WCI #287: House Hacking With Dr. Ayush Gupta

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This is White Coat Investor podcast number 287, House Hacking with Ayush Gupta. If you're looking to boost returns, lower taxes and build wealth, join the WCI monthly Real Estate Opportunities list for tips and strategies to maximize your real estate returns. And for introductions to exclusive investment opportunities, expect educational emails that introduce you to syndicators, fund companies, online courses, and online real estate platforms. Go to whitecoatinvestor.com reopportunities to sign up today. You can do this and the White Coat Investor can help.

All right, our quote of the day.

Today comes from a boglehead. It goes by RNJ who said it's only play money until it's gone. I think there's a lot of truth to that. Thanks for what you do. Whether you're listening to this on your way to work, on your way home, while you're working in the garden, whatever you do as you listen to podcasts, you're probably like me in that you have lots of days at work when nobody actually says thanks for what you're doing. And as docs, we tend to be people pleasers.

We tend to, you know, a lot of why we do what we do.

Is because we want to help people and we like to hear thanks. And sometimes we don't.

So if no one's told you thanks.

For a while, let me be the one who tells you that what you're doing is hard. It's not easy. There's a lot of liability there. It required a lot of training. That's partly why it's a high income professional job, is because it's hard. Not everybody can do it. And so thanks for taking the time to go through that training, go through that education, spending your 20s in school instead of out surfing and seeing the world in order to be able to help people the way you do.

All right, you may or may not.

Have heard, but we've got conference coming.

Up and we are excited about it.

This is the Physician, Wellness and Financial Literacy Conference. Okay. This is WC icon 23.

This is our fifth one.

We're doing it the same place we did it last year, down in Phoenix.

Where it was awesome. The weather was perfect.

March in Phoenix, you just can't beat it. And you know, whether you're sitting around the pool, whether you are playing pickleball.

Whether you're playing golf, whether you're going to the spa, whatever it is, the.

This facility has got it. But more importantly, you also get to go to the best medical conference of the year. It's divided into wellness stuff for those who are struggling with burnout, trying to figure out how to get this career so that you can have career longevity. It's got material for those who are just getting into personal finance, who are just joining the white coat investor community. It's got material for those who have been in it for 12 years since it started and are well on their way to financial independence, if not already there.

In fact, we have a lot of.

Material this year aimed at those about to retire, aimed at those already in retirement.

Retirement.

So I think those advanced folks are really going to love that stuff this year. But this podcast, although we're recording it in September and October, it is going.

To run November 3rd.

And that means there's only four days left to the early bird registration. Obviously, I'm recording this in advance. There may not even be any seats left by the time you hear this if you want to come in person.

But if there are, the price goes up in a few days.

So go register as soon as you can. Not only do you make sure you get a seat there, but you also can, you know, get that lowest possible price and you can make sure you're gonna be able to stay at the conference hotel before our room block fills. So lots of reasons to register early. You can do that and you can get more information about it at www.wcievents.com. some great keynote speakers coming. I'm giving a couple of talks. Christine Benz is going to be there again. She hasn't been there for an in person conference yet. She spoke at our virtual one in 2021 and I'm looking forward to her really getting the full experience of being mobbed after and having 30 people asking her questions. I think it's a lot of fun and a great experience for the speakers as well. Got some other great keynotes, lots of returning faculty, as well as a whole bunch of new people that you've never heard before. So it's going to be great whether you attend in person, whether you attend virtually, whether you do the premium package, whether you do the spouse package, whatever it might be. We want to see you there at WCICON23. All right, we got a great interview today. We're going to talk about house hacking, which is kind of a great way to get started in real estate investing. And so let's get our Guest on the line.

Our guest today on the White Coat Investor podcast is Dr. Ayush Gupta, a pediatric emergency physician who is also the founder of mdhousehacking.com Ayush, welcome to the podcast.

Thank you, James. Thanks for having me. Super pumped to be over here on your show.

Before we get into our discussion about house hacking, let's let the audience get to know you a little bit better. Tell us about your upbringing and. And particularly how it affected your views on money.

Yeah, so I was an immigrant. I'm born in India. I was raised till I was 24 in India. So growing up, very different lifestyle than what I live right now. So going back to the days Till I was 10 years of age, we used to live in a joint family, 25 people in a house with three bathrooms. So you can imagine how chaotic it would be. Me, my parents, my brother had one room to share. So lived in a very big mindset of scarcity. A lot of we are not rich and you can't get that. A lot of like, you got to work hard to achieve it. It's your friends whose parents are rich. So a lot of scarcity. Then growing up moved into a better space for us, my family and my brother. I did my med school in India. Again, in med school, it was like when you were in high school, you're like, what's next? You know, when you're in 10th grade, what's next? Are you going to go to science or are you going to commerce? Is one of the things we had to choose in India. And when you were finishing up high school, then what's next? You go to med school. When you're in med school, what's next? What residency are you going to do? So it's always like this. I think the scarcity mindset brought about this. What's next from your parents? A lot kind of kept me like in a bubbly position. And the mindset for money, like, it affected money a lot. Like because you're coming from a background of not a lot of wealth, so you look at opportunities in a very scarce way. So then I moved to the US when I was 25 and I've been here just over 10 years now. And I think in terms of your second part of the question about money, I think definitely affected that a lot growing up in terms of how the parents upbringing was done.

