BiggerPockets Real Estate Podcast - 359: Using an Agent to Find Your First (or Next) Deal With Ryan Meinzer, Stephanie & Hero Cruz, and Rob Kishi

Episode Date: December 5, 2019

You asked for it, and we answered! On today’s episode, Brandon and David interview three first-time home buyers, who all utilized the house hacking strategy in different ways! Our first guest shares how he bought in the most expensive market in the country and lives for FREE by using several techniques anyone can replicate (while taking advantage of a massive value-add opportunity). Our second guests share how they used house hacking to buy a BUSINESS that will generate over $20K in profit per month... while also eliminating the majority of their rehab costs and reducing risks and living expenses at the same time! And our third guest shares how he took advantage of California’s recent ADU law revision to buy a property that will eliminate his living expenses while making him massive cash flow at the same time. This episode covers FAQs—like how to use an agent to help you find a property, how to house hack in unique ways, and what to expect when buying your first property—and is guaranteed to get those wheels turning in your mind! Download this one, and share with a friend today! In This Episode We Cover: Ryan Meinzer How he found the property His unique angle on TIC (tenancy in common) What he intended to do reduce his living expenses How a sliding door turned out to be a blessing What the requirements are to convert a TIC Key lessons learned from this deal Hero and Stephanie Cruz The struggle of finding the right Realtor Finding a property that needs less rehab What is assisted living property How much they earn from each room Making more money to help more people Rob Kishi How Daivd and Rob were introduced during a meetup Why he fell in love with idea of house hacking What the property looks like Investing with Mom What ADU stands for And SO much more! Links from the Show BiggerPockets Forums BiggerPockets Bookstore BiggerPockets Network - Find a Real Estate Agent BiggerPockets Podcast 108: Building a $350 Million Real Estate Empire Using the 10X Rule with Grant Cardone Grant Cardone on Multifamily Investing and Why You Should Never Buy a House! BiggerPockets Podcast 350: How to House Hack Your Way to Financial Freedom in 3 Years with Craig Curelop The Core 4 Members Vital to a Profitable Long-Distance Real Estate Investing Team (blog) BiggerPockets Premium Membership Check the full show notes here: http://biggerpockets.com/show359 Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show, 359. Before the deal, it was just this impossible thing for me. It felt like to buy real estate. But going through the deal, actually making it happen. It was difficult, but like now that I've done it, I am so sure that this is the way that I'm going to have like financial freedom. And I am going to do this over and over again for the rest of my life as much as I can. 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 hype, 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 in the Bigger Pockets podcast here with my co-host, David, the agent man green. What's up, David, Agent Man Green? What's up, David, Agent Man, Green? What's going on? Secret Agent Man.

Not much, man. Today, we have an amazing episode. I'm super stoked about this. So basically here's what's been happening. Brandon and I get a ton of people that come to us and say, I can't find a deal. I can't get started. I want a house hack, but I don't know what I'm supposed to do. And what we've realized is that people are trying to do a lot of the work that Brandon and I don't

even do. We rely on real estate agents to do for us. So we wanted to do a show where we took three people that I've helped with various forms of house hacking and walk you guys through their stories so that you're, You could see what it looks like when you do this successfully. Now, I get a ton of requests for these kind of shows. David, it's great that you have the guy that buys 50 houses a year, but that's not me. What about the person that hasn't bought a house or they bought one house?

Because that's where I'm at. So you have spoken and we have listened and we brought in three clients of my own that I'm very familiar with their story to share with you guys what feelings they went through, what emotions they had, how they tackled the hurdles that were in front of them, what they expected and what was different than what they expected so that you can learn from their successes. Yeah, that's it. So obviously these are David's clients today. So you're going to hear like, I mean, they love David, obviously, because David's a good real estate agent.

So don't take this as, you know, David's trying to say you should come work with David. What the whole point of this is like here's how to get started. Here's a couple really cool strategies, including like a traditional house hack, an assistant house hack, an ADU house hack. You're going to learn about all three of those today. But again, like, and how to work with real estate agents to be able to get that? How do you get an agent to take you seriously? How to get an agent that actually knows what they're talking about? We talk about a lot of those things, negotiation strategies for buying that first property.

So hopefully you guys get as much out of this as I got out of this today. I think you'll really enjoy it quite a bit. But before we bring in the guest today, the first guest, let's get today's quick tip. Today's quick tip. BiggerPockets.com is a website. On a website, there are navigation bars. It's like that little bar across the top of most websites. Bigger Pockets has one.

If you go to it, one of those drop-down menus on there says network. If you go to that and you hover over it, you can actually click find a real estate agent. And actually, you can click that. It'll know where you're at, like where your Bigger Pockets profile is based at, like where you put in the zip code when you sign up for BP. And if you don't have a BP thing,

it might just know where you are based on where, you know, ISP you have or you can put in a zip code. Anyway, bottom line, you can find agents in your area. And what's super cool about that is you can see, like, on that page, you can see like how many comments those agents have, how active they are in the forums, how many people have voted up what they've responded with. What's really great about that is you can see who's actually an active member of bigger pockets, and they might know a little bit more about real estate investing than somebody who's not.

Now, if you're a real estate agent, that's a really good sign that maybe you should get active on bigger pockets so that when people come, they can say, hey, that person clearly knows what they're doing. Anyway, quick tip, if you don't have an agent, you have 24 hours from right now, go get an agent and make it happen. All right, I put you on notice, everybody, 24 hours. Did you know your house gets bored when you leave? I can't actually prove that, but it probably misses out on the action, the footsteps, the late night fridge raids. Yeah, when you're gone, your place is basically on unpaid leave.

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This and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement. And without further, I do. I want to get to today's interviews. So we've got three guests today. We're going to bring him in one at a time. And I think David will let you introduce the first.

Absolutely. First up, we have got Ryan Mineser. Ryan, good morning to you. How are you doing today? Good morning. Doing well. How about you? I am doing fantastic.

This is going to be a really fun show. So you and I met, I believe that you reached out to me through bigger pockets. Is that right? I did. Okay. And you had said, hey, I want a house at in San Francisco. You actually had a really good plan that was already, for the most part, put together. You just wanted to kind of bounce things off of me.

And we actually had a lot of success. with your deal. And we're going to talk about that and share with the listeners how we found a property for you, the struggles that we had, the obstacles we had to overcome, how you worked with me to kind of get through that. But how you really took the reins with a lot of this and put a plan together because you're a smart guy and you did a smart thing. So why don't you start off telling us what your plan was and how you found the property that we ended up buying? For sure. Yeah, thanks for having me again. I'm stoked to be here. So, I mean, pretty much you guys did the heavy lifting for me,

just listening to the bigger pockets. And that's what made me decide definitively that I had to house hack. And that's basically what my plan was. I wanted to do it in San Francisco, though. So, you know, most expensive market in the entire United States, however, through bigger pockets and some diligence, I definitely found the right thing, found the right way to house hack with you. Okay, so how did you find the property that we picked?

So there's an open listings website, which makes it super easy to just find property to get push notifications on your iPhone. It's a very intuitive app. I use that among like a ton of other tools. I can't even remember all the names of all the tools. I pretty much used everything under the sun. And then, of course, you when I linked up with you, you started giving me listings to MLS and with Krista and such.

What exactly were you looking for? And you knew you went to house hack. Were you thinking at the beginning? I want a single family or I want a duplexer. Like how set were you on what you wanted there? What was it you were looking for? Yeah, from the whole, like, Grant Cordone episodes that you guys had, like I was pretty set on not having a single family.

Also in San Francisco, you know, you needed easily one mill, one point two, like to even make that happen, which obviously, well, not obviously, but I do not have. So I pretty much knew that I had to do, you know, multifamily. And then when I started looking into the multifamily, even then at that point, I didn't have enough cash for that. So I found this unique kind of what I call an angle. and that is TIC tenancy in common in San Francisco. And they are priced about 20% lower than market of the comparable if it was a condominium.

And that was one of the kind of angles that I took to make this happen. Can you explain like the tenancy in common thing? I mean, like what type of property is that is that a legal term for for tenancy in common there? Or is that like a certain property type? It's a certain property type. And it is also, I guess you could say an illegal term. What it is, it's a joint tenancy essentially between at least two people. So if you have a duplex, for example, two people own the property together, but they separately finance their respective units.

