The House Hack! - How to reduce your home expenses and become a real estate investor!

All right, welcome everybody. This is February the 28th, 2 PM Central Time. My name is Andrew Postell. I'll give us another 30 seconds or so in case there's any stragglers that come in. Every single one of my recordings, uh, or my broadcasts are recorded. We put them up on the YouTube. So if you miss a few things, you want to share it, it will be up there as soon as I can get it up there. Um, some other things, we keep this to 22 minutes. That's it. Nice and easy, nice and short. So whenever I do a Drew 2, it's just kind of like about concepts. We can certainly spend a lot of time on many of these things, but I try to keep it short just so you understand where you're coming from. And then if you have any further questions, you can certainly reach out or Google these topics that we speak of. There's nothing here to sell. I'm not selling anything. There's no strings attached. This is just information, and today's topic is one of my favorite topics. This is how I got started into real estate through house hacking. So what house hacking is officially? Well, that's what we're going to cover. This is how we absolutely reduce our expenses when we own a home, and even you can be a real estate investor through house hacking. You don't have to be, but it's a lot of people's entryway. Into becoming a real estate investor is through house hacking. So who am I exactly? Well, I'm Andrew Postell. Yes, I'm the Drew 2. That's me. You know, there's nobody else here. There's no team or anything like that. It's just me. I've been in real estate for 20-something years. Again, my first home was a home that I house hacked. I'll even show you my first home in this presentation today. As a loan officer, I am in the top 1% of all loan officers in the country. Very fortunate to be there. I can lend in all 50 states, and whenever I speak about real estate, I mean residential real estate. There's lots of different real estate, so residential real estate is what we're here to talk about. You know, gas stations are cool, but we're going to be talking about residential real estate. You can also follow me on Instagram and on Facebook, and like I mentioned before, YouTube as well. Working on that very hard to get all of these broadcasts up on YouTube in a timely manner, and there's my information there. My personal direct phone number: 817-380-1913. Call me anytime. Certainly here to help. All right, let's set the stage because it's really hard to buy a house right now. I mean, there's all sorts of things like it's more expensive. It's The rates are high. Uh, the inventory that's out there is not what we want. Every single thing is worked against you on this current stage. So let's cover some things about how difficult it is. So you know where we are with it currently right now. The Federal Reserve did a big study. One of the main reasons why they're trying to press inflation down is that the average homeowner is worth about a quarter of a million dollars. That's very nice if you're a homeowner. But that's not the average person in America anymore. There's more people who rent than actually own a home. And if you're a renter, your average net worth is $6,000, $6,300. That's a huge disparity. That's how difficult it is. If you own, you're almost an elite company now. It sounds really weird to say that. I, I'm just a homeowner. Well, you're in the top percentage of America if you're a homeowner. And if you're not, society, economy, everything is pressing down on you in a really tough place. Now, not only is it the rates and the affordability, and it's your family and the news articles, everything is talking about how it's not a good time to buy. But I might, you know, just at least present a different case on it. The other side of the coin, we're going to talk about pros and cons a lot here today. I don't want to be the salesperson that says, hey, everything's great. It's not all great. But it's not all bad either. There's pros and cons to everything that we face in life. Everybody's scenario is a little different. So why should I be buying a house right now? Well, if it's right for you and your family, let's start there. Then the other pieces of it— 45% of sellers are willing to give a concession. That's a good reason. 33% of sellers are willing to reduce their price for you. For you. And if you're buying, there's not a lot of buyers. You have all the negotiating power right now as a buyer. You want to do anything you want. You want to offer less. You want to have them pay for— how about, how about if— would you like for the seller to pay to lower your interest rate? They are doing it. Yes, really. Sellers are paying to lower your own interest rate right now. Some of them are paying a temporary rate where it goes all the way down in the 2s for like a year, and some of them are buying it down permanently to entice you to purchase a property. So think about this from 2 years ago. If rates were in the 2s, would you get any of this? No. Matter of fact, most of us had to pay $50,000 over ask. We had to come out of pocket $50 grand just to even buy a home. So Don't think of it like, hey, I want rates to be low again. You