2413: The 10 Million Home Shortage and Co-Living Opportunities and Client Case Study with Jarrod

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Greetings, empowered investors, and welcome to episode 2413. If you're watching on video, you can see I have the puppy here with me today. It's great to have the dog. This is take your dog to the office day, right?

So here she is.

Anyway, she doesn't say too much, except sometimes when she's hungry, she'll start barking. And when she wants other stuff, it's pretty cute. Anyway, we got a great show for you today. Pardon the casualness of the dog, but she's left. She's left the building. Anyway, today we are going to talk about one of the things that can help solve the housing shortage. It'll only put a minor dent into it, but I think it is really one of the biggest opportunities we have right now, and that is co-living. So we're going to talk about that with a case study here in just a moment. I think you're going to learn a lot from this. And before we get to that, I want to talk to you about the new housing shortage estimate from none other than The White House. Okay, so the federal government is out with a new survey about the housing shortage. And, you know, I've done many shows on this. Of course, I've shared lots of statistics from different organizations, whether it be Fannie Mae, Freddie Mac, Zonda, Zillow, you know, etc., etc., a whole bunch of different groups. I've shared the numbers on what they think the housing shortage is, and those numbers range from about 1 million units about 7 million units. However, this new White House survey says it's even worse. It's 10 million units. That's the size of the housing shortage. So here it is. If you're watching on video, it's right on the screen. White House economists say deregulation could help solve the housing shortage of 10 million homes. Now, we've talked a lot about the deregulation environment, which I'm totally in favor of. Housing is just overregulated like pretty much everything else.

It's not special in that way.

But this deregulation thing, I say, would only make a dent in it. And here's the confusing thing about it. A lot of these surveys show that the regulatory costs related to housing are extremely high. They're maybe $70,000 per unit. But here's the thing, folks. Here's what those, those surveys, those articles don't tell you. They don't tell you that all of those regulations will not and cannot be eliminated. It's impossible. So what are they going to do? Shave off, you know, maybe the value of $5,000 or $10,000 in regulation, which is going to be very hard to do because they're subject to state and local governments, county governments, city governments, municipality. You know, it's just, it's not going to move the needle. It might nibble around the edges, but it's just not going to really move the needle. So the Trump administration signed two executive orders in March directing federal agencies to reduce housing regulatory burdens. So this is just at the federal level and make it easier for smaller banks to provide mortgages. It's been slow to take on other steps that would show that high housing costs are a top priority for this administration. You know, I think Trump is doing a pretty good job. I know crazy people will disagree with me and maybe not crazy people too.

You know, there's a lot of criticism you can aim at Trump for sure.

But overall, compared to what? Like, what else are we going to get? You know, do you think Kamala would have done better? Not a chance.

Okay.

They've been trying to focus on housing and other affordability issues for months to get ready for what's expected to be a challenging midterm season for Republicans. I think that's pretty obvious. You know, Trump spoke at Davos. He talked about this. The Iran war has driven up mortgage rates significantly, by the way. So we're not getting any relief there. And this is just keeping more and more people, number one, in their houses because the cost of moving is too That's the mortgage lock-in effect, but it's also keeping people in the renter pool, which will have— as soon as this multifamily oversupply clears, and it's clearing, it's clearing pretty quickly actually— when that happens, we're going to see a lot more upward pressure on rents. There's a lot of that under the surface of the water, just like the iceberg that hasn't really shown itself yet, but it's coming, folks. It's coming.

I've talked about that for a long time.

Look at this. This here is a map of the country showing the percent change in single-family permits year over year from last year to this year, same month, January to January. And it is devastating, meaning the shortage is going to continue to get worse and worse and worse because think of the population growth that we've had over the last quarter of a century, over the last 15 years, over the last 10 years. And continuing, right? Not as big as it was, but it's still there. And yet housing is going the opposite direction.

Wow.

I mean, this is devastating. Okay. But it's good for investors who own the scarce resource called housing, the limited supply and hard to replace resource called housing. Florida. Florida, a market that got over its skis a bit where I own several properties. You know, we like Florida still. We're very bullish on Florida overall. but it has taken a little bit of a step back over the past couple of years because it just got overinflated in the post-pandemic gold rush. Permits are down, down in Florida by 15%. They are down in Texas by 21%. They are down in the Socialist Republic of California by 16.4%. They are down in Arizona by 30%. 4%. Folks, this problem is so far from being solved. It's actually getting worse and worse and worse. You can see it happening. The data just shows you the story. Now, interestingly, in New York State, permits are up 3.2%. Hardly anywhere are they up, but there's a few spots, right? In the Socialist Republic of Washington State, a complete disaster where people are leaving like crazy. They are actually up 0.4%, less than one half of 1%. But overall, the permitting is just down, down, down in most places when it needs to be up, up, up. I mean, how are we going to get 10 million more homes if they're just not building anything? It's, it's absolutely crazy. Now, it's interesting also to look at multifamily permits. That's also housing. It's a different category, obviously, but it has hurt our should be, would be increasing rents on the single-family side had multifamily and the syndicators that keep ripping people off and the fund managers that keep ripping people off. People have been devastated investing in these apartments. It's been really, really a tough road to hoe over the past several years, but they have overbuilt them and they have been stealing people out of our rental market. The deals they've been making are so good that it has pulled people out of the single-family market into an apartment because you can't beat the deal. But that is changing, and it is changing quickly.

