’s really important to have leases in place.
Contracts are important.
Andrew Kerr (31:01):
Awesome. So then tenants are in, you’ve got real leases. How’d you actually go about collecting the rent? I know you live right there, but was it just we’ll walk down and pick up cash or a check or did you do any sort of electronic transfer?
Yeah, so it started out with, with a check just because again, they walk up one flight of stairs and you know, stick it under the door. But um, over time it grew into kind of make things easier and we ended up using a cozy.
Andrew Kerr (31:32):
Oh yeah, I use cozy for, uh, when I do my house hacks. Yeah. I think and I’ll, I’ll put cozy in the show notes, a link to it, but it’s a great tool that’s free for property managers.
Yeah, it was amazing. Uh, I mean, and then it’s, again, I tend to do everything a little bit on my own and I’m looking for stuff that’s going to be either free or very, you know, at a reduced rate. Right. And this gave me the option to do everything that I needed to do and receive the payments for free. And if anything came up with the option of, you know, if they were having issues with say a payment, they could also do it via credit card as well. I remember, right? So to have all those options available was important.
Andrew Kerr (32:13):
And the thing I like about cozy is if a tenant wants to use a credit card, they pay the extra credit card fee. It doesn’t take it out of our cut as the landlord, which I really, really like. And then, you know, did cozy actually had the maintenance portal set up? Um, w when you were still using it? I know that was something they launched a relatively recently.
Uh, I don’t think so. Cause the only thing I used, I set up, you know, like a, a showing or what you, but I don’t think I use anything beyond that.
Andrew Kerr (32:41):
Yeah. So recently they actually added this portal where the tenant can log in to pay their rent, but there’s also section now where they can log a maintenance request and then I will get an alert on my side and I’d be like, Oh great. You know, they’re having an issue with the toilet’s running or a faucet dripping. I’d call my contractor or the plumber, whoever it is, and then I could just write back through the portal, say, Hey, this contractor, here’s his name, he’ll be out there Wednesday or Thursday afternoon. And it was a, it’s a really cool feature that they launched here recently to help track those maintenance requests as well.
Yeah, I’ve had nothing but positive things to say about cozy. Um, it was, you know, again it was free and then if you had the option, if you wanted to get that money a little bit faster, I think it costs like $3 or something like that to transfer. Yeah. And I never did, but like I was always like running the math in my head. Like what if I got that money a little bit earlier? Would I pay my mortgage faster to save the extra whatever cause I’m like, yeah, personal finance, they’re just thinking about that stuff. But
Andrew Kerr (33:38):
And for folks that are listening, what Steven’s referring to is with cozy, the tenant will pay rent and then it usually takes five to seven business days, give or take to actually hit your account. So essentially cozy is drafting the tenant’s account. It takes, you know, a day to three days to clear and then they initiate the transfer over to your account as a landlord or owner. And that usually can take another couple of days. So they basically had this option where you pay the couple bucks and it cuts that sort of five, six, seven days down to like two or three days. Um, but yeah, I, I’ve done the same thing. I’m like, Oh, would it be nice to have the money faster? And I’m like, I’m not going to pay three bucks to get my money like two days faster. I’ll be fine. I’m not, I’m not that hard up for the money. I don’t want to pay a fee to have my money quicker. Cool. So you know, here you are, you fixed it up. It said two unit converted to a three unit. You have essentially zero housing costs. What are you doing with this extra money? Did you go out and party all the time, fancy dinners, brand new cars, or did you save some money? I mean, how did all that work out for you?
Aw, man I sold my fancy car a while ago. I don’t need that. No, I, I’d love, I would love to say that initially, initially that our first thought was, Hey, let’s take this money and invest or let’s buy another property or pay down debt or whatever. The, you know, the right things to say are, well, no, we didn’t right away. And I think we kind of wasted away that first I would say year. And I’d like to say that there’s some magical place for that money went. I don’t know.
Andrew Kerr (35:13):
I think we’ve all been there where you’re just like, where did my money go?
