BiggerPockets Real Estate Podcast - 350: How to House Hack Your Way to Financial Freedom in 3 Years with Craig Curelop

Episode Date: October 3, 2019

Ever wanted to break into real estate but just weren’t sure how to take that first step? You're not alone! Almost all investors struggled with their first deal. But today’s guest may be just what you needed to get your foot in the door! On today’s show, Brandon and David dive deep into the mind of Craig Curelop, the author of BiggerPockets Publishing's new book The House Hacking Strategy. Craig shares some incredible advice on how he eliminated his living expenses and earned as much as one could from a full-time job through house hacking—all by age 26! Craig breaks down just how simply you can get your first property with less than 5 percent down and turn it into a wealth-building machine that will help you achieve a “return on your potential” you may not have realized you’re currently lacking. You’ll learn what to look for in a house hack, how to find the “path of progress” to start your search, and which straightforward criteria we can all use when searching for deals. You’ll also hear how to make “hedonic adaptation” work for you, how to exchange comfortability for profitability, and how to decide which property would work best for your specific situation. We ALL want to own more real estate, and we all need somewhere to live. On today’s show, you’ll learn how to combine those two needs to build wealth and save money at the same time. Download this one today! In This Episode We Cover: Why he left Silicon Valley to build wealth through real estate How he bought his first house hack  Why house hacking is so effective for establishing financial freedom His scale of comfortability vs. profitability Who should house hack Why expensive markets are the best places to build wealth through real estate The importance of solid metrics in a potential house hack How he gets in front of the “path of progress” to maximize returns How to take advantage of low down payment options to snag properties that earn income How house hacking allows you to find the “return on your potential” How to make “hedonic adaptation” work for you, not against you And SO much more! Links from the Show BiggerPockets Forums BiggerPockets Podcast 252: House Hacking (Your First Deal) & Life Hacking with Craig Curelop BiggerPockets Podcast 014 : Cash Flow, Creative Finance, and Life with Ben Leybovich Zillow Xero Accounting Software You can listen on BiggerPockets here: http://biggerpockets.com/show350 Learn more about your ad choices. Visit megaphone.fm/adchoices

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This is the Bigger Pockets Podcast show 350. Yeah, it's the whole idea of like basically you get something new or you do something for the first couple weeks and it feels super uncomfortable or super different. But two or three weeks later, it's kind of normal, right? It's like if you were to buy a Ferrari, the first two weeks you're going to feel like cool cat in that Ferrari. And then week three, it's going to be your car. So it's the same thing with the house hack. You're listening to Bigger Pockets Radio, simplifying real estate for investors

large and small. If you're here looking to learn about real estate investing without all the height, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online. What's going on, everyone? This is Brandon Turner, host of the Bigger Pockets podcast here with Mr. David Green. What's up, buddy? Welcome to the show. Thanks, man. I'm having a great time.

I actually was out this weekend running the trails like I told you about. And I was running down a hill. And I kind of got cocky because I'm starting to get a better shape and I was in feeling good. So I started to go way too fast. My toe hit a rock. And I did that like weird spiral thing where you're starting to fall and tried to save it. And I couldn't. And I just ate crap and like skidded down that hill.

It was very painful. Did anybody else listen to this just now? Their first thought was, someday Dave is going to turn this into an analogy. This is hands down going to be an analogy someday. That's okay. This is where the fuel comes from. I pay a price to get these analogies, right?

They're paying associated. So I hope you all appreciate what I'm going through. I mean, if you all ever, like, been really confident about a real estate deal, you felt really good going into it, and then you just fell in your face. Yeah. You know what?

Today's guest actually shares a story of when he got, confident and he didn't screen a tenant and he stubbed his toe and he stumbled all the way down into a painful lesson that he had to learn. And he's going to share that with you guys today. So make sure you listen all the way to the end because it's a really good story. Thank you, Brandon. That was a wonderful setup. You gave purpose to my pain and that's what a good friend does.

That's what a friend does. All right. Before we get into today's show, though, let's get today's quick tip. All right, our quick tip today is simple. Look, this episode is one that I believe has a potential to like really change. people's life, like somebody's life. And a lot of people are going to listen to this. And like the direction of their life is going to shift.

It's like an airplane taken off in one way. If you shift at just a few degrees, they end up thousands of miles in a different direction. That's what this episode could do. So here's what I'm asking. If you listen to this show and you're like, wow, this is really good information. Share this with somebody. Just go and share this with somebody who might love the idea of house hacking and that could change their life and the idea of financial independence forever.

So do it. You can share with one person individually or just go put it up on your like, Instagram or something you can tag me or at Beardie Brander to David Green 24 at Bigger Pockets. You know, let us know so we can kind of jump into those conversations as well. But the idea being we want to get this message out to as many people as possible because we believe that house hacking is one of the best strategies for like building a good foundation to financial independence that there is. And Craig just goes into depth today on how to get that done.

So, I mean, house hacking changed my life. When I got started with real estate, it changed David Green's life here. And we talk about that in today's show as well. That's my not so quick tip. Cool. All right. Well, one last thing before we get to do it.

Yeah. What? What's the one last thing? Yeah. Why'd you make it weird? Let's get into this thing. So today's guest is Craig Curlop. Craig is a buddy of mine.

He actually, I first heard about Craig a few years ago because he applied for a job at bigger pockets as a financial analyst. And he came in and I realized, he got the job. And I realized right away there was something like different. about Craig. He was a rock star. Like just one of those guys that you just go to to get stuff done. In fact, David Green even here coined the term curl-up. So if you curl off something, it means

you like you're just like above and beyond like just do awesome stuff. So Craig's an awesome guy. But what even more impressive was Craig took the advice he was learning on bigger pockets, had never bought any real estate. And within like two months had bought a deal, house hacked it, and then has bought more since then. And I've kind of been able to watch this entire journey through the power of house hacking, be able to achieve really like five. financial independence. So he's even on Instagram now as like the FI guy. If you go to at the Phi FI guy, you'll find Craig. He's that guy that's like the financial independence guy. So today's interview is with him on how to get started with house hacking. What is house hacking? Why it works

for people, not just for, you know, single young people, but it works for anybody. We talk a lot about things called the hedonic adaptation, which is a super powerful, I guess, term can both hurt you or help you depending on how you look at it, which is really, really good. We also talk a lot about how to find house hack deals, what makes a good deal, why you can pay more than house flippers or multifamily investors by house hacking. And we have a great conversation about what we call, what Kevin, actually, our producer, calls the comfort continuum. Kevin actually labeled that one, so we're going to give him a shout out.

So nice job, Kevin, the comfort continuum. And again, total, like, life-changing stuff. So without further ado and without further building up to show, because it's going to stand on its own. let's oh you know what i should say before i bring in crag i'm just making this whole intro weird there's a little more ado it's not without further ado let's hear some adieu the one of the reasons today we're talking with crag is because we are actually launching a book today on bigger pockets a book that i've been looking forward to for years it's called the house hacking strategy and it walks you through exactly how to do house hacking so i mean we go into depth today but if you want a full book on this topic

go to biggerpockets.com slash house hacking. You'll find information on the book there. Again, biggerpockets.com slash house hacking. And of course, we talk about the book later on in the episode about a half hour from now. So now, without any more ado, let's bring in Craig to the Bigger Pockets podcast. All right, Craig, welcome to the Bigger Pockets podcast, man. Good to have you back again on the show. How you doing?

Hey, Brandon and Dave. Thanks for having me here. Yeah. So we're going to talk about house hacking today because that is something that you do and you've done. And you wrote a book about. And I did and love it. And technically David Green here has done it. And pretty much anyone who's the coolest people in the world have done it.

So let's talk about how it's done. First of all, house hacking. What is it? And then I'm going to go into your story. But first, let's just get it out. What is house hacking? Yeah. So house hacking is basically a new type of real estate investing for newbies.

