ADPI_018: Intro To House Hacking

Aug 19, 2018

Episode Transcription:

Hey hey what's going on guys welcome to the active duty passive income podcast? Mike foster your host here and it is great to be back in the States. Man let me tell you it just came back from deployment a couple days ago and I'm excited, you know its fun being back here. It’s been interesting. Let me tell you I've been trying to adjust to the weather here .just came from seven months of sand and today was just a torrential downpour. So that was interesting. But hey really excited to be back. I'm glad to come here and talk to folks and be able to meet folks face to face for the first time, which is exciting and this episode is going to be fun I'm going to teach you guys a little bit about my favorite way to house hack especially while you're on deployment and it's great because I have a little personal story. But first.

 Hey freedom fighters welcome to the active duty passive income podcast. The only place where military members, veterans and their families learn how to build wealth through real estate investing. I'm your host Mike Foster and I'm here to show you how to stop wasting your benefits. Now get off your ass, step up to the firing line and make ready for today's lesson. Shooter stand by.

Hey what's going on guys Mike foster in the house? Oh man it feels great to be back in the States. All right kind of hold it that's an intro. But I'm really really glad to be here honestly. It was long seven months for deployment man let me tell you. But definitely I'm glad to be back. It’s interesting to see what these next few months are going to look like. But really excited to be here and to be able to meet people face to face. so one of the things that we're going to start doing here soon is having some meetups and we want to be able to not only hear from you guys online, but we'd love to be able to see you guys face to face and to you know really go out and connect. So look out for that right. That’ll be something that comes up here in the interim. May start out on the East Coast and then eventually trickle its way out west.

But hey you know what you'd be surprised how quickly things will spin up. Because things have been spinning up here for an ADPI here for a little bit. So I'm definitely happy with how fast things are growing and we appreciate your support. Because you guys are the reason we are growing as fast as we are and you know it really just comes down to it. You know there's a need right, there's a hunger for information for knowledge out there regarding you know real estate and this benefit. Right this VA loan that a lot of people know that they have, but don't really know how to use it. You know you'd be surprised and we are you know not like we're not you know the gurus per se on you know the VA loan. But you know we have used it. right we have and well you know learned how to use it to benefit our investing career and so we have put together this program try to show people how it's done. You know how it can be done and we're passionate. We’re passionate I'm sharing that information and the knowledge with you. Because we think it's important. It’s important for not only us and our family, but it's important for our friends and it's important for you guys. Because you guys are extended, you're in our community.

You’re in our quote unquote family. So we feel bonded to you guys and you know we put this information out for you. So we hope that you take it for what it's worth and we hope that you share the information with those that need it. You know or those that you know that need it and hey you know if we can benefit lives because of that, we feel fulfilled and accomplished. So thank you again so much for taking your time and listening.

This episode is going to be about house hacking and it's something that we teach in the course that we have. It’s also something we have a dedicated module for. So go over and take a look in the show notes. You can see a link for that module. We teach about six different ways to house hack in this lesson I'm going to cover about three. But really they're all good. You know you just got to be able to take whatever that you can do with the extra space you have and do it. you know for those of you who don't know you're not familiar with the term, house hacking is being able to use the empty space in your home and leveraging that to make money, so you can put that towards your house, right your mortgage to increase the amount of equity that you have so that overtime the amount of time you spent paying interest is lot less.

You almost double your mortgage in what you are paying for the bank. In some instances it’s kind of crazy. But the reason why house hacking is huge because it cuts down that time that you are paying on your mortgage. So you don't pay nearly as much into interest and it is beneficial for you. so it is good and so yeah so we teach a few different ways that you can house hack your VA loan right and the reason why that is important, because your VA loan you are getting your home essentially for free.

I mean obviously you are paying money. So it’s not like its free per se. But you are putting heart, you are putting zero money down into close.  If you have a bigger house and you have a bigger mortgage, obviously you are going to pay a little more. Okay and that’s got to be understandable. Because of the size of the home that you purchased. Whether by necessity or by you know desire. Whatever it is up to you. But you know the reason why we teach hose hacking strategies is because often times there is a lot of empty space in our homes right.

In the military we worked from so many odd hours. Right we are gone almost all the time. So why not put the extra space you have in your home to work for you. that way you can make a little extra income, put down a little more on your mortgage and pay less interest overtime or even better pay more into that mortgage and then at the end of one year or two years, refinance that mortgage into a conventional mortgage, so you get your VA loan back 100% and you can go buy another house for free and maybe do the same house hacking strategies in that place.