Yeah. And you know, it might’ve went to fix up the house. It might’ve went to a vacation, like you name it. Um, like you said, wait, where did that money go? But, uh, we did end up kind of taking a big turn and we decided to have a plan or that money pretty shortly after though. Uh, so we didn’t, we didn’t, you know, spend it all the time. We ended up coming up. I mentioned, I said I was in charge of, uh, Chicago in terms of the property. So when my wife and I got married, we decided that whatever you brought into the marriage, that’s what you’re responsible for. So she actually brought in a home in Florida. So she had a mortgage. Yeah. So she had a single family home that she was renting down in Florida since we had moved into Chicago. So we decided to take that money and any rent that we got from Chicago in addition to, so we were actually like, we’re tripling our payments. So there’s the Chicago rents, there was the Florida rent, and then there was also just her regular payment that she was making, uh, to the Florida, to the Florida mortgage. So we are tripling down on our payment. So we took that and applied it to the Florida.
Andrew Kerr (36:30):
Oh, cool and just tried to rapidly pay that down. Exactly. Oh, cool. Smart, smart move. And then what was this turning point though? Why did you go from, you know, great, we’re using the money, it’s just going out, not quite sure what it’s doing, but you know, what was this turning point of? We’re now going to like rapidly pay down the mortgage and actually take this money and the savings of having zero housing costs and do something positive financially with it.
Yeah, so I think a lot of it was just, you know, the my mindset of I was in personal debt before I actually, during pretty much all of this and I was taking care of it. Um, you know, with my own money we were actually keeping everything in kind of separate but equal where, you know, the money that I made from my job was going towards paying off debt. So here I am paying off all this debt and for us to kind of let that money just not go anywhere, it didn’t make a lot of sense and we really needed to make a shift. Like I was already doing good things with paying off debt, like let’s do the next, you know, the next thing and let’s either invest or, you know, pay down this property so this income becomes free and clear essentially. And that, that was really the big thing was we’re just kind of heading in that direction. It just took us, you know, a couple of steps to, you know, get, get going a little faster I guess.
Andrew Kerr (37:52):
Cool. So now, how’d the property wrap up? I know you mentioned earlier that you ended up selling it. What was the decision there? Moving back to Florida? I know you said your wife was from Florida’s, was that the move back to closer to her family or how’d you end up selling the property?
Yeah, so we decided, one of the things that, so my wife is originally from Miami originally from Nicaragua and her family is down there. So she’s Latin family, very close to them, calls him every day, that type of thing. Whereas, you know, I’m calling my parents every Sunday and I feel like I’m the best kid in the world. So definitely different. Um, different cultures for sure. Yeah, exactly. And so we had always talked that, you know, with this plan was once that mortgage is paid off, like let’s have an open discussion if, you know, living in Chicago is right for us. And we ended up paying that property off at the end of 2016 just because of, again, we had all the extra mortgage payments, the rent from Chicago going towards that and we said, Hey, you know, let’s have a talk and let’s see if it’s the right thing. So during all of really 2017, we talked and started saying, Hey, if this happens or if that happens, because now we were down to one mortgage and in 2018 we kind of finally made the decision that said, okay, if we can go down to Florida, we’re going to make it happen. Uh, you know, it’s one thing to have a mortgage or only one mortgage, but we also needed to make sure that, you know, jobs were transferable. So we started that process to see, you know, could we work remotely, et cetera, et cetera. Um, well, we had recently fixed up actually our unit, we kind of waited a little bit and fixed up our unit, so I was in pristine shape at least if you’re in terms of, you know, from when we bought it in 2012 to 2018 and so we just decided at that point that, you know, you’re able to move down to Florida. And we, it was a lot of pros and cons. It was really a coin flip. Uh, and that’s not that what we did of course, but, uh, you know, we said, Hey, we can make profit and kind of lose some of the, you know, day to day things that we needed to do with property management, et cetera, et cetera. And then we can take that money and really decide what’s next. And we can have a, you know, if we want to have a real estate property again down in Florida or somewhere else, or if we wanted to invest in the stock market, uh, we could take those next steps. And that’s what we decided to do. We actually sold it, uh, right around July, August of 2018 and we moved down to Miami, Florida.
Andrew Kerr (40:28):
Cool. And are you now living in that house that’s paid off or did you get another place and you’re still renting off that, that other um, paid off house down there?
We are, we are actually living in the house that we paid off. It was a rental unit and then just the way things worked out, funny enough, uh, a pastor was actually staying in this property, ended up getting a calling right around the same time that we’re going to move down and ended up having to leave or what have you, very close to when the, um, the lease was going to be up. So just everything kind of worked out perfect. And we moved into our, you know, former rental now primary residence.