It is basically when you buy a one to four unit property, you live in part of it. You rent the other part out. So the rent from your tenants is covering your mortgage and you get to live for free. And what makes house hacking so powerful is that you are able to do it with a 3 to 5% down rather than putting that typical 20 to 25% down. So you really don't need to save that much to do it and you can quickly eliminate that housing expense. So why one to four unit? Why would somebody care about that?

So because a bank will not give you a loan unless it is a residential property. And their definition of a residential property is between one and four units. And that loan will basically say that you will live in the property for one year, which is why you also have to live there. So you're not going to get one of those three and a half percent down, really nice, or even three percent some banks will do now. You're not going to get one of those crazy lowdown payments if you're buying a 12 unit or something. Exactly.

Yeah. You got to be one to four. There we go. Okay. Now, you started with house hacking sort of, but in a little different way. Now, when I used to house hack, my first was a duplex. Well, technically speaking, I guess I owned a single family house. I rented out the bedrooms.

And then I moved into a duplex, rent a little bit of the bedrooms. Lex rented out the unit. So you could call both those house hacking because you did say one to four units, which means single family or whatever. So walk us to the beginning of your story. If you were on the show before a long time ago, but for those who didn't hear that show, what's your story? I mean, how did you get into this whole real estate thing?

Yeah, for sure. So it all started when I guess I was 23 years old and I was in a job that I hated out in California. And basically, I decided that I did not want to spend the rest of my life working and how, basically how to figure out like, how do I get out of this? right. And so I learned, I read Tim Ferriss's four hour work week and I learned that I needed a passive stream of recurring income to

get over that. And now after a startup idea after dumb startup idea because I was in Silicon Valley, I realized that man, why try to reinvent the wheel and try to start something that no one's ever, like, that no one's ever heard of before when I can just go into real estate investing is tried and true when everyone does it. So then, you know, I stumbled upon bigger

pockets, all that kind of stuff. And then I watched a bunch of your webinars, Brandon, and decided that house hacking was 100% the reason why, like, that is the jumpstart to kind of get started in real estate investing. So my first one, I moved to Denver to work at bigger pockets. And within two months of moving to Denver, I closed in my first house hack, which was a duplex. It was a two bed, two bath. So each unit had one bed, one bath. And it was an up-down duplex just north of city park, which is Denver's largest park. So great location. I could still walk or bike to work,

which also was super helpful. And it was totally redone. So I didn't have to worry about construction. or anything like that. It was just get in there and start managing tenants and start managing the property. So what I did with that one was I rented the top one out full time and I lived in the bottom and that still wasn't quite covering my mortgage. That was my main goal was to cover the mortgage. So I got a little bit creative and I Airbnb'd out my bedroom and I made like a quasi bedroom out of my living room. So I put up a room divider and a curtain and put a futon behind there and live behind a curtain on a futon for a year while Airbnb beat out my bedroom and basically having a revolving door of roommates coming in and out.

That's crazy. Yeah, the curtain in the living room. I remember last time you were on the show, we talked a lot about that and made a lot of jokes about that. It's crazy, but it's also like, look, if this was important to you, like, you made it work. You were like, hey, financial independence is important. Getting my mortgage covered is important.

So I'm going to sacrifice and do what needs to be done. And this is a phrase that you, I think you have in your book, and I think I've heard you say it before, the idea of like comfortability versus profitability. What do you mean when you say that? Yeah. So there's tons of ways you can house hack, right? But the ultimate thing, and I feel like this is with almost anything in life,

and I think David Green, you could probably attest this as well, is that the more comfortable you are, the less profitable your endeavors will likely be, right? When you're, if I, I could have kept that up my own bedroom, and that is super comfortable. But I wouldn't have been covering my mortgage. I would have probably still paying $300 a month a month to my mortgage, which is still way better than not doing that.

but I really had a goal to just cover that. And so, you know, there's multiple types of house hacking that you can get into, right? The one that I did was kind of a quasi, like traditional Airbnb. There's the rent by the room, which is slightly uncomfortable because you're living with roommates and people that you don't know. But if you want to kind of move up that comfortability scale and do what I think Ben Leibovich coined it, the luxury house hack, which is when you buy like a large house, the house of your dreams, but it has a mother-in-law suite or maybe an additional dwelling unit out

back and you rent that out, live in the house of your dreams, and you just have people coming in and out renting out your mortgage and you don't actually share any space with them. Yeah. Yeah, that's actually kind of exactly what I'm doing here in Hawaii right now because I have like this Ocean View house, right, with a pool and everything. And I'm like, if I wanted to now, I only rent out one of the units, it's actually three units total. I only rent one of it.

If rented the other one out, I'd be able to live for not quite free, but like it was like a thousand bucks a month is where I'd be at. But if I had moved into the smaller of the houses and rented out the one I'm currently live in, I'd live for free with an ocean view and a pool in Hawaii. And so, yeah, luxury. This works at the, I mean, people complain sometimes, oh, I live in an expensive market. This is not possible. I'm like, no, you don't live in a more expensive market than me. No one lives in a more expensive market than me. Maybe somebody out there, but like, you don't, like, if you can house hack at a $2 million price level, you can also house at a $40,000 price level, right? Yeah, exactly. The numbers are

just bigger, but they all work the same. I think it's important to point out when we typically look at Will my, will my rent cover my mortgage? That's like the holy grail. If you can get your mortgage covered, you're good. But if you're a hundred bucks short, it's literally just $100. It doesn't mean that you failed and you weren't able to cover your goal. And we fail to, like, I have a lot of clients in the Bay Area that we help do the very same thing. They come to me and they say, hey, David, I hear you and Brandon talk about house hacking. I want to do it. And they want clarity on it. And what I've seen from, you know, talking to Craig, looking at his book, seeing how this works in real life is you're also forgetting, Brandon, that even if you're like, you're saying a thousand

a month I'm not covering. Well, what about the principal pay down on that loan? Yeah. What about the tax incentive that you're getting owning a home that you don't get when you're renting a home from somebody else? What about the appreciation that's going to be coming in? What about the fact that every year your rent should be going up if you buy into the right market and the economy continues to go better? You're actually getting a lot more benefits than just the rent that's coming in. And when you factor that, all of those things into this equation, house hacking is ridiculously powerful. I mean, it is a force to be reckoned with when it comes to building financial freedom. And I know, Craig, that's actually something that's kind of near dear to your heart, right?

Yeah, 100%. I mean, the whole reason that I'm doing this right now is for financial freedom and financial independence. And it just, it expedites the process so much because David, like you said, you have all those wealth factors. And one thing to add to that is also the rent savings on that. So you still may be paying $100. But if you had a comparable place, but renting, you were probably paying close to $1,000. So it's still a $900 cash flow difference. But you take into account all those factors that David just mentioned, the appreciation, the tax incentives, the loan paydown. And I call that in the book called the net worth return on investment. So basically how much does your net worth increase with respect to the initial down payment

you have? And very rarely is that number under 100% after the first year. So basically you make your entire money back in the first year when you're house hack. And I think in all the case studies in the book, so I think everyone had over 100% net worth return on investment, which is why house hacking I think is so powerful. That's cool. You know, when I don't know if I've actually talked about this on. the podcast before, but I'll tell the quick story, if you don't mind.

When I bought this house, this, you know, luxury house in Maui, I wasn't going to do it. Like, I mean, I really wrestled with it and I came and looked at it and I fell in love with it, which is, you know, rule number one, you don't do in real estate, but I fell in love with this house and I really wanted it and it meant everything I wanted. And I called David here. I'm sitting at this hotel we were in town. I called David. And I was like, David, here's the deal.

I mean, David Green here, right? I call him. I'm like, David, this is like the deal. This is the house. I'm like, I can't do it. It's just too expensive. I don't want to be the guy in like a really good market who's making good income goes and just completely like below his entire like, you know, budget because he's making good income now,

knowing that the economy will go down again. And then I'm going to be, you know, that's what happens in every cycle. Everyone, they spend too much, right? And so I was like, I just can't do it. I really want it. He's like, well, let's walk through this. Like you're basically walk me through that. Like, first of all, the cash flow.