Look at the percent change in multifamily permits year over year.

So in a few select states, we are seeing still an increase in these multifamily permits, but many of them are down. Now, this is the number of permits, but What it doesn't tell us is the number of actual units, because I don't think they mean units here. I think they mean overall projects. So in California, for example, it's up, up 119 units.

Now, something interesting that's happening in California, I gotta tell you, even though we're not a fan of California, I just wanna tell you about this.

And I think I've reported on this before, and that is that to their credit, to solve the housing shortage, right?

And I hardly give California credit for anything.

It's like fraud central— California, Minnesota—

absolute disaster as far as the government goes, etc., etc.

But, but to their credit, okay, they changed some zoning laws that allow and actually encourage multi-family construction right near mass transit hubs. And that is going to change the complexion of California housing Kind of significantly, if you ask me, because you're going to see a lot more supply come in to some of these markets near mass transit.

That's a really interesting zoning law change, and I got to give them credit. I think it's good.

But if you're an investor in the Socialist Republic of California, that is not good for you because there's going to be a lot more housing supply in a market that has been supported by extremely limited housing supply. So It's changing. It's changing. Be careful. Florida down 60.2, down 60.2. Texas down 24.4. California up. New York State up. Oregon way up.

Arizona up 112, almost as much as California. So that's kind of interesting to look at the multifamily, even though that's not our major competitor.

It is always worth noting overall inventory still extremely low in terms of the single-family market. We are looking at just over 700,000 homes for sale, about half of what it should be, and it's up only 3.2% year over year, only 3.2%, but down since the pre-pandemic numbers of 15%, basically. So inventory up slightly over last year, not much, but way down still by 15% in the pre-pandemic 2019 numbers. So we still have a major inventory shortage. And then here's an interesting thing: new homes as a percentage of total inventory. Now, over the last 22 years that I've been in the business of helping investors build their portfolios nationwide and, and doing business in many markets, owning properties myself in many, many markets, we have gone back and forth depending on market conditions in terms of the inventory we're recommending. And the last several years, we've been mostly recommending brand new properties, brand new, fresh properties from builders because we could get the best deals from the builders. And we have fantastic builder incentives right now. We have some all cash programs that are great deals. Now, I don't recommend you keep your property structured as an all cash deal. Of course, I like leverage because it amplifies return. Lowers risk and gives you my trademark strategy, inflation-induced debt destruction. But in terms of the percentage of inventory of new homes, the new home builders, this is why they're making deals, folks. You see in the, you know, post-market crash, Great Recession type era, just nothing was built. You know, just this is why we have such a shortage today. The builders just, they turned it off for a very long time, like a whole decade, even a little more than a decade of very little residential construction. And remember, when we consider this different residential construction, uh, we are targeting entry-level homes as investors. And this is all new home construction, most of it being higher-end than we would even want to consider as an investment property. But now there is a— not hugely significant, but there is a glut of new home inventory. And that's why you can benefit from this. So reach out to our investment counselors, 1-800-HARTMAN, or direct 714-820-4200. Press extension 2 on either of those to get in touch with one of our investment counselors, or just go to JasonHartman.com, fill out any form on our website and we'll get in touch with you. This is a fantastic time. Remember, like Wayne Gretzky said, you've got to skate to where the puck is going. The market has been boring, it has been sleepy with very minor appreciation over the last 3 years, over 3 years now, but still amazingly resilient even after tripling the cost of mortgage money. But Skate to where the puck is going because you know where the puck is going, folks. We get past the war concerns, we get our new Fed chair, we got midterm elections coming up. The money is gonna get easier and the money is gonna get cheaper. And you know what that's gonna do to housing prices. Remember, every 1% in mortgage rate is equivalent to about 10% in value. So don't miss this opportunity. This right now is the time to position yourself to win the game. After the news all changes and becomes positive and the market catches on fire, you're going to have already missed it. The smart money skates to where the puck is going.

Think about that. Really, really think about that.

Okay, one more thing. Empowered Investor Live is coming up. We are just about a month away. We'd love to see you there in Irvine, California. Empowered Investor Also, you can still guess the date of my MLS book.

Okay?

And I know some of you have tried. I appreciate those of you who've entered the contest for free tickets to Empowered Investor Live. That's 2 free tickets, by the way, by guessing the date of this MLS book.

I'm moving it around kind of quickly because I don't want to see any dates on it.

But this old MLS book was mine. I was well into my career when I used this MLS book. Fortunately, I saved it because it's kind of a collector's item now. Look at these black and white listings in this newsprint book.

It's awful.