Andrew Kerr (41:07):
Well that’s pretty cool to go through this whole house hack experience. Use that to help accelerate the pay down for the Florida home and now you’re living in a home with no mortgage. That’s a pretty cool story.
Yeah, it’s, I’m glad everything worked out that way. I’d love to say that, like that’s exactly how we planned it. Um, but you know, it’s come down here to, you know, down to Miami, down to a house and my wife originally bought before we ever even married and had it be completely debt free. Uh, no mortgage, no debt in the family. It’s a, you know, that’s, I can really credit a lot of it too, you know, to house hacks.
Andrew Kerr (41:47):
Yeah. All right. So if you’re thinking back through that house hack experience, you know, what do you feel your biggest win or biggest success was?
My biggest win. Renting the place. Having people pay me to live in my house. Yeah, no, I mean that was a lot of it too. I think if I would just take out one thing though is, is really just figuring out the ins and outs of being a landlord and a property manager because you know, it’s not like it’s, yes, there’s books out there, but it’s not like, you know, it’s not taught in school per se. Yeah. Like, yeah, you took a high school course where they’re like, how to handle a washer breaking.
Andrew Kerr (42:26):
It’s very different from like theory reading about it to the actual like practical application of like getting that call of like, Hey, this broke and trying to figure out contractors and all that fun stuff. Yup. All right. So you know, again, if you’re sort of thinking back through that period, you know, what do you think your biggest challenge was? Or is there anything over that sort of six year period? If you could go back and change it or do it differently, you know, what, what might that be?
I would say one of the biggest challenges for us was it was an old home I mentioned before, you know, Chicago, the home was built. And like I say, I used to say, you know, before the Cubs won the world series and the last time. Yeah, thank goodness. Um, but yeah, so it was just an old house. So there’s always going to be something that was, you know, not perfect. And you know, what happens with any home. But when it’s, you know, when you’re living in a home and you’re trying to treat, you know, for us that second floor as our, as our home, but then treat the rest of the property as well, like an investment, really kind of keep that balance. So there was always really something that could have been updated, fixed and trying to figure out, you know, what’s the best use of our money? I would say that’s something that I probably would, that was a challenge. Yeah. I don’t know if we did it right or we did it wrong. Um, but you know, that’s kind of how you figure things out.
Andrew Kerr (43:49):
Cool. And then would you ever do a house hack again?
It’s like another one of those. Um, you know, I think I would, it would have to be the right situation. You know, again, a lot of it would probably come down to the value, you know, it doesn’t make a lot of sense because we’ve gone, you know, essentially polar opposites right now. You know, we went where we had someone right below us and you know, even below them there was someone. And now we, you know, we have our own place. If I want to scream at the top of my lungs. Y.
Andrew Kerr (44:21):
yeah, you can do it. Yeah. Your wife might get mad at you, but now you don’t have to worry about tenants getting upset.
Yeah. You know, the tenants aren’t saying, Hey, I think something’s wrong upstairs or whatever. Um, not, you know, not that you’re ever really thinking about that too much, but, uh, it is a different scenario. Uh, so I think I would do it, but it just would have to be the right situation.
Andrew Kerr (44:41):
Yeah. Cool. Well, I really appreciate you being on the show, but before we let you go, what we’d like to do is ask all of our guests a set of final six questions that we like to call. So six rapid fire questions. You ready for them?
I’m ready. That’ll be very fast.
Andrew Kerr (45:00):
Awesome. All right. Number one. What is your your favorite personal finance blog or book or podcast?
Uh, I’m sorry, this supposed to be quick. Uh, favorite book, probably Richest Man in Babylon.
Andrew Kerr (45:13):
Oh, that, that in rich dad. Poor dad. Or like two of my classic, very old school books. I really love that one. And it’s such an easy read. So if you haven’t read it, go look it up. It’s an easy book to read. All right, so moving on to number two. What’s your favorite real estate related blog book or podcast?
Yeah, I, I kinda grew up in a way on a Bigger Pockets. Yeah. So it was a little bit, I was listening to them all the time and I was also, you know, diving into, you know, Bigger Pockets in the forums would have you, and now I’ll be honest, if I, if I have a, I kind of refer everyone now to uh, coach Carson.