If you rented out all the units, you can go back and live anywhere else and actually make money. I'm like, okay, well, that's true. And then he's like, and then how much you. paying down the note on that multi-million dollar house every single month. Okay, well, that's true. And how much appreciation can you expect on average over the next year ever? Is a house in Maui, you know, worth almost two today? Is that going to be worth more or less 20 years from now?

Oh, yeah, a lot more. So he basically, without saying that word, the return on net worth or the net worth return on investment, like that's exactly what he walked me through. And that's why I was like, oh, I really can't lose because I can always fall back to renting because it does cash flow. Now, if this was not a non-cash money property, that's a big difference. But that's that financial independence piece that like financial independence is like the ability to do at least how I define it, what you want, where you want, when you want, how you want, with whom you want. And so like I have that freedom here.

If I had to just rent out the units, I just rent out the units and move somewhere else. Right. So anyway, David Green, thank you for encouraging me to buy this and to house hack this. I appreciate that, man. It was a, it was a honor to get to be a piece of it because I could just hear the anxiety in your voice. Like your heart was saying, I need to do it. Heather loves this house. Like you came and you said, dude, of every house we saw, this is it.

Like I know she wants it, but your mind was like, it's wrong. I can't do it? And what we did was what we tell other people to do. Don't ask, can I do it? Ask how can I do it? What would it take for me to be able to say, okay, let's do this? And Craig, you mentioned something that I think is so powerful. And you mentioned that there's comfortability and profitability.

And I like to walk people through this example that it's a spectrum. On one end of a spectrum is comfortability with very little profitability. On the other end is pure profitability with no comfortability. Right. It's like, Brandon, you had a very similar story. you were sleeping on a couch renting out every bedroom. You're six foot five of twisted steel and sex appeal. Trying to wrap your stuff into this three foot couch, okay?

That is not comfortable for you, but you wanted it so bad that you did it. And there's probably a story to be told about how not only was that good for the moment, but it built up your inner muscle of delayed gratification and being willing to do what it takes and deny yourself pleasures to be successful and probably why you became here. Craig, honestly, man, the same thing. You know, side note, I know the first time you were interviewed on this,

podcast, Josh was teasing you about like renting out your clothes to other people. So you can earn more money. That's a man who's comfortable, right? I'm willing to rent out my underwear if I can get ahead in life. And that's why you've done so well. But you see, you understood this concept. Like that's Robert Kiyosaki talks about in rich dad, poor dad. Rich people think a certain kind of way.

They're not rich because life gave something to them, although sometimes that's the case. It's usually what life gave them was a parents that taught them how to think. And you understood, I can choose to be comfortable or profitable. and you push yourself as far towards the profitability side of that spectrum as you were personally willing to live with. And that's, I really think the listeners need to understand. This is why some people make it in real estate and other people don't because they'll come to me and they'll say, hey, David, I really want a house hack. And I'll say, okay, where do you want to live? And they'll tell me a city where it's nothing but track homes, that there's no way you can get an in-law unit in there or a split level where you can combine it or there's no duplexes in that area.

And I'll say the only way to do that is if you either rent out the rooms or you literally modify your house. to make it a dual income property. And they'll say, I don't want to do that. And what they're really saying is, I need to be more comfortable. I don't want the profitability that bad. And so house hacking as powerful as is, comes to the price.

And the price is your comfort. And you have to ask yourself, how much of my comfort am I willing to sacrifice in order to get ahead later and end up like the Brandon Turner buying a $2 million place in Maui. And I think, like, Craig, I don't know if a lot of people know your story,

but I commend you so much because you embrace that and you did that and you were teased for it and you were mocked for it and people didn't get why you were doing it and now you're starting to build up some like real momentum and we're seeing the fruits of your labors and you deserve to be like put up on a pedestal and acknowledge for for doing it the right way and it's really working out now yeah no I literally couldn't have set up better myself like exactly very nice all right so let's get into the details about how's hacking a little bit how somebody can do this we want to make this kind of a how to episode of the podcast so first

of all, how do you know if house hacking is right for you? That's kind of the first step, right? Is you have to decide, you have to make the decision, I'm going to do this or I'm not. So how do you know it's right for you? Well, if you want to achieve financial independence and you want to do it within five to 10 years, I would say house hacking is, again, the most powerful way to do that because it is eliminating that largest expense that we talked about, which is likely housing. And it is going to be a lifestyle change too, right? So you have to be okay with a lifestyle change to sacrifice in order to achieve that financial independence. Now, I think, you there is a strategy out there for everybody. And like David said before, it is, you know,

that whole comfortability spectrum thing, right? So on one end of the spectrum, I would say, which is the least comfortable but most profitable is you live under a bridge, right? There we go. That's, that's, financial freedom. Financial freedom, right? You'll be with cool Mike and the boys or whatever under the bridge. You got it. In a van by the river. In a bay by the river. You know, the second, the second way, right, would probably be, you know, maybe you have a camper or you have a van that you live in on, on your property or a trailer or something like that. The third might be, you know, you rent by the room because you're still living with other people. Then you maybe have the traditional house hack where you,

right, kind of like Brandon would say you have a duplex, triplex or quad. So that way you at least you have your own unit, but you're sharing walls. And then on the opposite end of the spectrum is the most comfortable, which is that luxury house hack we talked about previously where you have that additional dwelling unit that you're renting out. And so I think one of those you should fit into that spectrum somewhere and wherever you fall in that spectrum is what you should do. That's good. The spectrum of, yeah, the spectrum of comfortability. Why can I not say that word? Comfortability, bitty.

Comfortability, and profitability. I like that spectrum that you guys are talking about because it's smart. Because it's, people tend to always be like, no, I can't do it because of this or I'm not going to be it, you know, whatever. Ooh, who just wrote that? Was that David? The comfort continuum? I think that's right, Kevin. Was that Kevin?

Kevin, our producer who's hanging out here making sure our sound good. The comfort continuum. that's deep. I like it. I try to tell people that for everything in life, when they say they want something, like Brandon, you have such a good line where instead of saying, do I want this, you say, how much am I willing to pay to have this? Isn't it something like that that you're always mentioned?

Well, yeah, it's like the idea. And I didn't make the stuff I heard it somewhere. But like, rather than saying what do I want? It's what pain am I willing to put up with to get it. Yeah. Yeah. That's exactly right. And like Craig has mentioned, is there a bigger expense that almost all of us have

than our housing expense. No. Brennan, I know. Taxes, maybe. Maybe, yeah, that could be true. But if you're a real estate investor, probably not. No. Because, yeah.

So, Brendan, I know that you and I have talked about this before, that when we talk about people living in an expensive area and they'll often say, I just can't get ahead, I can't get ahead. It's almost always just your rent or your mortgage that's more expensive. Yeah. Milk doesn't really cost a whole lot more in San Francisco than it does in Wisconsin. And cars are more or less the same price. Direct TV is almost the same price.

Like almost every one of your expenses is the same whether you live in a place that you make $11 an hour or $50 an hour. But the housing, the housing is what increases so much. And if you're like Craig and you figured out how to neutralize the housing expense, you get all the benefits of living in expensive market and making a good income and getting opportunity without having to throw your money back into real estate. And that's where real big wealth comes from. I got this buddy who is like always broke, always broke, calling me, complaining, crying. Really, it's like always broke. and he lives in one of the most, like, really expensive city out in the East Coast. And I'm like, telling him, I'm like, well, you got a couple options.

I mean, the reason you're broke is because your rent is $3,000 a month and you make $12 an hour at your job. So that's why you're broke. And I tell him, like, you got a couple options. You can either house hack your way. Well, my wife doesn't want to do that. Okay, which I actually want to ask you that Craig in a second how to deal with that objection. His wife doesn't want a house hack. Okay.

Well, then you got to maybe move some more cheaper. Yeah, but I don't want to do that. Okay. You got some problems here. Like, there's, I don't know, it drives me nuts. And stop complaining is kind of the answer, right? Like if you're not willing to take the only options you really have or go get a better job, well, I like my job. Okay, well, I can't do anything.