This is the way we used to do real estate, folks. Okay, it was way different than it is now, and I've been doing it for many decades. So guess the date. Whoever gets closest to this, and maybe even the second closest person, we'll give you a couple of free tickets for Empowered Investor Live. Just go ahead and register anyway so you get in on the early bird pricing. EmpoweredInvestorLive.com. Or at JasonHartman.com. You can do either one, and we'd love to see you there. We have a 2 and a quarter day conference, starts Friday evening, ends Sunday at the end of the day, about 6 o'clock on Sunday. Really easy, great hotel rates, only $151 per night in a nice brand newly remodeled hotel, beautiful property. It's going to be a great event. EmpoweredInvestorLive.com. We love to see you there, so be sure to join us for that.

Everybody loves our conferences. They say they get so much out of them, so much information.

Information, networking, new friendships, great stuff all the way around. So check that out and let's go ahead and get to our guest today and talk about this co-living case study. Here we go. Good day, empowered investors.

I've got a great guest for us today and that is Jared. Now his story is fantastic.

He is a tech guy working for Intel, doing it and so forth.

And he got fed up with the high taxes because the more he earned, the more he paid. He's in Oregon, so you know what that's like, probably blue state. And that really motivated him to check out real estate investing. And he's been following my work and some of the others that you all know that I've had on the show over the years. And he has some good insights to share about co-living. We are really going big into the co-living world and, you know, Many of our clients have purchased co-living turnkey properties through our network now, and we're looking forward to a lot more of that. Jared, welcome, and thank you so much in advance for sharing your great experience and knowledge on this topic.

Yeah, thanks for having me. I appreciate it, Jason.

Yeah, it's my pleasure.

So how long ago did you get interested in real estate?

When did that start?

Uh, well, April of 2023. Tax season of 2023 really set me over the edge, man.

So only 3 years ago, and interestingly, that was kind of a hard time because we had the, we had the fastest interest rate increase literally in history at that time. And here you are. But did you go right into co-living immediately, or did you do traditional single-family rentals?

Yeah, being at Intel, I'm sure you've heard of the OKRs, objective key results. They sort of— I've been there 25 years, so they beat it into me. And, uh, and KPIs and all that. So I'm a big data guy, nerd, it guy. But my objective was the maximum amount of cash flow with the least amount of properties and tax benefits. The taxes is really what started me off, uh, and so that was my goal. So I, I look at the goal and work backwards. And so the only thing that would really work for me long term was co-living. I did look at the traveling nurses, but my research said 2029, 2030, that would be, you know, more more people coming on, there'll be less traveling nurses. So I went with the co-living given that my estimate of the economy was going to get worse, which I think I called that one right, and it worked.

So what I think you mean when you say traveling nurses is midterm rentals, right? Yeah, now on the real estate side, yeah, some co-living owners do serve that market of the traveling nurses, by the way. What do you mean when you say that, like, I wanted to find her midterm rental type?

Yeah, Airbnb, Furnished Finder. I was going to target the traveling nurses because I wanted that clientele. I didn't want to do it to the random stuff and then have all these different problems. I wanted to cater to that, so I'd have blackout drapes and all that. But I looked at Texas, Florida. I think Texas had 21 level 1 trauma centers. I was going to buy near those. And then Florida, same thing. But the property taxes in Texas scared me away, and Florida, I didn't want to deal with the insurance. Boy, I dodged a bullet there because the time I was looking, the insurance wasn't too bad. And so I ended up at Arizona because I was looking for red states and the property taxes were relatively cheap and insurance was inexpensive in Arizona. So that's why I'm there.

And Arizona's turned purple, as you probably know.

Yeah, I saw with Amy.

But it used to be a red state. Okay, how many co-living properties do you have, and how many total rooms do you have?

We have 4 right now, looking to get our 5th here pretty soon. 32 units, so 8 per property.

And you, you like the formula that we like, which is the 8-bedroom, 3-bath. It's sort of a sweet spot. People have done great with more or less rooms than that, But that's a good sweet spot. And I agree with you on that.

This May, become an empowered investor. Join Jason Hartman and his team as they empower you to gain control of your financial future and create wealth. Get your tickets at empoweredinvestorlive.com.

So you acquired these properties and initially you were using the well-known software platform PadSplit, but now you're doing it on your own, right? Or you're starting to transition to, uh, to do it on your own. Tell us about that.

It guy. And of course I have to run a pilot, right? So I ran the first pilot, ran it with what you call, you know, my co-living house through PadSplit. It was fantastic. So I did two more and then I think it was May of '24 or '25. They, uh, or sorry, May or June of 2024, I think it was, PadSplit changed their fee structure to where I think they had taken on investors. I heard Mark Cuban invested with them, and so I think they had to pay out their investors or something. I don't know, but they switched up their pay, their fees, to where it's now a variable. It's a 10-day take every new member that comes in. So my existing PadSplits, those are fine. If I lose a room, not the end of the world. But if I was to bring up a new house, 8-bedroom house, I would go backwards for 6 months. So it didn't make any sense to me And I wanted to do it on my own anyway. So that's what we did. And it's successful and I like it way better because I can put the— Yeah.

So you live in Oregon and your properties are in Arizona. Do you have property managers or are you self-managing?

