From House Hacking to Small Multifamily! Tips and Tricks for New Investors to Maximize Cash Flow

Welcome to the Cedar and Porch Real Estate Investment Podcast. I'm the host, Shona Lepis. Follow along as we unpack and demystify real estate investment strategies through expert interviews and personal experience. From how to find off-market deals to creative financing to long-term and midterm rentals, our goal is to educate and inspire others to gain financial freedom and generational wealth through real estate investing. Hello everyone. Thanks for joining us today. I'm happy to have Brandon Hendrick on. We met at a local REI group and he has done Matterport and virtual video tours for my midterm and long-term rentals. I like absolutely love that I rarely do in-person showings since I have virtual tours. So Brandon, I would love to hear about how you got into real estate investing and your journey so far.

Yeah, well, hey, thank you so much for having me on your podcast. I appreciate it greatly. Long time. What is it? Long time listener, first time caller. So yeah, so how I got started, like many people, Rich Dad Poor Dad, the book, right? That's where everybody starts, like from this major dissatisfaction with the 9 to 5, figuring out, okay, how do I get wealthy? How do I stop working for other people? You know, For me personally, it was my dissatisfaction with having a boss and having a landlord. And I was like, man, I really want to be in control of my destiny. I want to be in control of my time. I want to be in control of where I live and when I live and all that other stuff. So I was just started like doing what anybody would do. Go on Google, start reading books, blog, blogs, podcasts, all that stuff, trying to figure out. And I ran into Robert Kiyosaki, The Rich Dad Poor Dad, BiggerPockets, all these different. Like YouTube, there's all kinds of people talking about it. So I just started to like learn and absorb as much information as I possibly could to like help me figure out, okay, what's my path? And like everybody else, there's, you know, there's stocks, there's starting your own business, there's real estate. And I resonated with real estate. So I just kind of went headlong into that. Um, because I like the fact that you can use leverage, the bank's money. Um, there's a lot lower risk of failure, like with a business, right? There's a pretty high chance that you could fail and that's scary to lose everything. And stocks, uh, you have no control over the up and down. With real estate, you just have a lot more control, which I think is important to me. Um, so that's kind of the why I got started. How I got started was probably like, I wouldn't say the worst way possible, but like very, very not good. I got an agent that I just, I think a friend of a friend said, "Hey, this guy's an agent if you're looking for a house." And he didn't know anything about real estate investing. I'm certain about that now. And he's just like, "Yeah, let's find you a house, Brandon. You can start a family," and all that other stuff. And I was like, "Well, hold on." I, that, that's not the, the true intent of why I'm trying to buy a place. I, I want something that's an investment. I want something that cash flows. I want something that, you know, the cash on cash return, ROI, all that stuff. And he probably looked at me like, uh, glazed over eyes and he's like, sure, let's do that. And at that point I should have ran, but I didn't know any better. Um, even though I did all this reading and stuff like that, I thought I could just like, well, I don't need my agent to know anything. I just, I just need him to open the door and then I'll figure it out. And that was a big mistake. I definitely wish I would've had somebody who knew more, who had some doors, you know, that could have given me proper guidance. But yeah, having an agent that wasn't a real estate investor himself or herself was a big mistake, I think. And then I bought it on market, which is another, you know, classic kind of mistake, you know, when there's so many options of finding off-market deals, buying from wholesalers, negotiating yourself and saving the realtor commissions. There's like 100 other better ways to do it than buy it with a real estate agent that's not an investor on market. So I, my first deal I paid retail for, I paid exactly what it was worth, no equity whatsoever. So probably the worst way you can start. The reason why I bought the deal was because I thought I could house hack it. I thought if I came in here and I lived in one of the rooms and rented out the other bedrooms, that I would be able to live for free and save money for down payment on another property, which happened to be true. It actually did work out that way. House hacking is the best way to cash flow. If you don't know what you're like, and I'm telling you guys this, I probably did the worst deal you possibly could and it still worked because I house hacked it. So I was living for free and I was saving my money. I did a lot of the repairs that I could myself. I had a buddy of mine who helped me put down a new carpet downstairs. We put luxury vinyl plank, which took forever because it was 1,500 square feet. Minus 2 bathrooms. So yeah, it took forever. I wish I would've hired somebody. It took way longer than it should have. But I did a lot of the work that I could myself, you know, cleaning out the gutters, painting, that type of stuff. You need the sweat equity. So I bought this house $400,000. That's exactly what it's worth. That's what it appraised for. That's what it was on market for. Needed work. So you know what all the books tell us to do, right? Buy the worst looking house in the best neighborhood you could afford. So I at least did that right. I did that. And it was a 4-bed, 3-bath house with an office. So I turned it into a 5/3. Obviously, by adding a 5th bedroom, didn't really increase the value of the property. It's not like from a 2-bedroom to a 3, adding a 5th bedroom didn't really add very much equity, but it allowed me to rent another room and that's how I made it work. And the property needed a lot of work. And I started doing it. Needed a fence, needed all this other stuff. I watched a bunch of YouTube videos to kind of figure it out, and I did over time, and I paid some people and I made it work. And I don't know if I got lucky because of COVID I hate to say that, but with the crazy explosion in equity, I bought an on-market deal for exactly the cost. I might have even lost money because of all the money I had to put into it. I put in like $30,000 in repairs and sweat equity and stuff like that. And it probably was worth like $420,000. So like terrible deal, terrible deal. And because of COVID I bought that in 2019 when I was 26. So this all happened when I was 25 and I decided to make a change. 13 months later, I bought the house at 26, and then COVID happened like a year later, and within 2 years I was up like $200,000 in equity. Because I leveraged the bank's money, I made profit on $400,000 worth of equity, not my 3.5% down first-time homebuyer. So I, I will— like, I was all in the deal for like $13,000 and I got a huge house. Um, so the leverage was just amazing and I was able to get gains on all that. And last time I looked, I mean, they're houses in that area are selling for like $600,000. So like I've made $200,000 off of a terrible deal, but maybe I got lucky with timing, right? I wouldn't suggest that, but I was able to live for free, which allowed me to save up my down payment for my next property, which is another type of house hack. I just did it with a 4-unit building. So, I don't know if you, how much you want me to go into that, but that's kind of how I started with, with the house. And it required a lot of work. I bought a terrible deal on market with an agent who had no experience, and it still worked. So house hacking is extremely powerful, but I did get tired of sharing a bathroom and a kitchen with my renters. So, so I really had to go buy another deal.