may not be able to compete if rates get that low again. Right now there's a lot of incentives for you to buy, but there's still this element. It's expensive for me to afford that mortgage payment, and this is what house hacking is for. All right. So house hacking, what is it exactly? We're going to define it right here. It's making income. That's it. Making income from your own primary home. You can do it lots of different ways. So the benefit to house hacking is that you're going to decrease your expense. You will not cash flow. I want to be clear about this. I want to set the right expectations because a lot of places out there, hey, make money, you know, you're going to be making so much, you only have a mortgage payment. The reality of it is that you're going to have some type of mortgage payment, although you are decreasing your expenses for homeownership. Okay, decreasing. And that might be good enough. So here's some of the examples that I'll give to how people house hack. How do people house hack? Well, they can have a multiple unit building, right? Like a duplex, triplex, quad. They can have an accessory dwelling unit. Sometimes these are called like mother-in-law suites or garage apartments. Yeah, but they can earn income. That's what people are doing. You can rent out your extra rooms, your basements, your attics, your garage apartments. I've seen people put RVs on their own home. Hey, I live out in the country. Come rent an RV space for me. And they've got power and all this kind of stuff. So sky's the limit. Well, maybe your local ordinance is the limit too, but for the most part, you can do some form of house hacking if it's within your ability. This is how I started out, right, is house hacking. I can't do it now. I'm married. I got a family. I can't rent out the rooms to other people. My wife would not be cool with that. So sometimes where you are in life allows you to do these things, but it's still a good idea for you to understand and know how this can help you, or maybe a client of yours. So that's what house hacking is. So let's just talk about some case studies. Oh no, let me talk about pros and cons first. That's right. Thank you. All right. So pros. If you're going to house hack and reduce your expenses, how does it help me? Well, you're now building wealth in real estate. This is something that the Federal Reserve study that we referenced in the very beginning talked about. The average homeowner is worth $250,000. You're building wealth by owning real estate. If you're renting, your average wealth is $6,000. You're not building wealth, you're paying somebody else. This allows you to start building wealth in real estate. The other piece of it, too, is that if you're owner occupying a property, you get a better rate, a better term. Your down payment is lower. Like, there's so many benefits that you get as a homeowner, as an owner occupier, than somebody like me who's a real estate investor. I've got several properties. I can't get those same rates that you can if you're occupying your home. So a lot of times your out-of-pocket is lower and your rate is better than anything that I can do. That's a benefit. Smaller down payments, and the thing that I like—you actually are investing in real estate. You're learning. I have people call me, Andrew. I want to get started in real estate. I want to buy ten properties this year. All right. Well, how do you even know that you like it? Let's start with one. If you can figure out one, maybe that'll lead to other ones as well. All right. Now, pros and cons. I told you we'd talk about the bad and the good. What's the bad? Well, hey, you gotta screen tenants. Anybody know how to do that? I didn't know how to do that in the beginning. What else we have to do? You're now a landlord. You just added another job to yourself. Yeah, you might have housemates or roommates. How about vacancies? What if it doesn't rent for a little bit? Wear and tear on your home. Absolutely, these things happen. This is part of being a Landlord and a real estate investor, and house hacking, good and bad. I want to present the right information for you to make a good decision. There is good things to this, and there is bad. For me, when I started out, I didn't really have a choice. Like how else would I be able to afford a home if I didn't house hack? So sometimes society and economy puts these things on us. We're like, I can't even afford a home. This allows you to. at least have the home, home be more affordable to you, if that makes sense. All right. Now let's get into some actual case studies. So these are some properties that I own and some properties from some clients too. I want to show you examples of how people are working the house hacking to their benefit. So this first one is mine. It's a single-family home. This home was in Florida, my first home. This home. Yes, I'm showing it to you. I know it's not very much. It's like a very simple home, and this is all I could do. I couldn't do anything different. This was very beginning in my career, and it was a great home. I loved it. It's located in Tallahassee, Florida. It was a 3-bedroom, 1-bath. I rented out each room that I didn't live in. So, right, so I had 3 bedrooms. So