Like, yeah, something's got to give, right? Yeah, something has to give. It's a life shit. Yeah, it's a lifestyle change for sure. And you just have to kind of figure it out, for sure. And here's what people, here's what drives me nuts. It's like people think, and I don't fault them for it because, I mean, you don't know until you know. But being a landlord is not that hard.

It's scary at the beginning. But like, have. Having a roommate is not that bad if you had to do it. Having somebody lived downstairs if you had a duplex, not that big a deal. If you had a fourplex, who cares? Like, you get over it. And you're not stuck there forever. It's a year or two of your life for the next 50, 60, 70 years of your life.

Right? If you just sacrifice, I love, I see those memes online sometimes, but they're so true. Like, if you just work really hard for a short period of time, you can enjoy the rest of your life for a long period of time. Yet people don't want to sacrifice. They want to eat their lucky charms, marshmallows, and just leave the cereal in the bowl. right but I want I want to eat that cereal for a while and then pour another bowl and then eat that cereal and pour another bowl until I have just a huge plate of marshmallows or bowl of marshmallows and that marshmallow and that's good wow that's a different analogy that I was expecting me to come with and now I have diabetes

financial diabetes with Brandon Turner there we go okay so a couple more questions that's throughout you we have a lot more questions how do you find a potential house hack. How do you find one? Like, what are you looking for? So I think everyone looks for something different, right? But what I personally look for is, you know, I really like this whole single family strategy where you rent by the room. And I've just never really elevated my lifestyle so I can totally continue to do that, right? But what I look for in a house is, one, the most bedrooms and the most bathrooms per dollar. Right. And so I try to get a, you know, in the Denver area here, I'm looking for five bed, three bath. That's about 350 to 400,000. That's my sweet spot.

I know that's going to cash flow. Rent by the room, you're going to cash flow about $1,000 over the mortgage with that kind of property. And also you want a property that you can, I like a property that I can either have a lot of options with. So maybe I can section off the bottom from the top and Airbnb later. Or maybe I can rent it out as a full-time unit because I may not want to manage five people in a property anymore. And it has to work as a regular rental as well. Now, it likely won't work as well, but it still needs to work so I can hold on to it. And I personally also look for the location in terms of where is the path of progress heading

and basically just going in the next little neighborhood over. Right. So the prices haven't appreciated you there yet. But you know they're going to because they're building and building and building that way. And I don't think they're just going to like go around my neighborhood where I'm going to be. Right. So put yourself right there. And I also look for bike paths, right? Like I'm still biking to work.

I still do all that. And again, that also eliminates the whole transportation cost, which is likely people's second largest expense. So by eliminating house hacking and by eliminating my transportation expense, you're saving 50% of your income just by those two things right there. Yeah, really good. Well, are you looking on the MLS or something more creative to find these? I just go straight on the MLS.

I think with this strategy, every single deal works. It's just, does it work for me? Explain that. So financially, every single deal that has a five-bed, three-back, in the areas that I'm looking that are $350 to $400,000, they work, like a lot. Like between, you're looking at $700 to $1,000 over the mortgage at least every single time. And so then I just look at the house itself and say, okay, do I want to live there? Would someone want to live here if I moved out?

What, like, how's the parking situation? All of these kind of things, where does the improvement come in? Is the path of progress moving that way? So I just kind of look at the house and evaluate things that way. And yeah, that's basically how I did. Can you define what you mean by the path of progress for the listeners? Yeah. So basically cities tend to move in general directions, right?

I'm going to use Denver as an example because that's where I live. And so Denver, basically the, I call it like the heartbeat of Denver is right downtown, right? And then if you just go south of Denver is kind of already been developed. It's kind of in the past, in my opinion. But the future, right, is north of Denver. So you look at rhino. Rino's an area in Denver where five years ago you would not step foot here because you'd probably be killed. But now it's one of the most popular areas in the city.

And so I just keep going north because it's clear that Denver is moving that way. And so I'm just north of Rhino where the property values are still cheap. But I can still get those, I can still command the rents, not quite that Rinal can command, but still well higher, well above what I can get for the mortgage. And also it's very helpful to know what the city is planning to do. For example, the city of Denver is planning to put a basically like an empire state building type thing right in North Denver. So I'm sure my properties are not going to. be hurting because of that there, right? That's going to bring tons of jobs and people are going

to want a place to live. That's close to their work. That's smart. So, hey, what do you, what's your plan long term with these properties? I mean, let's see you buy a single family house. Like, let's got house hacking for a single family for a minute. Let's say you buy a single family house and you rent out the bedrooms and you live in one of the bedrooms and everything's great and you're making good cash flow and you're living for free. And then you, you know, get a girlfriend or a wife or a husband or whatever and you just want to move out. You get a better job in another city. What do you do you just continue rent out by the bedroom? Do you do analyze it as what it would be like to rent out as just a whole single family house,

just to one family? Or how do you look at that? So it kind of depends on the situation as to when that occurs in my life. If that were to happen right now, I would say I would move out and I would rent out my room. And I actually have a couple property managers that are able to do the rent by the room property management. So they're hard to find, but you just have to kind of keep looking, keep looking, keep looking. And you'll find someone that is willing to do that. And so that would probably be the thing I try first.

Now, if that didn't work, again, I also look at the property and make sure that it will also rent out as a whole unit by itself and still be able to cover in excess of my mortgage to have room for those expenses as well. So the houses that I have will work both ways, but it's just, it's way more profitable to do the rent by the room strategy. So I'm going to do that for as long as I can. Extract the most out of my dollar until I decide I don't want to do that anymore or it's too much work. And then I'll be able to sit back a little bit more. Yeah, that's really good. One thing, people ask me a lot, like how they can analyze, like what they should be looking for in a house hack or how do they analyze? it. And what I tell people, I love to know your thoughts, but it, and it sounds like you just

pretty much says exactly what I'm going to say, is like, analyze it both ways. Like, analyze it as if you're living there because you probably will. I mean, you're going to, you're going to house hack it. But then also analyze it like you're not going to live there because you won't forever. And so like you don't want to buy a property that makes really good sense right now. And then as soon as you move out, the day you move out, you're suddenly losing a thousand bucks a month in cash flow. That would suck. Right. So analyze it both ways. Do you agree? 100% agree. Yeah. And also like when you are analyzing the deal, too. I don't know if you want to get into this, but I just think that people, a lot of times,

there's too many numbers when you actually like looking to analyze the deal, right? You have like the payment, the monthly, the mortgage, the insurance, the taxes, the vacancy, the capes, all the stuff. So I just am a firm believer of you need to be a certain threshold over the mortgage for the deal to work. Right. You have your mortgage payment. My threshold is between $500 and $1,000 or more. But it's going to vary depending on your city, right? And it also a very depending on the property. So on an older property, I'd want a little bit of a higher threshold

because there's going to be a little more room for those expenses that come up. Whereas on a nicer property, that's a little bit newer. You won't need your reserves to be as high, that difference to be as high. But the bigger that difference,

the better the deal is going to be. I don't think there's ever a case where that is not so. Yeah. So I just think people get really like, all of these numbers get caught out and they take hours and hours to analyze deals.

I think it's easier to literally go into a property and say, okay, I know I can get about 3,500 for rent for this property. My mortgage will be about $2,200. I'm making $1,300 over the mortgage. That's a great deal. Yeah.

You know what's cool is you don't have to worry nearly as much about the ROI on your huge down payment of 25% that you're dumping into this thing because you're going to a 3, 5% down. There's very low opportunity costs. When you actually understand house hacking, both from the person who owns a property and makes income and the person who rents the room from you because really they're saving money too. We haven't even talked about that perspective. But how much better is it to pay. $600 for a room, then it is to pay $1,800, $1,800 for your own comfortable apartment.