No, I'm self-managing.

Okay. So with co-living, there's the option to totally self-manage. There's the option to have a traditional property manager and use the tech platform where you're paying more when you use both of those. Most people start that way. They have a traditional property manager and they use the tech platform. So they're paying those heavier costs. But once they kind of learn how to do it, they do what you do, right? Did you have a traditional property manager in the beginning as well?

I did try.

Never.

Okay. I did. I tried. I interviewed them all, but my goals didn't align with theirs. And so I ended up self-managing.

And I agree with that. That's what I always say. You know, you can't serve two masters. And this is why we love self-management. We recommend it in our Empowered Investor Pro group. We teach people and help people with their self-management. It's really great, folks, just on traditional properties, but amazingly also on the bigger, on the, you know, bigger job of the co-living properties. Okay, maybe let's talk about your self-management first if we can, Jared, because, you know, some people are thinking, wow, that's just too much work. Yeah, but with the tech platform, the self-management is, uh, it's not really that onerous, is it?

It's not bad. I do, I would like to preface this, I do have a full-time job that's a 14, 15 hour a day job. Um, it manager, like you said, at Intel. And so I do this on my phone. Everything's on my phone. I am a firm believer now, uh, almost 5 months in, I found out because what I did was I decided to see what would happen if I just let PadSplit fill it. That was a mistake. I mean, it wasn't a mistake. I did it on purpose to see what would, what the outcome would be. And it was, it was horrendous. And so from there, I built myself a checklist, right? One of the first things I say to members—

why was it bad? What was wrong?

The people they put in there, they just want warm bodies. I mean, I'm not knocking it, it's a business.

They weren't picky. They were just like a property manager, which is one of the reasons we like self-management. You can get better, longer-staying tenants yourself self-managing than you can with a manager, right? Because the manager's motivation is not They have misaligned interests, right? They just want to get a warm body in there. They're not picky enough. They don't screen well enough.

And it's really not hard to do this stuff, folks, to do the screening.

So yeah, go ahead.

Yeah, 100%. So I do start with the property though. I got to make sure I have plenty of parking. It depends on your market. So in the Phoenix Metro, you know, they're spread out and a lot of people work different places. So parking is key. That being said though, I've learned that usually about 50 to 60% of the people have cars and that's about it. Some people take public transport, ride the bikes, but I have to have a car.

And by the way, let me just comment on that if I can. That varies based on the metro. Phoenix, as we all know, is very car-based. In some metros, you're gonna get way less than that, where there's much more mass transit, better mass transit, and it's not so sprawling like Phoenix is. But overall, pad split-wise, it's about 40% have a car, from what I understand. But here it's higher in the Phoenix metro 'cause it's very car-based.

So if I get the property right, I'm a 2,000 square foot or better, 2.5 bath, because I can turn that half bath into a full bath. And that's important in the Phoenix metro concrete slab. It's hard to add another bath from scratch. No HOA, no pool, mainly because my lawyer said with the pool was like his number 2 issue that he had lawsuits for. And but yeah, so I start with the property, get the property right. I do take bigger homes and I add bedrooms. And then once I get that I get that squared away, then I work on the tenants and the members, I should say. And the members for me, I'll just give you some numbers. I turn down about 40% of the people that the platform you mentioned, Pat's, what sends me on that, on those properties. And they don't like that. And I'm sorry, but, and I even have the 15% bottom checked off so I don't get the lower of the people. And even still I do that. But then the other 10%, they leave on their own because my opening statement is, look, co-living doesn't happen organically. You as a member have to enable it. And that right there scares people off and people say, oh, you're losing members. Like, no, I'm not. I'm avoiding a problem, right? Because I don't have the time. No, even if I didn't have a job, I wouldn't want to deal with those type of folks. And as a result, yes, it takes me a little bit longer to fill the properties, but I don't get nearly as many calls as other hosts in the area because people just say, oh, it's rough. And I'm like, well, did you screen them? And they're like, well, no, PadSplit does that. I'm like, you have to get involved. It's your business. Right? They don't have a vet— like you said, they don't have a vested interest in your business. They just want to get paid, right?

And, and you, you do all this working 14 or 15 hours a day for Intel, and it's all done from your phone, right?

Yep, my phone, man. It's, uh, I, I'm a tech guy, and so if you looked at my phone at the apps, each house is the exact same even though they're different places and, and counties. But they all run Sifley locks, they all run, uh, Sensi thermostats, right? So I look at everything and then they give me a report out And some of that I have to do on my own. I'm using some AI stuff here and there, and I'd like to get more time to do some more AI. I think it would help me. But the reason I did all that is I want to scale, right? And that's the other reason the fee structure kind of upset me with PadSplit is because in the future, I've been buying all this on my own dime, right? No, no investors, nothing like that. But eventually I'm going to run out of money here in the next 2 houses. And when that happens, I'm probably going to have to start raising capital and then doing that type of thing and finding partners. But how do you go to a potential investor and say, "Hey, I have this 10-day variable I can't account for. You want to invest with me?" It's kind of hard to do that, so I like the static numbers, and so I can maintain that on my own. Plus, like you said, with PATSPUT, they only give you 24 hours to vet the tenants, and it's not enough time. I don't get background checks. I don't get credit checks, none of that. They don't let you see any of that, so I go out and run it myself, and I get to place the members. Oh, and I found in the last 5 months, I've had 2 calls in 5 months, whereas I have about 1 or 2 calls of property per month on the, on the pad splits. And so less calls, and that's because I can put the right people in the homes that I think might get along.

