How House Hacking and Co-Living Can Fast-Track Your Path to Financial Freedom

0:00How do you drive cash flow and how do you advise people today on you know if they want to buy investment properties in Denver? What's what's your current approach? Yeah, so I will say is the the first thing you're going to do is like kind of get your mind right in that you can't compare the deals that I got in 2017 to the deals that you're going to get in 2026. Just like just like you're not going to be able to compare the deals in 2035 as you can in 2026. Yeah, right? You have to just buy what's available at this time.

0:32And so what's working we and we've kind of seen a lot of things come and go through Colorado. But what's working the best right now by and far is a strategy called co-living. And so it it's just like house hacking and it's you know you you live in you buy a house you live in one room, you rent out the other rooms and then you basically you know you you gather that income from the other rooms, you move out of that and then you rent your room out and then you've got a cash flowing property. It's one of the only ways we're seeing true true cash flow in in Colorado these days.

1:06however, if you if you really don't want to like live with other people like understandable, we're still helping people buy, you know, house hacks where they live in the upstairs and rent the downstairs on Airbnb so they have their own separate space and you know, instead of a $3,000 mortgage they're paying a thousand bucks, right? That's still a huge massive savings. And you're still building wealth and you're still buying in an appreciating market. So like no matter what you do house hacking makes sense like 100% of the time in any market at any time. Like house hacking always makes sense and if you're under the age of 30 or you're not financially free and you're not house hacking like you're you're you're you're getting behind.

1:44Yeah. And and I guess I should back up cuz I maybe some people aren't familiar with the term house hacking, but when you say house hacking, what do you mean specifically? Yeah, so house hacking is simply that you you buy a property with low percent down typically 3 to 5% in order to get that 3 to 5% down the requirement is you got to live there for at least 1 year. So you're moving into your investment and you're what you're moving into is producing income to offset your living expense. And that's essentially house hacking is being able to pick up an investment property with low down.

2:15Yeah. Yeah, and I love that you brought up co-living cuz I I've been talking about that as well as well as well as short-term and mid-term rentals and you know, I I hear people say well, you know, rentals don't work anymore cuz cuz the traditional long-term rental in a lot of cases when you buy in a single family house the numbers don't work you know, in a lot of case especially you know, in higher cost markets like Denver. So then people are like well, I just can't invest because you know, rentals just don't work anymore. It's like well yeah, that that you know, tried and true method might not work as well, but maybe get outside the box a little bit.

2:52So so this co-living strategy can you outline how that like the I I mean I know you gave an overview of how it works, but like what's the ideal type of property? Someone was like okay, I want to start this strategy. What does that look like and then what are some of the things people should think about cuz I think that people start thinking oh man, somebody's going to be living in my house going eating all my food in the refrigerator and like you know, how what are what are some of the things people should consider? Yeah, so first thing the house typically you just want a larger house where the layout the layout kind of makes sense.

3:27So typically we like to see 2,500 plus square feet at least a six or seven bedroom you know, three three baths is kind of like our our baseline. Typically you're not going to find a house on the MLS that has seven bedrooms on it. Maybe you find one with six. So instead what you do is you find okay, well is there a five or a four bedroom house that has like a really large you know, rec room downstairs in the basement or like is there a dining room that can easily be made into a bedroom? You kind of look for these like hidden bedrooms in the current layouts. And you know, we like to leave one common area.

4:01Everything else pretty much goes into a bedroom. And so you know, typically you know, we want to try to get seven or eight bedrooms in these homes. And so that's kind of step one is just kind of looking at the home in the layout and all that. Step two is you want to figure out like does the parking work? So you know, you want to see hey, are you take that little yellow guy on Google Maps, right? Drop it right in front of the house and go look to see if there's people parked on the street. If there are, then it's probably okay to park there, right? Maybe you're on a corner lot or maybe you're across the street from a park or something, right?

4:34So you just got to like make sure the parking situation is is decent and you're not going to like, you know, make your neighbors all upset by having parked cars parked in front of their house. Got it. Okay. And and so when you start looking for properties for people like a lot of realtors that that I come across will say, "Yeah, I can help you find a deal." And then what they mean by that is I'll set up an automated search for you that'll go to your email and then you call me when you're ready to submit the offer and so I can collect my commission, right?

5:07So it's like very hands-off help, you know, so which is kind of what you alluded to I think in the beginning. For you guys then what what what type of service do you like if somebody's looking to do this with you, do you go out and screen through deals and then bring them back and what if if so, what do you what are you looking for specifically? Yeah, so so the way our process works and the way we teach it is you know, you're you're meeting you know, you have your initial appointment with any sort of potential client, right? And and your whole thing is to show your client that you are the best person for them to work with.