When you see how it benefits everyone, you really wonder, why does not everybody in the world do this? Why is this like this secret that we have to tell people about? It's amazing. Yeah, that's really good. No, you mentioned, David, that you mentioned the three, you know, three or four, three, three and a half year loan. I mean, sorry, percent downs, like three and a half percent down, right?

Or maybe five percent. Some banks are doing three percent for owner occupied loans, which means you agree to live in the property. So Craig, why can't I just instead just say, I'm going to live in the property, get that 3% down payment and then not move into the property? And then secondly, why can't I just do that every month, every week over and over and over? What's to stop me from that? Well, bank fraud is to stop you from that. Or mortgage fraud, I should say.

And if the bank does catch you, now they're not like going to your house and looking in your window and seeing if you're actually living there. But for some reason, if they do catch you, that's five years in jail. And I think what's worse, I mean, imagine being in jail and being next to the guy who killed somebody or whatever. And, oh, what are you in for? Oh, I just didn't live in the house that I said I was going to live in. Like, it also looks like a wimp in jail. So, yeah, you were. There's really, there's no, there's absolutely no way.

But on the positive side, when you're in prison, not only do you get your housing paid for, but also your food paid for. Yeah, all right. And no, this is true. No travel expenses, no car expenses. Like, really, this is the, this might even be better than homeless. Because homeless, you've got to pay for food. Prison hacking.

Prison hacking. I like it. I believe we talked about this once before. I think we may have this. That's going to be your next book, Craig. This would be the follow-up to the book on house hacking here. By the way, what's it called the book, your book? It's called the house hacking strategy.

Okay, the house hacking strategy. So next is going to be the prison hacking strategy. And that book's going to be a bestseller. I sure hope so. All right. I have a question. Oh, go ahead. No, you go first.

Well, I actually was going to actually ask you a question, David. Because I know, I mentioned a minute ago. I know you've done some house hacking stuff. But I don't even know. know all what you done. Can you explain like your journey real quick through house hacking? And then we'll go on to some more questions. The first part is I'm in this really unique position as a real estate agent where not only do I do this for myself, but I actually help other people do it. So I get massive exposure to different strategies and how they work. And that's why I'm such a big fan of Craig and his book.

Because I've seen there are people that literally did not make sense for them to buy a home until you consider house hacking. And it becomes way better for them. They're spending way less than the rent. and they're owning a home and they're getting future appreciation. So in the Bay Area, what we have to do is figure out because there's not a lot of houses that are just a duplex or a triplex. We don't have many of those. So you kind of have to be creative about how to do it. Like what Craig's saying, renting out rooms, buying houses with a split level so that you

live in the downstairs, finish basement and you rent out the upstairs. Sometimes that means you got to run a bathroom downstairs. You got to take the plumbing from above and run it down. And there's going to be a little bit of rehab work that would be done. So the first thing I would say is like, don't think you can't do this. because there's not just a duplex and you needed it to be a duplex. If you can find one, that's amazing, but you can make it work without that. And sometimes that's even more profitable. The way I do it is super simple. So I live about 12 minutes away from my real estate office in Discovery Bay,

California. And what I do is I have interns that want to come work for me, move into my house and rent a room from me and then work in the office where they learn how to build wealth through real estate. And I just rent out my rooms. I'm a single guy. I don't use hardly any of my house anyways. I really only need a bedroom. The kitchen is fine to share with everybody. It ends up paying my mortgage for me. I get to live, you know, 12 minutes away from work. I still have all the space that I would need. And I'm not home a lot. So it's not that big of a deal to have roommates. And I just think, Brandon, you said that earlier. And it's such a good point is people think in their mind, I just couldn't have roommates. I just couldn't do it. And that's not true. Craig set up, you know,

a little divider in his living room and put a futon in there. And boom, he's like saving massive money. and it's not complicated. If you can't have people in the house with you, you just cannot do it, then you just look for a house that has like an area that you can divide. Can I rent out the downstairs and live in the upstairs? Can I rent out this side of the house and live in that? Can I find a house with an ADU?

Can I make a house with an ADU? The idea of house hacking is a principle. It's not a like I need to find this thing and run with it. It's the idea that your home can generate income for you and reduce your biggest expense. Yeah, it's called, have you heard of hedonic adaptation? No, but I like the sound of that.

Yeah. It's the whole idea of like basically you get something new or you do something for the first couple weeks and it feels super uncomfortable or super different. But two or three weeks later, it's kind of normal, right? It's like if you were to buy a Ferrari, the first two weeks you're going to feel like a cool cat in that Ferrari. And then week three, it's going to be your car. So it's the same thing with the house hack, right?

The first two weeks behind that curtain was a drag for sure. I was not comfortable. It was hard. I wasn't sleeping very well. But then towards the end, my room was vacant. but I would still choose to sleep on the futon because that was my bed. Yeah. Right?

Now I felt more comfortable there. So yeah. Yeah. It's just the same thing. Yeah. You adjust pretty quickly. Now, a couple questions for you. First of all, is this only a single person's game?

Is this only something that, you know, a young 25 year old, how old are you? I'm 26. 26 year old guy can do or David Green, you know, handsome young real estate agents can do. Or is this something that, you know, ugly guys like I could do? Anyone can do it. I mean, Brandon, you did it. I did it.

Yeah. Yeah, no, I mean, anyone can do it, right? It just depends on what strategy works for you and your family. Again, it's going to be harder to live behind a curtain with a family. But I actually know someone who did live behind a curtain in their living with a family. And they gave me the inspiration to do what I'm doing. So, yeah, it was in San Francisco, actually, when I was living out there. So, yeah, I tell you, if you're okay with being a little bit uncomfortable for a couple weeks before that hedonic adaptation sets in,

and you become comfortable doing whatever that is, you can absolutely do it. Yeah, that had that adaptation thing works both ways too. Like, like you get used to certain things. Like when I was first, like,

you know, when Heather and I first got married, like we would literally sleep in our car. We did Prius hacking. We traveled around the country and our Prius and slept in the back because the hotels are expensive. And we camped more often and like,

that was a trip. Now, then we got into like, well, we started staying at Super 8 motels, you know, super eight or Motel 6, you know,

like the cheaper $70 night hotels. And now today, like, we rarely say anything that's less than like a Hilton or a Marriott, you know? and like I mean I've been will I get into like four seasons level like I only stay at the four seasons like I don't know but like it works both ways and it's dangerous right it's dangerous because you get sucked into this idea of now I got to pay you know I had a friend once we went to dinner and I said this on the podcast before but I'll say it again I went to dinner with this friend and he was talking about how he's living just like he's broke he's a living paycheck to paycheck and he he's always just scrounging for money and then he said he made like $300,000 or $250,000 a year or that you know the past year. And I'm like, what do you spend your money?

He's like, I don't know. I'm just like, I'm just living. And then he ordered, the waiter comes over and he's like, what would you like? And he's like, I'll get that bottle of wine. And it was like $400 bottle of wine. And he just orders it without even think about it. And I was like, I get it. That's that hedonic adaptation, right?

Like that was normal to him and that was acceptable and that was comfortable. And he would not, he'd not going to buy a $100 bottle of wine or a $50 bottle of wine. Like that would be, that'd be ridiculous, right? So it works at all. And it sounds like I'm making fun of my friend, but I do the same thing. We all do the same thing, right? We're wearing nice clothes.

But there was a time in our life when we were probably in college where we didn't wear nice clothes. We shopped at thrift shops or whatever, right? That's a natural part of life. Exactly. How does somebody, okay, say, let's shift slightly from house hacking and go a little bit broader.

Financial independence. What is financial independence? And how does that hedonic abutation hurt that? And how can somebody overcome that? We're on big picture here. I mean, big picture, financial independence is basically, the technical definition is that, when the income from your investments, the passive income from your investments,

exceeds your expenses such that you no longer have to work. And then that basically frees up 40 plus hours of your week because that is dedicated to work. And now you can just go pursue your passion, travel, spend time with your family. Or you can continue to work, but now you have all of the leverage and negotiation in your hands rather than your employer's hands. So that's the short and swift definition of financial independence. And that's, I mean, that's again what we do here at bigger pockets, right? is just teach people how to achieve financial independence through real estate investing,

so they can then go and change the world and do whatever they're super passionate about. And that's why I'm super passionate about this as well and why I love house hacking. Amen, brother. Yeah. I like it. Okay. So I want a house hack, Craig. And I'm looking around and I don't see any for easy ones.