I lived in one, rented out one for half the mortgage. Rent out the other one for the other half of the mortgage. So yeah, I lived for free. That's what house hacking does. I still had expenses, like if something broke or utilities, you know, I still had expenses, but I didn't have a mortgage payment when I had the home rented. And this was a great home for me being young. I rented out to my friends. We had great parties. I had awesome memories. I can't replace those memories. What's, what's the value of that? There's no value to that. But the financial benefit was that I was living at a very much lower cost basis for myself. I lived in this property for 4 years, and then I moved out. And when I moved out, it was now a full-time rental property. I rented it all the time when I moved out. So I purchased this home for $53,000. I know, Andrew, you can't purchase homes for $53,000 anymore. You want to bet? It may not be in a place you want to live, but this is all I had at my disposal at this point in my career. I could only afford a $53,000 home. I'm hoping that you can afford more. It doesn't matter what the price point is. It could be $530,000. You can still house hack it. Mine was $53,000. I used a first-time home buying loan to purchase the home. That means low down payment. And I rented it for 2 years for tax purposes. So let me hang— let me pause here for a moment. I need to interject a tax rule in here. So if you live in a property 2 out of the past 5 years, you can sell it and not pay capital gains. So part of the strategy was for me to occupy the home for 2 years, which I did, then only rent it for 2 years so that when I sold it, I did not pay any taxes On the amount of money that I sold for. Yeah, that's a rule. You can do it. So here's the benefits of me owning this home. I live for free. That's great. I rented it for income. Yeah, I made money. And then I sold it tax-free for $86,000. So I made $30,000 on top of my rental income, tax-free. Anybody interested in this strategy? Yeah, I certainly was. I didn't even know all these rules when I started, and I benefited greatly from this. Greatly. Do you see how house hacking can help you? I hope so. Hope this is coming through. All right, let's take some higher dollar homes so that we can see some other price points and other techniques. All right, so this is another case study. It's an actual client of mine. They purchased a duplex. Here it is. Please don't Google image it and try to reverse where they live, please. This is just an example, but it's a— you see the 2 blue front doors in the beginning. So in this home, it's a 4-bedroom, 2-bath duplex. So it's just a 2/1 on each side. 2/1. That's all it was. 2 bedrooms, 1 bath on each side. They use an FHA loan. That's a 3.5% down payment. So the purchase price— their down payment requirement was 3.5% of the purchase price of the home. That's all FHA loans will do that. I shouldn't say all. 99.9% of them will do that. Now, the mortgage payment here was $4,000 a month. Ooh, that sounds crazy. $4,000? Yes. And here's the other thing I want you to be aware of. Remember, I'm talking about good and bad stuff here. They rented one unit, each unit for $1,850. $1,850 does not allow them to cash flow. This discussion is not about cash flow, but it still benefited this customer. How else? So if I, if I subtract $1,850 from $4,000, that's $2,150. That's my expense each month because I'm renting the other side. So my out-of-pocket, $2,150. How else can I purchase a half a million dollar asset and make a monthly payment of $2,150 on it? There's no other way to do it. This is the only way to do it right now. So if you want to purchase high-dollar assets and keep your expense low, Think of house hacking. This is exactly what this client did. So in this scenario, they asked the seller to reduce the price by $50,000, and the seller did. The seller also gave concessions to help them purchase the home because remember, there's not very many buyers right now. You have the negotiating power, and their commitment is to live in the home for 12 months. That's what FHA requires from you. You at least have to occupy it for 1 year. Now, we talked about if you wanted to live in it for 2, you don't have to, though. There's a tax benefit if you do, and that's if you wanted to sell it. This client may not want to sell. They might want to keep it forever. You need to occupy it for 1 year to meet that commitment. I hope that makes sense. So low out-of-pocket. Maybe they'll live in it for 2 years. Who knows? And the other piece of this, every year, maybe not every But more often than not, they're going to increase rent. So while they may not cash flow when they move out immediately, they will eventually. I've been doing real estate investing for over 20 years now. I've never decreased rents ever. I may not have increased the rent every year because of economic conditions, but I've never decreased them. On this home, this person is going to be very happy that they purchased it. This is a duplex. So we covered single-family duplex. Let's cover another case study. Here's a single-family home, SFH, single-family home with an ADU. That's that accessory dwelling mother-in-law suite thing. So here's