Okay, wait a second, you said 2 calls in 5 months?

Yeah, one was because a lady was moving out. She said someone took her, um, uh, what was it, coffee or something? I don't know what that was about. And then the other one was, it was a disaster, and I placed them. It 100% my fault. I had 7 of the 8 filled. 8th person, he checked out, nothing in particular wrong with them. And I was like, okay, I put him in there. And then 3 days later, almost immediately, he was having issues. And so within— I got him out within 2 weeks. That's why I like to be in Arizona, because if I was in Oregon, that would take forever. And I know this guy would have been a pain. It would have been 6 months to a year for sure.

Okay.

All right.

So the whole property runs for 5 months before, and you only have 2 phone calls. Or emails?

Yeah, well, I have— well, I do have some messages through— I use a TurboTenant app. I don't know if it's okay to say. And so there's messages on there, but that's like, hey, I'm going to be a few days late with rent or, you know, stuff like that. I have a 5-day grace period, right? And so then there's a $50 fee after that. But, you know, people just communicating through the tool.

Wow. You're collecting rent weekly when you're using the software platform, but are you doing that on your own?

I'm doing monthly on my own. I'm doing— and I'm also doing a— it's still co-living, but I'm doing longer-term leases. I do 1 year for 6 of the rooms, and then the other 2 are 6 months. So I will do a 6-month, but at a little bit of a premium. So I try to hit that 1 year, which it does take longer to fill, but I get— I tend to get people so far, except for one, that are pretty, um, they're good people, right? I'm trying to put good people in the property. And as a result, like, they said, hey, it'd be nice to have a, a table and chairs out back. Sure, no problem, man. I I told them, what do you want me to send you? And I got— they gave me an Amazon thing, it was like $500. They're happy, I'm happy, and they have another place, a community area out in the back. So, you know, that's great to work with them, you know.

Why are you doing monthly rather than weekly? It's just easier to only manage it once a month than every—

yeah, I asked—

you do get a little less money. You get, you know, if when you do it weekly, you're really getting like 13 months of payments, right?

Yeah, yeah. I don't want to have to manage weekly weekly income or, you know, payments. So I, what I do is, and I know why they do that, do that because a lot of people in that platform, they're not the best with money or their finances or can be a struggle, that type of thing. Right. So it's, they do the weekly to keep up with it. And that's great. What I do is to satisfy that and to add a filter up front is simply just have the first month paid up front. Right. And depending on their credit score, I usually don't do this, but if their credit score, you know, no criminal background, you know, they seem like they could get along with people, but maybe their credit's not the best. I'll do a first and last. And that's helpful. And so far it's worked out. But then again, that model has only been 5 months, so I don't have a lot of time in that. So I'm trying to prove that out. So by, I'll say, April, if everything's still going smoothly, then I'll buy another house and do the same thing.

Okay.

Your numbers are phenomenal.

Tell us about some of your numbers. And if you want, share your screen like you were doing before we started today. Feel free to do that whenever you want.

Yeah, sure.

But tell us about some of the numbers and the metrics.

Yeah. So the first house we ran was a pilot, and it's on the west side in Glendale. And that one's hitting about 1500 net or so, and it's profitable. And that's great. I know the long-term rental people are like, oh, but that's not even— my average is about $2K net. And that's net-net, right? That's after setting aside like $250 per house for maintenance and whatnot. I do run my— I think I told you, I do run my CapEx out of reserves that I already had. So I'm not pulling out of that income for reserves. So just take that into account, which is the proper way to do it.

You're doing it the right way. The way—

yeah, if you can. I mean, you know, if you can't, then obviously you need to put money aside in reserves in the beginning until you build that reserves up. But yeah, no, the 4 properties, they're averaging about $2K net.

Okay, so $2,000 a month net after the debt service.

Yeah.

And what kind of financing are you doing? What's that? What kind of financing are you using?

Um, 2 of them are— I bought personal. One's a VA, by the way. And that, that one, the cash on cash is kind of stupid, and people won't believe this, but 30% because I had zero down on the first $300K. $150K. So I'm not going to get in the weeds.

How did you do a VA loan though? Don't you have to owner-occupy that?