No. Well, hey, first of all, I think the fact that you took action and bought a house and made it work, I mean, it was actually a good deal. That's how I got started. I was having a roommate at the time. Time. That's what house hacking was not a term.

Yeah, yeah, exactly. Before it was a thing. Yeah, exactly.

I was looking for like a mother-in-law, and then I was like, well, I have— I found a house with it upstairs. And I was like, the living room is not shared, the kitchen is shared, in the bathroom. And I would sometimes hide out in my room because I didn't want to see anyone.

That's exactly what it feels like if you haven't house hacked yet. Your room is the only safe— like, you have an entire house and your room is the only safe place.

Like my first roommate, or roommate was a super— he did this guy, he played video games, he kept to himself, he was brilliant. And then, I mean, I never— he'd come down and boil water, you know, every night, and then he'd go back to his room. And then I had a few more, and this one girl was just super sweet, just really chatty, and I knew when she'd get home, so I'd run to my room, you know, she was getting home from work, because I was like, I don't want to have to talk. Yeah, but look, I think, you know, I think when you're starting out, like, you go to MLS, but I think people should know, like, it's not the worst right, because there are creative strategies. So just starting and taking action, I think, is like the takeaway, right? Because it's— yeah, you like, you want your first deal to be off market, owner financing, like zero down, like all the things, right? And that's not really realistic.

Yeah. And here's the one thing I want to tell people. I did nothing out of the ordinary. Nothing. I got an agent. I bought an on market property with a 3.5% down because that's what you can do as a first time homebuyer. I did nothing out of the ordinary. Anybody can do this. All you need is 3.5% down, good credit, and I think you have to be at your job for at least 1 year. Yeah, so that's it. That's it. I mean, and I know that may be really difficult for people, or if you're a gig worker or whatever, and especially in this economy with the way things are going with interest rates and home values and wages not keeping up, I understand that's way more difficult now than it was maybe even just in 2019. But whatever you got to do, even if you got to get a co-signer, whatever it is, I think like you're saying and your previous guest, John, with taking action, my biggest win out of that was that I now have $200,000 in equity just because I bought something. I bought something at market value. And since 2019, all the way to now, Yes, the COVID explosion super helped, but let's say not even that, I would still be up $75,000, $100,000 and I needed a place to live anyways.

Totally. Yeah.

So, you know, so just buy something, you know what I mean? Like, I mean, maybe don't try to buy a terrible deal, but at least buy an okay deal. Right. And you'll be fine. What is it? I've heard somebody say the worst deal today will be the best deal on the market 10, 20 years in the future.