And then they have a separate agreement with the OCCNRs and all that good stuff to define their co-ownership and their co-habitation. Okay. Very cool. Yeah, so it's a way of holding title, but most people find tendency in commons to be less desirable than holding title in a traditional standard where you're like the sole owner of the property. And that was one of the ways that Ryan was able to find like a really good deal because he found a property that was priced less than how the condos were priced. But it was approved or zoned to be allowed to transfer into a condominium, which would have made the value of it go up. Because Ryan knew that, he recognized he had an opportunity here to buy a property for undermarket value, which would then be worth more later. TICs are kind of, they're usually specific to certain areas.

So San Francisco has a lot of these. You're not going to see a lot of them in some of the Midwestern states, I don't think. But it was one of the ways that Ryan was able to find something that would, like, he could add value to this deal. Very cool. Yeah. Exactly. It's kind of like a way instead of like finding a co-a partner to invest in like a multi-family, it's kind of a way to do that without like having to, you know, be married in the same ownership with someone like that. Yeah.

Now, your goal was basically that you wanted to buy a property in San Francisco, which is either the or one of the most expensive housing markets in the country without having to spend very much money to live. there. So why don't you share a little bit about your plans when you found this property, I believe you came to me after you'd already gone to the open house and you kind of checked it out, what you originally intended to do to reduce your living expenses? Yeah, for sure. Essentially house hacking, which in short, it just means that your roommates pay for your mortgage, your principal interest, taxes, and of course, insurance, PITI. So that was the goal. We had to find a unique property like we mentioned TIC. We had to find the angled again. to be competitive with the TSC, that is like the financing as well as everything else that we just talked about.

But the house hack situation was pretty straightforward. You find it was a two-bedroom, two-bath, but you and I, David, we saw an angle to make the dining room my bedroom. So pretty much that's what I did. Was there really? Yeah. It was pretty straightforward. It wasn't any like crazy rehab work or anything like that. Did you pull a Craig Curlop and just put up like a sheet in between the dining room and the bedroom or like the rest of the house?

I did. I did for the beginning. That's funny. That's funny. A fancy door. A sliding door, which meant that I didn't have to go through all this permit junk. So it's like, it was actually a big project. However, it was very straightforward. And I got to design this door to be pretty much my favorite thing in the entire house now.

So actually turned into a blessing. That's cool. That's very cool. Yeah. So can you walk us through? I mean, like what, like, what was your payment? What was your payment like then? How much were you renting out to the room for?

Or like what did you actually at the end up having to pay to live there? Well, like in terms of the purchase price and kind of go through all that. Sure. Yeah. Let's go through the numbers. Yeah. That would be great. The numbers.

Well, purchase price. I think it was, David, correct me if I'm wrong, but I think it was listed for like the 95. We offered $800 and they accepted. So it was pretty sweet. It's a little $5,000 on top. There you go. Okay. So you bought it for that.

And then what's your mortgage payment look like on that? The PITI principal interest, taxes, insurance, is. is $4,000, about $4,400. And that's being really conservative. It's more like $4,100. Sure. Okay. And then you are able to, you're renting out the other bet one of the rooms in there?

Is there multiple? Are you getting any other rent out of that? Yeah, two rooms, renting out two rooms. So I got two rooms. Okay. What do they pay? So the one room is like a master with its own bathroom. The other room has a Jack and Jill style bathrooms.

So I put about $200 on top of the master for the premium for the master. they pay, the master pays about 2,200, and the other guy pays about 2,200 as well, 1,000 as well. That's awesome. I've fluctuated the prices. I make sure I get 4,400 income. So basically, I think now I'm charging $2,300 for the master

and 2,100 for the other one. So you're living for free is what you're saying. I'm living for free. I can do all the number crunching. Yeah, that's crazy. I can do all the number crunch than I want, which I have. Yeah, that's so cool. All right.

So can you walk us through like what was it like? I want to talk a little about working with David. We're going to talk bad about David. David, David earmuffs. So, no, I want to know, like, working with David. David is not just like boost his ego or whatever. I want to talk about working with an agent that like understands investing. Like, had you tried working with other agents at all?

Or did you instantly just say, no, I'm going to work with David because he gets it. And what was that like working with an agent who knew what they're talking about? Yeah, for sure. I'm actually an agent now in California. So I was studying concurrently. concurrently while I reached out to David. And even though I am an agent, I would absolutely use an agent again for my first deal. Absolutely for my first deal, no doubt about it.

I mean, it was awesome. He gave me all the assurance that I needed to go through with the deal. He gave me the confidence. He eased my nerves. We went through the numbers together. Like, this was my first deal. So although I had been listening to the bigger pockets a lot and thought I had a good deal on the numbers, like David helped me refine those.

We formulated the strategy together. We, you know, we both found the place. We got through the deal. it happened. So it was, it was awesome. I would, I would do it again in a heartbeat. Yeah, that's cool. You know, one thing that was unique to Ryan's situation is when you're, when you're buying a condo or a TIC or something, basically like something this expensive because San Francisco has really high price points, you're going to have a lot of complications like CCNR's covenant codes and restrictions, HOAs. There's all these rules that a lot of cities have. And we had to read through a lot of documents to

make sure that San Francisco would allow what he was doing, not just would they allow it, but what would it have to look like for it to be allowed? What would the other people in the unit feel about what we were going to be doing? Would they cause a stink, right? And that's something that if you don't have someone who's experienced doing this, that could be overwhelming. That alone stops a lot of people from taking action moving forward because that what if is so big that sits over their head.

Now, Ryan's actually, he hasn't really talked to himself. He's an extremely smart guy, very successful businessman, has started his own startups, run his own companies. He's really, really smart. But real estate's an area where he wasn't as experienced in. And that's one of the biggest benefits of having an agent is there's someone that can help you decipher all of these questions that you don't know if they're going to be a big deal or not.

And then there's stuff that's going to pop up in the escrow, right? There's things that the seller wanted from us that we didn't want to give to the seller. There's things that we needed from the seller that the seller didn't want to give to us. And having someone who's a little experience negotiating really helps. You know, Ryan knew what he needed to feel good about this. But that doesn't mean he's got experience with actually going out. to try to make that happen. So in my opinion, I think, you know, in this case, Ryan knew kind of everything that he

needed to know. But I bet he still wouldn't have taken action if he didn't have an agent there because there's that, well, what if I step forward and I'm stepping on a landmine and I don't know. And I think a lot of listeners can really relate to that fear of, I don't know what I don't know and it keeps you from taking action. Yeah. Totally, David.

I mean, the action is this. I mean, there's three things you need to get your first place, right? Save by spending less, like learn to find an angle. and the third, like, act daily. And David, you help me act on that point, right? And this is how, like, I turn my dreams into realty. Yeah, that's awesome. That's awesome.

So if we break this one down, he bought a TIC. So we were in for around 800,000 when this would have been north of a million, had this been a condo. We took the dining room, which you really don't need when you're a single guy with two roommates, he's and turned it into a bedroom. So now he can live for free and rent out these rooms. And I think Ryan would admit he could get more if he needed for the rent. He probably really likes the roommates he has,

which is a big piece of house hacking. You don't want to live with someone that you don't like. Yes. Yeah, I can definitely get a little bit more. Right. And in the future, he will, I'm sure. And then there's plans to convert it into a condo, which is going to put a lot of equity into his pocket when that actually comes around.

And then maybe he rents out that third room and goes and does this again the next year. Oh, yeah. So those were three angles like Ryan described that we look for that added value to the property. They're going to build his wealth really big. Not to mention now he's saving. that $4,400 a month that he would have been spending where he to live in San Francisco on his own. You take $4,000, you multiply it by $12, what is that $48,000 a year, a little bit more of that, that Ryan is now saving.

That's probably going to be his down payment for the next property that he ends up going to buy. Ooh. And the other thing we didn't mention was this was a TIC, which they're usually really hard to get financing for. Right. Because what you're kind of doing is like in this case, there's four units to it. You and three other people all have to go get a loan in one loan in all. four of your names and everyone agrees to pay 25% of it, which is kind of complicated and most of us don't like that. But this particular unit, we found a bank that would do what we call fractionalized

financing. So they would allow Ryan to get one fourth of the loan in his name. Somebody else gets one fourth of it in their own name. So you don't have to worry about some of the complications that come from it, which makes this a more desirable unit. Someone's going to pay more for a property that has fractionalized financing than one that doesn't want a lot of them don't. That's another angle. And it just plays up to what you and I talk about, Brandon, a lot of the time, which is the more tools that you have in your toolbell, the more deals you can take down and the more profitable you can make them. So why? Why did the place? You said a fourplex, right? Is that what you said? It's actually a duplex. The place, the place right next to it is identical, though. So that's probably why it was. Yeah. Yeah. Why would they choose to do it the TIS, like what sell at that model instead of just condo wise it? I don't know if that's a word, kind of why it themselves. Yeah. It's, you need to have. convert a TIC to a condo, which is a pretty arduous process, actually.