So before you leave for your one tour that might be say 3 or 4, 5 years, maybe more; then you can have a few homes that you've purchased and in those homes once you leave you put a tenant in those homes, so that way your tenants are paying off your mortgage for you and again you are building your net worth, which is the amount of money that you essentially are worth right. The amount of assets that you have are your net worth is building and you are not paying into it, your tenants are. So all your expenses are covered and you are building your wealth and your passive income overtime and that what we teach.

That is the core foundation of active duty passive income. We want to teach you how to grow passive income through rental real estate and building wealth for you and your family. So that way by the time you are done with your 20 years or if you are done with your 4 years; however long you want to stay in the military. You can use the benefits that you have to get you started on your journey. At least get started you know. I mean everyone’s journey is completely different. So we are not here to tell you how to live your life. We are here to show you that when you have passive income that comes in month after month that you don’t have to worry about because of the properties you have making money for you essentially right. Tenants paying you that income every month and your expenses getting covered. That extra that you have can finance your life style that you desire.

Maybe that boat that you want to get when you retire or maybe those trips you wanted to take with your family. You know maybe that gift you wanted to get for yourself at the point you retire or maybe the business that you want to run right. Maybe you have enough passive income coming in to finance your business so or so or so you can get out and maybe run that business right and you have enough money to survive on. So you can go all-in on whatever it is that you desire and you don't have to worry about what you're going to do for money. You can translate real estate into whatever desire or passion that you have in life and you can pursue that passion 110 percent. That is why we do what we do and we'd love to be able to get you guys to that purpose. 

So house hacking right what is it? We discuss what it is. But how can you do it? You can do it one of many ways. Right there's no one-size-fits-all. But one way that we teach is being able to use the extra room. So let's say if you buy a four bedroom two or three bathroom house right and you are either single or maybe you have a girlfriend, boyfriend or you have a wife or husband or whatever spouse and you know you guys aren't using the extra rooms. Why not turn those extra rooms into rental units. you can use those extra rooms to rent to some buddies or you know maybe some co-workers or whatever right and you can have them rent from you, may be a little cheaper than it is out in town. Because they're getting a room. But still enough that you can offset a lot of your mortgage income. so your BAH you can use for your mortgage and whatever extra money you're earning from the extra rooms that you're running out, say maybe 500 or 600 a month whatever.

 All right you can use that to pay also towards your mortgage and begin to house hack your home and you'd be surprised and how much equity you can build over the course of 12 months. Okay so keep it in mind. Do the math, let's say if you had to extra rooms that you're running out for 500 each right. That’s one thousand a month times twelve. Twelve thousand extra dollars that you can pay towards your mortgage and you can use that to offset that interest that you're paying over time. All right so now you have a lot less to pay off and you also build equity. So you can again refinance after one year, two years. Maybe two years with something like that. Right in that example might work out a little bit better.

But hey you know you do the math, you plan it out and you make it happen. Okay another way is you know if you have a small business or if you have you know an extra way of income coming in that you're using some extra space in your home, let's say a garden you want to grow vegetables. I was talking to one of my friends, she has a garden in the in her home and what she does is she goes to those markets and I don't know why I'm forgetting. Its farmer's markets right. Where people can sell their own stuff individually. She goes to those and she makes a little bit. You know she doesn't make you know a killing off of the stuff that she sells. But she makes quite a bit and she's able to use that income for you know whatever it is that she decides to do. She doesn't particularly house hack.

But she certainly could and I told her about that. I said hey you know you can use this money that you're earning to pay down towards your mortgage and you don't have to worry about paying it for 30 years. But you know her goal wasn't that. Her goal is to use that money for something else that she was looking to get down the road. Which is fine and again it's all about your individual reason for investing. But she got that property with the big backyard, with the intention on growing that garden and selling them at farmer's markets when she could and you know what she's doing very well for herself.

So honestly I mean more power to her and more power to any of you who have aspirations and it doesn't have to be you know a garden. You can use a big backyard - maybe host dogs. Right maybe if your dog sitting for you know your friends or for your neighbors in your neighborhood right or if you want to I don't know create like a little dog park right. You could do that and you can charge for the hour that people use it or whatever right. You could even do something like you know running out your garage for certain people who let's say like to fix their cars. if you have a big garage right and you've got a lot of tools, maybe you have a lift you could use that and certain people want to bring it to your house.

Because you're cool and you've got some good music and you know maybe got some beers or whatever right and people just want to kick it and chill and they can throw in a little bit of money to help support you and what you got going on. Boom! Right you turn your garage into a little Auto hobby and done. You know I mean there's so many different things you can do. 