India. So You've lived with 25 people in your house before. So house hacking seems very natural to you, I imagine.

I know, right? That was the ultimate house hacking.

All right. So where'd you do your. Where'd you do your residency and your. And your fellowship?

Yeah, so I trained in New York for my residency at a pediatric residency in New York in Brooklyn, and then I moved to Michigan where I did three years of pediatric emergency medicine fellowship, and now I'm in New Orleans.

New Orleans now. Okay. All right, well, tell us a little bit about mdhousehacking.com. i took a brief look at it last night. Is it a business? Is it a hobby blog? What exactly is mdhousehacking.com?

Yeah, house hacking has been this great opportunity and great tool to help me create resources and wealth that I never thought existed. So I created this website of social media. It's called MD House Hacking. And it's basically a resource, a platform for medical professionals who want to get into house hacking. There's a bunch of tools available over there, like you can, like download calculators and stuff. But I think the main value that I provide over there is to just get on one on one calls with people, especially like medical professions like residents, PAs fellows, med students, young physicians who are trying to get out of this rat race of working into medicine and trying to get into financial freedom. Just talk to them and going through what the process of how it's hacking looks like. And I think everybody can do it.

So is this a labor of love or are you like charging them for coaching them to do it or how's it work?

Right now it's all free. I think at some point I think I'm going to start charging it. But right now it's labor of love. I think one thing I've realized is the effort of giving, the value in giving to people is a big satisfaction. It helps me work harder towards whatever I'm trying to achieve. So right now it's labor or love. Just trying to spread the concept around in our physician or medical professional world because a lot of us are not trained to learn about finances and businesses. We're all focused towards medicine so much. So this is more about just creating the awareness with people and showing them that if I can do it, anybody else can do it. And it's been done for years.

All right, well, let's talk about house hacking. Let's start with just a definition. Can you define for the audience what is house hacking?

Yeah, house hacking is basically, in my mind, the safest real estate investment strategy in which you live in a portion of the house and then you rent out the portion of the house to other people so they can contribute in helping and paying Your mortgage. So it can be done in various ways. You can live in a 1:1 unit building and you can rent out the other units to the other people, or you can live in a single family house in a bedroom and rent out the other bedrooms to other people. There's different ways to do that, but it's basically renting out a portion of your space for the people to help you pay some of the mortgage.

I think the classic way is, is someone buys a duplex, they live in one half and they rent out the other half. But obviously there's almost an endless number of variations. If you rent out like an accessory dwelling unit downstairs, you know, there's like a separate apartment or a, you know, guest house on the property. Do those count as house hacking or are they separate? Because they're technically separate dwellings?

No, 100% they count as house hacking. So I like to like define it in like three ways to understand, to make the medical professionals understand, like the medical student way, the resident way, the attending way. So the first one is like a beginner medical student way in which you like buy a single family house, you have like five bedrooms and you rent out four of them and you live in one of them. You know, that's a way of house hacking. The second one, the restaurant based, like you buy a bigger property, like a duplex, like you were saying, a triplex or a four plex, something like that. And then you live in one of the sides, you rent out the other sides. As a resident, you need that privacy a little more than a med student. So you get that. But at the same time you getting a portion of your mortgage covered or you even getting cash flow out of it. And the third one, which is like an attending style, in which attendings are like, I'm an attending, I need more space, I need, I don't know anybody. My privacy is like you have this big house and you have an ADU or a guest suite or a grandma suite in the back and you rent out that to either a long term midterm or a short term tenant. So all three can be, can be house hacks.

What do you see as the main benefits of house hacking?