It takes about a year to both owners need to be living in it, owner occupied, and then you need to go through some kind of like modifications if it's not up to snuff, you know, to the current days, no current type of requirements. So, and it does cost about you got to get a survey, you got a surveyor, which costs like easily five grand, you got to get another inspection, you got to get an appraisal, you got to go get, you got to refinance it. So it's a process that although it is pretty straightforward process, it can take a lot of time. And it was not a condo.

And like David mentioned, once it converts to a condo, it jacks up the value by at least 15 to 20%. Because then one of the main reasons is because anyone trying to buy the place can get conventional financing, whereas we had to get unconventional financing. That makes sense. That makes sense. All right. So I'm curious of like overall this whole thing, like the whole process from beginning and the end, like what would, would you? you say you've learned in that process, like that you could like teach other people like, hey, now I know this. I didn't know that before. So if you're in my shoes a year ago or two years

ago, here you should know. Anything come to mind? For sure. I guess I would just echo this. There's three things that I said like I've always, I had always saved by spending less. That was the first thing, right? And then the second was I was always like actively learning. I mean, for goodness sakes, I was even trying to become a real estate agent. But I still didn't even know what to do. So there's infinite learning. So always be learning. Right. And then I really think that finding that angle that David and I spoke of was really the kind of differentiator here with us. That angle being the property type, the financing, the bid, the negotiation, you know. And then finally, just like acting, right?

Like everyone talks. Acting daily on a daily basis is what I did. And one of those actions was calling David. And that was one of the best calls ever, right? So that he got me to take my actions. And like he said, there's a lot that I did not know. And then we just made this thing happen. happen together.

Very cool. Yeah. And I would probably add on top of that that there were moments that was very stressful during the escrow. And you have to just accept that that's a part of this deal, right? Like fear is a piece of it. Uncertainty is a piece of it. Anxiety, tension, stress.

You can't buy real estate without going through that, which is why a lot of people don't. So I know, like, Ryan, that probably caught you off guard. It was a little different than other things because there's a lot that you can't control and you don't know how it's going to work out. But you handled it really well. And you got to come out on the other end with a lot of wealth waiting for. you. Thanks. Yeah. I mean, just the peace of mind from having an agent, a professional, an expert that's

gone through this millions of times, right? That alone is in and of itself worth that three or six percent. Like, I don't care. This is your biggest investment of your life and you're going to try to do it without an agent. That's nuts to me. So like just even, especially for your first deal. So that's why it was definitely the way to go. Awesome, dude. All right. Last question that I have for you. Can you tell us how your mindset has changed from before the deal to after the deal and how you feel about real estate now going forward? Yeah, David, before the deal, it was just this like impossible thing for me. It felt like to buy real estate.

But going through the deal, actually making it happen, it was difficult. But like now that I've done it, I am so sure that this is the way that I'm going to have like financial freedom. It's definitely like how I'm going to get there. And I'm going to do this over and over again for the last of my life as much as I can. that's how my mindset has changed. This is definitely the route to freedom for me. And that's definitely what's ultimately going to make me happy in my life.

So that's out. Now you ask me the second part of the question, Romney, what that was? How has your mindset changed moving forward? What's different about you now? Oh, I mean, I'm just going to take more action by doing more real estate. And now that I'm an agent, I'm going to be doing even more so with you, David. So, I mean, this is definitely my path, like I mentioned, to financial freedom, no doubt about it real estate's the way to go. I love it. Now, I believe if people want to hear more about Ryan's story,

you wrote a blog post on BP, or maybe I wrote one about your story. So you can definitely check that out if you look at my blog articles. But what Ryan has found a way to do through the magic of house hacking is find a property in the most expensive market in the country, live in it for free. Once it's converted to a condo, I'm going to guess that he probably adds about $200,000 to $250,000 to his net worth from that. that one deal, as well as the, you know, 4,400 a month he's saving, which in a year is close to $50,000. And now he's got that much more experience and that was more confident to go do the deal again

the second time. That didn't come without a price, though. There's some fear. There's some apprehension. There's some worry. There's some work that had to be done. You had to go to the city and do a lot of research on permitting and find out what was allowed, what was allowed, what qualifies as commercial use because that was prohibited versus

not. So you definitely earned it. You didn't just get the six-pack. You had to go to the gym and do the crunches, but you got it, and now you got that bug. And I know you're going to go on to build a lot more wealth and buy a lot more real estate. So that was awesome.

Very glad I got to meet you. Yeah, for sure. Thank you. Thank you, Ryan. That's exactly right. Yeah, thank you, Ryan. Last question for you, Ryan. Where can people find out more about you?

Yeah, totally. You can find me, Ryan Mineser.com. Now that I'm an agent, you can go to Rye cares. People call me Rye cares sometimes. So rye cares. com. All right, Rye cares. That's awesome.

All right. Well, thank you, Ryan, for doing this. Now, we're going to bring in another guest here in a moment. But first, David, I want to hear from you real quick. What was it that you liked about working with Ryan? Just so, like, people listening to who can be like, if you're trying to attract a good agent, like a rock star agent, how can they best appeal to a guy like you or an agent who actually understands

what they're talking about? Like, what attracted you to Ryan? That is a really good question that you're asking. So one of the things that was unique about Ryan is it was clear, I'm going to do this. I want your help to help me do it. as opposed to the buyer who comes to me and says, I want to do this, but I'm scared to death,

make me feel good about it. Take away all my fears and then I'm going to move forward, which is not something I can humanly do. And it ends up being a waste of my time and I take on a responsibility of some other humans. They're the only one they can face their fear. Ryan was different. Ryan was also very clear about what he needed to feel good moving forward.

So it wasn't all easy, but it was, okay, David, here's what the CCNR restricts. Here's what I want to do. How can I make it happen? Then I was able to dig in there and figure out how is this defined? We could talk to attorneys. We could talk to the city permitting department and find out this is what we want to do

with this count, right? It was very clear to get the answers that we needed to make sure that this was the right deal for him moving forward. Ryan also had blueprints drawn up. Hey, here's the different configurations of how I can work out the house. Which one do you think is the best? He didn't come to me and say, hey, David, I want this to happen, figure out a way to do it. You do it.

You figure out what I need to feel good about this. Because had I done that, I still don't think that Ryan would have been comfortable moving forward because we all want to believe that it's our own ideas that we're taking when we're taking action, you know, that's a problem. A lot of people come to real estate agents and they want them to be the miracle worker is you figure out a plan, but you make me believe that it was my plan in the first place, and our brains reject that. And that wasn't the case with Ryan. So with Ryan, it really did feel like a partnership. Here's the stuff he's doing. Here's the stuff I'm doing. We are doing it together. Both sides end up winning when we get to the finish line.

And the next time we do it will be that much better. We've worked together before. I know more about how he thinks he knows more about how I think we know more about what to expect. And as you understand, Brandon, those are the best relationships. When they're mutually beneficial, their partnerships, it's not like an employee, employer type of a situation. And I think that, I mean, Ryan, because of his previous success with business, he kind of understood that more than a lot of people do. And I think it's why he had more success than most people will. Good answer. Good answer. All right. So let's move on to the next guest today. David, you want to introduce them? All right. So next up, we have two very close friends of Vine. I really, really love getting to know these people. This is Hero and Stephanie. They had a

unique situation. So I believe that I met these two when I was speaking at a real estate meetup, and they had come to learn about whatever topic I was talking about, long distance investing or burr or whatever it was. And they came up to introduce themselves after. And I think that you guys told me that your baby really likes listening to my voice, right? That was the first thing we talked. Yeah, it loves the bigger podcast. Yeah, I got to meet my biggest fan. That was kind of cool. And we scheduled a follow-up call, and they basically explained to me, they were looking

to buy an assisted living facility. So this is a house that you buy and you convert to have typically elderly people come live in when they can't take care of themselves. They need some form of supervision and assistance. But they're not in the point where, like, they need to be in a hospital or hospice care where there's like a nurse assigned to them all the time. They're in this transition phase where they need someone looking over them, keeping them safe, and they have various needs.

