BiggerPockets Money Podcast - 95: The House Hacking Strategy with Craig Curelop

Episode Date: October 21, 2019

One of the most commonly asked questions in the BiggerPockets Forums is “How do I get started investing in real estate with no money?” Craig Curelop has the perfect answer to this question - House Hacking! Craig shares his own story of three house hacks - and counting! We dive into the numbers, look at what makes a good property to house hack, and even talk about the different ways to hack your housing. Craig also shares ways he dealt with people who didn’t understand what he was doing - including his family and most of his friends.  Craig even shares his biggest house hacking mistake - how not following his tenant screening protocol led to a terrible experience. If you’re thinking about jumping into house hacking, this episode lays it all out. In This Episode We Discussed: Craig's journey with house hacking  Craig's numbers on his first house hack What PMI is Craig's PMI monthly payment How he leverage his first house hack into the second house hack Craig's numbers on his second house hack The importance to consider the occupancy law How he bought his third house hack Craig's numbers on his third house hack How he managed all his rentals How to find a property manager The idea of sacrificing comfortability and profitability Advantages on house hacking What kind of property makes for a good house hack On luxurious house hack Getting pushback about house hacking Craig's biggest house hacking mistake and how to prevent it Things that is important when it comes to house hacking And SO much more! Links: BiggerPockets Money Podcast 35: Hacking Your Life to Live for (Almost) Free with Craig Curelop BiggerPockets Podcast 244: “Unfair” Taxes and Unfair Advantages with Linda Weygant, CPA BiggerPockets Podcast 350: How to House Hack Your Way to Financial Freedom in 3 Years with Craig Curelop BiggerPockets Money Podcast 02: An All-Out Approach to Financial Independence at an Early Age with Scott Trench BiggerPockets Forums BiggerPockets Blog Tenant Screening: The Ultimate Guide Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast show number 95 with Craig Curlop, author of The House Hacking Strategy, How to Use Your Home to Achieve Financial Freedom, and a member of the staff here at biggerpockets.com. So you definitely want to be in a living situation that you will enjoy, right? And so the whole curtain thing most people probably would not enjoy, I actually did enjoy it, believe it or not, just because I got to meet a lot of people. And it was an experience, right? I love the experience. It's time for a new American dream, one that doesn't involve, working in a cubicle for 40 years, barely scraping by. Whether you're looking to get your

financial house in order, invest the money you already have, or discover new paths for wealth creation, you're in the right place. This show is for anyone who has money or wants more. This is the Bigger Pockets Money Podcast. How's it going, everybody? I'm Scott Trench, and I'm here with my co-host, Ms. Mindy Jensen. How are you doing today, Mindy? Scott, I am super excited for today's show because while I am the president of your fan club, I'm also the president of Craig's fan club. He is doing some pretty amazing financial wizardry with this house hacking strategy that he's mastered during his short time working here at Bigger Pockets. Short time, it's like two and a half years or something. But he's just really crushing it. And it's exciting to see somebody who is, I know I make

fun of you guys for being young, but you're significantly younger than I am. It's exciting to see somebody who is so young doing something so financially advantageous, you know, taking the risks and making the sacrifices that you need to do to be a house hacker. And when I say risks and sacrifices, the risk is actually pretty minimal. The biggest risk is that you have more house than you need. And the sacrifices is just you're living with somebody else. But especially for somebody Craig's age, you know, he's coming out of school where he was living with roommates. He's just living with more roommates. And now those roommates are paying his mortgage. So. Yeah, I think, I mean, from a risk perspective, Craig's situation is that.

the lowest risk you can possibly get, right? He has tenants to help him cover his mortgage. He's not at risk long term of rents going up and that being a problem for him, like every tenant is at risk for. And, you know, he's got help. Like, every homeowner is at more of a risk because they don't have tenants helping to pay down their mortgages, right? So Craig has built several hundred thousand thousand dollars in passive income through his real estate investing activities. He's got a diversified pool of tenants, right? You know, his risk, like, to your point, is just so low with this. And this is the way to do it or a method that you as a listener can go and practically apply

it in your market. Some of the themes and the principles that Craig's applying, the fact that he's applying them so aggressively and so early on in his career, you know, it's guys like Craig are going to have unlimited freedom by the time they hit 30 years old to go out and take on the world and go start a business, go whatever, maybe work for bigger pockets forever. Whatever it is that Craig wants to do, he'll be able to do because of what he's applied in these past couple of years. And you'll listen to his story and hear the personal sacrifice that came along with that. I have to decide if it's worth it or not. But there's a spectrum here. And I think

Craig also outlines that really well. Yes, he does. I wanted to point out that this isn't just a strategy for 30-year-olds. As I mentioned later on in the show, I've considered this as well. And it's just another way to generate passive income. Craig shares the amount of money he's generating from his three rental properties. And we didn't ask him how much he spends every month, but I bet this more than covers all of his spending. Oh, yeah. Craig's just a master at finding those those points of leverage in his spending and his income and figure out a way to reduce his expenses to zero, it maximizes income. And he's been doing that consistently. And that's, you know, that's how you kill it.

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Join thousands of small business owners who have streamlined their finances with Found. Audible has been a core part of my routine for more than a decade. I started listening years ago to make better use of drive time and workouts, and it stuck. At this point, I've logged over 229 audio book completions on Audible alone, and I still regularly re-listen to the highest impact titles. Lately, I've been listening to Bigger Liener Stronger for Fitness, the Anxious Generation for parenting perspective and several Arthur Brooks' audiobooks that have been excellent for mental well-being.

What makes Audible so powerful as its breadth. Beyond audiobooks, you also get Audible Originals, podcasts, and a massive back catalog across business, health, parenting, and more, all accessible in one app. If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP money. Craig Curlup, welcome back to the Bigger Pockets Money podcast.

I'm so excited to talk to you today. How's it going? I'm so excited to talk to you too. It's not like I don't get to talk to you every day. I know that seems kind of weird. I have to introduce the show the same way that I always do, but I actually work with you, although today I'm at home and you are in the office recording from where I normally record from. So yes, I'm excited to bring you back because I think that can I Can I say that you are the world's foremost expert on house hacking? Is that overselling it? I think you can say whatever you want, Mindy.

Okay. Craig Curlop is the world's foremost expert on house hacking. Even though Brandon Turner made up this term, Craig knows more than Brandon does about it. Because he's actually done it. Has Brandon done it? I guess maybe. But not to the extent that you have. Okay.

Let's get started, Craig. Well, before we do that, I'm going to continue with my intro. Craig first joined us or last joined us, both, I guess, on episode 35 of the Bigger Pockets Money podcast, we already got his story, his money journey there. And if you haven't listened to that episode, you really need to because Craig did what nobody else has ever been able to do for me. And that is properly explain how you can invest before you pay off your debt. And until Craig came onto that show, I was like, no, you should always pay off your debt. Always, like, the sky is blue, the grass is green.