Yeah, I did. Oh, that's— I moved down there and I lived there for almost— yeah, and that's how I was able to build my team because I knew— I took a year off from Intel and I went down there and I just dove headfirst into real estate because I knew I wanted to do it. And it took me a long time to build the team. People ask me, how do you manage this remotely? It's because I spent that time up front going through— I think I went through like had like 5 cleaning ladies before I found the right one, and I have some backups. Uh, same thing with handymen, plumbers, electricians, all that stuff. So I have a pretty good team, 3 deep, except for AC guys. I have 4. Raul's my number 1 guy. What I do is I have the first person I call is usually like a mom-and-pop or a smaller business because they seem to care more. But if I can't get that first person, like if it's busy in the summer on AC, then I'll call the big box stores next. That way I'm almost— because, you know, Usually if I'm calling for a reason, it's important. I need to get something fixed right away, and I can't afford to keep calling all day long. So that's the way I do it.

And by the way, let me just talk about that for a moment. You know, over the years we've recommended TaskRabbit, Thumbtack, of course Angie, which formerly Angie's List. But you know, I gotta tell you, just last week personally, I used Craigslist again, and I do really well with Craigslist. I, you know, people can say what they want, but you get so much response. And if you just write the posting well and explain exactly what you want, and for $5 you post it as a gig, because these are gigs, they're not full jobs, right? You can get people for anything you want. And then I'll just do a reply after they reply. And I'll just usually copy and paste that same reply to everybody, to the few that look good, and boom, you just get people at such low prices and like motivated, hungry people. It's not perfect, nothing is, but I find Craigslist to be pretty great, honestly. Good old-fashioned Craigslist. Yeah, forever.

But I think it depends on your market. I— Zillow doesn't work for me for rentals and whatnot, but I use Thumbtack back as well. But I have heard on the east side, like in Atlanta and places, uh, Zillow is pretty good for rent by room. But so I'm using TurboTenant for my, my, um, one property that I'm running on my own. So here's my latest, nothing too crazy there. And since January, here's my gross income, right? This isn't after the property management. So we're at $34K gross, and this one hasn't been paid yet, so we're $16,900. My take on this is, let me see, is, uh, $13,700. So this is a short month, and so we have probably have another one payment or so. You can see here's the averages. This is my income, not the gross, right? Here's the gross, and they take their property management fees out. And then here's my breakdown of just January to February. Here's— this is my 26th house, Horseshoe, Kathleen, and Morton. So these are the 4 properties. The Horseshoe is the one I'm running on my own. So you can see I'm coming right in there, similar to PadSplit numbers. Now this one here is a little bit higher because people paid early in December— or sorry, late in December, and then early for January, and then already early for February. So this, this is a little bit skewed. This isn't normal. It's probably going to come in about here. And also the mortgages haven't come out yet for, um, for March.

So just—

okay.

And how much are you charging per room on this property, for example?

It depends. So, uh, the pad splits are anywhere— they're weekly, so we're anywhere from $185 to $215. One— a couple of the bigger rooms are $245, believe it or not. They've been there for 2 years. Per week, right?

Yeah.

So those are big rooms, and those I have about 4.7 months of average stay, but I do have 1 or 2 people in each one of the properties have been with me 2 years. Like, it just, it works out great. So I do have turnover, but it skews the data, I guess, if you want to look at it that way.

But yeah, but see, the thing is, folks, look, it's great to have people that stay a long time, but the turnover in these co-living properties is easy peasy lemon squeezy. It's just a room. It's no big deal to deal with turnover.

And like I said before we started recording for the show here, criticizing turnover is like criticizing a hotel saying people are only staying 2 or 3 nights, right? You know, like, yeah, that's what a hotel's model is. It's meant to be transient, right? But it is better when people stay a long time. Tell us about some of your tenant or member avatars, if you will. Like, what's the typical type type of person?

Is it, is it a contractor traveling, insurance adjuster, older person, uh, is it the working poor?

Like, you know, give us kind of the vibe of what your different—

uh, yeah, all of those. Like, it's really, really weird. The reason I moved to the East Valley, Gilbert, it's totally different demographic, as you well know. And that's another reason why I only have 2 calls, is because it's just a different, different vibe. But on the west side, like the Glendale house, I have contractors that come in from Texas for 4 to 5 months, right? And I know that up front. I had a nurse for a while. She was with me 8 months, and I— when she left, I was like, hey, did I do anything wrong? She's like, no, no, I'm buying a house. And I was like, holy crap. Found out that she was working 3 shifts and just saving up, saving. She'd saved before she moved in with me. But yeah, it's all of— all those above. I have, uh, my North Phoenix houses. For whatever reason, I have— well, TSMC is up there, so I do have— I'd say about 20 to 30% of the people are TSMC, not employees, but they work like I have a security guard. I have a fiber guy, a technician that lays cable and whatnot. I have a foreman that works up there too. Then I have insurance people, which is odd to me. You mentioned it and these were not the people I was thinking of. I was thinking it would be a different type of people, right? I found out luckily that it's not. It's just people, hey, some people just want to save up and pay credit cards and they're with me for a year and then they're gone. Some people— But back to the jobs, I guess I answered your question. Yeah, insurance adjusters. I got one guy. He's never there. It's fantastic. I mean, he went to Florida with all that stuff. He went to California. He does— I don't know, is that adjuster, the people that look at the damage? Is that the— he does that. He travels a lot, but his family's in Phoenix, and so he just wants to be there and have a place to crash and sync up with the family, you know, when he's there. And then I have another guy that moved from Connecticut. He's older, and same thing, he just wanted to be with his son and his kids close by.