So many, I think coming from medical professional stand point of view is we are always thinking about medicine and medicine all the time. We think about that as our only image. House hacking gives you opportunity to do other things in life which is not medicine related. But use the determination and the grit you learned in medicine to develop financial freedom. It's a safe way to invest, you know, A lot of us into medicine are like really worried about our investment. We're like very stuck to our money. We don't want to give it to anybody because we think it's they're going to spoil it or they're going to drop it. And it's because we work really hard to earn it. House hacking is a very, very safe strategy in which you have to pay rent to live somewhere. Instead of paying rent, you're paying mortgage. But most of your mortgage is covered by other people. So I think that's really good. I think what other people can learn from it, especially coming from my experience, is like other strategies in life. I didn't know that I'm going to learn or love finances as much as I do now. I don't know. I love Excel sheets as much as I do now. Some people love hospitality a lot. They love Airbnb a part of their property. So they love decorating. And I've seen physicians who started to house hack a portion or Airbnb a portion, and they love it. They love catering to guests, they love decorating the place. They have their entire family and kids taking part in that project. It's a great family bonding thing as well. It creates a passive stream of income. Like if you start in residency and you, you're doing that, by the time you are in fellowship or you are being an attending, you have that other stream of income coming in. And one of the big things I think you being an ER doctor, me being pediatric ER as well, is burnout in medicine. And I think what helps preventing burnout is having these other streams of income, other sources coming in. House hacking or investment helps with that. A lot of prevents resident burnout, prevent earning, attending, spurn up. So I think a lot of benefits overall to it and very, very low risk strategy to get into real estate investing.

Yeah, well, I mean, you may be able to have a significant income, but certainly you can reduce your costs of housing. That's beneficial. You may be living in a nicer place than you could afford on your own. You know, in a market that's hot, where things are really appreciating fast, you now own a bigger, more valuable property that's appreciating fast and it's probably leveraged to boot. So you're probably making significant amount of money on the appreciation. But let's talk about some of the risks of house hacking. What do you see as the risks here of doing this?

Yeah, great question. I get this a lot. I think two big things and I can share with Examples, what if I get no tenants is one risk that I get and I have to pay the entire mortgage myself. And the second thing which is even bigger is what if the toilet get clogged in the middle of the night and I'm in the ER or I'm in the call for a hospital, you know, how am I going to pick that toilet which is clogged? Both of them can be offset by great resources and systems. When you buy a house hack and you set that up, you know, you don't need to. I've never. I don't know how to clog a toilet. I don't know how to work anything. I don't know how to drill a nail. I probably know how to do that, but I don't have to do that.

I got news for you. You pound nails, you don't drill them. So I'll give you a little tip.

There on what to do with the.

Nail there, you know, so that explains to you, I've been doing this for three years now and I still don't know how to do that. And I do like major renovations. So it's, it's something that you don't really have to do it. You screen your tenants. You screen your tenants really well. So they're not going to be messaging you in the middle of the night if there is something that's an emergency in the middle of the night. You have system and processes like you have a handyman or you have a property management company which is managing that. In terms of finding tenants, there are ways to do that. I think it's especially in today's market, especially being a physician or a medical student or residents, you have this added benefit of connecting with other people like nurses, travel nurses, med students who are coming for rotations or long term like residents. And easily you can find tenants. It's a problem of plenty in finding tenants because we all have gone through that and everybody thinks that the physician, when you're renting a park, your space, they love it when you are actually showing your space to other people because they think as a physician or a med student, you're like a very reliable person. So both these clauses that I feel like disadvantages wise is actually not really that bad.

Now obviously when you're doing what you call the resident model or the attending model, you've got some additional security there. But when you're doing the medical student model, I mean, these are roommates, they're sharing your space. It's not just about tenant screening. You're also selecting Your roommates. And even if you're splitting a duplex or if you're one unit in a fourplex or whatever, or you have someone in your adu, you may not have a roommate, but you're choosing your neighbors. Yeah, I think a lot of people worry about that. I mean, these people that are coming to live in your house, they've got access to your food in the fridge, they've got, you know, your computer's in the house, they could steal that or get on it and steal your identity or you know, use your bed or you know they're going to dirty your toilet. What, what do you think about those concerns that people have that keep them.

From doing house hacking?

That's such a common concern. That's one of the first things that a medical student or resident asked me about that what if I'm not home and I'm at work and somebody does that to me? They hack my computer, they look at my mails about how much my mortgage statement is when it's sent over to my house. That's why you screen your roommates really well and you define the roles. You tell them that okay, I'll be friends with you at other places, but I still am the owner of the property, I'm still at the landlord. So it doesn't mean that you can do stuff to break the relationship of a landlord and a tenant. You still sign a 12 month lease with them if you're doing a long term tenant. I personally like to tell my tenants that I am the landlord. So it creates a very clear transparency among them that I'm the landlord and I'm living in the building and which actually makes them be a little more careful. Like I've never seen a party going on in my place with my buildings because I'm living in the building. Same thing goes for that tenants. And then when you write a lease for them, like suppose you have a roommate and you're writing a lease for them, you just write it. There's no parties allowed. I mean you write in the lease that don't use other people's food and bathrooms and stuff like that, and that's violation of lease and you can kick them out. And at times if that breach is happening, you can bring it up to that person, be like, hey, this is what's going to happen, this is your lease, you've signed it. Make sure you sign the lease. I think what a lot of people do is like, hey, that's my body. So I'm going to just have my roommate and pay 750 bucks a month helps me off some of the costs. But it's so important to have a written document signed. It helps you a lot in the future. So. And I live with roommates during residency and fellowship, you know, and I didn't buy a house that time, but I had roommates. But I think it's the same thing. Like as a roommate, you choose another roommate who you think you're going to be compatible with and that person is not going to touch your food in the fridge. So, yeah, that's my feedback on it. I think just having a roommate in college, it's the same way having a roommate while you own the property too.