You pay off your debt before you start investing. And then Craig's story really made sense how he was able to make the minimum payments on his debt while investing in real estate through what method? Craig, was that house hacking? House hacking. And then so Craig, is it safe to say that you paid off $86,000 in debt because you house hacked? House hacking was probably the number one driver in that. There were other things, but house hacking was the number one driver for sure. And just to continue blowing up, Craig, for a second here, you know, like very few people, I think, have studied this concept to the depth that which you've kind of taken it and applied it consistently over a multi-year period, interviewed as many people as you have to try to get a wide range of strategies around it. And then you're just making it work where other people maybe think it can't work here in Denver, Colorado, for example. And I just want to give you a big compliment and all the work and thought.

you've put into this. I think it's going to help a lot of people rapidly build a lot of wealth your book. Well, thank you, Scott. Yeah, I definitely have studied a lot and talked to a lot of people on the house hacking strategy. And as you'll see in the book, you know, every chapter ends with a case study of everyone that I've studied in all different markets, doing all different types of house hacking as well. So there's something out there for everybody. Nice. Well, can you give us maybe a little a quick, let's do a two or three minute recap of your journey with house hacking and then maybe kind of an intro for those who are new to it and how they can think about approaching it here in end of 2019. Yeah, sure. So my house hacking story started actually just a couple of months

after I got hired at Bigger Pockets. I got hired in April 2017, started my first house hack in June 2017. And that was a duplex that you probably heard in my previous episode where I rented out the top, lived in the bottom and Airbnb in my bedroom out on Airbnb. All of those savings allowed me to... That's where you lived behind the cardboard curtain. That's right. You're not going to let me forget that. All right. Just to make sure, yeah. Yes.

Well, it was a cardboard box with a curtain on the other side. Here he is, $86,000 later. Yeah. And so that basically, like all that savings, right, helped me be able to, you know, make my minimum payments on my student loan to the time and save up for my second house hack. Exactly one year later, I closed on my second house hack and then rented out the first one full time, did the second one.

That one was a five-bed two-bath, which I rented by the room. So a different strategy there. And then I saved and saved and saved to then get my now third house hack pretty much a year later after that. So it's a very repeatable strategy. Okay. So let's look at the numbers for your first house hack. What did you pay for it?

What was your monthly payment all in principal interest taxes insurance? And what did you rent out? What money did you bring in through your various rentings? Yeah. So the first property I purchased for $385,000, $3.85,000. My down payment, I did a 3.5% down FHA loan, which was about $17,000 to $20,000 down. My monthly payment was just over $2,000. Interest rates were very low at that time.

And so I was getting $17.50 for the top. And from Airbnb out my room at Airbnb, I was averaging about $1,100 per month. So a little less in the winter, but a little more in the summer. So over the course of the year, it averaged out. It's about $1,100. And so what's that? 2850 on a $22,000 mortgage, and I was living for free. $200, right?

Is it $22,000 a year or $2,200 a month? It was $2,000 a month for the mortgage, just over $2,000. Got it, okay. So that's awesome. You're living for free, building down your, paying down your mortgage. Has the property appreciated now a couple of years later? Yeah. So I actually just got an appraisal.

and it appraised for about $80,000 higher than when I just purchased it two years ago. Awesome. Do you have plans to refinance that property? I'm actually taking a HELOC out on it. I don't plan to refinance it yet. The only time I'll refinance it is if I do indeed want to get another multifamily or I need to use that FHA loan again. Nice. What are you going to do with that HELOC?

Right now it's just kind of reserves so I can use my money to then, you know, potentially purchase another investment here in Denver. That is not a house hack. My goal for next year is to obviously purchase another house hack, but in the meantime, I also purchased a traditional rental as well. All right, this is awesome. I don't want to go too far that unless I drive it at hole, but I'm very interested, so I will anyways.

How would you kind of describe your position on risk, reward in relation to taking out a helock? You know, you're leveraging even more on this and pulling it out and holding it in cash as a reserve and opportunity fund or whatever. How are you thinking through that from a risk-reward perspective? Well, so I'm not actually drawing down on the helock until I actually have the opportunity.

Okay. Sorry, I thought you'd pulled it out already. Oh, no, no, no. Okay, so that makes sense. Do you think that if you get to 20% equity in that property that you'll refinanced out of your FHA loan? Yeah, once it gets a 20, 25%, I'll refinance. It'll probably become an investor loan. So I'll be able to remove the PMI, lower my monthly payment.

And then, yeah, have a whole lot more options with, you know, having the FHA loan out again. I can then, you know, go ahead and do another multifamily property with a low amount down. Okay, we're talking a lot about things that we all already know about. break this down a little bit more for people who are listening that may not be familiar with all these terms you're throwing out there. PMI is private mortgage insurance. What is your PMI monthly payment? So the PMI on that property is about $250. Oh, okay. And so any property for the listeners there, any property that you don't put at least 20 or 25 percent down on, you're going to have to pay PMI. And people always wonder, is paying the PMI worth it? And I say it 100% is

worth it, right? And this is the reason is that because I pay an extra $250 a month in mortgage, right? But I get to purchase a property for $60,000 less than if I didn't have the PMI. So how long would that take me to save up $60,000 rather than just pay that $250? Right? So I say $250 more a month. I don't even know what that math is, but it's for a time, a lot of money. It's a lot of years before I can then purchase a house just to sacrifice not paying PMI, especially if my renters are actually paying it for me. That's a really good point. And PMI, you said 20 or 25% down.

It's 20% down for an owner-occupied property. If you don't put 20% down, then you are paying PMI. I've heard a couple of different ways that people are doing PMI. One guy was able to buy his PMI or pay it off at the beginning of the mortgage. It was something like $1,000 to pay it off. He's like, yeah, I'm going to do that. And that's four months of your PMI. I don't know what his was.