Andrew Kerr (45:56):
Oh yeah. He’s in South Carolina. I was at a fincon back in September and got to hear him talk and chat with him for a few minutes. Yeah. He’s got a really cool story.
Yeah. And he’s just a smart guy. And if he doesn’t know something, like he’ll be honest and you’re like, you won’t try to like sales pitch you into giving some idea. He’s just like, yeah, I’m not sure wha, you know, maybe talk to this guy you might know having, so yeah, probably both of those.
Andrew Kerr (46:20):
Cool. All right. Number three, what’s been your favorite travel destination so far?
I’m still coming in with Kauai, Hawaii, which is a kind of like the smaller Island, uh, of, of Hawaii. It’s like the quiet, the ones that like go to bed at 9:00 AM or wait 9:00 AM.. 9:00 PM because nothing’s, nothing’s open. Really fits who I am.
Andrew Kerr (46:44):
Yeah. Yeah. Awesome. And then what’s next on your travel or vacation list?
Oh man. Right now it’s taking a break. We actually just got back from Italy. I’ve been back from Italy. For a total of, I think like three days.
Andrew Kerr (46:59):
You’re still battling jet lag at all?
Well, I think that’s what brought me in the sickness. There was like part sickness, part jet lag and they just like crashed into each other. Um, but yeah, I was actually in Italy for five weeks, so I’m ready to like do nothing. I’m like, where I’m at.
Andrew Kerr (47:16):
Italy’s my favorite country. I’ve been four times. And then going back for the fifth time in June of 2020. So, uh, yeah, I’m right there with you. I’m a little jealous you spent five weeks there. I think the longest I’ve spent in Italy is like 10 days, two and I always seem to add on other stuff, but, awesome. And then number five. What’s your biggest bucket list item that you haven’t accomplished?
Yeah, so I would say I actually want to own a professional sports franchise. No, it doesn’t have to be like the Chicago Cubs or anything because that’s, we’re talking billions. Um, but yeah, I’d be happy with like a little minor league team or uh, like those in, uh, in the Midwest, they have like summer league baseball team. That would be crazy fun to own. Uh, so that’s one thing. I’m still, I need a little, probably a little bit of time, but on the list.
Andrew Kerr (48:09):
Awesome. That, that’s a pretty good bucket list item. I don’t know, have you ever followed a Gary V?
Andrew Kerr (48:15):
Yeah. So, you know, his big thing is like, he wants to buy the jets. Uh, so now that’s billions. But yeah, that’s a cool bucket list item. Um, and then number six, do you have a favorite life hack?
Yeah, it’s, it’s pretty old school, but I would say my life hack is to, is to track everything and write everything down. So when I find them having the biggest success, uh, you know, whether it’s weight loss, personal goals, eating, fitness, no money is when I’m really just tracking everything. When I’m writing it down, pen and paper and you know, like I can still put it in an Excel or I can still, you know, write it online. Well, when I’m writing it down, you know, I see something and to me that’s, that’s my biggest life hack because a lot of people, they don’t do that anymore. Everything’s an app, you know, it’s on, you know, an alarm on their phone or something that tells them to when to eat or something. Oh. Where I, I find that just writing things down is really, really effective for me. It’s like a repeating process, making an ingrained up here in the mind that is.
Andrew Kerr (49:20):
well, what, what was that old saying? It’s, you can’t, uh, measure what you don’t track. And I’m, I’m a big believer in that too and I think there’s a big difference between putting something in the app versus like physically writing it down. I know I retained stuff so much better when you actually physically take the time to write it down.
Andrew Kerr (49:38):
Awesome. Well Steven, thank you so much for being on this show and sharing your story. It’s such a cool story, uh, what you did over those six years with your house hack in Chicago and how that helps set you up financially. Um, I really appreciate you being on again and for all the listeners, I’m going to put all of Steven’s contact info in the show notes so if you want to reach out to him, we’ll have his Facebook or social media posts on there as well.
Hey Andrew, thanks again. I really appreciate it. Hope everyone listened to this story. It took a little something from it and can apply it to their situation.
Speaker 1 (50:11):
Awesome. Thank you so much. Thank you for listening to the house hacking podcast. For more up to date information on house hacking code, access, links, and resources mentioned in today’s show, and connect with the guest and host head www.fibyrei.com that’s www.fibyrei.com where your house hacking journey begins.
And you can check out another small house hack podcast episode here!