I know friends so many friends that have gyms in their home. Right I mean even that you have the ability to charge people a little bit. Have like a little quote unquote membership. Because they don't need to come into your home and they can come in and use it whenever they want. But they can pay right buying to it and that money you can use towards financing your mortgage and house hacking your home. It’s just there's so many different ways that you can do it.

So you just got to kind of get creative right and don't let the negative thinking of I can't do it or maybe it's not for me or you know maybe this or maybe that. What if there are so many what-ifs in life. If you let all those what-ifs hold you back you'll never be able to live okay. So find something that works for you and do it. Do it especially if it's going to grow a little extra income and especially if you can do it while it doesn't take any of your time. I mean something like this right or something like doing a business out of your home that takes a little bit of time all right to set it up and also to maintain it. so ideally you want to have the most passive way of going about making the income and something like renting out your rooms individually, that is definitely something that you can do or even if you're renting out your backyard to folks or friends that want to say grow stuff.You know I mean like I said you just got to get creative right and do whatever it is that works for you. Okay it's not one size fits all. So that works out. 

The last one I'm going to tell you about is my absolute favorite way of house hacking and it's amazing. It’s what I've been doing for the past two years now and it's called vacation rentals right or short-term rentals. But I absolutely love it and I absolutely recommend it to anybody who's looking to get started in house hacking. Because you can make quite a bit of money off of it.

Now of course you always have to check to make sure that your local laws support it right. because if you don't you could pay quite a hefty tax or maybe fine and you never really know how that stuff's going to play out. So you do want to make sure that you're within the legal requirements, within your location. Let’s say your condo association right. if condo association going to complain you might want to can reconsider or just talk to them and figure out how you can work around it right. These are always ways to make it work. Especially in the world we live in you'd be surprised how much money can actually fix your problems.

It’s kind of sad, but it's true. But anyway make sure that you're in a place that accepts it. Actually go out and do the research don't just you know assume that your place doesn't and it wouldn't work. You’d be surprised a lot of places do okay. So go out and check. but Airbnb is great because you can rent your places out per night just like any hotel does and you can make quite a bit of money and depending on where you live, right most if not almost all military installations, not at all okay I'm not going to say all.

But most military installations are by the water right of some sort. So if you have a house that's near any body of water, your place might be, might be a good rental for the summer. Right I mean if you're by a lake or if you're by the ocean or if you by you know a river or something right, I mean let's be honest how people love to spend time in homes by the water. Especially when there's nice weather around and they can even kind of kick back relax enjoy a nice view. Right I mean its good stuff.

I am just for example okay I'm just going to show you or tell you about how much I've made. This is not by any means you know a promise that you're going to make this much. But it depends on how much time you rent, how much work you put in for your rental and how much you charge of course and of course you know your area. How desirable it is for travel. So my first year I made a little over twenty thousand within my first summer. I rent it out for about three and a half months and it was good. I did really really well.

I was on deployment for half of it and then I was under way for another little bit after my little mini deployment. So I only got time to spend time with maybe a few of my clients. But I had a great property management system in place. My neighbor was helping me out a lot and my aunt she was helping me a lot with the tenant turnover. So she would go and clean in between rentals and she would reset the property every time for me.

Wonderful blessing, absolutely love her and I thank her so much for it and I also compensate her for it right. So definitely make sure you have your systems in place that will support you and help you out. I also compensated my neighbor because he you know took a lot of his time to help fix some of those big issues that we had with appliances or with air conditioning right or all that stuff right. He took the time to help me out and I appreciate that and you know I compensated him for as well. So you know it's good to have a network of folks that you can call on and have ready just in case something happens.

Because we're not always going to be there right. I mean we could be on deployment, we could be on assignment, you can be on training whatever right or we can just be at work and if you're like me and you work in a secret space like 90 percent of the time, you don't have access to your phone and you can't have access to like regular you know unclassy email all the time. So it's kind of hard to stay on top of things when they go wrong. So making sure that you have that network in place for you know your vacation rentals is absolutely crucial, okay absolutely crucial.

So yes definitely recommend that. okay but yeah I made a little over twenty thousand my first summer and this summer I'm set to make a little under forty thousand, which is great right. So I almost doubled my profit. I was able to apply a lot of the lessons learned that I had last year and apply them for this year and I also realized I can get away with charging a little bit more. Because last year was a little bit more experimental. I played around with the prices a lot to maximize my occupancy and I realized I didn't have to do that nearly as much.