My friend Jake has, what, $75 a month for PMI? And if he didn't do that, then he would have to pay capital gains taxes on stocks that he would sell to get the 20%. So, you know, don't write off PMI automatically. I mean, if it's really expensive, it might not be worth it. But definitely do the math. There's a lot of different ways to figure that out. Yeah. So basically, if I understand correctly, the strategy is you buy a 3.5% down because you don't have 25%

percent down, which is close to $100,000 on this property. And you have this great opportunity to earn a return, live for free, all that kind of stuff. The property appreciates you paid on the mortgage and you approach that 20, 25 percent. So for me, when I was house hacking, the holy grail was being able to refinance out of that PMI and reduce my mortgage payment very dramatically. Is that one of your goals that you're going for? It is not my primary goal because I'm actually pretty comfortable with where my rents to my mortgage is right now. And so at this point, I think I would rather just have that he lock available and then use that leverage to buy another property rather than just have more equity in the current property that it's in. Because we talk

a lot about return on equity, right? And so when your return on equity is not very high when you've got $100,000 some odd dollars in the property itself. I think that's a great way to approach it. Different and also awesome. So tell us about how you leverage that first house act into the second one. So through all those methods of saving, right? So I wasn't paying rent for that first month. And I was cash flowing about, you know, after reserves, maybe $500 over the mortgage. And so net difference is about $1,000 more than I was saving prior to renting before. And so that, on top of my original savings that I was saving before from my job with bigger pockets and some other side hustles and stuff like that, I was able to save another 40, 30, 40 grand in that next year, which

was able to leverage up into the second house hack, which was the five-bed two-bath house up in Thornton, about 10 miles north of Denver. And this, strategy I did the rent by the room where I lived in my room, had my own room with doors and walls and all that good stuff, and just had four roommates. What a unique experience for you? I know. So let's look at this property. Then what did you buy it for? What did it rent out at, etc? So this second one I bought for $343,000. This time I did a 5% down conventional mortgage. So with this one, you're actually, I was a lot to do with 5% down because it was a single family. I don't think you're able to do this with multi-family yet, but maybe at some point.

And so this one I put down, it ended up being about another $20,000 for the down payment. And I ended up putting $10,000 down in repairs to add a fifth bedroom and just do, you know, some small things here and there. And I ended up renting out all of the rooms for $3,100. And my mortgage payment was $2,000. This is even better than the first place in a lot of ways. And central to this premise is the ability to rent by the room, right? and you're not allowed to do that in the city of Denver. So you can discuss a little bit of how you researched

and found out where the areas were that allowed this and then why you chose this location? Yeah, so Denver County, you are not allowed. There's occupancy laws where you're not allowed to have three unrelated members living in the same home. Now, people do it and they don't get caught. It's not like a super enforced law, but again, it just puts you at the risk of being caught

if it ever does happen. So I decided to not take that risk and move up to Adams County, which is where Thornton is in. and it's just outside of Denver. And there's no laws on that there. So I have five unrelated people living in the house, and it is perfectly legal. And you just go about researching it by...

Honestly, I just did it by networking and going to Meetups is really how I found all that out. Yeah, Google's a really good search engine. I don't know if you've heard of it. No, I've never heard of it. Yeah, it's a small thing, internet startup. Yeah, and that's really important to consider is the occupancy laws for the city

that you're looking at buying a property in. Craig has a five-bedroom house. I really love that you bought a five-bedroom house because that's a weird house. That is probably going to take you a little while to sell when you go to sell it. But why would you sell it? Because it's cranking out cash at $3,100 a month. Was that with you living there or without you living there? That's with me living there.

So when I moved out, add another $700 on that. That's $3,800 on a $2,000 a month mortgage payment. I'm sorry, Craig. You can't make money in the Denver market. it's so clearly you're lying. It's true. So what'd you do next? So then, you know, that basically just managing the two properties for that whole year.

And again, continue to save, continue to be frugal. And a year later, I, to no surprise, bought my third house hack. And this one is a little bit more recent. This one I just closed on in August of 2019. And so this one, there was a total of six beds, three baths. And this one I kind of did a hybrid of my last two strategies. So in this property, it's basically like a split level almost. There's a separate entrance that goes right to the downstairs to the garage.

And the downstairs has three beds, one bath, and a kitchen. So I decided to wall off where the upstairs meets the downstairs and redo the entire basement so that I could rent the bottom out on Airbnb and I could rent the top out room by room. So now I live in a three bed, two bath with two other roommates, and I rent out the bottom on Airbnb. And what's the profile of this investment look like? from purchase price and rents, expenses, all that good stuff. Yeah, so the purchase price was $3.80. I bought it for $3.80.

The mortgage on this one is a little bit more. It's like just over $2,100. And for the top two rooms, I get a total of $1,000, $900 for the master, and $6.50 for just the regular bedroom. And the bottom, I am just putting on Airbnb now, but I've got friends actually here are bigger pockets who have similar properties that are actually smaller than mine that are Airbnb out.

and they make about $2,000 a month for like a studio basement. So with my three-bed, one bath with a full kitchen, I'm going to conservatively estimate that I'll make $2,000 a month on that. And so that'll look like $3550 on a $2,100 mortgage with me living there. Outstanding. So how do you expect to manage these over time? Are you going to self-manage forever? Or what's that look like?

It seems like a lot of work, if I'm thinking through this, to manage all your Airbnbs and rentals. Yeah, it is for sure a lot of work. and I actually found a property manager that does rent by the room. So that is the quick answer, I guess. And I just signed her on actually like this week. So hopefully she does well. And if that works, then my investment strategy has changed.

And I'll continue to invest in single properties, single family houses here in Denver. So how did you find a property manager that manages the rent by the room? And I want to look into this rent by the room strategy because I know, oh, Linda Wygant on show, I think 240 on the real estate podcast or 240. too. She does rent by the room and she's also making money in a place where you can't really make money because property prices have gone up so much where rent has not kept pace with the property prices. So how do you find somebody who rents by the room? Do you just ask them? As a property manager? As a property manager.

Yeah. So I actually, someone actually just reached out to me and said, hey, is there any way I can help you out? And I said, yeah, find me a rent by the room property manager. And they just called them like five or ten people. and and I called, they, he introduced me and it worked out. So, yeah, it was great. Was this an Airbnb tenant? I know, no, it was not an Airbnb tenant, but. Craig, Craig once found love through his business here, right? Where?

Love is a strong word, but we'll say yes. Yeah, that's an inside joke between Scott and I. Okay. Fair enough. Okay. So it sounds like you have a wonderful approach here that you can sustain. It's been building a great return on equity, which I think is a great metric. Look it up if you're interested in learning more about that. That's, I think, the way to underwrite these properties over time. But what, what, what, would you say, to you would you say, I may not do you say to a five-bedroom house or rent out four other of those rooms? I may not live behind a cardboard curtain or be as creating. with this six-bed three-bed place. So what would you say to somebody who is looking to house hack but once is maybe willing to accept a little bit less of some of these tremendous numbers that you're putting up in exchange for some of those comforts?

Yeah. So we talked about on the Bigger Pockets Real Estate podcast a few weeks ago, the whole idea of sacrificing comfortability and profitability. So the idea is that as you move along the spectrum towards profitability, you get less comfortable. And as you're the other way, you get more comfortable but less profitable. And so I would suggest everyone to go as far as you can along the spectrum towards profitability as you can, especially at first. And then as you continue to house hack, you become richer.