There's no duplexes or triplexes, price below market value, where I can add value and I have low risk. So what would you tell me that I should do? I would say you have to get creative, right? Now in this, I've heard this multiple times now in this market, there's no such thing as finding deals. You have to make deals. Sounds so smart. Who says that? Yeah.

Probably David Greener ran into Turner, but who knows? Who knows? Not me. But yeah, so, you know, that's kind of like the same thing that, you know, that I've been doing in the Denver market, right? The first one, I live behind a curtain that was making the deal. Right. Now, that duplex is on its own and it works with me moved out because there's two separate units. I was, again, I was trying to find another duplex for a while or triplex or quad.

but then I realized that it just wasn't working, right? There were very few that actually worked. And the ones that maybe came on the market were gone in the second by cash buyers that I could not compete with. So then I went, okay, what else could I do? And then I looked into the single family home option and renting out the rooms. And that worked great. So that would be like, in my opinion, again, it's the best option because you profit so much. And you still have your own living space in terms of like you have your own bedroom.

You're still sleeping behind a door and windows and all that kind of stuff. So yeah, I don't know. Sorry, does that answer your question? Yeah, it was kind of like if I'm cruising on Zillow and I'm looking for properties and I live in Austin, Texas, what type of stuff would you guide people to be looking for a house would be a good house hack? Yeah. So the first thing I do is I ask them what their comfortability levels are, right? So I'm also an agent too here in Denver and I help people house hack as well. So first thing I always ask is what's your comfortability level? Are you willing to take the cheapest room in the house and rent out all the nicest rooms? or do you want the most expensive room in the house? Or do you need your own place? In which case we'll have to look for a duplex,

traplex or quad. And then I tell them, if you're going to go that multifamily route, again, back to that spectrum, you're going to sacrifice profitability for that comfortability. You're going to pay for that comfort. So usually they end up going with, yeah, it's my first one.

I really want to get the most out of this first investment. We'll go with a single family. And usually it's not too hard to convince them that way. But again, if they are really gung-ho about having their own spot, I'll look for a place with a separate in-law unit or the duplex, triplex, or quad, stuff like that. Beautiful. Yeah. That's cool.

One thing that we kind of touched that in a couple times here, but I want to just point it out here about, you know, we talk about the financial side of financial independence. You know, I can pay my bills. I don't have to work. If something happened, I lost my job, I'd be okay. What I think is actually probably the best thing about house hacking is when you eliminate, and financial independence in general, when you eliminate, you eliminate it. eliminate that expense, you are able to then take risks on other big things in your life that help you generate massive revenue later on.

Like, by house hacking, it gives you the ability to quit that crappy job and go take a shot at a startup. Or you quit your job and go into flipping houses full time or being a real estate agent. I mean, like the reason I told that story right earlier about a friend of mine who lives on the East Coast and that, you know, $3,000 month rent, the reason he, like, he wants to be an agent. He keeps talking about wanting to be a real estate agent. But, I mean, David, you know.

those stats, like, I don't know, most, however long it takes, like, agents to make their first sale and how many, like, new agents make, like, nothing the first year, he can't do it. He just, he, like, he can't do it. He can't take that risk. But if he had no payment at all to live, even for, like, a year, again, like, that return on potential, we'll call it, the ROP, like, the return on potential is huge. Like, it's millions of dollars for a little bit of uncomfortability for a few weeks until you get used to it, right? Yep. Yep. Exactly. I think Scott says it. I love the way Scott says it. As he says, most people are out there playing not to lose, but once you're financial independent, you're playing to win. Yeah. So it's totally different, right? Yeah. And yeah, I totally agree with you.

It's an amazing idea because as your house hacking, you're probably less comfortable. So there's a part of you that's wanting, I want to get out of here. I want to get out of here. And how powerful is that as a motivator to get you in there and play to win? Yeah. Wouldn't you guys agree? That's one of the main reason people don't succeed is like they're just comfortable and they're on cruise control and they're having a hard time.

finding that inner beast that just wants it so bad. Well, when you're sleeping on a futon every day and you can't have your girlfriend come over or whatever, it definitely puts a fire in you to want to get ahead. And that's such a good point. Like you can access the return on your potential. Cool. All right. Craig, I want to know about the book a little bit because I know it's coming out.

You sent me an early copy of it. It's fantastic. Really, really, really, really good. You sent me an early draft of it as well. And I read that one. And I was like, this is unbelievably good. And not to say I didn't expect you to be good, but I had not really read much that you had written before. And it was really, really well written.

I was very jealous that I didn't get to write the book on house hack. And then I read yours. I was like, oh, this is so much better than anything I would have ever written. I doubt that. No, it was really good. So the book is called The House Hacking Strategy, How to Use Your Home to Achieve Financial Freedom by Craig Curlop. Am I saying that writer is like Curelop? Do people ever say Curelop?

Everyone says Curelop, but it's actually Curlop. Okay. And the way I just, you know, 25 years into my life, I figured out how to get people to say it correctly. And it's, it's like kerplop without the first P. So curlop. All right. I like it. Curlop.

All right. So the book is, you can get it at biggerpockets.com slash house hackied. I know you, there's an audio book version. There's a ebook version. There's a physical book, of course. Then there's the ultimate edition, which I recommend everybody getting because it has all of that stuff included. Plus a bunch of cool bonus stuff. But that's only if you get it on bigger pockets.

Right. But yeah, do you want to explain anything more about the book? Like, why'd you write it? What should people do? Where do they get it at? Yeah. So the reason why I wrote the book was because, again, I think my number one passion is to help people achieve financial independence to real estate investing. And I think the best way to start and to learn is through house hacking.

So I basically took everything I know about house hacking and funneled it into a couple hundred pages in this book here. Yeah. And so like Brandon said, you can find it at www. com. bonus content with that if you get the ultimate version. And so that'll include house hacking calculator that I drummed up. It's got an interview, Brandon. I don't know if I'm ever doing this.

I do. One we do. Yeah. We dive deep into Brandon's house hacking and basically how it got him to where he is today. It includes an ebook that I wrote, how to save up for your first house hack, basically how to save up that first $20,000. And it talks about saving your expenses and all that. And there's a bunch more too.

So again, I really put a lot of heart, my heart and soul into the ultimate package. Yeah. Didn't I hear that you did like a video. like walkthrough of your first house hacks or something like that. Yeah. That's so cool. A video walkthrough of the three house hacks that I've done and we'll show you basically the rents that I got through each and the mortgage payments and all that and how how it

kind of compounds over time as well. That's so cool. And then there's also a live Q&A. And so the live Q&A, do you have the date set for that one yet? We don't have it set, but it will be within the first two weeks of it launching. Okay. So I would say before August 16th or so. All right.

So if you want to attend the live webinar, yeah, the Q&A with Craig, make sure you get the book before the, you know, within the two, first two weeks of today. Like, it comes out today. The book does, I believe that this episode's airy. And so get it within the first two weeks if you want to attend that live webinar. And, uh, yeah, sounds good. Now, again, I highly recommend everyone get that book, but we're not quite done with this show. I think next, we want to head into the next phase of our show. But the last question I have, though, Craig, before we get to the deal deep dive, I'm just wondering, what, what are you doing after this? Like, what's your long-term plan with real estate? Don't know. Okay. That's okay. So,

I used to have all these long five to 10 year plans, all that kind of stuff. And I just realized that life changes so quickly that having those plans is almost silly. So my goal is to just be as flexible as possible. So anytime that an opportunity comes my way, I'm able to handle it. Or something comes my way, I can handle it. So the next couple of years, I'd like to maybe travel a little bit or do something. But I'd like to someday have a family and maybe kind of do something that you and David are doing here.