So I didn't this year and I kind of you know kept the price is pretty standard and I'm surprised with how much how well I've done this year. Which is great. So I definitely recommend it and even with last summer my last summer I made enough to you know pay my mortgage for a full year. Which is great.

So now this year I've made enough to pay my mortgage for almost two years right. Which is great. So I'm hoping to continue and make you know doing that well. You know barring obviously the laws that you know as they're ever changing in the area and hoping you know that things don't change too bad. But yeah I'm hoping to continue doing well with it and it's great it's my primary residence guys, like this is where I live. So the fact that I was on deployment, I literally came back two days ago and now I'm set to do you know really well this year again I'm happy. You know because that money can go towards bettering my financial future with you know my family and yeah and set us up. So definitely recommend looking into short-term rentals okay with Airbnb or VRBO, its all website run.

So you do your scheduling, you do your booking every payment or it happens online. So its super simple and it can be right it can be virtually hands-off as long as you have set your support systems in place. Now obviously someone needs to be able to respond to tenants, when they inquire about your booking. They see you online and they say they can we stay. Someone has to be there to respond to it and it doesn't have to be. You could have a friend or property manager take care of that for you and that's okay and those same people can or don't have to go out and meet the tenants as they come to your property. That’s okay. A lot of people do, a lot of people don't. I haven't, I've only done it maybe once my entire time, I'm sorry twice my entire time renting out. 

I actually went to go visit the tenants today because I went to drop off some linens, some extra linens that we had for them I washed up. But they checked in yesterday just fine and everything was cool. Because my check-in instructions were very clear-cut and very precise. I attached pictures with all the two so it makes sure that there's very little questions if any and I also make sure that they have it early enough, that way if they do have any questions they can bring it to me and of course as always if there are any concerns all right they have my number, on the listing they have my email and they also have the network; the ability to contact me via the website. So they can do that and I'm not the only one that has access to it. My wife also has access to it. She is also active duty military. So sometimes it is hard and we have our property manager, my aunt. She helps take care of us as well when we can't catch things right away. so again it's all a matter of you know making sure you have the systems in place to take care of doing the things, taking care of the your six essentially right and doing those things that you need help on when you can't cover down and if you decide and you can completely decide not to cover down right. If it's your business model where you don't want any interaction at all, you can do that. You absolutely can do that.

You can have somebody right, let's say you own a property; that's an investment property and you want to Airbnb it full-time. you can have a company or a person or some people, a team in place that can take care of for you, so you never have to worry about anything as long as you trust them obviously and you hope they're doing a good job and you could follow up with them to check the status and make sure everything is running smooth.

But yeah you don't have to be involved in the process at all and you can still make that good, you know cash flow coming in each month from all the different rentals. Because the checks are going to get sent directly to your bank account and you're good to go. It all gets handled for you. right so I absolutely standby vacation rentals, I really do and I know that there is a growing issue regarding them and the states or the counties of which you know people rent in. the counties see it as a liability and you know something that draws money away from the already established hotels in the area. but you know what honestly the way I see it is that business is business and you know things always change and evolve and old businesses are always to come to you know the new and the shiny right. So it’s kind of is what it is you know.

I think you know it's going to eventually evolve to where Airbnb will be you know able to conduct the business that they normally do maybe with certain tax implications. I don't know and I am honestly not partial to any one side. With the exception of the side that I know the Airbnb has done great things for me and helped me get started in my investing career and I hope that Airbnb can continue to do that for so many other people.

However it looks like however it needs to look like legally and all that right. I just hope that you know people are able to be inspired you know and to get started in doing something to change up the monotony to make the income that they need to get them started on their life journey, life goals to be able to accomplish the dreams that they set forth for themselves earlier on in life right. 

That’s really all I care about. So anyway thank you so much for listening. I appreciate it. again we hope that you're able to take the information that we put out on this podcast in our lessons in the information we have on our Facebook group just to kind of go out and you know to take some action and create some change in your life and make some good stuff happen. All right all right all right so that's going to do it.

Thank you so much again like I said for listening. Before we leave I want to take some time to shout out a 5-star review that we received. Thank you so much it was from the guys of the military investor network right thank you. Such a great podcast that teaches our military and veterans about real estate investing. Thank you guys for what you are doing and thank you so much you know for your review. We really appreciate it and we are really happy with you know our mission here and what we do for you guys.

It means a lot to us to hear your feedback and if you guys would you know listening would be so kind to go in and leave us a review or let us know what you think, honest assessment, let us know what you think. It benefits other people and it also helps us get you know listed higher on the podcasts that are shown. So we can make sure this information gets out to those who need to see it all right. As a matter of fact I'm going to look one up. Because we had a great question come in this week and I really do want to highlight it and I'll answer it here on the podcast in case anyone else may have that question too. 