And I'll let you guys discuss the various levels of care that there are and how you charge. But you're kind of running in a form like kind of a, I'm something best would describe it, like a medical facility in a sense without maybe providing some of the medical care, more of the supervision of people. And you need a very specific property to make this work. You want more than one bedroom. You need all kinds of compliance issues with making sure that it's in line with government regulations and it's very hard to find a property like that. And additionally, Hero and Stephanie

were trying to get into this with a low down payment, right? They wanted to find like a house they could use an FHA loan to buy. So we had a lot of complications in being able to make this happen. And they had already been working with somebody else for a long time trying to find a property that would work and they hadn't had any success. So that was kind of when I got introduced to that point. They told me what was going on. We went over their situation. And what we ended up doing was breaking down their overall plan into several smaller steps that were much more manageable. So I'll let you guys jump in and explain what your frustration was like before we met, what it was like once we met.

I never really got to hear your guys' perspective of what it was like working with me. And then we'll break down into details after that. Okay. Well, we were working with an agent probably about eight to 10 weeks before that. We were looking for houses every day. We were on like the basic platforms like Realtors, Redfin and I would get some email, you know, notifications from a realtor. And we would be at open houses every weekend.

Every weekend, yeah. For like eight to ten weeks. And so at some point, I guess our realtor kind of just got tired of having that back and forth. It wasn't like our realtor was driving us to all these houses, but it was just maybe a realtor wanted like that one quick and done deal. And then she talked us about maybe saying, oh, I guess your goals, your goals are too high or something like maybe. Your criteria was very specific. And I think she was kind of

wasn't in line with our goals at that point. And then it kind of just, we've realized that, well, you know, now I think it's time to just, you know, try finding someone new or working with someone new and, you know, sourcing another agent. And that's when you came in. I think that's, I think, and Brandon, you can probably relate to this. That's a struggle a lot of people have is the frustration that builds up when you're not getting the result that you want and you're not sure whose fault it is. Is it my fault?

Is it my fault? Because they're not finding me a property. What's the realtor's supposed to do? What am I supposed to do? I mean, I hear that question on the forums all the time. And I don't know that there's actually an answer for what one person is. post to do because frankly, every client's different, every realtor has different strengths. There isn't really a set rule. And it's very easy to become frustrated. And you see this a lot

when you get on the agent side where you do the very same thing for two people. One person thinks that you're a Greek God and you walk on water and you can't mess up. And the other person maybe you were charter for and they think you suck and they hate you and they're really frustrated. So I'm hoping that people can take out of this episode like what it looks like when you get it right. because what I remember from what you guys told me was you're trying to find something that had eight to 10 bedrooms maybe, but a lot of rooms that didn't need a ton of work. And you could get in there and buy it with a low down payment option. And you were either getting outbid or the houses weren't working.

And what we discussed was, hey, rather than try to get that 10 bedroom house on your first deal, what if we get a four or five bedroom house? You use your low down payment FHA loan. You get the kinks of your business worked out with maybe four clients instead of 10. So you develop the systems that you're going to put together. You start the hiring process because that's going to be tough to learn. You find your facilitator, your administrator, who's going to do the work. You learn the regulations.

You kind of get like, we do this one like a deal with training wheels. Once you've got that down and you're established and I mean, not only will this be paying your mortgage for you, but you guys should be making quite a bit of money every single month once it's up and running. Then you go bigger on the next deal. You've got more money coming in. You can put more money down. You can be a little bit more aggressive. and you guys were like, hey, that sounds great. Our other realtor never explained it like that to us.

Let's do it. And what's funny is we came in, you guys met, you brought the baby who was super few. It was very good the entire time. And you already had a list of like three homes that you thought would work. And the one that we ended up getting was a property that had already been used as an assisted living facility in the past. So the rehab portion was a lot smaller, right? Yeah. So it was an assisted living previously.

And then they tried to turn it back. into a single family home. So assisted livings would need to have ramps and all that. So they tried to turn it back into one. And yeah, so it had five bedrooms and one office technically. And so they, then we would only need rehabs to maybe get the property into code for back into compliance, yes. Yeah.

But it would it. And it would it cost as much as if we had bought a regular six bedroom house and tried to turn the whole thing into something that would comply. right? Correct. We would probably have to make more rooms. So build up walls and then more egressed exits. Yeah, it would probably would have cost more. Definitely a lot more. Okay. So I mean, that's one of the reasons that I thought this house was when we should aggressively go for. And then when we were trying to buy it, of course, somebody else jumps in. That's always the case. There's always other buyers that want to get involved. But we were able to muscle them out and get it

wrapped up under contract. Did you fight them? Like physically? I don't make my clients do it. That's good. Well, it's kind of like the whole, like, you know, David and Goliath, the story, right? Like, like, the Dave and Glythe went out there, like, instead of the army's fighting, they send their, like, their warrior in to fight. Yeah.

I'm watching this movie on Netflix called The King, and they do the same thing. They send the Kings out to go fight, right? So that's what you do with an agent. You send an agent knight, and like, you give him a sword and let them just go to, you know, whoever wins, lives. Like trial by combat, right? Exactly. That's exactly what it is.

Yeah. Just like the movie Troy. Yes, exactly. Same thing. Pretty much. David, people call David Brad Pitt actually all the time. Like,

they get confused all the time. Like, aren't you Brad Pitt? Oh, wait, no, you're David. Yeah, I get that. Well, if you put your shirt on more often, they wouldn't get so distracted. So anyway, moving on. All right, so what I want to go to is,

like, finding the right agent is so key to try to invest in real estate, whether you're trying to buy a house for yourself or whether trying to, you know, invest in a $50 million property. It doesn't matter. Like, finding good brokers, good agents is, vital. So can you guys walk me through like, what was the difference between David and somebody

else? What did you learn in that process? What would you tell somebody else about finding an agent today that would help, uh, it would help others. Okay. I think, um, finding someone who's in line with what your goals are, uh, definitely helps a lot. Um, our previous, uh, realtor, she was very organized. She was really a prompt. She would meet us there on time and everything. It was great. I mean, she would, we would go through so many houses. But, unfortunately, Unfortunately, I think she had the other aspect of what you see in the property and if she would see the same thing in the property to make it more functional, especially for an assisted living that we wanted to start with. We were, you know, when we would spitball ideas about we can make this into a room and stuff like that. The connection wasn't quite there.

Sure. That makes sense. And then with David, I guess it was just much easier because he understands real estate a lot better, I guess, than the other person. And just having that thinking about house hacking and how we can use that to our advantage and just using that and leveraging that and making a plan from that, I think helped us a lot. And also with David, there's a whole team. It's not just David, but there's other people behind him helping. him have all the moving pieces just work together. Yeah, the system.

So it was just very easy. Thank you, guys. Why don't you explain to us a little bit about, because this was a house hack combined with a business that you're literally running. That's one of the ways that I think, I mean, you're one of my favorite clients I've ever helped because I think that this is a brilliant strategy.

Like you were able to buy more or less a business for three and a half percent down. So explain to us how an assisted living facility works, why you're drawn to it, how you wanted to look at the end so that the listeners can get a better idea of what you're doing. Okay. Well, the main reason why we really got into it is I'm a registered nurse by trade and I actually do hospice nursing. So I go into a lot of these homes every day for my day job.

And so I got drawn to it because every time I go, I feel like I just always complain in my heart. like why can't we have better homes or better equipped, better run facilities and jumping in and listening to bigger pockets. I just felt like I myself can make a difference and I can do the best of both worlds and still doing my nursing kind of in that term being an administrator or owning the business and also owning the real estate. So what kind of person lives in an assisted living?

like you're in your place. I mean, is we talking developmentally disabled? Are we talking elderly? Elderly. Okay. Yeah. So there's not hospice or yes.

We could do hospice too. Okay. It just depends on how much like the state would approve us for. Sure. But usually there's like it in a residential assisted living in California, the maximum that you can have for you not to get permits is to have six residents in the home. And then you can get permits for like two hospice patients. So it can.

Interesting. All right. So you're saying in California, at least, and I'm sure every state might be slightly different, but you can buy a large single family house. Mm-hmm.

And then without having to be like permit, something special, you can have up to six people living with you, the state is paying or are they paying themselves either way? You get paid. Uh-huh. I mean, there's two ways to do it.