You lose a bit of the barrier that you typically have between a landlord and a tenant. You know, it's a business relationship because sometimes you have to evict these people.

Right.

You think it's harder to ev somebody that's also your roommate, that you see the difficulties they're going through, why they can't pay the rent. Do you think that's emotionally harder to do an eviction?

It can be, I won't lie. It can be if you're trying to evict somebody who's your roommate and your friend. But that's why you have your security deposit. Doesn't matter if you're a roommate or not or a friend or not. You get a security deposit and you tell them, I mean, you have to pay the mortgage and you're dependent on that person's rental income to pay the mortgage. If they know that you are the owner, they also know if you are a co resident or some somebody like that, that you make so much salary as well. Because everybody knows how much a resident makes approximately. So they know that if they're not paying that 750, a thousand bucks, you can't afford that mortgage, so you have to kick them out. It might be challenging, but in a way, if I've realized with people, especially the tenants that you screen well when you choose them well, that's where it all goes down to how well you're screening them. You know, if you screen them well, they can understand where you're coming from. And being transparent has been the best case scenario for me. I have had to evict tenants before, but those are extremes and I didn't get to screen them. So I think screening your roommates really well can help you. But at the end of it, if you, if they're not paying your rent, you. You still have to evict them. It's a business Transaction, you have to tell them, you just have to be transparent to them. That helps a lot.

What about some of the legislative risks, you know, the regulatory risks? For example, some communities you're only allowed to have a certain number of adults living in one house or you know, the neighbors get upset because there's six cars parked on the street out front. What, what, how do you manage those?

Yeah, you have to look at your local, state or local, state landlord laws about how you're getting people in. Most places will allow one to two person per bedroom. So for example, if you buy a four bedroom house, they will allow six to eight people to live in it. Most of your neighbors are going to be okay. Like I live in a, I live in New Orleans, it's like a college town but at the same time it's a lot of hospitals around as well. So most people know that if this is a duplex, you'll have at least four to five people living in it. So they're okay with it. As a landlord, if I'm house hacking, I'm owning it and I'm getting people in. Just make sure you don't overdo it, don't get greedier.

You shouldn't have 25 people living in there like when you were growing up.

I know, right? I wish we had the space for all 25 and thank God everybody has their own space now. But that was back in the days is pretty challenging. But as a, if you are starting out house hacking, I know it can be super attractive that hey, why don't I have two people in the living room, two people in the bedroom, two people in that bedroom. You know you're going to get 10 people so that you, instead of just paying off your mortgage and getting a little cash, you want to get 5,000 cash flow, 10,000 cash flow. Don't have to do that because you're going to get into trouble. So it's a great strategy but you have to be careful not to get over greedy with it. You just do it right and you're going to be fine to do it again next year or next year and repeat again. And I think in two or three years it just makes you a different person and you have different kind of bank balance as well.

Now when you go to rent a property to somebody, you can't discriminate them based on their, you know, where they come from or the color of their skin or their gender or their religion or their sexual orientation, you know, in most states or whatever. But all that goes out the window right when you're living on the property, you can pretty much discriminate against anybody. How can that be useful? Or is there a problem with that? What do you think?

I think it's. You don't call it discrimination. I think you'll get into trouble if you're. You like telling people who come to apply for your house as any of these things that you mentioned in terms of race and gender and color, that you don't want them in your property. You just have to like, you own the property. You choose your tenants. You don't have to tell the other people why you didn't choose them. So that. Stop. That's where the discrimination stops. They don't know the person that you chose, why you chose them, whether it was their bank balance, whether it was a credit score, whether it's a background check. You still should do all these things when you're screening a tenant. So that's where. That's where discrimination goes away. For example, you. Sometimes I have property management companies discriminating a lot more than house hackers. Like, if I am choosing my tenants, I'm like way more open to having any kind of applicants and anybody coming staying in till the time their background kind of screens through. But a lot of times you can hear that from property management companies that they're not taking somebody because of some. Some race or color. So I think because you're the owner, you really, really care about that place. You really care about who's going to stay with you. So you try to pick the right person for you who's going to be sleeping in the next room.