You get to have more options to become more flexible. You can scale back and move down that spectrum towards the comfortability section until you're at the point where you're 100% comfortable. Yeah, you know, I think that I think there's a lot of good stuff in there. I think when it comes to house hacking, right? One of the big advantages, as I see it, is your ability to put down such a low down payment and have such extreme leverage against that, right? And be able to de-risk it by living in the property, self-managing, fixing all those problems. But if you have $500 or $1,000 or $1 million in net worth, getting a great return on $10,000 or $15,000 down isn't really that important. You could probably pursue the same approach you're doing right now with

just regular rental property investment? Is that kind of what you're trying to say with that? So I don't think there's a better way to deploy $20,000 and get like 100% return on that than house hacking, right? And so even if you're a millionaire, it makes sense, I think, because still you're not going to get a better return on that $20,000. Now, if you think a 100% plus return on a house hack

is just not worth it to you, you've got a million dollars. So like you can do what you want. So like, so you just doesn't kind of, a way, like, how comfortable are you willing to be versus how comfortable are you not going to be? But the point I'm trying to make is you're saying, hey, you really should go as far as you can along the path to profitability at first because the stakes are so high and it's such a good, return is what I'm gathering from your argument there. And I think that's absolutely right.

Like when you're starting out, it's just so powerful, this mechanism, this tool, house packing to move you towards financial dependence. But there is a light at the end of the tunnel, right? You don't always have to get a 200% return on your $20,000. and you can get the big nice house downstream or move down that spectrum over time. Is that right? Oh, of course. Yeah. I don't think anyone is doing this so that they can just house hack forever, right?

The whole thing is like house hack for a few years, so you have all of the options later and you can live the life that you want later. So what's your dream house, Craig? Well, there's definitely going to be a curtain involved. Ten bedrooms. Ten bedrooms, four curtains. Wait. A lot of bunk beds.

Is dream house or his dream house hack? Is dream house? Like, what's your long-term? term desired living situation that you're house hacking for? I don't really care. Like, I just want to be comfortable. Honestly, like, whoever I'm with at the time, just whatever makes them happy probably.

I just, like, a place to live has never been, like, the utmost important to me. I'd like to have a good location. I'd like to have a nice, clean house. But other than that, it's just make the people around me happy and then I'll be happy, I'm sure. Got it. Okay. So let's say somebody's listening and they want to house hack.

They think this is a great idea. What kind of property makes for a good house hack? and what are some things they should watch out for that may not make it such a great property to house hack? So I think the first thing you want to do is figure out what strategy you want to do. So if you're in a market where you can do a duplex, triplex, or quad, and that's what house hack you want to do,

then find a duplex, triplex, or quad. But you'll want to see things you want to look for is location, proximity to public transit, if you're in like a city. If you're doing a single family, I like to look for the amount of beds in baths per dollar. So hopefully, like, you want the least amount of dollars for the most amount of beds and baths because you can always fix them up and make them look nice.

But if you can get a lot of beds and baths, or if you can get a house with a lot of square footage, but maybe only three beds and two baths, you can maybe add a couple bedrooms. So figure out ways to, like, add value to those, to a property where you can potentially increase the value, get more for rent, but still, you know, keep that mortgage payment about the same. Got it. What's an example, I'm sorry, I'm harping on this point. But what's an example of a house hack that you've heard of or come across that is more luxurious, right? Because I think a lot of people are going to have this challenge, right? Where they're,

you know, and I know we've talked about this, but where they don't want to live the way I did in my first house hack, right? Or the way you lived in your first house hacks, right? Nobody wants to live the way he lived. Yeah. So how do you, what's an alternative for someone who maybe has a significant other who, they understand there's financial benefits. But what's like an approach that you can say that, hey, this is how you would make a case for this to your spouse while still retaining some element of privacy in your living conditions?

Yeah, so that's moving towards the comfortability end of that house hacking spectrum that we talked about. And I think Ben Leibovic coined it the luxurious house hack, right? And that whole idea is where you have a house of your dreams, you're forever home, but maybe you have an additional dwelling unit in the back or mother-in-law in the basement or something like that. or you can just Airbnb that out or even do a long-term rental, which will maybe make you $1,500 a month.

But it may not entirely cover your mortgage, but it will certainly help you pay your mortgage. And who doesn't want $1,000 a month? Awesome. So love it. Maybe can you walk through how you would kind of think about that as a stepping stone for maybe a small family? Like what are some more examples of that maybe? Another example would be,

so obviously there's, you know, the single family house is probably the most popular in terms of like what a family would want to do, right? But if you want to take it a step back, maybe you get a triplex, right? Like a triple decker type thing, like top three down. And maybe you live on the top so you don't have any noise above you. And you rent out the bottom too. So it's like you and your family up top. You get the nice view of the, like what Brandon's doing, right?

Brandon's got a triplex in Hawaii. He lives in the top with his family. He rents out the bottom too. So that's like another way to do it. Yep. Love it. What are some cautionary tales to tell people before they, before they jump into this with both feet.

Do you know anybody who's had a bad experience, Craig? Yes, I know myself who has had a bad experience, which we can get into in a minute. But the one thing I want to kind of warn everybody with, and Scott, I think you said this really good about a year ago. And it was that at every point in this journey, you are never going to be like your peers, right? Basically what you said was the first year,

you're going to look like a poor man, right? Living behind a curtain or whatever it is, and people are going to ask you, why are you doing this? You make good money. Why don't you like sacrifice a little? Or why don't you treat yourself a little bit? And then you realize that no. And then you buy a second property.

And how many people do you know that can buy two properties in two years just out of college or whatever it is? And you start to build a lot of wealth, build a lot of wealth, and a lot of wealth. And then all of a sudden you've got tens of thousands to hundreds of thousands of dollars where you can start investing even more and you hit financial independence

and you become basically financially independent in your late 20s, early 30s or basically five to 10 years from your start point. So you're just never like anybody in that entire journey. So be prepared to be different if you decide to embark on this house-acking journey. Have you had a lot of pushback from friends? For the first year, I was getting a lot of flack for sure. I mean, just in the office, I was getting a lot of flack.

You still get a lot of flack because the curtain. Yeah. The curtain, the cardboard box. You know, I was definitely like very, very. Do you have a picture of this, by the way? I do have a picture of the curtain. I don't have a picture behind the curtain. That's from my eyes only.

We'll post a picture of the curtain on the show notes for everyone. Yeah. But in the office, I always felt that was good nature teasing as opposed to ridicule. Oh, yeah. Well, there's that. And then I've got my parents didn't get what I was doing. My grandparents didn't get what I was doing. So I would get some flack from them as well.