It could be paid by the government, but that's a little bit more complicated. So what we're trying to do is just to have privately paid rooms. So that's paid for by the patients, the families from their pension or whatever. Yeah. And how much work is this in for you guys, like to actually do on a day-to-day basis, Amara you, are you cooking, cleaning, that kind of stuff or are they pretty much self-sufficient on their own?

We are providing like cooking and cleaning, but we're not doing it ourselves because we're, we plan to hire caregivers. Okay. So usually the thing is we have two caregivers in the home. They take care of like cooking, cleaning. assisting them. And then most of the time these people have nurses that come in and out of the house to to kind of check on them, check on the medications and things like that. And that's what I actually do for my day job. Yeah. Okay. So let me make sure I get this straight. And you guys correct me if I'm wrong,

because here's what's so fascinating about this model. You buy the real estate with low money down and you convert it to be in compliance for assisted living facility. Then you hire an administrator who is licensed, who's going to run your business. And that's, that person oversees the caretakers that come in and provide whatever care you're offering. The family members of your patients will pay you to keep them there. And here's what's so cool that a lot of people don't realize. It's actually the administrator's license who's on the line if something goes wrong, not the person who owns the real estate.

So while they own the business, it's like owning a construction company, but you have a licensed contractor who's on the hook if something breaks and falls apart and somebody gets hurt, not yourself, right? Yeah. I love that model because all you, have to understand is how the numbers break down and how to hire the people. Now, in your case, Stephanie, you actually are a caretaker. So you're going to do some of the work yourself. But when you get 10 of these properties, you probably won't be. You'll probably just be managing

the other caretakers. Can you share with us a little bit about how much somebody will pay for the type of property that maybe not your house specifically, but a house like this one, just the typical numbers of what somebody would pay and then what it's going to cost to run the business? You mean for what the patients or the families would pay? Yeah, what the family is going to pay per patient and then how much you have to pay the caretakers and everybody to run the business. Okay. So usually I would say just an average up here in Northern California, the pay scale or the amount of money that is probably around 4,500 to 6,500, it could go from those prices.

And it just depends on how much care they need, I guess. And also for the caretakers, I mean, the caregivers, you pay them like minimum wage. So if you've got five bedrooms and you guys are living in the sixth one that was like an office, that's 25,000 or so in gross revenue. And then what would you estimate you're going to have to pay in wages and supplies? So, I mean, right now what my plan is since it's still a startup, I wanted to learn the whole business. So I'm working as the administrator.

So I'm not paying that in salary and paying myself. And then for the caregivers in wages, it'll probably be in groceries. it'll probably be around like, let's say, 15 to 20,000. And then if we have six patients in the house, then that'll pay us about 6,500 times six. Wow. So you're potentially at 15 to 20,000 in the cost to operate and up to 35,000 or so in gross revenue,

giving you a profit of, what is that, 20 to 25,000 or so. when you're full, you're completely Yeah. Right. Now, that's some pretty nice profit. Now, of course, and that's monthly. That's not necessarily the same as somebody who's renting out rooms and they do no work.

That's how most real. When we talk about house hacking normally, they're just paying you money to live in the space. You're providing nothing but, you know, a place to live. There's some work that goes into this. You're running a business. That's why you're getting more money. Actually. A ton, right?

You work. I wouldn't want to do it. I mean, like, if you, If anybody ever meets these people, they have huge, huge hearts. These are some of my favorite clients that I've ever worked with. And I'm not just saying that because their baby likes me a lot. I really mean that. And they're doing God's work, you know, like taking care of people that really need help that really probably wouldn't be getting any attention at all.

And Stephanie told me that's really what motivates her to want to do this is she sees the lack of care that a lot of people get when they're in the twilight years of their life. And that bothers her. But that's really good cash. If you're making $25,000 a month per house and you end up getting $4,000. four houses, you can be making, you know, 1.2 million in profit just to manage four assisted living facilities. Well, maybe a little less than that because there's a lot of like insurance that we didn't take into account with that question.

Very good point. However, we, we got in on this property for three and a half percent down, right? And when you guys want to buy your next property, you can probably also do it for five percent down. It's a way that you can start a business if you have some understanding of how this stuff works for very little capital upfront. and just more time. But it's a pretty cool twist on house hacking that I don't think we've talked about before.

Yeah. Yeah. Yes. So what are you guys most excited about when it comes to the future and how you want this model to grow out? I mean, the real reason why we're doing this is for like freedom of time and financial freedom too. Since we have that little one, I'm really excited to just be able to grow this business for ourselves and not basing our schedules off of our 9 to 5 jobs. And, you know, scaling it up to something bigger where we can give opportunities for other people who were once just caregivers and they can work as administrators, you know, and make more money and run our business so we can teach them what we know and give them more opportunities to. And then growing our portfolio and growing our business at the same time.

So it's a win-win, not just for us, but we're able to help a lot of other people. Especially the caregivers. I feel like the caregivers sometimes in the industry are very underlook. Yeah. Yeah. So it's definitely give more shine to them because they do a lot. They really do all the work that, you know. It entails to run the business, basically.

I mean, if they provide great care for our patients, then everything's going to run smoothly. And I feel like they deserve to, you know, be. can have the same opportunities that we potentially could have. And they're part of America too. So, you know, that's awesome. So the patients benefit, the caretaker employees benefit, you guys benefit, the real estate benefits. And if you have a good agent, the agent benefits,

that's exactly what you want a deal to look like. Can you guys share a little bit for the people listening who are struggling, either getting started or finding the right agent to help them? What did it feel like when you knew like, okay, this is the right person and I know I'm going to be successful? Well, the amount of like confidence that like when we came into your office there in Bramwood, we sat down and we instantly knew. It was this whole presentation. Yeah. There was a PowerPoint.

And you guys brought toys for my son. Yeah. Kudos to you guys. No, but really, you know, you and Brandon were our mentors. for like this whole ordeal. Just really listening to you guys and, you know, having David Green as a realtor just, yeah,

it's like that we're going to know a rock star who knows rock stars. It's that whole ordeal. And funny thing is when we went to the meetup to listen to him as a guest speaker, one funny thing was, sorry, David, but he asked, does anybody in this room have used, my team in real estate.

And unfortunately, there were no hands that raised up. And so we looked at each other and was like, why can we just have David Green? We'll call him next week. That's funny. So, yeah. So that's kind of how it started. And like when he went through the long distance investing

and then the burying during that time, we just knew that we got to talk to him. We got to make sure that we get our names out there. and speak to him personally. And they said surround yourselves, yourself with like-minded people and surround yourself with successful people. So you kind of get to where they are.

And that's what we did. Yeah. That's great. And that's why we're here. That's awesome, guys. So you took action. You went to a meetup. You followed up at the meetup with what you saw.

You met with an agent who explained to you, hey, here's what the plan is. Here's what we're going to do. Here's what it'll look like. And we provided a lot of information to education up front, which is what I think a good agent does. And now let me sum up what your deal look like so people can know what to look for in a deal. You were looking for an assisted living facility, which is a business because that will generate

more income than just a typical renting out the rooms and people provide for themselves. You went with the property that had already, for the most part, been rehab to be in compliance with what you wanted and you saved yourself a ton of money on construction costs, as well as a ton of time for what would have to happen. You don't have hard money lending fees during this period of time because you bought it as a house hack and you only had to put down three and a half percent. So that saved you a lot of money too. You're using it as a house hack. So you're also eliminating your living expenses to help with this business. So your rent, what your mortgage would have banned. That's something you have to

factor into this that you're saving as well. And then you took your big goal and you split it into several smaller chunks, bite size pieces that you could actually manage. And you took what was a huge jump and you broke it up into little steps of a stair that you're going to be ascending together. And when you put all that together, you're going to end up with a very profitable business that should be very emotionally gratifying and a lot of success. And that's why I wanted you guys to be on the show so that other people could see this is what it looks like when you do it right. Well, we thank you for having this. Thank you. All right.

So that was awesome, guys. Anywhere else you want to go, David, before we bring in our next guest? All right, guys. Thank you so much for sharing your story. This has been enlightening for a lot of different people. How can people find out or get a hold of you if they want to find out. out more about you to learn more about what you're doing. We're still working on our website, but you could get a hold of us in our email,

N-U-R-T-U-R-E-H-O-O-D. It's like neighborhood, but nurture. I like it. Nurturehood, senior living at gmail.com. And if you want to see cute, cute pictures of my little one, you can follow me on Instagram. It's F-E-E-E-E-I-G-E. All right. Everybody, please, go follow them and like that little tyke of theirs.