But you could do that. You could, you could make it so the only people that lived in your house with you were straight Catholic women.

If you wanted to.

Right?

Yeah. You can 100%.

There's no rules against that.

If you're living there, there's no discrimination. If somebody who's non Catholic male who's applying for that place, but you only want Catholic women who is applying for that place, you cannot post it online. That's discrimination. You cannot post it. Looking for a Catholic woman for a roommate like that, I think that can be considered discrimination. But once people come in, you can screen them like that and you can choose. I chose my tenants the way I wanted them to be. Yeah. I wanted young couples who are working and who, who are going to take care of the property. And that's how I have all around, because it matches my personality as well.

Yeah, I mean, I mean, my understanding.

Is with typical rental, you know, when you're just the landlord. You can't post anything like that in your ads and you can't discriminate against them. I mean, I suppose you can, you know, kind of do it under the table where people don't really understand that's what's going on. But if someone could prove you discriminated against them because of their race, whatever, they've got a case against you 100%. But I think if you're living there, you can put whatever you want in the ad. Can you? I mean, you could say only young couples or only medical students. I think as long as you're living on the property, you're allowed to do all that, right?

Yeah, you can. I think the correct wording would be like, preferable to go around over there, like preferably medical students or preferably young couple are suited for, for these kind of folks. So you have that category applying and not this broad category. And you can screen people easily. Yeah, that's what I would do.

Well, you've mentioned some screening procedures. Tell us about your application process. Right. You've decided you got this bedroom, somebody moved out, you want to bring somebody in to stay in that bedroom. What's the application process? How do you screen? Walk us through that.

Yeah. So for me, the application process is very broad. Like, I would create a broad net of people that I can get in from. So, for example, as you were saying, I can choose my tenants. I love medical people. Like I love medical students, I love residents, I love nurses who can come and stay. So one of the things that I do, which other people don't have it, is talking to program coordinators. Like, I know program coordinators around in the hospital that I work in and asking them if they know any classes, any residents from med school. Same asking the other residents and med students. That's like me doing active work. Then the other thing you can do is like Zillow, Facebook and some other online rental websites. You can post your. Your link over there and then you have bunch of applications. So I use a property management software which deals with all these things. A software and not a company. So it doesn't take a lot of my cash flow out. The software kind of. I set the criteria. So I said what credit score I want? I said what income I want? I said how many people I want to live over there? And I said those things. And the applicants know they can't apply if they don't fit that criteria. Once those things are set and they apply, then they get my calendar and then mutually we decide what Time we're going to meet at the property for them to walk through. Depending on the property, I think sometimes, or the unit sometimes I have so many applicants that I just have to have an open house at that point. Last year or this year have been pretty crazy for rentals and people don't have space to live.

Do you conduct an auction? You get them all in the room and you auction off the room or how's that work?

I have had that opportunity, but I'm still like a very safe landlord. I want to say I don't do that auction part. I've had people come in and tell me that I'm going to pay you thousand bucks more than what you're charging right now. But it's like that's a red flag. The people coming in and be like, I'll give you six months rent. You know, that's a red flag. So I stick to my guns and I'm like choosing doing the background checks. Once they've walked through and they're still interested, then you go to this background check. The same property management software can do the background check, credit score check, and you get a couple of reference letters from them and that's how you get them in. And I think there are a couple more steps, obviously that I'm skipping over here. But I think you get great tenants if you just do a little bit of work. And I think we have so much advantage. This is for long term tenants though. You know, if you're doing midterm tenants like for example, travel nurses, you have something called Furnish Finder you can use. If you're doing short term rentals, you're doing Airbnb and vrbo. So those are other places where I do find my tenants as well.

Do you typically call an employer if they're a resident at the hospital? Do you bother calling the employer?

No, not if the resident at the hospital. I would not. I actually have two residents and two med students. I'm in my house right now. I have four units in the building that I'm living in. So I have two medical couples living upstairs and they just show their contract, you know, the hospital contract they are at, whether it's a residency contract. And it's super easy these days to do a background check on people. Like, you know, Facebook has a bunch of stuff. You can Google the names of people and you can actually do a quick background check on people. So it depends on what kind of. There are non medical people. If I'm, if I'm getting in, I would definitely Call their employers and make sure they're okay.

How do you make sure a student has the means to actually pay your lease?

Yeah, exactly right. That's my. When I first rented out to a student, I was thinking the same thing. They have their loan, they send you their loan information. So whenever they take a medical student loan, they get a portion of of money which is directed towards rental. And I didn't know that till I saw their the paperwork that they sent and they had a amount that was written over there. And if my rental amount is much lower than that, I know I'm in good situation with them also. The other thing to offset that is to have their parents sign cosign only or somebody that's higher net worth course anabilities and you can do a background check on them. So those are the two methods that I've used for getting medical students.