the property and here's the accessory unit. So this person, it's a 2-bedroom, 2-bath home with the accessory unit, and that accessory unit was like a studio, still had a bath and a shower. But it was a studio type of a place. This customer furnished both the home and the accessory unit fully furnished, so that way they could do short-term rentals, STR, short-term rentals. So they list this property on the short-term rental sites, VRBO, Airbnb, and whichever one rents that week or that month or that day, The client would then move into the other place. So sometimes the front home, the larger home, would be rented, and sometimes the back home would be rented, depending upon desirability of who's looking for what. And they would rotate. And that's how this client chose to work with this property and house hack it. So they used a 5% down loan. Their scenario is a little bit different. So 5% down, which is still fine. They purchased it for $11,000 under— we, yeah, fully appraised. They purchased it under the appraised value. They got a deal, and the seller paid for title insurance and survey. These are the things you could not get if rates were in the 2s again, and they're— and clients are getting them right now. Homebuyers are getting them right now. The biggest piece of the puzzle is, how do I navigate the true cost of the mortgage? And this is how people are doing it, through house hacking. So single-family homes, duplexes, Yeah, ADUs. All right, let's cover one more topic and then we'll call it a day, right? Every 2 weeks I do this for 22 minutes or less to get you back on your day. We just cover concepts here. You can call me if you ever want to cover any of the details specifically to your profile. Okay. All right. So VA loans, you do have to be a veteran to use a VA loan, but you could do 0% down on a property. It's a great benefit. And in case you didn't know, in case you're a veteran, you can have 2 VA loans. So in theory, you could purchase 2 homes with zero down. That's great. USDA loans, also a zero down option. Now, this is more for the country in the rural— I should say it in the right verbiage, but rural settings that may not apply to everybody. But hey, zero down if it does apply. zero down to purchase a home. And let's think about house hacking to reduce our monthly expense on that property. FHA loans, 3.5% down, and that's 3.5% down whether it's a 2-unit, 3-unit, 4-unit. That's a great benefit, and you don't have to be rural. You don't have to be anything. You can be a millionaire and still use an FHA loan. There's some nuances if you already own an FHA house, but But the most vast majority of us who don't have FHA loans, we can use this for any property that we see. And then conventional— conventional varies greatly from 5% to 20%, depending on the property. So, right, everybody's scenario is a little different. All of these, though, all of them can work with a first-time homebuyer grant. If you're a first-time homebuyer, you can absolutely buy a property like this and get a grant. And oftentimes a first-time homebuyer will say, hey, if you, you know, a grant, the program itself, if you haven't owned a property in the past 3 years, we would still consider you first-time homebuyer and give it to you. Some of these grants don't require you to be a first-time homebuyer at all, so you can get money to help you purchase a property. There's several programs depending on your state where you live. There's so many of them. Just know that they could all work with any of these types of loans. And all of these loans can go to 1 to 4 units, but the conventional one gets a little bit higher. So sometimes FHA is better than a conventional loan when I'm doing a multiple unit property. And they all say the same thing: you got to live in the property for 1 year. I have plenty of people who buy the property, 12 to 15 months later they buy another one, and they just keep buying their own primary homes every year, and they'll house hack it. Rent out the rooms. And they, you know, if you were to look at them, you would not think that they'd be a millionaire on paper, but they've got several properties. They've just been doing it for years. You can do this too. At least something to think about, right? That's what today's topic is for. So you understand the concept of it, what it takes, get some examples. Just gives you something to think about. Now, this is it. We're already at the 20-minute mark. So this is the end of today's presentation. So thanks for being here. In 2 weeks, I'll be doing the same type of presentation for 22 minutes at the most about first-time homebuyer grants and down payment assistance programs, the benefits. And we'll do it the same way, pros and cons for 20 minutes, so that everybody understands the concepts and get you back on your way. There's my contact information on the screen, and I'll hang out for a few moments if you want to ask any questions or anything. Just take yourself off mute again. I don't have a team, so thanks everybody for your patience as I had everybody on mute. But certainly here to talk further, or you can just give me a call at your convenience. Thanks everybody so much for being here, and have a good rest of your day.