She's a cute. That's funny. Thank you. Thank you for having us. Thank you, guys. Very much. This was great. Appreciate it. Thanks for having us.

All right. Well, that was awesome. Yeah, that's a cool strategy. I'd never thought of it before. Like the idea of combining house hacking with assisted living. Very, very cool strategy. Did you know your house gets bored when you leave? I can't actually prove that, but it probably misses out on the action.

The footsteps, the late-night fridge raids. Yeah, when you're gone, your place is basically on unpaid leave. It's sitting there in the dark thinking, I could be contributing right now. Your side room wants a side hustle. Even your Wi-Fi is like, we could be networking. You're on vacation, spending money like it's a sport, while your staircase at home is fully capable of sending your income upwards. Here's the twist.

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A co-host can handle all the details like messaging guests, creating your host space, and managing reservations. So everything runs smoothly. It's a practical way to earn a little extra money, maybe even some cash toward your next trip. Plus, you get to share your place with someone traveling to your area while you're off making memories, somewhere else. Your home might be worth more than you think. Find out how much at Airbnb.com slash host. Now, I think it's time to bring in Rob. You want to introduce them? Yes. Rob Kishi, welcome to the podcast. How are you doing today? I'm doing great. Thanks for having me, guys. Awesome, man. My pleasure. Now, Rob found me, I'm trying to remember, was it at a meetup or did you

get my information from the Bigger Pocket site? So initially it was a meetup that my manager actually recommend that I go to. And shout out to Nate O'Neill, if you're watching this, much love. And then that meetup really sparked my interest in real estate, saw the value in it. And the timing was right to kind of lining up from my first house. And so I thought it only made sense to work with you. Yeah. So I hope that people are seeing the patterns here in taking action, going to a meetup, pursuing your interest in real estate, leading to big things happening. Now, Rob reached out and he wanted a house hack, which, I mean, frankly, Brandon and I talk about this. I don't know why everybody isn't house hacking.

I mean, unless you have a really big family and you just can't put other people in the property or you can't find multifamily property, it's silly to be paying 100% of your own mortgage when other people would be happy to be able to lower their own expenses. It's really just a win-win for both sides. A person renting the rooms or the units, they save money. You save money because of sharing these living expenses. And Rob's a smart guy. So he wanted to take advantage of that. Now, today's show, we're talking a lot about my clients because I know these stories.

That's where bringing them in. But I don't live everywhere in the country, right? There's real estate agents that are all over the place that you want to be asking, are you familiar with house hacking, right? Could you explain to me how house hacking would work? Rob, do you mind sharing what it was that we talked about that made you feel comfortable that like, okay, this guy gets what I want to do and he can help me do it? Yeah, I think, you know, all the content that you guys have definitely provided a lot of

reassurance. Clearly, it's something that you have a lot of experience with and really not something that I saw a ton of from other agents. Granted, I didn't do a ton of research on other guys, but it definitely felt like this was the right play to link up with you. And the Bay Area is a pretty competitive place. I know that I needed the right folks in my team to get the deal done. Yeah, that's exactly right. I mean, in general, most buyer clients that I work with in the Bay Area, you're going to try several times and fail before you actually get something under contract because there's so much competition. And that is a natural, we call it barrier to entry.

But anytime you find barriers to entry, you know on the other side of that, you're usually going to have big wealth coming because it was so much harder to do. Now, Rob's case, you actually had a couple factors you're trying to work into this. You wanted to find a place that you could live in and save money on. You didn't want something that was going to be a really big rehab. You didn't want it for your very first deal to take on a huge project. You have a good job. You make pretty good money.

you don't want a distraction from what you were doing. You wanted something that would kind of minimally impact your life. You also wanted several other people in your life who don't understand real estate investing to approve of it, which I think a lot of people out there are actually struggling with this too. Sometimes it's a spouse. Sometimes it's a family member. But everybody usually has an opinion of what's best for us. And trying to satisfy all those makes it more complicated.

And then you wanted something that you could really like add value to yourself. So in this case, we ended up finding a property that was zoned for. multi-family even though it wasn't already set up for multifamily. So there's some value hidden in there. But you had a really big wish list. Tell us a little bit about why those things were important to you and what your plan was. Yeah. So I think one of the biggest reasons I fell in love with the idea of house hacking is just kind of the passive value and the passive income that it creates. Really big believer. And that's kind of the key to financial freedom. So I was pretty committed to doing something in that fashion. I actually did the deal with my mom. She's a 50% owner in

it. She lives in Hawaii, so it didn't have that kind of on the ground connection to look at the houses. Yeah, we're all born and raised out there. So it was a little bit of a challenge kind of going back and forth, doing all the communication with her and kind of making sure that her concerns and her expectations are met. My brother is also in the house with us. He has a bigger dog, so a yard was important having that space. What was really cool about the property that we landed on was the fact that it was zoned for a four-unit complex. There's a lot of potential there. It actually has a detached garage that we're planning on converting into an ADU.

There's a space for another ADU if we want to do that in the long term. So, you know, a lot of really good things about it. And it was, you know, in the price range that we were looking for. We were going to open houses literally every weekend for about four or five months, driving across the bridge from San Francisco to Oakland in that traffic every single weekend. It was brutal. And, you know, if you guys are in the best, Bay Area, you'll know that things go very quickly and they go for much more than listed.

So every time we were interested in a house, we found ourselves in the middle of a huge bidding war. And so that was a little bit of an awakening. But I think, you know, after the first couple of months, we really kind of reset our expectations and then really had a much clearer view on what we were looking for, what we wanted. And then when those things did come up, we're able to move quickly. That's great. Okay. I'm just curious. What did you, what did you find then, I mean, like, what was the property you ended up buying? So it's a single family home, three bedrooms, two bath. There's a detached garage and, again, tons of yard space.

So kind of the future state or the big vision is rent out the master. I'm actually living in the smallest room to try to maximize the rental income. Convert the detached garage into an ADU, rent that one out, and then build another ADU on the other side of the property and rent that one out as well. There's a few different entrances. So, you know, the separate ADU will have its own kind of gate entrance and just a lot of space to work with. And the house itself was in pretty good shape.

The inspection came back pretty clean. And the sellers, they do quite a bit of work on it. So as David mentioned earlier, little rehab. It was pretty much turnkey outside of a few minor things. Yeah, that's great. So the plan was, you said your mom came in on it with you. Like, what was, what's her role in that? Is she making cashful off of it then?

Or is she going to eventually live there? How does that play in there? Yeah, she's participating as an investor. Okay. You know, I think it was really cool because we were able to do this kind of together as a dual project together. Yeah. So, you know, it was, there was ups and downs throughout the process.

And, you know, as you guys are talking about earlier, there's a lot of fear, uncertainty, doubt, stress that kind of comes along with buying a house, especially with my mom being hundreds of miles away across the Pacific. Yeah. You know, I can only imagine what she was going through. It definitely brought us a lot closer, and I'm really, really happy that we did it together. It's something that, you know, we can have together for years and years to come. And we're already excited talking about, you know, what's the next house going to look like?

Where's the next one going to be? And so it's a really fun, really fun thing. Okay, that's very cool. So, what did you pay for the property? So it was listed just under 600 grand. I think we made an offer at a little over that or maybe 620. I'm not really sure. David, keep me honest here.

We did want to go a little over asking simply to lock it down. And there was a lot of negotiations involved there. Much love David, again, for helping out with that. And so we got at, I think, at around 620 initially. And then the appraisal actually came back a lot lower. It came in at like 600,000. And so there was even more negotiations that needed to be done. And again, David, just the guru in that space really took care of business.

I think we ended up landing at around 610, which was around our kind of best case scenario after talking through initially. Okay. So let me enter, jump into David then. David, how do you deal as an aging? Because it's something

that a lot people are dealing with is, I mean, first of all, let's talk about this. People for a long time, we bought real estate that was way under price. Like, you know,

I mean, if the listed was, I mean, I would never pay over asking like five years ago, right? That was silly. Like a property was listed at 200 grand.

You offer him 170 because that was the market we're in. So a lot of us got accustomed to that. So today, I bristle at the thought of paying over asking ever. Yet, yeah, why is that not such a big deal? Because David, you talk about this a lot, but David, why is that not such a big deal to pay over asking?

So the first thing you need to understand is that you're not getting a deal if you pay less than asking and getting ripped off if you pay more than asking. Asking is an arbitrary number that gets thrown out there. And the amateur focuses on the list price and that's all that they see. Yeah. Right. And you see a lot of clients like, oh, that's listed at 600. If I can get it for $5.95, I got a good deal.