Let's hear some house hacking success stories. Have you. Can you share some of your own or of other people when things really worked out well?

Oh yeah. Well, I'll share mine if that's okay. So I started this three years ago when Covid happened. It changed my mindset completely and I was going through the same route of attending life and trying to buy a single family house. Covet happened, everything shut down. I couldn't do that. So I think it was the blessing in disguise. I learned a lot, got into education, educating myself about real estate investing and finances. So what I did was I went out, I bought a house. It was a four unit building. I bought it for $690,000. I'm very transparent about it, so I'm okay with giving you the numbers. I bought $690,000 and I did work on each unit as I was living in one. So I lived in one unit and I rented and I was renovating the other unit. I wasn't, the contractor was. So I was making some money every month which I was putting towards payment of the mortgage. So I literally didn't have to pay the mortgage ever for that property. Over time, over like the next six months, increased the value by one and a half times and then did the cash out. Refi got all the money that I put in the house, whether it's down payment, renovations, everything out from it. And now I live in it for free. I make around 1500 bucks living in it for free. I used to pay 2,300 bucks a month before that to pay for my rent and Now I'm making 1500. So I have a spread of 3900 or 3800 if you count it that way. I save 23 and I make 15. And at the same time, I have this amazing property which is worth a lot. And every month is being paid down the mortgage and I don't pay a single penny of that. It's my tenants who pay every month for that. So I'm creating the equity, my debt is being paid off. I used a heloc, a home equity line of credit for the rest of the amount that I refinance and I use that money to buy another property. I bought two more properties just because of my first house act and I'm under contract with number third, number fourth property. I'm under contract now. And it just. No balls when I was starting it. The first few months were tough. You know, like anything I tell people, like going into med school, when you were doing your first laceration repair, the first stitch, your hands were trembling, your attending was shouting at you, the fellow was like, how slow this person is. They're never going to survive. But then 10 years later, once you go to residency, fellowship, or even if you don't do fellowship, residency, and then now you're attending, you're good at it. You can do a seizure in like 5 seconds. Same thing for investing. You know, you don't start like at 10 out of 10. You start with learning how it is. So it was a good learning process, but it snowballs very fast. That's my success stories. But there's a bunch of people that I know who like Airbnb aside and then moved out and then did it again. Like residents who did one house in a, in a three year period during residency and another house in a three year period during fellowship, and now they're attending and they're making $3,000 from those two houses, the passive income completely after paying out the debt service and they love it.

That's pretty awesome that you're, you know, you're two or three years out of training and you're already working on your fourth property. So that's pretty exciting. How about horror stories? Have you heard any house hacking horror stories? I mean, you've been doing this in what's been a pretty awesome real estate market, let's be honest. Right? Everything's going up in value.

Yeah.

Have you heard any horror stories from people that tried to house hack?

Yeah, I have, I have. I think it's less horror stories than Vince. I think one of the things is the real estate market of the last three years have been on the upswing. And right now you start to hear more horror stories. I think the more horror stories you hear about is the more the rehab projects, the ones that people only take to value add. And those are the big horror stories that I've heard in which you are buying a house, for example, for $400,000 and you think you're going to spend 50,000 on the rehab and you think the after repair value is going to be 600,000, but you end up spending 150,000 and after repair value is $500,000. So that's the horror story that I've heard in terms of the after pay value. But at the end of the day, you're still living in it. You might not have created that equity that you were planning to do, you might not be able to cash out refi, you might not be able to take a heloc, but you are still cash flowing or you're still breaking even. So the worst horror stories are something like this, but even in that the person who did the work or who's living over there is living for free or making cash flow by living over there. So that's why I keep saying it's such a safe investment strategy that even your worst case scenario, if you are doing a little bit of due diligence upfront, you, you can offset most of it because you're living in it as compared to you have to pay some, somewhere where you live in it, you have to pay for a rental you have to pay or a mortgage you have to pay. Why don't you pay a mortgage and then have some roommates which is going to offset some of that?

You know, historically most of the time, about 2/3 of the time for residents in a three year residency, they're actually better off renting because the place doesn't appreciate enough to overcome the transaction costs. Do you think if you're house hacking, it changes that equation and makes it smart for residents to actually buy?