And basically I would just have to push back and be like, you know, like the numbers work. I get it. Just trust me, I'm not going to live like this forever. It's just a stepping stone. And I think now a couple years later, they kind of understand where I was going with this. So you just have to stick to your guns, know that you're going to be different.

You're probably, especially, I'm very lucky that I get to work at bigger pockets and I'm surrounded by people that understand. But most people are not like that. You have to just be ready to take some flack and take strides with it. Yeah, I mean, I think that that's the tradeoff, right? You went as far along that line to profitability as you could.

And in two and a half years, I bet I don't know what the specifics are at this point. you probably don't even know because you have to have to get my praise. But I bet it's close to $250,000 in wealth that you've created through these three decisions to this point, right? It's $100,000 a year and really tax-advantaged wealth that you've generated and a lot of tremendous amount of power that comes with that. And you know what?

Yeah, we gave you a little grief about the curtain. But, you know, that's like you have to respect the heck out of that set of decisions and how well you've executed them. and the lifetime of benefit that you're going to receive from having made them. Yeah, if you live behind a curtain for one year and you get 40 years of your life back, so I think I'll take that trade any day. That's right. Wow.

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today. We'd love to talk. Business. Okay, so let's talk about some not so exciting experiences, Craig. Oh, you're making me come back. Yeah, do you think I was going to forget that question? I'm sorry that you went through it, but I really want you to share this so other people can

learn from your mistakes. One of the things that I heard, we all just got back from the Bigger Pockets Convention, which was held in Nashville. We're going to have one next year, too. Right, Scott? Yes. Well, we're going to reconvene, regroup, and plan on another one. It was awesome. The conference was amazing. The conference was amazing. We're going to have another one. And so one of the things that I heard from so many people there is, you know, I want to hear the negative stories. It's so easy to hear somebody say, hey, I made a million dollars. Look at me. But what really teaches you is when you have a like, oh my God, I can't believe I have to go through this moment, which Craig did just a little while ago. Craig, what happened? Yes, it was a very methzy situation.

Oh, my God. I forgot that it's you guys together. Oh, Craig and Scott sit in the office and go back and forth with these awful dad jokes and puns and it's just my worst nightmare come true. So tell me about your methsy situation, Scott. Craig. I'm sorry, Craig. So what happened was as I was renting out my third property by the room, I was having people come in to look at the rooms. And I signed two leases very quickly. But I still had other people kind of coming in and taking a look. And so I had two leases sign and two other people came in.

And they said, oh, well, can we check up the downstairs? And I said, okay, yeah, sure, why not? So I showed them the downstairs and I told them in advance that this would be a construction zone. And you'd have to come upstairs to use a kitchen, use the laundry, all that kind of stuff. And they seemed to be perfectly okay with it. And so I got greedy, I got overconfident, and I got, I guess, overconfident and greedy and lazy. And basically I just said, okay, we'll let you in a month-to-month lease because I always intended to Airbnb it and figured out what the heck could happen. What's the worst I got to happen on a month-to-month-lease?

So I just signed the lease, you know, do the background checks, didn't do any of this stuff. And they move in. And on the first day they move in, the contractors start renovating the basement to get it prepared for the Airbnb. be. And the contractor is down the hallway ripping up carpet when they smell something that they never smelled before. And it wasn't cigarettes. It wasn't marijuana. They didn't know what it was. And so I went and I googled the woman's name who came into the house. You should do this before you sign a lease, by the way. And it turns out that she was on our county's most wanted list for hard drugs. So I went about calling the police to try to get this woman out of my house. And they were no help at all. They basically told me that, oh, you're allowed to.

to smoke meth in your own home if you have a lease signed and it's like their private residence. And I was like, what? Yeah. It just, it just blew my mind. I was like, I couldn't drink a beer at 20 years old in my basement, but I could smoke meth. So that blew my mind. So they weren't doing anything to help me. So basically I just did the whole cash for teasing where I said, hey, you guys have to be out by the end of the week. And I'll give you all your security deposit, all the rent that you paid and $500 to just get out. There was two people down there. And they took the offer. They and it's off my plate now. But yeah, it was a stressful week and a half there for sure.

You got off really easy because, I mean, did they stop smoking meth in your house? Yeah, well, they left, so. They were there for the rest of the week. Oh, I don't know. I don't know. I didn't actually bring the meth situation up to them because I don't know what meth people will do. Like, I don't know.

I just didn't want to put myself in a weird situation where it got violent or anything. So they didn't seem violent, but I don't know. I was scared. So one of the things that I was hoping to do with this podcast, was to encourage the listeners to house hack, right, and inspire them and say, look, there's a great way to go about things here. This, I think, this meth story is, I think, pretty scary, right, to anyone considering this. Like, it's one thing to have a meth problem in a rental property, potentially. It's quite another to have it in your house, right? So how do you, as a, again,

as an individual, prevent that from happening ever, right? What are some of the steps that you could take to make sure that that is not a possibility in a place that you're trying to house that for yourself? Oh, I've got this question. I've got this answer. Step number one, background checks. Step number two, Google their name, Craig.

Did you background check the rest of the people in the house? Yes, I did because I knew I was going to sign them for long term. But again, even if it's month to month, just so after you get your first deal, you're probably going to like do really well, right? Because you're not very confident. You're going to make sure all your eyes are dotted, your teeth are crossed and all that. But then you start to get to your second,

third deal, and you just become like overly confident and cocky about it, which I clearly did. And I got served a piece of humble pie there. And always, always, always just screen your tenants, don't take any shortcuts. Like that's the lesson you got to get out of this is don't be like me in that situation. And screen your tenants, don't take shortcuts, even on month-to-month leases,

even if they feel like they're your friend or whatever, just like go through the process and treat your rental business, your house hacking business like a business and follow the processes. Yeah, I think that's good. I have not had this situation happen because every one of my tenants that comes through goes through my credit criminal and background check. Right.