Yeah. Well, what if all the comps were at $5.50, right? You paid $45,000 more than what you needed to. So the first thing you want to understand is the way that properties are valued is a combination of what the rest of the people are willing to pay, what we say what the market dictates its worth, and what an appraiser would say it's valued at. And when we write our offers for our clients, we always include a contingency so that if there's a low appraisal, we get to back out of the deal, which gives us negotiating power when that does come up. Now, in this particular case, we got super lucky that the appraisal came in, though, because there was a lot of comps that were priced. much higher than what we paid for this house. We just got an appraiser who was irritated with the fact that prices were going up in the Bay Area and they wanted to do something about it.

So it gave us some leverage to knock some money off. But the first thing you got to realize is don't be so simplistic to think that because you paid less than ask price, you somehow got a good deal. You want to look at comparable sales. And then you want to look at which way the market's trending, right? For the last, God, like nine years, eight years. Every house has sold a little bit more than the one before it. Comps have been steadily rising.

So what we do is we look at what other houses have sold for and we base our offer off of that as well as, okay, if we're going to pay 610 for this house, is that better or worse than, is there other houses we could pay less for that would work the same way? No, there's not. Every other house is 650. So if we back out of this deal because we couldn't get it for 600, we'd have to pay 620. All we're doing is winning that battle to lose the war because we're going to go pay 650 for another house. So that's the first thing you want to look at. The second thing you want to ask yourself is what is this house worth two? you. Now in this case, this was perfect for Rob because it's zoned for multifamily. It already has a

garage built that he can then go finish. It's got electrical already run to it. It's really close to the house. So you can tie into the plumbing and make this an ADU for relatively low money. It's got space to build another ADU on it. And what we haven't mentioned yet was that the actual main house can easily be split into two and a second kitchen put into where he could turn the main house into two different units and increases rent by 30 to 4.4. 40% just from that one small move. So he's going to be able to turn this thing into a fourplex, making it worth more to him than it would be to someone who doesn't want a house hack.

Yeah. That person's not, it's not worth as much to them. So it's another thing you want to ask yourself, like Stephanie and Hero, they could have paid much more for the assisted living facility than they did. They didn't have to, but they could have because the rehab was already done. So someone who doesn't want to use it for an assisted living facility, it's only worth so much. But to them it's worth a lot more because they're saving a lot of money there. It's another thing that Rob understood he had the right mindset.

He wasn't, his ego wasn't controlling his decisions. He was looking at it holistically and he understood this is going to be a great deal for me, especially if I look back 30 years from now with how much money that that's generated. Now, when it comes to negotiating the appraisal, that was the other question that you asked me. It's not the same all the time. What a good agent does is they understand that people make decisions based on emotions. They don't make decisions just based on information. So when the appraisal comes in low, you have to look at it from the seller's side.

This was a house that they had just, they'd done a massive amount of rehab work to. It was, it's like spotless. This was like a model home. Their expectations were that they were going to sell it for more than what we had got it under contract for. So they were already disappointed. Now they get hit with the low appraisal, even more disappointment. Their initial response, when someone feels like they're being taken advantage of it, is to dig in their heels and say, I'm not giving you anything. So it wouldn't have made any sense for me to try to play hardball with them when they had their heels dug in.

So I explained to Rob, hey dude, we can back out of this deal. And the only thing they can do is put their house back on the market and run to the same problem with somebody else. Let's not ask them for anything. Let's just wait. Let's give them a week. Let's give them 10 days. See how long they can hang in there because they're marinating in their stress and eventually they're going to cave. They're going to break long before we do because we've got all the details on our side.

And the other thing we did is we negotiated a couple thousand dollars for repairs before we even brought up the appraisal. because I knew if they took a haircut on the appraised value, they weren't going to want to give us any money for repairs. And Rob, to his credit, hung in there. It's stressful when you're buying a house and you don't know how it's going to work out. You just want an answer and you want to be done with it. But if we had pushed them, I think they would have just said no. So instead, we just waited and waited and waited.

And finally the agent came back and he's like, we need to get this thing sold. The hard money costs are killing me. What can we do to make this happen? And they wanted to drop the price like two grand. I wanted to come all the way down to 610. And I think I was actually in Hawaii, visiting you, Brandon, and all this was going on. I just told the guy, well, that's not going to work.

Let me know when you've got something that can actually work for my client. And eventually they broke. But the point I want to make is that that only happened because Rob could handle the emotions of uncertainty and anxiety and fear. He was very good. Maybe it's that Hawaiian background where he's just super chill. Like, okay, David, if that's what we got to do, let's just wait. And he rode that wave, so to speak, and we ended up getting the money. But that's how negotiating works. It's not just everything's on paper and it's all logical. There's a lot of emotions that go into it. Yeah, that makes a lot of sense.

So Rob, you got through the process. You bought the property now for around 600, 610. What do you rent? Like, what's your mortgage look like? And what can you rent out all the bedrooms for, the ADUs? And like, how does the financial breakdown look? Sure. So we're still somewhat new to the house.

I think we moved in only about three or four months ago. So we were taking care of kind of the main house things that we wanted to do. furnish the place up. Sure. So we just started listing the master. Okay. I'm looking for somewhere probably around 1,200 to 1,300, hopefully. We'll see how it goes.

My brother's in the other room, so he has the Ohana discount, you know? Yeah. So we only charge him like, I think, 800, but we could probably get a little more in the future. Okay. And hopefully the ADU is going to rent for at least 15 to 18. That's awesome. The mortgage itself, so I think if you include the insurance and, you know, all the other stuff. It's right under 3,000. I chose to just pay that separately. So my monthly

comes out to 2,200. Okay. So total expenses on the thing are probably, like you said, mortgage around 22, all the tax insurance. You might be running 3,000, you know, maybe some water sewer garbage in there somewhere. But potentially, if you're able to get, let's say you're able to get, like, even just the minimum numbers you just said there, 1,500 plus $1,200 plus $800. That is $3,500. Am I doing that right? Right. Yep. So like, so potentially your total, all your expense. I mean, basically you're like, again, living for living for free at this point. If you wanted, like, once you get these done. And that's before he, he, he, if he wasn't to split the main house into two units.

Yeah. Which could increase that even more. Yeah. So again, you're, you're. And the second 80, potentially as well. And the second ADU, yeah. So huge potential. I think that's what really got me excited about this place. Um, you know, I think I'm going to hold on to this for a long time. Yeah. And just really kind of excited about real estate in general. You know, You know, it's definitely something that I plan to do for the rest of my life. And I think this is a really good way to start it off. Can we talk about ADUs for a second, that term ADU? Can you explain what that is between the two of you? Like, what is an ADU?

And California just recently passed a new law about ADUs, right? Is that a thing? Do you guys know? I heard about it. David can probably speak more towards it. But an ADU essentially is a detached dwelling unit, essentially like an in-law or a separate little house. It'll normally have a mini-kitchenette, a mini-kitchenette,

at a mini kitchen, mini bathroom, you know, anywhere from a large bedroom to a medium-sized bedroom. Maybe there's even a little space for a small living area. But it's a really cool way to offer a tenant a lot of privacy and then help, you know, drive cash flow for yourself. Yeah. Yeah, it's really a fantastic, it's basically like state-sponsored or state-encouraged house hacking. I mean, Hawaii's been doing it for a long time. Everybody in Hawaii has an ADU. In fact, Hawaii just passed a new law that, well, they're in the works. I'm not sure what stage it's in, but it's going to pass. It sounds like where you can now have two, depending on your lot side, you can have two ADUs legally.

And the reason why is because it really fixes a lot of problems, right? Like a lot of people just aren't going to buy a house. That's just a given. They're not going to buy a house. They're going to need to rent something. There's no places for rent in Hawaii. It's really hard to find places to rent. So the government's like, well, let's just have a bunch of homeowners build little houses on their property if they have a big enough property.

So it's not weird. and now there's housing for the masses that's affordable housing for the masses, small little units and it also offsets the purchase price of people

so like for example I live in my house here in Maui and I have a $1.7 million house and I could live for free if I wanted to just by ADU in the thing and so it helps everybody

across the board helps the state, helps the government, helps me, helps the tenant, helps everybody and so it's good to see that California has recently passed to ADU laws or they're changing them anyway

and I'm not sure if it's the whole state or part of it but a lot of states are finally getting the idea oh, this is actually a really good idea. So anyway, if you're in one of those areas that you can put one of those in, ADUs are fantastic.

