What is House Hacking with Coach Chad Carson

Welcome to House Hacking podcast!

The first guest of the show is Coach Chad Carson. As a successful real estate investor that has been in the game since the early 2000s, he has a wealth of experience. With his track record and credibility, he dives into the idea of house hacking. Today we will learn more about what house hacking is and how it can impact your financial future. 

What is house hacking?

First things first, house hacking is an alternative strategy to turn your residence into a better investment. Although there are lots of different ways you can approach house hacking, the goal is to find a way for your primary residence to produce an income and offset the mortgage. 

Ultimately, house hacking can dramatically transform your financial future. Instead of spending a large portion of your income on housing expenses, you can save and invest the money to build wealth. Since the average American spends 30 to 50% of their budget on housing expenses, it is easy to see how house hacking can change your personal finances for the better. 

Why Coach Carson started house hacking

When Coach Carson graduated from college with a Biology degree, he wasn’t sure what he wanted his future to look like. At the time, he had the idea to become an entrepreneur that invested in real estate. 

He got his start by wholesaling properties. With that, he would find good deals and get the property under contract. Then he would find a buyer for the property in exchange for a finders fee. As he was building this business, he was living for free in a friend’s spare bedroom. 

After a few months, he bought a single-family home with seller financing. That bumped up his housing costs to around $700 per month. However, he noticed an extreme variability in his income. He could make $20,000 in one month, but then have a dry spell for several months. With that, he wanted to find a way to keep his housing expenses as low as possible. And that is how his idea of house hacking came about. 

Six months after purchasing this single-family home, he moved into a four-unit property that he had rehabbed. He rented out the single-family home. Once he found tenants to fill the other units, he was able to live in the space without any housing costs!

Creative financing strategies

When Carson bought the single-family home, he used seller financing to purchase the property. He found out about the property through a connection in his real estate network. The seller was looking to get rid of the property. So Carson asked if seller financing was available, and they were apple to work out a deal. They landed on a purchase price of $120,000. 

He bought it with the intention that it would become a rental at some point. When he moved out, he was immediately able to rent it out for $950 per month. When Carson’s income had stabilized, he was able to secure a traditional loan for the property. At that point, he paid off the original seller and was able to knock $15,000 off the total cost of the loan. 

Finding the multiplex

Carson first heard about the four-unit property that would become his first house hack through a friend. The property was owned by the bank and wasn’t even on the market yet. When he got a phone call to check it out, he immediately drove across town to take a look. 

Although the property was in serious need of rehab, it seemed like a manageable property to Carson. It was in an affordable section of student housing with real potential. 

Once he had found the place, he had to get creative with financing again. This time, he talked to a local lender that was willing to give him 80% of the purchase price. The last 20% came from his savings and the help of a private lender. 

After securing the financing, Carson closed on the property for $70,000. It cost a total of $115,000 to fix up the property into a rentable condition. Once it was liveable, Carson moved into a middle unit. Once he had moved in, he found three tenants for the other units. 

Six months after he had bought the property, all of the units were rented and the repairs were complete. At that point, he was able to get a new mortgage on the property with a fixed interest rate that was considerably lower. When he refinanced, he paid off the local bank and private lender that had originally loaned him the funds. With the refinance, he borrowed $120,000 because the property was now worth $155,000. 

He was able to refinance so quickly at a much higher price by working closely with a mortgage agent. The agent taught him how to properly document all of the repairs. 

Finding the tenants

When Carson was looking for tenants, he used the property to help screen new tenants. He put a lot of care into the small details of the renovation and lived on site. That told future tenants that he cared about the maintenance of the property and attracted the right cliente. 

Although he has checklists to screen tenants now, he cobbled together a screening process for these tenants. If you are looking for an easy way to screen tenants, he recommends using Cozy.co.

The benefits of house hacking

After moving into this property, Carson was able to dramatically reduce his housing costs. That gave him more flexibility as an entrepreneur. He was able to build his business without worrying about a high housing cost holding him back. 

After a year or so, his wife moved into the property. They were both able to continue saving a large portion of their income for 5 years. This years of intense saving has helped them on their path to FI. 

Beyond the positive financial impacts, Carson was also able to learn a lot about the niche of student housing. Most of his tenants during his house hack were students and that taught him how to effectively manage student rentals. A large portion of his portfolio today consists of student housing, and he is still leaning on the knowledge base he built while house hacking. 

Building a real estate portfolio

House hacking is one area of real estate that Coach Carson has successfully navigated. Additionally, he has built a successful real estate portfolio. 

Looking back, he reflects that he might have been too aggressive while building the portfolio. In 2007, he and his business partner had 33 closings on houses they were flipping and rental properties. They kept working to bring in more and more deals, but the numbers weren’t always exactly right. 

If he could change anything about the journey, he wishes that he could have owned the process that he was comfortable with. Many real estate investors in the space feel the need to continually push forward on to more deals. But Carson recommends owning the process that makes you comfortable and it will serve you over time. 

You don’t need a portfolio of hundreds of properties to be successful. In fact, Carson says that some of the most successful people that he knows in terms of lifestyle and happiness own between 5 and 10 properties. Although they aren’t setting any records, they are happy with their balance in life. Don’t feel like you have to move on to a bigger deal every time. Find a process that works for you and strike a balance that makes you comfortable. 

The Famous Six

What is your favorite personal finance blog, book, or podcast that you’ve read recently?

Your Money or Your Life by Vicki Robin

What’s your favorite real estate related blog or book you’ve read recently?

Strong Towns by Charles Marohn

What is your favorite destination so far?

Ecuador

Where will you travel next?

Spain

What is the biggest bucket list goal that you haven’t accomplished yet?

Excited about donating time and money to things that are important to him. He has a goal of giving away $1 million dollars. 

 What is your favorite life hack?

House hacking! Also, geo-arbitrage is a great life hack. 

How to connect with Coach Carson

You can find out more about Coach Carson on his website. You can also follow him on Twitter, Facebook, and YouTube @CoachChadCarson. He is also on Instagram @coachcarson1 and LinkedIn @CoachCarson. 

Resources

 

Be sure to check out our Ultimate Guide to House Hacking for a great overview of the different styles of house hacking and different types of tenant bases.

Check out the home page for “The House Hacking Podcast” here.