Okay.

Yeah, yeah.

So it's quite a different tenant avatar. I mean, how much time are these people in the properties outside of sleeping there? Are they hanging out there?

Are they really living there much?

Or are they just coming there to sleep?

Yeah, that's why this works is because I'll say some of the folks that are doing some of the gig work, like say they have a regular day job, but then they'll do Uber or whatever at night. And so they're working, so they're gone, right? Most of the time. I do have a few people, like I have an older gentleman in the Gilbert House. He's there pretty much all the time, which is great because he cleans up and he keeps everybody in line and it's great. The other houses, some of the folks are working 2, 3 jobs, and so they're not there. They're really there to crash. And so one of the things I do enforce and then say in my initial consult with the people is, hey, look, at night it's 10:00, put on earphones, don't, don't upset anybody because I can't afford to have people move out for one. But two, I want to keep harmony, right? That's my goal is harmony in the house, right? If everybody gets along, cleans up after themselves, and I go through the whole gamut, it's about a 10-minute conversation. And like I said, I do scare off about 10% and I'm totally fine with that.

Right.

Okay, good. Good to know. Good to know.

What else do you want people to know just in general about this operation and you know, how to be successful with co-living?

For me, in my experience, I mean, out of the gate, yeah, it's going to be a lot of work, right? But you do all the work up front, it pays for itself down the road. I mean, with real estate in general, it's a long game, but with this strategy in particular, in your market, once you learn your pain points and you work on addressing those pain points, it does get easier. Took, like I said, about a year. And even then I had an issue where I had a member come in and I, it was, I kind of know why I did this. I had at that time 3 houses, 24, 23 units of the 24 were filled and he was the last one and I was going to be 100%. I was like, yeah, I haven't made that mistake again. But I was like, yeah, and he seemed fine. But one of the things he said a few times and in the back of my head I heard it and I didn't really focus on it, which was, you're not going to have any problems out of me. And he said it 2 or 3 times, and it should have been a red flag, but I was a dummy and I put him in there. And within 2 weeks, I had 2 people that were long-term members that were— I think we're going to stay for a long, long time— move out. And I was like, oh man, so that was painful. And I couldn't get out of them what the reason was, but I was pretty sure what it was, but I didn't want to accuse the person. So the third one moved out, and then a fourth one moved out, and I was like, this is crazy. So the fourth one that moved out, I finally did get from her what the issue was. And she told me she would tell me after she moved out. So after she moved out, I got with her. It was that guy. And so I had to have him move out. So that was 5 people. So I was down to 3. You know how bad you have to mess up a co-living house to not cash flow for that month?

That's right.

But pain is a good teacher, and I'm glad it happened early because it really set the tone. I thought I was vetting members pretty well, and I got proven wrong. And so that was great.

What are your best practices for vetting them?

I have a whole checklist. Like, I come out and say, You know, one of the things I say almost immediately is co-living doesn't work organically. You have to enable it, right? And you as a member of the household, you have to clean up after yourself. There's a whole checklist, like make sure when you're doing your laundry, I mean, common sense stuff, but I have to go over it anyway. So people hear it once because I don't do the whole 3 strikes, you're out thing. I say, hey, look, this is what it is. And if they, if they mess up, okay, that one time, depending on what it is, okay, fine. Like, for example, I just had a gentleman move in a week and a half ago. And I explained all this to him and he said he was okay with it. Well, then I get noise complaints, right? Like I was saying, you got to be quiet. So it's 11 o'clock at night and he's screaming at something. And so I call the guy. Turns out he just got divorced and he was yelling at his ex-wife. And I was like, okay, just, you know, keep it down. Don't do this again. 2 days later, he's yelling again. I called him, he didn't answer. So I sent messages. A couple hours later, turns out he was playing a video game and yelling at the thing. I was like, look, man, this isn't going to work out. I can't afford this. So I had to ask him to leave. So I did, before anybody rated him in the app on that side, the PadSplit side, I said, look, it's best for you to move on. I said, look, I'm doing you a solid here. I'm not trying to burn you. And he did. So he's moving out on the 1st. So, and so far he's been good and everything. But yeah, I'd say just go over, you know, what works for you and your market. But for me, it's cleanliness. You know, I hate to say it this way, but not like obeying the rules, but just basically try to not be a pain, right? You know, get along with people, right? And clean up after yourself.

Well, that's what you want them to do. To do, but how do you screen them for that?

Oh, well, I can bring up my Word here. Let me just go through it.