5:41They hopefully agree and they sign the the buyer's agreement, right? And so we'll put somebody on one of them searches that you just mentioned without a buyer's agreement. That takes us 2 seconds, and you can tell me what you want, and we're happy to go look for you. But, I'm not going to go and screen all the properties on the MLS and and and and deep dive on each one and then send you my top three or four and if if we don't have a buyer's agreement signed. Yeah. Right? Like, I can't commit to you if you're not committing to me. And we've got a whole bunch of clients that are already committed to us, so we don't need to waste our time with the person that's not committed.

6:14And so, that that's how we run our business, and that's how I encourage everybody to run your business. And so, let's say you sign the buyer's agreement and and then okay, we're like you and I are now working together. One of the first things I'll do is is say, "Hey, let let's try to find a time this weekend to go see some houses." I'll come up with a list probably by Wednesday or Thursday, probably Thursday. And I'll I'll run, you know, probably four or five by you. Why don't you do the same? You run four or five by me, and let's pick the top four or five that we have between the two of us, and those are the those are the ones that we'll go check out this weekend, and if any of them make sense, we'll make an offer.

6:52Nice. — you kind of guide them you guide them along that process, and it's a pretty seamless you know, it's a pretty seamless to go from step to step. Yeah. And what is it that makes the top four or five for you? Like, when you're looking at potential deals, like what where are you focused in on? I big it just depends on the person, honestly. Like, I I'm I mean, I I at this point, I know exactly who you are, what your goals are. We've had the initial call, so like I I can kind of put myself in your shoes and try to figure out what you need.

7:23But, depending on what they need, right? Oftentimes, what we're seeing is location is is somewhat big, the house itself and how nice it is in the layout, the parking situation like I mentioned, budget is oftentimes a a factor a limiting factor for people. And then of course, the strategy they want to do. And so, you know, we kind of take all those into account and yeah, and then we'll often times what happens is like I'll find I'll find some houses and they'll find some houses and the houses they find like they look good, but I'm just like, man, I know that layout.

7:57I've been in thousands of houses. Like I just know that layout's not going to be ideal. Like we can find you something better. And usually it's usually we're probably you know, probably 80% of the houses that someone brings to me I'm saying no. I don't think that'll work for you. But I'm like, but hey, if you really want to see it, I'll show you, but I'm just telling you that I don't think you'll like it. And I think finding, you know, finding a realtor and if the realtors are listening, being the realtor that can kind of treat every single deal that you're doing like it's your own and just say like, yeah, I wouldn't buy that one will show your clients that you're not just chasing the commission and that you actually care about this investment for them.

8:35Yeah. And I think that's when it's so key to work with a realtor who is an investor, who's done this before because you know, you bring four or five deals to an agent who's only been working with with homeowners, you know, looking for these beautiful, you know, properties that are the most I guess visually appealing and emotionally appealing, but not considering the numbers and have never used it as an investment, they might give you terrible advice, you know, and say, oh, no, you should look at this one because it looks nicer, but you're looking at from the standpoint of no, I've I've been down that road.

9:12I've tried investing in that type of property and and these are the things that that went wrong. Let me show you the types that actually work. I think that's so invaluable. Can you maybe share a couple examples of deals that have been you know, that people have done recently that that have worked well, you know, in terms of just like general numbers of like okay, what they bought it for a location, like what you think each bedroom might bring in and why it was a a good deal. Yeah, we can do one that that I just did with the partner.

9:46So, yeah, there's a there's a house hack kind of situation where this guy basically So, I partnered with somebody who went to go ahead and live in the home. And so, he's house hacking it. And we turned a four-bed, four-bath into an eight-bed, four-bath. And it was the purchase price was 660. And we got a pretty big a pretty big a a lot of concessions. So, we were able to basically pay zero closing costs. And then what I actually did was I increased my commission to like 6% as a realtor.

10:19And and I took the additional what I would make outside of that transaction and I put that towards the deal. So, we actually came in with very little down cuz he only put 3% down. I got an extra 3%. You can see how that math works out. So, we essentially got the deal for almost nothing. And then and then, you know, we put probably 20 or 30 grand into it, adding bedrooms, you know, just changing some things around a little bit. And we're expecting to get about 6,000 on the low end on for rent in the house.

10:55And the mortgage payment is 4,000. Okay. So, you know, and then that and that 6,000 is does not that that includes utilities being paid for, right? So, like Got it. 6,000 for like 6,000 over that, not including utilities or like utilities being paid for. Of course, you know, we'll have some maintenance and capex and all that, but our our true cash flow in this house is probably conservatively, you know, 1,500 bucks a month. Wow. And this isn't like a good It's a corner lot, big house in Arvada, which is a nice area in Colorado.

11:28Like it's a great house, great location, and it's cash flowing us. So, like we can have our cake and eat it, too. Yeah. That's amazing. And and so a deal like that what what type or what how much does a bedroom rent for in in that area? So, a a master bedroom would probably go for about 1,000 to 1,100. Wow. And then a like a typical regular bedroom, you know, whatever, 10 by 12, shared bathroom, will probably go for 7 to 800.