And actually just like kind of build an empire like that. But I just don't know. Like it's hard to say. What I like about that is stay flexible. And again, house hacking is a great way to stay flexible. So very cool. Be flexible. All right.

Well, dude, let's get into the next segment of the show. This is the part. I love this part of the show. It is our deal. Deep dive. Dive. Dive. All right.

This is a part of the show where we dive deep into one particular deal that Craig here has recently purchased or done something with. So Craig, do you have a deal in mind that we can dive deep into? Yeah. I feel like we should just do my most recent one, which is one that is not really mentioned in the book. because I wrote the book before I did the deal. Okay.

All right. Some extra content here. Sweet. So first question. What kind of property is it and where is it located? So this property is a single family house. It's a six-bed, three-bath single-family house located in unincorporated Adams County, which is like this little no-man's land between Denver and Westminster.

And it's great because there's taxes are really low. There's not really all that many rules that I have to follow in terms of, you know, So Airbnb type rules are rent by the room type rules. And yeah, so that's where it is. And how did you find this property? Just found it on the MLS. All of my deals I found on the MLS and they all seem to work really good. That's, again, one benefit of house hack.

Another one is that you can make the numbers work on the MLS because that's a cool strategy. How much did you pay for the property? Or I should say, how much was the property? How much were they asking for it? And then would you end up paying? Yeah. So the asking was $390.

We went under contract for $390. But there were some things that the inspector caught. we ended up closing at 380. So I bought it for $380,000. All right. And is the only negotiation that you use that inspection report? For the most part, yeah. Basically, you know, some electric was a little janky and the furnace was old and all that kind of stuff. So I said, hey, there's at least $10,000 worth of expenses here. And I, so with house hacking, right, I don't really care about getting the best price for it because I would rather just get into it and have another month of saved rent. And as soon as I get into that house hack, the timer.

starts where I can get my next house hack. Right? And so I could wait and wait and wait and try to save $10,000, which is what maybe $20 a month or $50 a month or something. But that's nothing compared to the thousands of dollars a month I'm saving. So I really don't care. I usually just go in and asking. Such a good mindset.

So many people focus on winning the battle and lose the war. Yeah. Yeah. It's true. All right. What about funding? How did you fund this deal? Yep.

So I just did a 5% down conventional loan, very normal from the bank. the 5% down conventional you can use on a single family, you'll have trouble getting that on the multifamily ones, the duplex triplexer quad, but you can use the FHA on the duplex triplexer quad. Beautiful. And I know what you did with it, you houseacked it. What was the outcome of that deal? Yeah. So basically the way that works is my mortgage payment on that deal right now is about just over $2,100. I am renting the top half out. So basically it's three beds, two baths on top, three beds, one bath below. And I'm renovating the bottom. to turn it into an Airbnb and separating the two. So the basement has a separate entrance to the garage. So I'm just walling off where the top meets the bottom.

And it's totally separate. So now I got a separate entrance Airbnb downstairs. And that's going to go for about $2,000 a month at least. And I'm renting out the other two bedrooms upstairs for a total of $15.50 total. So I'm looking at a $35.50 in rent coming in on a $2,100 mortgage payment. That's awesome. Yeah. And I'm living for free.

That's amazing. All right. So what lessons did you learn from this deal? Anything you learn? Well, there's a funny one. I guess we can get into it. So, all right. We'll get into it. What's the one thing you always need to do is screen your tenants and don't take any short cut screening your tenants. Yeah. And I got lazy and got greedy on this one and kind of got caught with my pants down and ended up with some really shady tenants downstairs. So what happened was I was doing the rehab downstairs. And these people were coming to look at the upstairs, but I had already filled the upstairs.

So I said, oh, why don't you just come look at the downstairs and see if you'd like to live there? There will be a construction zone, but just heads up. And I'll give you a discount on the rent. And they said, oh, yeah, sure. And they both loved it. Should have been a red flag that someone wants to live in a construction zone. Yeah. And so they moved in and I had the contractors in kind of pulling up carpet and doing stuff

down the hallway. And they said they smelled this horrible smell that they had never smelled before. Something burning. They didn't know what it was. was like, you know, marijuana is legal in Denver. It wasn't marijuana. It wasn't cigarettes. He just doesn't know.

And so I went and I googled the person's name who was downstairs and she was on our county's most wanted list. Oh, no. For like, yeah, for very hard drugs. And so I was like, oh, shoot, I've got this like meth head in my house and I don't really know what to do. And so naturally I, you know, I kind of got a little bit scared. So I left.

I got the roommates from upstairs out. I called the police. and they were no help at all. They basically just said that, oh, if it's her house and there's a lease, she actually has the right to smoke meth in her own house, which I don't know if that's true or not. But either way, the police weren't helping. So then I went back to them and I just said, hey, you guys have to get out.

Basically, I did a cash for keys deal. I said, I'll give you your rent back, and give you a $500 if you can just get out in the next few days. And they got out and they're out now. But yeah, it was just a mistake. And I was talking to my friend, Chad, because I know very much. And I talk about it in the book, didn't even take my own advice that you have to do your background checks.

You have to do credit checks. You have to be very diligent with every single person you live in your house. But I just got greedy, felt like it was easy month-to-month type lease that I let in. And yeah, it came back to bite me for sure. It was a $1,000 mistake. Could have been much worse. And I'm lucky to get out the way that I did. But, yeah, I mean, sometimes they say you have to, you know, touch the fire to make sure that it's hot.

The fire is hot. And just, again, yeah, make sure you do not take any shortcut screening your tenants. It's such good advice. Yeah. So. Yeah. I mean, people think sometimes like, I don't know, like I said earlier, land loading is not hard.

It's not. But it's also not something you can just like go and do just like, I got it. Like it's like driving a car. Like it's not like driving's that hard. But you wouldn't just jump in the car when you're 12 years old and just assume you know what you're doing. Yeah.

No. And you have to be careful too. Like the first deal you're probably super diligent on because it's your first one and you want to be really diligent. But then you start getting more comfortable and more comfortable when you start to relax a little bit. And that's exactly what happened to me is I met these people. seemed really nice. They seemed cool. And I was like, okay, yeah, whatever, month to month.

What's the worst that can happen? Well, that's the worst that can happen. So yeah, yeah, just be careful and don't take any shortcuts. Please learn from that. Yeah, great advice. Great advice. All right, well, that was a deal deep dive. Now we're going to head over to the next segment of the show. It's the world famous fire round. It's time for the fire round. All right, time for the world famous fire round. Of course, these questions come direct out of the bigger pockets forums. And we're going to fire them right at Craig's face. Are you ready, Craig? Watch out.

All right. He's dodging him. Number one, after you house hack for a year, because for those not aware, generally, you're supposed to stay for a year. You don't have to stay forever, but you're supposed to stay for a year when you get an owner-occupied loan. Any tips for moving on to the next house hack? I'm worried that the bank is not going to approve me for a second mortgage based on my

income. So you have to find a lender that works for you. My lender takes the rent from my property and counts it as income against my debt to income. So I think a lot of lenders will do that, especially if you have leases in place. And so basically, as long as the deal works, your income should be higher from the debt payment on that property. So it would actually put you in a better position. And that is why you have to actually claim your income on your taxes. So I don't. Yeah. Yeah. It will catch up with you if you try not to. Yeah. A lot of people just won't, they'll rent out the bedrooms or rent out

anything. And they're just like cheating the government. And then they go to get a mortgage later. Oh, you didn't make any money. It's surprising how often that comes out. Like I think I told you as I'm starting a mortgage company. And so many people are like, well, how do you make this income count without me having to pay taxes on it? You don't. You pick your poison. You either break the law and don't get to use it or you pay your taxes and get to you.

That's a very good point. And I would say, in my opinion, being honest and paying your taxes and allowing you to house hack more properties is far in away a better option for wealth building particularly. Yeah. All right. This is from Laura Heinz in Laura, Kansas. How do you keep track of expenses? And also when it comes to taxes, does it get too complicated to do taxes yourself?