I mean, especially because you're doing it remotely. You're not meeting these people. You don't see them. You know, maybe you have a Zoom meeting with them. I don't know, but—

No, I usually just do it on the phone because it's hard enough to get a hold of them within that 24-hour period, let alone setting up a Zoom and going through all the tech with them. But it's been working for me. So I say, I mentioned this already, but are you a responsible person who can get along with people and pay your rent on time? Oh, I guess I do say that. That's a little harsh, but I said co-living only works if people enable it. So I say it differently, but that's the gist. Shared housing is much— is for mature, responsible people typically looking to save money on housing. It only works if people get along and are clean, right? And then I go through the typical questions like it's for single occupant. That's important because, you know, some people assume they can have boyfriend, girlfriend and use your imagination at 2 in the morning. It doesn't work. So single occupant, no pets, no vaping, smoking on the property, no kitchen appliances in the, in the bedrooms. No guests, right? That's a big one. And, uh, be courteous, clean up after yourselves, again remove the laundry, don't eat other people's food. I can't believe I have to say that, but I have to say that. And then the quiet times from 10 PM to 8 AM.

So, and then in addition to that, you're doing probably the 3 typical background checks, I'm guessing, right? Credit, criminal, and unlawful detainer.

Yeah, on my personal one, but for the PadSplit homes, I don't get access to that. Oh, I do get their driver's license. And that's about all I see. I don't get their social, any of that. So I do capture the driver's license and I save it in a file. And the only reason I do that is because in the future, if I do have to do collections, then I use, um, I think it's Front Lobby. It's $99, but it's better than 50%. So I use that and fire it off, which has worked fairly well. I'd say half the people end up paying me back, usually with payments, but, uh, in terms of collections, collections. Yeah.

You use Front Lobby to do that.

Yeah.

Okay.

Good, good stuff. Anything else you want to share with people?

You know, Jared, I really appreciate all this, and so do our listeners. Just anything else I haven't asked you questions on?

I'm learning from you and from Zuber and Dion and Matt the Lumberjack, all the guys who were at the ORAT event this last 2 weeks ago. And in that, I've learned bits and pieces from each one. And Matt says it's the— I'll keep it PC— BS to income ratio. So now if your goal, like mine, is is maximum cash flow with also potential for appreciation, you know, and tax benefits. My goal, the cash flow piece, I think a lot of people have that goal. This will get you there, but you are going to have the BS ratio is going to be high in the beginning, and you can mitigate that, not completely eliminate it, but you can mitigate it. So for me, it's worked out well. So I would say don't be shy, don't, don't listen to some of the folks that— consider your audience, right? So say somebody's doing it, but they may not be doing it the way that you would do it. Like, I knew that going in. And so I saw— I took about 5 months of research. And the people— the reason I came to the 8 bedrooms, because it was a— I have houses I could put 10, 12 in, right? And I don't go to the garage either. I do in the house because I want to be able to bring the house back to a long-term rental or change it back if I had to.

Nothing—

if you need to reconvert it back. Yeah.

Like, let's say 10 years from now, you know, we all know inflation's, you know, it's not going to go up, right? So in 10 years from now, the house is going to be probably—

you're being sarcastic.

Yeah, sarcastic. But, and so if I needed to and if I needed to sell and I didn't want to sell it as a business with a co-living, then I could sell it as a house and maybe extract the equity and do whatever. But I would say consider the source when you're doing your research and run your own numbers. I know the numbers aren't everything, but it is lucrative. It's just in the beginning you're going to have some pain and I'm available to— I talk to people all the time and mitigated some of that pain. They still have issues, but I try to help out where I can so that way they don't have to go through the same pain that I did. And I learned from you guys some of the pain that you did in general. I know people weren't doing co-living, but just acquiring the properties or watch out for ABC, those type of things. And so I mitigated that. And then doing this myself, I ran into a lot of pain and then I've mitigated it now and to where I feel really comfortable. And like I said, I'm doing a W-2 job, which hopefully I'll retire from soon.

That's, that's, that's amazing that you're, you're doing all this. You're so successful. Systematized. I really just give you tons of credit for being so organized and methodical about it. Just everything you're doing, it's great. So keep up the good work. Keep up the good work. And I can't wait to hear more about your self-managing without the tech platform backup, you know, and how that goes. I know you're rolling it out and I'm really excited for you about that.

So it's the same thing to me. It's actually better. But I mean, it's all it is is just a different platform. Right. And so to me, it's really no difference. Oh, well, I'll take that back. Obviously on the PadSplit platform, they acquire the members and you could argue good or bad. I acquire the members, but I'm using TurboTenant and it's working out. I get, I get a lot of leads and I owe Dion this because he's the one that helped me on the marketing piece. Right. He had told me, cause he looked at my, my ad for the first time and he goes, this is exactly what I think a real estate investor would do. And I was like, oh, thanks Dion. He goes, I was like, that wasn't a compliment.

Yeah.

And so he talked about the amenities around the properties, things to do, hiking, shopping, all those type of things. So I incorporated that in the ad and almost immediately within 2 days it really started getting some traction. So that's been a game changer for me because I'm not a marketer, I'll just be honest. And so that platform TurboTenant and help from other investors has really helped me out a lot. That's the thing. Community, community, learn from others.

Yeah, absolutely. Absolutely. Definitely learn from others.

Well, Jared, Thank you so much for sharing all of this.

We really appreciate it and keep up the good work.

Thanks, Jason, for having me.

Have a good one.

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