12:01And then you know, then there's also like if it's like a basement small like really, you know, that might go for like 600, 650. Wow. And these are are they like working professionals or students or who who is it that's that's renting the bedrooms? Usually they are working professionals. Usually they're younger, like, you know, entry-level kind of jobs or just to give you like some concrete examples, we've got some people that work at the airport. We've got some people that work at like Coors Field.

12:35We've got some people that work There's an engineer, a guy that works in the museum, guy that works in an aquarium, guy that works in a senior center. So, it's like those kind of jobs, you know, like jobs that are, you know, probably a little bit more soul soul work than like really making a high income. But we also get some guys that, like I said, were engineers. They make great money. They're just smart and they want to save and they want to buy a house on their own someday. So, like, they're not going to They'd rather live in a room for 700 bucks than an apartment for 1,500. Yeah. Yeah. That makes so much sense. And and this is when I think it's so smart to not just universally apply a investment strategy across every market.

13:13You know, you got to think through the markets in an area like Denver, like, you're renting a bedroom a master bedroom for what a whole house could rent for in Indiana, you know, where where I'm at, you know, so it's like it it makes so much sense in a high cost of living area where rent's high, you know, housing there's, you know, not there's a relative shortage of housing and big population center. Like all the factors really lead up to making this work really, really well. And then, you know, if you still want to do the long-term rental single family strategy, then you buy in a much less expensive area.

13:49So, it's like matching the strategy to the area, which I think is so smart. And not a lot of people do. A lot of people just like pick a strategy and like this is what I do and I'm going to do this everywhere, try to do it everywhere. So, I think that's super smart. Do you do it recommend that investors become realtors? I know that's the route you took, but it what do you What's What's your advice around that? I think it all I mean of course it's going to depend, right?

14:22I think it's worthwhile if you plan to do a deal a year to be a realtor because, I mean, think about it. Like you'll save if you're buying a $500,000 house, you'll make a $15,000 commission every year, right? And that will will drastically reduce how much you got to bring to the table, especially if you're house hacking, all that kind of stuff. Like so so if someone's just starting out, I don't see why why not, right? Now, the if you're already making a lot of money and like take like taking the time to study for the exam and take the exam and do your own deal and learn real estate and all that kind of stuff, if that's not worth your time and you can go make more money in your current business or your current W-2 job or like you just don't want to do that, then of course then don't do it, right?

15:06So, yeah, I wouldn't say it's a it's like a one-give-all answer, but for me I was like I figured this out when I was pretty young and I was like, "Hey, if I can save on that, then I can basically, you know, I can basically buy houses with almost nothing down." Yeah. Yeah, that makes a lot of sense. And then when it comes to financing, that's another big question that comes up for for a lot of people. How how are you seeing most I know you mentioned 3% down. How are you seeing most people financing the types of deals that you guys are purchasing?

15:38A lot of people do them with So, if they're if they're going to move in, right? If they're house hacking, it's 3 5% down, owner financing, conventional financing, FHA, VA, that kind of stuff. A lot of our you know, now that we're doing more like I'm not house hacking anymore. But now we're buying co-living properties. So, it's same idea, we're just not living there. So, those are going to be the 20 25% down DSCR type loans. And so, we're seeing either either way there. I see. Okay. Interesting.

16:10And does FHA still work for this strategy if if you want to move into it yourself? Oh, yeah. Yep. FHA doesn't care as long as you can make the payment. Got it. As long as you're as long as you're moving Yeah. Awesome. One other strategy that you outline on your website and I recommend other people or recommend people who are listening to this go to your your website. It's the the FI is it FI team? Is that what it is? Yep. The fiteam.com. But there's a there's a strategies tab and when you pull that down, there's about seven or eight different strategies that are outlined there.

16:48So, it's a great way to look through and see what what matches your personality cuz there's so many different ways to make money in in real estate. But one other strategy is the BRRR strategy. Are you finding like so so just for people who aren't familiar, BRRR is buy, rehab refinance, rent, and repeat. So, basically the idea is you got to buy it cheap enough that you can put some money into it, build equity, and then refinance out your capital to do it again. Are you finding deals that that can still work as BURs in in Denver. I think BURs coupled with co-living, yeah.

17:22But but not you're not going to pull out all your cash. BURs are really hard. They're really hard. If someone comes to me and tells me they want to do a BUR as an agent, I I I pretty much say like if you're really looking for a BUR like I'm probably not your guy. So, you know, you say a lot of your a lot of your people that you talk to don't love working with investors. You got to be able to screen out like who's going to waste your time and who's not. Almost all BUR people are going to waste my time, so I don't really talk to them. We we do them, but I but I know I'm not going to waste my own time, right?

17:53But a lot of people have this idea of what a BUR is or they read a book from 5 years ago that like really articulates what BUR can be and what the opportunities are. If they're not ex- if they're not ex- if they're someone's going to need a BUR or flip and they're not experienced and have done a handful of them, then I'm probably not going to work with them.