I was just going to say, interestingly, you know, in the four or five months, me and my brother were doing these open houses. We were essentially, are really looking at homes with pre-built ADUs or already finished detached welding units. And they were all going for like north of 800 grand. And so we looked at this property and thought, you know,

we can convert that ourselves, do hire all the subcontractors and get that work done, probably for no more than 100. at most and then, you know, automatically get that value built in. Yeah. Well, it's cool about the ADU thing, too. Depend on the area, of course. A lot of people say, well, 1% deals are really hard to find.

2%'s impossible to find. But 2% deals are not impossible to find when it comes to necessarily building an ADU or 1% is definitely not hard. I mean, again, it's prices are going to differ everywhere. But let's say you spend, you know, I don't know, you spend 150 grand building a really nice ADU and everything rents for $2,000 a month, $2,500 a month. you know, depending again on the area, obviously, it's going to be the similar purchase or similar cost to build,

but very drastically different rent. So like on Hawaii, where I can rent an ADU for $3,000 a month out here, if I'm in Ohio, I'm going to rent the same ADU for $800. So again, you have to look at your market, but it's a great way if you're in an expensive market

to really drive up value into, and that's a good way to just invest in real estate and in an expensive market where prices are appreciated. And then when you go sell the property someday, now you've got a really cool sales thing. You say, hey, you know, you can pay more for this property because it has an ADU. You can offset the rent. You can house hack.

And there's a lot of people that have an interest in that. So, yeah, cool. Yeah, it is, it can be impossible to find a 2% property, but not to make a 2% property, right? And that's something we talk about a lot is, is don't be lazy. Let your mind take one step further than what's right in front of your face and have some creative vision like what Rob did to see how to make this happen. If you guys want to do some more research on, the law we're talking about, it's Assembly Bill 68, so you can look that up.

What it basically did was removed a lot of the regulations against ADUs on property. So for a long time, people didn't want someone to be able to put additional dwelling units on their properties because they were afraid of all, you're bringing tenants into the neighborhood. It's going to lower the value. But now what people are realizing is there's so much demand that those tenants are usually the same type of person as a homeowner. So people want that. They're like, please let people build ADU so I have a place I can rent.

that's what I really, really need. And I think we're going to see in the markets where there's a lot of demand, which is typically closely tied to the employment industry, right? Like where jobs are going to like the Bay Area, Southern California, L.A., they have this problem down there. It's really bad. There's a lot of opportunity, but there's not a lot of housing. They're letting you build an ADU on a single family lot as well as a separate, like junior

ADU. So there are laws about how big it can be and what you can do and how many. You have to look that up. And I think on duplexes you're even allowed to. add two ADUs to those lots as well, making it like a four unit property. So, Brandon, you made a very good point. It costs the same to build it in California, more or less as it does in Indiana. But the rent you get is so much more. You know, what Rob's going to get for his ADUs. And here's the other thing we don't talk about. In areas with high demand, rents go up every year.

Yeah. Significantly, right? So what starts off as 1800, you'll calculate as 1800. But in five years, it might be 2,500 or 2,300. Right. It's significant. jumps every single year, which just makes owning real estate that much better over the long term. And I think you can testify that that too, Brandon, the best moves we made were properties that when we bought them, we maybe didn't realize how good they were going to turn out. But looking back five or 10 years later, you're like, wow, can you believe how good this has worked out? Yep, definitely.

All right. Well, thank you, Rob. I'm very happy for you. You earned it, man. That was a stressful thing, like what you mentioned, trying to manage all the different pieces and keep everyone happy and look it up from every different angle. Is there anything that you want to share about why you're glad that you worked with an agent and what advice you can give people for what they should look for when they go find an agent

to help them do the same? Yeah, definitely. First off, just want to say, thank you, David, for all the help. And, you know, it was really a big part of why we chose this house that we landed on and couldn't be more happy about it. I think your agents essentially, like, in some ways, the captain of your team. You know, you want to align yourself with the folks that know the market. They know the industry.

And specifically, they know what you're living. looking for. And, you know, further advice, this is my first house. So if anyone else is looking for a first house or when you do, it's going to be an emotional rollercoaster. There's a lot of moving parts. And even more so why it's really important to have a good agent there, have those resources, whether it be family members, co-workers, agents, you know, people that have experience there and people that can help kind of answer questions, put your concerns at ease, and just stay positive. You know, it took us a little bit of time. But in the end, it's all work. worth it and there's so much potential in this place that I'm really excited about the years to come.

Awesome, brother. Can you tell us how people can find out more about you if they want to get in touch? I'm sure. Probably best way is Facebook or LinkedIn. So any of those platforms you can find me, Rob Kishi. And thanks again to Nate O'Neill for introducing you to real estate and always being a big supporter of everything I do. That guy's awesome. Every time I turn around at a meetup, he's there with this big smile patiently standing in the back. That's awesome. All right. Well, that was a That was awesome, everybody. So again, thank you all. Who came today to watch this or listen to this episode of the three house hackers.

We had kind of a traditional house hack. We then had a hospital. Assistant Living Facility House Hack and an ADU House Hack, we could call it. Kind of just three different ways to be able to get started on that journey towards financial freedom. So very, very cool. But David, I'll let you kind of wrap things up then. Well, if you guys want to learn more about the whole process of house hacking, you can definitely

check out the book that Craig Curlop wrote. What's the full title of that, Brandon? The house hacking strategy. The house hacking strategy. Very good book. I would highly recommend that for anybody. If you're not house hacking, I'm telling you, you're sleeping on real estate. This is a cheap way to get in.

It's a cheap way to learn. It's a easy way to kind of like learn the ropes of real estate investing and build up your confidence. And what I've heard from every single guest today was now that I've done it, I can't wait to go do my next one. Yeah. Before you do the deal, do I really want to do this? Do I really want to do this?

This is scary. Do I want to get into it, right? And, man, how much is that worth to have confidence that you want to get in and get the next deal because you've actually got through it? Yeah, that's true. That's true. Very, very cool. All right. Well, we do have a pro member spotlight today.

I want to make sure we hit before we get out of here. So today's pro member shout out goes to Dave Malone in Nashville, Tennessee. He is on a tear. He's done two burr deals in just the past couple months with no money out of pocket. very, very cool. So check out the deal in more details by going to the show notes, biggerpockets.com, so I show 359. And hey, if you're a bigger pockets pro member

and you want to be featured here on the spotlight section, just send us info about your latest deal. Email us at podcast at biggerpockets.com. Put the word pro deal in the subject line. And before we get out of here, last thing, we're talking about pro members, right? We just talked about the pro spotlight. But we actually have a new membership on bigger pockets

that doesn't apply to everybody, but it's going to apply a ton to some of you. And that is our premium membership. So what the premium membership is, is a new level of membership, a new tier of membership for people who are vendors at bigger pockets, meaning you are a real estate agent or you are a lender or like a hard money lender or, you know,

some kind of vendor, specifically though, agent and lenders. You guys, everyone want to look into this. Just go to BiggerPockets.com. That's premium. You can learn more about it. But it helps you basically connect with people on, Bigger Pockets. Millions of people come to BP every single month. Being a premium member helps you connect better with them. So you can make good connections, good networking and attractive new

clients for your business. So again, BiggerPockets.com slash premium to get more info there. And if you're not a vendor, but you want to find good vendors, that's where I would start. You have a much better chance of finding a good person if you go through the premium links there. So thank you very much. I really enjoyed this episode. It was cool getting to share how a newbie can get started how how I wanted to say easy it could be, but how simple it could be if you get the right people around you and you take action. Brandon, do you have anything else you want to say? I don't think so. Just that I hope people take the stuff and put it to action. So go out there, find a real estate agent. If you don't have a real estate agent, go find one. In fact,

if you go to actually BiggerPockets.com in the navigation bar, I think it's under a network, it says find an agent right there. You can also click find a lender, but find an agent. And then go there and look in your area. It'll actually show you all the bigger pockets agents that are in your area. Find some, start talking with them, send them a private message, get in touch, because finding a good agent is one of the most important things you can do if you want to be a house hacker because you can find deals on the MLS today. So get a real estate agent, get the thing going. So there you go. Awesome, buddy. Thanks for sharing that. Thank you. This is David Green for Brandon, the ADU Animal Turner. Signing off. You're listening to Bigger Pockets Radio.

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