And so I would be willing to bet that this person didn't have a 750 credit score in addition to the criminal history that they might, might have had and probably didn't have three great references from prior landlords and an employer who you could call to verify their income at certain levels. Like one of those parts of that process, and then of course the criminal background check would have enlightened you to this behavior. Is that right? That is 100% right. So your odds are probably, like, I would say that if you follow a good process and research it include some of the things that just mentioned there, you're highly unlikely to have a situation like that. As unlikely as you would, much more unlikely to have that

situation happen than if you were to, for example, go and try to find a roommate by interviewing folks as a tenant. That's exactly right. Like Scott, again, filled with wisdom. Listen to Scott. Like, yes, that is 100% what you need to do is just follow the process. Yes. I'm really just, again, a believer in the power of this concept of house hacking. And as to your point, the spectrum of possibilities, how this can apply to anyone, right? From someone who's starting out and willing to live in a kind of dumpy place like mine or not dumpy, but like behind a curtain like you, to somebody who's got a family and is like, hey, I want to live in like a modestly pretty nice duplex, right? That's like a set of townhomes and rents out the other ones. And you know what? I'm not going to get the 2%

rule in Denver that Craig's getting, but I'm going to get a heavily subsidized mortgage and live, you know, maybe if my mortgage is three grand, I'm going to pay 2,500 of that through the house hack and bring a little bit left to the table and still live for a much lower cost than I could at the alternative and generate a great return that way. And I just think there's so many ways to avoid the problems that you just experienced or offset some of the pay a little bit more or equal a little bit less of return in order to get many of the advantages, if not all, of this concept and apply it to your life. That's right. And all of this stuff, too, is in the book. Like I say this too. I just literally did not follow my own advice there.

So again, it's just one of those things that, again, I got, I got greedy and lazy. So don't get greedy and lazy. Hey, Craig, what's that book called again? It's called the house hacking strategy, which is probably backwards there. But it's it's forwards. No, I agree with Scott that this is still a really great way to generate wealth. It's a great way to start investing in real estate when you're just starting out, when you're younger, even when you're older, but you're young, so we'll point to that. I do get a lot of people asking, I mean, that's the whole reason we have this podcast in the first place. People are asking, how do I get started investing in real estate with no money in bad credit? Well, let's fix your bad credit. Let's fix your no money. And then let's

get you into a house hack. So you can get started investing in real estate. You didn't stay in that first property, you moved on a year later. You didn't stay in that second property. You moved on a year later. And now you've got this like rental empire. I don't have three rental properties in my current area. So it's a great way to buy a property. You know, the owner occupant loan, we kind of glossed over this. The owner occupant loan comes with lower down payment requirements. I mean, as low as 3.5% with an FHA, I think three or five percent with a conventional loan. That's a great way to get into a property. As an investor, you have to put 25% down. The bank doesn't even want to talk to you if you don't have 25% to put down. And yes, there's people that can get lower than that, but they've been

doing it forever and blah, blah, blah. But this is a really great way to get started. And like Scott said, even if you want a house hack where it's not going to completely cover your mortgage, every dollar that doesn't come out of your pocket is a dollar that you can save. That's right. Totally right. And I just think it's a great way to an introduction into real estate investing as well. Like talk to 10 real estate investors. I guarantee you nine of them started house hacking, especially if they're here on bigger pockets. I started house hacking before it was created before you guys called it house hacking. I called it having a roommate. And that was, you know, that was pretty nice. So I do think, though, that it is important to bring up the negative aspect. You work at bigger pockets.

You literally talk real estate all day, every day, and you still had something happen to you because you got lazy. So pointing out that, you know, mistakes happen even to perfect people like Craig is just another way to learn. He's shaking his head. No, you're perfect, Craig. No, thanks. Well, and I'd venture to guess that the fact that you had at that point, five, six, seven, seven tenants between those first two properties alone. and then you had, you know, you have three, four new tenants in the new property, if you include yourself, right?

That's a lot of tenants, given the amount of property that you've purchased, right? So the way you constructed your house hacking business, right, is a lot more complicated than what many investors might experience if they buy two duplexes, right? Like I bought, I started out buying two duplexes, right, for the similar asset value to your portfolio, right? That gave me three tenants. it's a completely different structure and the odds of having a problem there

kind of to get dramatically reduced when you have that little bit less of a scope there. Yeah, just with the numbers. And I've had, all of my other tenants have been great, right? And it's like, oh, I'm sure everyone's this way. And again, it's just get overly confident based on history and you lose, right? There's a reason why the Patriots lost a Super Bowl in 2007.

So. One of the other things that I think is really important when it comes to house hacking is, I think that there's a value in liking your hope, right, and wanting to live there, right? Because one, is where you're living. So you might as well be happy as happy as you can, as far along that comfortability side of the spectrum without impacting your profitability as you can get. And two, if the market, if market conditions were to change or, you know, something would have happened and your income was cut or at work or whatever, you know, the fact that you're able to live in the property, I think de-risks the situation

to a certain extent. So what are some of the considerations that you have on that front when you think about your next house hack or what advice would you give to somebody going into it like that? Yeah, so you definitely want to be in a living situation that you will enjoy, right? And so the whole curtain thing most people probably would not enjoy, I actually did enjoy it, believe it or not, just because I got to meet a lot of people.

And it was an experience, right? I love the experience. Now I live in more of a house. So it's a much more homey place. I've got like a living room. I've got a kitchen. I've got a backyard. All these things.

It's just that I have roommates, right? And they're hardly ever home or whatever. So it's... Mindy is just writing that a quote. Oh, gosh. I enjoyed living behind a curtain because it wasn't experience. It wasn't an experience. Frank Curlop.

Bigger Pockets Money podcast, show 95. All right. Keep going, Craig. Yeah. It wasn't experienced. I did love it. But, yeah, so the last two places I've lived, I've really enjoyed because, you know,

I've got to have my own room. I don't mind having roommates. I actually don't like living alone just because I get lonely, I guess. And yeah, so it's comfortable. So I like that. And I'll continue to do it this way until my life changes in some other direction. I have to say that I was inspired to consider house hacking in my next property. I have an unfinished basement.

I can make it into a bedroom in the basement. And we're going to put a bathroom down there too. I have friends who are transient is not the right word. but how would you describe people that are like trans- Nomadic. Nomadic. I have friends who are nomadic and need a place to stay for a short amount of time. Now, I was considering doing it just, you know, just to generate extra income because why not?

I've got space that I don't need. I would like money instead. Well, before we kind of get to the famous four here, what are some of the, are any other items you want to leave us with related to the strategy of house hacking, Craig? I just think you have to, though the first house hack is going to be a slot. right? The first one, you get in, you put down the largest investment you ever made. And if you're not buying a brand new house hack, you're going to end up, oh, this is broken, this is broken, this is broken. So you find yourself fixing things for the first few months.

And you just feel like you're never going to get ahead. But once you get it settled after the first four or five months, you start to kind of see the rent savings and everything kind of come in. You start to really see your savings pile up after like six, seven, eight months. And then you all of a sudden are able to buy the second one. And when you buy the second one is really when you start to be really start to see the power of it. And then you're just going to see more and more after the third, fourth, and fifth. But you just have to push through that first one and don't be afraid to just take action and actually get that first one. Another thing is that I just see a lot of people being really scared and trying to find home run deals on these

house hacks. And every single house hack that I've purchased, I have purchased it basically at asking price. And for the reason that is, is I would rather just get in and start saving on rent and start having another property that is going to appreciate that I can cash flow, that I can pay the loan down on, that I can get the tax benefits from, then try to find this home run deal, that's $20,000 under asking because within two months, I'm $20,000 up in net worth game. I love both of those. And I can honestly relate really directly with your first comment about how it's a slog for the first couple of months. When I bought my first house hack, we closed around Thanksgiving and that weekend. I had to go and move. And it was cold. It was like dark.