 So bear with me, I'm actually looking through my Facebook now. Okay here it is. So the question was right if you're buying a house and during the inspection you find the house is in need of a new roof, how would that be dealt with? One the seller would fix it prior to closing or the buyer would deduct the cost of the roof from the offered amount for the property and fix it themselves. Question mark. Alright okay so we had a bunch of great you know comments in regards to see that question and I'm just going to go ahead and give my own little personal advice. But I'm going to say that it depends right so and this goes with any issue. It doesn't have to be a roof it can be you know whatever. Electrical, plumbing right whatever you name it, you'll run into the gamut. But if there are any issues that you have in your closing, it's going to depend on two things right; financing and time.

Okay how much time do you have before you want to move into that property? How much time you have with regards to the financing that you have right set aside for that purchase or how much time you have left on contract right. Time is a variable that is important. Because if things are going to get fixed prior to closing you need to make sure that that time window allows or an extension can be granted. Because obviously it's going to take time to fix stuff.

So you want to make sure you have that time. If it is not going to get fixed before closing right, you need to make sure that the financing you have for it will allow that. Okay now what I mean is if you're going through most big banks and you're just getting a conventional loan or you're getting a VA loan, banks will not allow you to buy a home that you can't move into from day one. Unless you are getting a special type of loan for that purchase is a 203k loan, a FHA loan right. Something that will allow you to you know rap in some of the costs for the repairs. Because the bank knows and assumes already that property is going to be fixed okay. But again this is for you if you're going to move into that property. Now there are banks that will lend for you conventionally on investment properties. Because they know that it's an investment property and you're probably going to you know fix some stuff up and do some stuff, that's fine. they're comfortable with giving you the loan based off of the amount of risk that they assess based off your portfolio or your income that you have coming in. right that's essentially what they're lending to you for as well as the asset itself. But they understand. but if you are dealing with the type of property that you are going to live in yourself, you need to check with your financing options and you also you need to make sure that the time allows in order for you to you know figure out what you want to do next.

Okay now let's talk about what you want to do next. Honestly you can go about it right the two ways that you mentioned. You can negotiate for the sellers to fix it for you and a lot of time sellers don't really want to.  They want to sell their property as is because it's less hassle on them. so you know maybe the better option would be then to do what also you said you negotiate the purchase price down and you factor in the cost of those you know repairs. Because that sometimes is a little easier to do, especially for the seller who's not really motivated to fix anything else? They just want to sell their property and be done with it.

Right so that is definitely something you can do and really those are the most common options and that's you know obviously just my opinion. but you know the more experience you have with these things, you know you can wrap in. maybe the seller will allow you to get a contractor in right, get a quote for the price and maybe they'll pay for it or they'll negotiate you know portion of the payment for it or whatnot right. There are many different ways you can tackle something like this. But those are the most common methods that I've heard about that I've physically done right.

Perfect opportunity to talk about this. So I'm closing on a triplex in Mississippi as we speak. Hopefully I've it closed by next week. We just got the inspection back and there's so much stuff that needs to get done to this property man let me tell you.  But we're negotiating with the sellers on bringing the price down. Because I think that's going to be the best fit for us in regards to this investment.

But again you know there are many different ways that you can tackle that kind of issue and like anything in real estate right, you have options. so don't ever think that you're locked into one way of handling a problem and it's good to have a network like our Facebook group to reach out and I hope that you get were able to get your question answered and if you have also run into this problem that wasn't your question right and you can it benefited by that answer, I am glad and I hope that you're able to benefit something get out of it too.

Okay all right anyway I've been talking long enough thank you so much again guys for listening. I hope that you guys reach out to us and connect. Please subscribe to this Facebook, I'm sorry to this podcast. Hit us up on Facebook, hit us up on our Instagram and also reach out to us if you have any questions right. Check out our website. if you are ready to take some action and you want some help in regards to you know learning how to invest and you want our mentorship and our guidance, go check out our program;

We have a course designed for you take you step by step. We have an awesome mentorship program called start the spark, where we will guide you through the process hand-in-hand we will help you out and we will also connect you to our greater network of folks that are standing by ready to help you too. Thank you so much again for all your input, all your help and all your time. We appreciate it. I'm looking forward to seeing all of you guys here soon. We’re going to be doing some meetups here on the East Coast like I said and I'm looking forward to it. It’s going to be great okay. I'm Mike, I'll catch you later. 











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