That's my biggest regret in residency and fellowship. I wish I house hacked one property in residency, another one in fellowship, and I can give you some numbers if that works. So an average resident, I agree a resident should be house hacking. And this is why an average resident makes around $60,000 a year. That's, that's an average residency salary varies 10, 20% depending on what part, which comes down to around $3,000 a month for their monthly salary. An average resident space around 1000 to 1200 bucks out of that or 1500 bucks out of the 3000. That's around like 30, 33 to 50% in terms of their monthly income that they pay for rental units. If you think about in a three year residency program, which most people do, that's around like 40, $40,000. And I can give perspective from New Orleans and Michigan. I was not into looking at houses in New York at all. I'm sure expensive areas are tougher, but if you look at New Orleans, you can go buy a four or five bedroom house for $400,000. A single family house you can easily find in a nice area for $400,000. Your mortgage on that would be around $3,000. You get three roommates, they are paying off your mortgage for a thousand bucks a month. They're paying your rent for a mortgage of a thousand bucks and you're living for free. You save a little bit for your expenses. Now basically what happens is by the time you finish your residency, a three year residency, you save that $40,000 that you were paying for rent. Over three years, your property has been paid down around 20 or 30,000 as a resident because you make less than $150,000. You can write off some of the taxes from depreciation of the houses, which is a great strategy. Any CPA can talk to you about it. And even if the house doesn't appreciate 0%, 0%, you are coming out $100,000 on top as you finish residency, which is a great strategy because you were paying 40,000 before and now you have a property. When you leave residency, you rent out the four bedroom somebody too, which is cash flowing. A thousand bucks a month or 12,000 bucks a year. So it's a great, like imagine starting that when you're intending and you're so far ahead. So I personally think that the fourth year of med school, like if you are finishing up 4th of med school after you've done with all the interviews and your match comes out in somewhere around March, that's when residents should start like thinking about this process or something related this like how can I, how can I do something like this to offset some of my expenses? And as a resident, I remember one time we used to offer a moonlight payment of 500 bucks. Everybody used to jump on it. Imagine saving 1200 bucks a month. It's, it's a great strategy. It's something which has been done for years. I think house hacking terminology wasn't there. I think people were doing it for a long time.

Yeah, I had a co, I had a co resident that was doing this back in 2003. So it's, it's not a totally New concept for sure.

Yeah. And a lot of residents over here are also doing it. They just don't know that it's called house hacking. They, they live in a place, they have some roommate who is a transferring med student or a traveling med student and they help offset some of the mortgage. And it's perfect, it works for them. They like it. I think it's just the action steps that as once you start finishing up your med school and you get into residency, you're so into medicine all the time and you don't think about anything else but just focusing a little bit on some, some other stuff can exponentially charge your future.

So let's say you're a resident, you decide you're going to do this. You walk in and you want to buy this 400, 500, $600,000 house. And they're like, all right, well how much do you make? And you're like, I make 55,000. Right? Yeah, that's a little hard. How do you make sure you qualify for the loan? Because you tell them, oh, I'm going to rent out three rooms. I'm not sure the lender believes you. Right. How do you qualify for that loan?

That's perfect. So they're like a few type of loans, which is very helpful for doing that. Not a lot of conventional loans which is like 20% down. Who look at your background like that will help you with financing that. But there are physician specific loans and.

The resident usually doesn't have the 20% down.

Yeah, doesn't. So you want something like physician. That's where the house hacking is such a powerful investment because you can use low down payment for. You can use 0% if you want to go through a physician loan program and 3.5% if you want to use a FSJ loan program. I think the physician loan is a great, great, great strategy because it doesn't look at your debt as a resident. It doesn't look at your medical student debt and a college debt. It prevents you from. It doesn't allow you to pay pmi, which is a mortgage insurance, which you have to pay when you're paying less than 20%. And it looks at your future. It looks at, okay, you're a pediatric resident, this is your future earning on. And they think that's a safe bet to invest in.

I mean, I mean, they still look at your income though. They still care about how much the loans can be and what your income is, right?

They do, they will, they will look at that. And the other thing you can do to offset that is to say that you're going to be renting the three units for 1000 bucks each, for example, the example that we use, and they will use 75% of that number as well. So if you're saying you're going to rent the three units for 3,000, they're going to use 75% of that, the loan broker and be like, okay, so 2500 or 2400 will be covered from that. Can you with your income of 60,000 afford 600 bucks a month? And that is yet that is generally a yes. Even if you're, even if you're 55, $60,000 salary. So those are things that you can do and you know what I mean. If none of these things pan out, you have like somebody to help you. Go find an uncle, go find a doctor, go find your parents, who going to be helping you be on the mortgage. You're responsible for all the work, you're responsible for the payments, but have them as a collateral in doing it. And there are so many people who are doing this right now. There's so many physicians, fortunately for all of us in the last few years, there's so many physician entrepreneurs who've come out who love to provide value and help residents and have gotten into real estate and just there's so many people who will help you be a collateral for these things. Obviously everybody and anybody will do background check. Best place with your family. Start with your family. If you cannot have a mortgage lender give you the loan based on your income, have your family sign off on it and you be the main person on it so that those are, those are ways to offset it.