I had to do it all in one day because I timed things poorly. I dumped all my stuff in, set up my bed. and then I woke up the next morning and realized that a very critical element of housing was missing for my life, which is blinds. And people could just see into your house without that. So, like, every day for the first couple of weeks, yeah, and this might be just because I was completely naive, 24-year-old who knew nothing about the world. But, you know, like, these things, like, came together slowly. And it was, like, a little rough for those first couple of months while I installed blinds, painted and stained cabinets,

fixed things up, didn't have a tenant in there yet because it was vacant. And then once I got the tenant settled and we got the place settled, it was, it became, I began reaping those benefits that Craig started talking about. And it ended up being an enormously powerful investment for me that's built multiple six figures in wealth through cash flow and appreciation over the last five years. Yeah, I wanted to ask you actually, like where, you bought that first house in 2014, right? So like, how does that look for you now? Like, where is, what did you buy it for and what's the value there? Yeah, I bought it for 240, and I believe that it's probably in the ballpark of $500,000, between $480 and $520, somewhere in that range, where I'd get it repraise today.

And it produces a great cash, well, it rents for about $2,600. And I think I'm a little below market as well with that. And the mortgage is about $1,500. Wow, and those are good tenants. Yeah, we've got good long-term tenants, no vacancy in the last three years. Nice. So, again, the power of house hacking, right? Yep, absolutely.

been a really powerful thing for me. But yes, a little lonely and a little depressing for this first couple of months, especially while there's no tenant in there. And then off to the races after that. Yeah. So I'm going to bring up a different thing. I have bought and sold more houses than you guys have simply because I'm as old as both of you combined. And I've been investing forever. When you buy a house, something breaks. Something always breaks. If you're not house hacking, you're still going to be fixing stuff when you move in. And really what breaks is inverse. proportionate to how much money you have in your bank account or how easily you can weather the fix. So if you buy a house and you spend every last dime on that, Murphy's Law 100% rules real estate.

And you're going to need a new furnace. You're going to need an air conditioner depending on what part of the world you're in. Your water heater breaks in the middle of the night, yada, yada, yada. But if you have a good, comfortable position, your salary allows you to weather a big purchase like that. you've got a nice bank account. You're going to get like, oh, I need a new light switch or some random weird thing like that. So I just want to point out that you're always going to have things that need to be fixed when you buy a house. It's just kind of what happens.

But having a house hack, I mean, if you're going to buy rental property or you're going to buy real estate anyway, make money off of it. Yeah, for sure. I mean, you always want to have some reserves too, right? I don't recommend spending the last dime on a down payment. I would say you want to have at least probably $10,000 after the down payment. payment just for when things go wrong. We just got our first snow here in Denver a couple days ago. And that night, I realized my furnace blew. So it didn't have a furnace. Luckily, I've got $5,000 that I can dole out and do the furnace and reserves. Like, that was very important.

And luckily. Well, if I didn't. Smartly. Smartly. Yeah. Smartly. That's not a word, but smartly. Smartly. Smartly, I had $5,000 that I could, you know, it wasn't really a huge deal. And now I've got a furnace that will last me likely for 20 or 30 years. So I'm not upset about that. find it's really funny. And Scott, I don't know if you're the same way in Mindy is like, I have like a really hard time buying like a $20 pair of jeans, but I have like no problem spending like $3,000 on like something for my house. Yeah, I'm about to spend. I just bought a live, another live in flip, but I'm about to spend approximately $100,000 on it over the next year fixing up like a new everything. So yeah, I can totally do that. But I would never spend $20 on jeans. They're $5 at the

goodwill, Craig. Yeah, exactly. Although your car is about $100,000, right? No, I don't have that anymore. I sold it to buy the house. I want to say like the Costco jeans are like between $12 and $20. So it's like if I'll just pick up a pair of will have that Costco. So I might spend $20 in a pair of jeans. Well, Scott, not all of us are CEO.

Yeah. They're almost a rich Scott. Yeah. Some of us have to pinch our pennies. I want to know about your reserves, Craig. So Scott on episode two talked about his reserve. And when he bought his first property, he had $10,000 in reserves. When he bought his next property, he put another $10,000 into the reserve pot.

What was your reserves for your first property? And did you add to that with the second and third property? And I'll say real quick, I was not comfortable until I was at 15 in reserves on that first property. I was not, yeah, but go ahead. Go ahead. Yeah. So for that first one, I think I still had about 20,000, like in the bank after the down payment. But that was just because like I was done, you know. The second one, I probably had about 30.

So I probably did the thing where it's like $20,000 as a base and then $10,000 for any incremental property after that. But that's just like what makes me feel comfortable. People would probably say that I'm very conservative in that way. No, I like those numbers. I like those numbers a lot because let's use $5,000 as a ballpark figure. Your roof is probably going to be around $5,000. Your air conditioner is like around $5,000. $3 to $5,000.

Craig doesn't have air conditioning. No, Craig doesn't have air conditioning. So it's about $5,000 to get a new roof. It's $3 to $5,000 for an air conditioner, $3 to $5,000 for the furnace. You know, it's, I know somebody who just paid $3,000 to get a water heater. It's like $800 if you install it yourself. It's not that hard to install, although they are pretty heavy.

But your furnace isn't going to break at the same time your air conditioner breaks at the same time you need a new roof. At the same time you need a new water heater. But one property could have a new furnace and need. a new furnace and another property could need a roof and another property has a water heater all at the same time. So being able to comfortably absorb those costs is just so key. I know somebody who had a rental property. The furnace and the water heater blew in the same year, not even at the same time, but in the same year. And they had a hard time like financing that. They had to sell the property

because they couldn't afford for something else to go wrong. Don't sell it now. Everything's new. You know, but so I just want to reiterate that having adequate reserves, even if you think that's too much, I hope you never touch that $20,000. I hope all the rent that comes in covers every bill and then you just have $20,000 sitting around. But, you know, I also know that you could weather that storm, even if you didn't, because you have a good salary and you are not a big spender. That's right. Okay. It is now time for the famous four. These are the same five questions we ask all of our guests, or four questions in one command.

Craig, what is your favorite finance book? You can't say yours. No brown-nosing Scott either. I was just about to. I thought I was going to ask him for a race. I like set for life. My favorite finance book is probably, it's got to be the millionaire next door.