I'm thinking I might need to hire a CPA. Yeah, so I do have a CPA and she does my taxes for me, but I still do the bookkeeping myself. And my first year, I was just doing Excel because it was pretty easy and the expenses weren't too high. But after you start getting two, three, four properties, I was just done with Excel. So I moved to an accounting software called Zero. It's like 30 bucks a month. All of my statements get imported into the,

zero software and I just allocate them appropriately. And at the end of the year, it's pretty easy for my accountant to do what she needs to do to get the taxes done. Very, very cool. All right. Let's go with Andrew from Virginia. If you're house hacking in a college town, how do you set up the rents? Because most people go home during the summer, so you won't be able to collect rent for

two to three months. Do you just jack up the rent for the year and then have it super cheap during the summer? Or what would you do? So you could just do a 12-month lease. So yeah, they can go home for the summer, but doesn't mean they have to go home for the summer. They could still kind of hang out on campus or whatever or maybe get an internship or a part-time summer job on something on campus. So I would still continue to do the year lease, but maybe give them the option to say, hey, if you do want to get out after nine months, you just to find someone to fill those last three months that I approve of. Yeah.

I wonder if you could also give people, because I'm a big believer in giving people options about, you know, it's just anything in life, right? Starbucks, Tall, Vinty, Gronde. I wonder if you could say, hey, the rent is going to be $1,000, a thousand dollars, a month. month or it's going to be 1200 for a nine month lease. It works out the same to you, but like dumb college kids would probably be like, I don't have to pay three months in the summer. Great. Even though like the numbers, you just work it out.

So it's exactly the same. I wonder if you could. I bet you people would be okay with that. So yeah. Yeah. You could do that too. Yeah. All right.

David, number four. Last question. Does the 1% rule and other rules of thumb apply when looking for a property to house hack or is it different? That is a good question. I never kind of the 1% rule kind of escape. mind. Yeah.

Because I just feel like it is so, it's so different based on each market. It is. If I'm thinking about my math, I mean, I've got a $380,000 house and my rents are $3,500, and it's a very good deal. So it's not quite the 1% rule, but it's close. And I think I got a very good deal. So sure, the 1% rule kind of works, but I don't think it's set in stone because I know properties that are not quite the 1% rule that are working very good.

Again, I think the whole thing, there's so many ways to spin it. But if you just spin it that way with rents over your mortgage with some reserves in there, You won't lose. Here's a good reason why that is, too. Craig, do you know off the top of your head? What are your property taxes per year on that property? It's about 2,000. All right.

So if you were in Texas, in some areas of Texas, your taxes would be about $8,000 for that property, right? So the difference is $400 or $500 a month difference in taxes. So that's why things like the 1% rule can be kind of helpful. But they're also like super flexible because like if you're in Texas, you know, that's a lot worse deal for you than if you were in Denver. Colorado has lower property taxes. You know, so like that's, you know, one percent rule again, it's helpful, but it's super not that helpful because you still need to actually do the numbers. Like, look, like, what are my, yeah, my taxes, 200 a month or 700 a month?

Like, I mean, is my insurance going to be 100 or it's going to be 500 a month? You got to run those numbers. If you talk to your, if you talk to your lender, he'll be able to tell you about what your monthly payment will be with principal interest, insurance, private mortgage insurance, all, everything you need, taxes, all of that. So I would just get that number. And then you can just go look at houses. And you know, you adjust it accordingly based on the price of the house.

But it's not going to change that much. All right. Good answer. Good answer. All right. That was the end of the fire round. Now it's time for the last segment of the show. It's our famous four.

All right. The famous four are the same four questions. We ask every guest every week here on the show. We ask Craig these once before. We're going to ask you again. But before we get to them, let's hear what's going on this week from my buddy, J. Scott. over on the Bigger Pockets Business Podcast.

Hey there, Brandon and Bigger Pockets podcast listeners. This is Jay Scott, your co-host for the Bigger Pockets Business Podcast. This week on the business podcast, we have a fantastic guest. Paige Wilcox is with us. Paige and her husband started a chain of wellness and fitness centers. And on our episode this week, she tells us all about how to create systems and processes so that you can eventually license or franchise your. business. So tune in this week for a great show. Now, back to your famous floor.

All right. Thanks, Jay, as always. And now let's get to it. Craig, favorite real estate book. I almost don't want to say the same answer I did a few years ago, but I feel like it's still the same. Brandon, it's your rental property book. That was the first book I ever read on real estate. I was like, wow, like, good night. It basically wasn't on there. All right. That's cool. I'll take it. I'll take it. Yeah. No, that, that, that, that, that, that, that, that, that, that, that, that, That book kind of really got me going and it got me excited for real estate. And it also introduced me to bigger pockets. Thanks, dude.

Great job, Brandon. You wrote an awesome book. Thanks. Craig, what is your favorite business book? Favorite business book is going to be either never split the difference, which we had that guy on the podcast. Chris Voss. David Voss. Chris Voss. One of the best books I've ever read, save me tens of thousands of dollars with a $10

copy of that book. And also the Four Agreements is also another one that's really good. It's a little bit more of a spiritual book, but just helps you kind of stay even keeled and It's really good. Do you know who wrote the four agreements? Is it a Miguel something? I forgot the guy's name. Miguel,

Diaz or something. Yeah. I tried to like, like, multiple times I've tried reading that. I still can't get through yet, but I'll try again. Wow. Yeah.

Some people, I know, that's what it is. I need words like, Good night moon. Like, good night, like, no,

every time I read it, like, people love that book. And I like read it. I'm like, I just, I like read it. It's not bad. I just couldn't like, deep,

get deep. I don't know. whatever. I'm amazed there's a book you didn't finish. You would read the back of a shampoo bottle. Like, you just read everything. He reads his receipts from the restaurant. He likes to read. All right. That's funny. Well, I'll give another shot because I hear it's good. I just haven't, you know, it's got to hook you. It's like a TV show, right? You ever watch the first episode of a show and, like, you don't watch the rest. It's something that just doesn't hook you yet. Anyway. Fair enough. Craig, what are some of your hobbies?

I really love to travel. I like snowboarding in the winter. I love to hike. Love to ride my bicycle, love to just be outside, hang out with friends. I mean, love to do real estate type stuff, read, right? I mean, the works. Yeah. Is that helpful? I hear you. Break. Break and cash and checks. Yeah. By the way, if anybody wants to listen to the Chris Voss episode we mentioned, it was episode 260, 260. Thank you, Kevin. Nice. All right. A last question from me. Craig, what do you think separates successful house hackers from those who give up, fail, or never get started? Just being able to get uncomfortable and have that, have that, what is it called? Basically, be able to be uncomfortable for a short amount of time so that you can, you know,

take the rest of your life back, right? Was it delayed gratification? Delayed gratification is exactly the two words I was looking for. Yes, thank you. Yeah, delayed gratification and being able to actually take action on that. And also just not going to cut up in the numbers and just taking action and just doing something. Yeah. Right?

Because you can sit, you can sit twiddling your thumbs. and running numbers all day too. That's not going to get you anywhere. So, yeah, taking action and getting uncomfortable for sure. Cool. All right, Kirlop. I think you dropped some incredible knowledge bombs on us. I am very grateful that we have somebody like you to kind of break this down.

And I know it will change lives. For people that want more Kirlop in their lives, where can people find out more about you? The best place you can find me is on Instagram. I'm at the Phi Guy, just T-H-E-F-I-G-U-I. You can also find me on bigger pockets. I'm on Facebook and stuff as well. but Instagram is probably still the best the best way.

And you can also get the book at www. biggerpockets.com slash house hacking. All right. Thank you, Craig, very much. Appreciate it. And for everybody else, again, like I said, go pick up the book. It's fantastic.

David Green, do you want to take us out of this thing? Yes, sir. This is David Green for Craig, the Pants Hacker Curlop and Brandon 6'5 of twisted steel and sex appeal Turner. Signing off.

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