All right, well, shorter long term rentals, which is the best way to do house hacking. Should you be putting this up on Airbnb and vrbo or do you think you're better off, you know, getting longer term roommates that are more stable and don't. You don't have to hassle with. What do you think?

I've done both now and I can tell you my perspective. My girlfriend loves short term rental because she loves decoration, she loves hospitality. I love more of the passiveness of the long term rentals. I think it depends on your personality as a house hacker. Like if you think, oh, I'm gonna have a friends over sometime and I need those roommate rooms available like once in a month or once in a few months, then the short term rental would make sense for you. Short term rental is generally more work, however it more cash flow as well. So the Same property which would cash flow with three bedroom, 3,000. A short term rental would cash flow on 5,000. It depends, I mean, I'm just giving arbitrary numbers. But short term, generally cash flows a lot more. It's more work as well. But if you set systems and processes, there's so many short term rental assistance in the process. We have an Airbnb out in the mountains and we barely have to do anything because there's so many systems and processes in place that it can be done very easily even if you're working in the hospital. I work in the hospital all the time, but it can be done. So it depends on your personality. If you want to play it very, very safe, you want a safe net of income coming in, have it very passive, not doing a lot of work, have great tenants in place, consistency. Then long term rentals work a lot. But if you feel like you are that person who always are on a go and wanna make extra, wanna do extra, love hospitality, love decorating, then short term rental is the way to go as well. But you can set up systems in that as well so you don't have to do a lot of work.

All right, well, we're coming to the end of our time. Eventually 30 or 40,000 people, mostly docs, are gonna listen to this podcast. What have we not talked about that you think they should know?

So House hacking is a strategy, right? Like what I wanna tell people if I can and the things that I've learned and I was telling in the start of the podcast about scarcity, mindset and about what next. We always, as physicians, we keep delaying our work, we keep delaying gratification. I think a lot of times we have to find that balance of doing stuff now and being a more well rounded person. Medicine is just one part of your life and it's a big part. We've worked really hard to get there, we work really hard to be there. But think about other aspects of your life. If I can tell one thing that's helped me the law the most is relationships. Having coaches, having relationship learn, having mentors, being a mentor has been great. But finding them, and that's what I would encourage people to do out there. Like if you're a resident, if you're a medicine, if you're a physician, go try to talk to other people and most people are happy to talk to you about these kind of stuff, then they're hiding stuff. They are happy to guide you, they're happy to mentor you, they're happy to tell you other things you can do. In your state of the life, which they might have made a mistake that can help you to not make the same mistake. So create that relationship with other people in life, other folks, and then spend time working on other aspects like apart from medicine, relationship, work on your health, fitness, Spend time giving and become the best of who you are today.

Awesome. Well, Dr. Ayush Gupta, pediatric emergency physician and founder of MDHousehacking.com thanks so much for being on the White Coat Investor podcast.

Thank you for having me. I appreciate it. All right.

I hope you enjoyed that interview as.

Much as I did.

House hacking is one of those things that it absolutely works. Is it some additional work? Yes. Is it some additional risk? Yes. Is it a great way to start real estate investing? Yeah. Yeah, it really is. And whether you're just using an accessory dwelling unit, whether you are renting out a house, there are now bedrooms, whatever it might be, there's a surprising amount of wealth and income that may be hidden in that place you're living. If you're looking to boost returns, lower taxes and build wealth, join the WCI Monthly Real Estate Opportunities List for tips and strategies to maximize your real estate returns. And for introductions to exclusive investment opportunities. Expect educational emails that introduce you to syndicators, fund companies, online courses, and online real estate platforms. Go to whitecoatinvestor.com reopportunities to sign up today. You can do this and the White Coat Investor can help. Don't forget, if you want to come to the conference, now is the time to register. Www.wcievents.com I'd love to meet you in person. I love the conference. I feed off it. I like to hear hear your concerns, your challenges, your successes. They help direct the direction of the content for wci, for the blog, for the newsletters, for the podcast, for the videocast for the next year. And so it's a great opportunity for me to meet a large part of the WCI community all at once. So selfishly, I hope you come to the conference. Thanks for those leaving us five star reviews and telling their friends about the podcast. Our most recent one comes from Bo Sizzle. So says five Stars. I can't say enough good things about this podcast. It is a must listen and for me, the best tool in the suite of WCI offerings. I tell all my medical co workers about it and it still amazes me how many have yet to stumble onto it. Keep up The Good work, Dr. D. Thanks for the great review. I appreciate that. Bo Sizzle. All right, we've come to the end of another podcast. I hope you enjoyed it. I enjoyed making it. Luckily, my technical team has to spend a lot more time on it than I do. But either way, please keep your head up and your shoulders back. You've got this and we can help. We'll see you next time on the White Coat Investor Podcast.

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