I mean, I just think that is just like the fundamental frugality. Like, just gives you so many options being frugal. So the millionaire next door. It's a really great book. Awesome. What was your biggest? House hacking mistake. Well, we chatted about that already.

Definitely the meth-y situation. Give us a second mistake. Second mistake. It's like, I don't make mistakes. Yeah, honestly, like, there hasn't really been anything that's been, like, crazy bad. Fair enough. So just not following your tenant screening protocol

you already had in place. Yeah, I guess really, if we're pulling teeth, I guess it was allowing a dog upstairs when I was living downstairs and that duplex because the dog would run around at night and bark at night and it would just drive me nuts

all the noise. But that is, I guess, a mistake that I made, but again, it didn't come back to no pun intended, bite me or anything. Oh, there's a pun intended. I know you.

Definitely. That's a terrible joke. Oh, God. I really, stop. Oh, my dog. All right. Just finish. It's going to talk to you anyway. I'm taking it up my headphones.

What is your best piece of advice for people who are just starting out? And since we're talking about the house hacking book for people who are just starting out house hacking, besides screen your tenants. Yeah, well, I'll be screen your tenants. The biggest piece of advice of starting out is just don't be afraid to jump in and do it. Again, the quicker you get into your first house hack, the quicker you can get your second, the third, the fourth, and the quicker you're starting your journey towards financial independence. But that timer does not start until you close on property number one.

So, again, don't worry about getting a home run deal on your first one. Just get the first house hack. It will pay you many dividends. Do you have any more of these really rough dog jokes? I don't have a dog. I probably have some more dog jokes. Let me just pause for one second. Oh, nice.

Okay. What's brown and sticky? A stick. A stick. Yeah. That one's my favorite. All right. That's not even a dog joke.

I know. Well, they got a, what do dogs eat that are brown and sticky? Dog food. Okay. Let's move on too. Where can people find out more about you, Peg? So you can find me, best places on Instagram. I'm at the Phi guy.

You can also find me on Bigger Pockets, and that is probably the best two ways. Or you can pick up the book at www. www.biggerpockets.com slash house hacking. Love it. Well, thank you very much. This has been, I think, a lot of great information. And I think everybody should consider how a house that could potentially change their lives and figure out as far as they're willing to go along that spectrum that you outlined on the profitability, comfortability side, at least for a year or two. Because like you've demonstrated with your career and work and what you said in this podcast, it's just an enormously powerful tool that you can leverage to move toward financial freedom very quickly. That's right. Okay, awesome. Thanks, Craig, for stopping by. All right. Thanks, Mindy. Thanks, Scott.

All right. That was Craig Curlop from BiggerPockets.com and right over there. But yeah, what did you think, Mindy? And the author of the House Hacking Strategy. You have to name the book, Scott. Oh, yeah. And author of the House Hacking Strategy, How to Use Your Home to Achieve Financial Freedom. What did I think? I thought it was a great show. I really like his enthusiasm for the concept. I really like his strategy. He's able to see down the road and say, oh, if I make a few sacrifices now,

I'm going to have so much freedom. What did he say? Something like it's a year of pain to get 40 years of your life back. That's brilliant. Yeah, I think it is a great comment. I also think he said, I enjoyed living behind a curtain because it was an experience. Sorry, I have to make that one more comment.

It certainly was. All right. But that's the point, though, is if you house hack or do something that is a little more aggressive or a little more overt for a year, two, three, however many it takes you to kind of push through to the other side, you know, all of a sudden, Craig finds himself in position where he has a net worth of several hundred thousand dollars. He has no bad debt. All his student loan debt is paid off, right? He has very low expenses. He has a great job and generates a very good income. He is over the hump.

And for the rest of his life, he will be accumulating wealth, whether he really goes after it or not because of the system he's set up for himself. And he can add in whatever it is that makes him happier that he wants without really bearing that as a delay toward financial freedom. So just kudos to him and kudos to how he's been able to apply this strategy here in Denver when a lot of people feel that they can't. Yeah. And kudos to him for sharing this story.

of his mistake, not screening his tenant, who turned out to be smoking meth in his house. That's right. I really wanted to bring that up because I already knew that story because he, I was there living it with him. I'm not living with him, but you know what I mean. Like he, like he would come in and talk about it in the office. Like I lived through it with him. He works at bigger pockets. All he does all day long is talk about real estate investing. He's in the forums. He reads the comments. He reads the comments. about all the people that, you know, have done this in the past and have made these same mistakes. And yet here he is also making the same mistake.

I think it's really important to point out that, you know, you can get cocky and you shouldn't get cocky and everybody makes mistakes. And he learned from it. He's never going to make that mistake ever again. But you don't have to make that mistake. Learn from Craig's mistake and always screen your tenants. And I'm trying to think, like, and thinking about that, right? You know, because this is everyone's worst nightmare is Craig's situation, I think, as a house hacker.

What if my tenant is that person? Yeah. Does that in my property, right? And that's a risk that comes along with renting your property out, especially if you're not following the principles to screen tenants with that. However, it's just as much of a risk if you live in a place that somebody else is the landlord of. Exactly. You actually have less control.

Yeah. So there's a lot of ways to look at that. And you certainly don't have that risk if you are buying a home and your single family home, but you also are completely alienating yourself from these possibilities that house hacking brings in the wealth-blooded equation. Right. And I'd like to point out that Craig has never had a problem with any tenant that he has properly screened. So, you know, he fully admitted that he got lazy. And I just, I really wanted to share that part of it because, like, people think that Brandon Turner never makes any mistakes. But he makes mistakes. I make mistakes.

Yeah, really? I thought you were perfect. I made plenty of mistakes with my tenants. I had one experience where I had a bad tenant because this tenant, basically a series of great screen tenants came. Then one leaves, another roommate comes in, another roommate comes in, another roommate comes in, and all of a sudden, I'm left with a tenant that just because I wasn't as diligent, I didn't go through my screening process with. And luckily, things have worked out so far. But these things can happen no matter how tight you try to control them with these screening things, right? every one of us has made a mistake. I'm sure you've made mistakes in your live in flipping business. Never. I'm perfect. I've never had a mistake. Yeah. It's not about not making mistakes. It's about

mitigating them. And you know what? If someone's going to live in the property with you, that's where you just can't afford to not screen your tenant. Yeah. Yeah. And we have an article on the Bigger Pockets real estate blog called something like the ultimate guide to screening your tenants or whatever. I will find that and I will link it to the show notes, which can be found. at biggerpockets.com slash money show 95. Okay, Scott, should we get out of here today? Let's do it. From episode 95 of the Bigger Pockets Money podcast, he is Scott Trench and I am Mindy Jensen,

and we're out of here.