Exactly right. It's a very long game. Like, I think people think you have to have this crazy cash flow and it's like, you know what, your mortgage stays the same and your rents keep going up, right? You just got to think long term and get—

Yeah, exactly. And I'm glad you said cash flow because that's Robert Kiyosaki's favorite word. And that's what was ingrained into my head is it had to cash flow, had to cash flow. And that's still ingrained in my head. I don't feel comfortable buying a house where I am negative every month because I don't have a bunch of money. I'm not a rich millionaire with 50 units or 100 units, right? Like being cash flow negative is a bad way to start. So I would recommend not doing that. Even if you're breaking even, you're really not. You're really not. Like you have to cash flow because one plumber, $300, boom. You know what I mean? Whatever, right? Whatever it is. You're just out of money immediately. So you really want to cash flow. Very, very— if you're going to do anything, I think that's the only thing I did do right, is that I knew that I would live for free. So all the money I would have spent on rent, whether it be $700, $800, $1,000, I could in my mind put that aside and say, hey, if anything happens, this is house money. This is money I would have paid to rent anyways. Put it into my own house. So that's— that was the biggest thing. That was the reason with the house hack is that I knew I could cash flow if I rented out all the rooms for $700. Because it was a 5/3, it would cover my mortgage and some. And I had PMI and I had PMI. Like, I mean, you know, putting 20% down, it will, you know, take too long. Don't, don't wait for that. Just buy something now and pay the PMI. And, and this is what I tell people, especially like aspiring new people. I would take a loan at 50% interest. I would pay 50% interest. As long as the renters covered it. It doesn't matter how much interest you're paying as long as it, as long as it makes sense, as long as it pencils, as long as the rents cover the mortgage, who cares?

Exactly. And I think, you know, you can refi in a couple of years. We're going to refi. We're not stuck with these loans forever. I mean, exactly.

Yeah. The people who are buying right now, that's That's great. Prices have come down. That's great. You're at 6, 7%. As long as your rents are covered, covering the mortgage, who cares? And maybe even in this environment, maybe it's okay to be breakeven because when you refi down the road, you're going to drop your PMI. You're going to, you're going to make a huge spread on going from 7 or 6% interest down to hopefully 4, maybe 5%, right? You know, we'll see. I'm not I'm not a Fed spokesperson or anything, but, but when I, because I plan on buying another house, I'm going to do my taxes in February because I need to fix my DTI. Because when you're doing conventional loans, they have all these requirements and debt-to-income is one of them. And my DTI is really high. On paper, I make $60,000 a year from a W-2 job, and I have almost a million dollars in debt. From the two properties. And they don't like that. They said that that's your DTI is too high. And I said, okay, what do I need to do? And they said, well, lower your debt or make more money. So I'm trying to do both.

It's another reason for like owner carry right now. It's another story.

Yeah. Yeah. If you can get seller finance, do that. Yeah. Trust me. Yeah.

The other thing I really want to emphasize is owner occupied, right? It is such an opportunity because from the bank's perspective, you are in there, you are way less likely to walk away from an investment property versus owner occupied. So if you can just leverage your W-2 and owner-occupied status, right?

Yes.

I don't think people really quite realize that, how important that is.

Yeah. No, it's huge. I mean, so I'll just tell you some of the benefits from owner-occupying. So it went like this. My down payment was really low, 3, 3.5%. When I went to refinance, when rates were really low, 2 years later, I got it 2.6% because I was still living in the property. So I was at 4.3% when I bought it. I was able to get rid of my PMI and go down to 2.6% because I was still living in it regardless of all the renters. I was still living there. And then before I left to go buy my next property, owner occupied, I got a home equity line of credit and I got better terms and better rates and better treatment because it was my personal residence. So that's what I would tell people is buy a house, refi when it makes sense, and then before you leave, get a, get a home equity line of credit. And that's exactly what I did. And then I used, uh, actually ended up using that line of credit on a flip. I, I think I paid $800 to the bank to do a flip with one of my partners, right? In like interest, $800 on my HELOC. And I ended up making over $20,000 with my partners. Like, we each made $20,000 and I paid the bank like $800.

That's brilliant. Yeah.

Yeah. Like, HELOCs are amazing. Like, do it. Like, and the cool thing is you don't have to pay anything if you don't use it. It's not a loan. It's a line of credit. And, and, and I think in this economy, access to credit, whether it's cash or a line of credit, will be invaluable. For repairs, for buying another property, for doing a flip, for JVing with somebody, for, you know, whatever, right? Just having access to the capital is very, very important as we come into, you know, the next couple years, 1, 2, 3 years of where we're going to be seeing a lot of things happen where in the market where, the different, the different, the different market shifts that are going to be happening where people may be going into foreclosure, where properties may be coming up for sale much more affordably. And you want to have access to capital, you want to have money, you want to build a partner with people so you can take advantage of those opportunities. So that's kind of why I'm harping on the home equity line of credit. It's very, very important to have that. Um, and that's what I did. That's what I'm going to do on this house too. So I used the fact that I wasn't paying rent or mortgage in my house to save all the money I could. That's my only strategy, you guys. That's the only thing that I've implemented consistently is save all of the money you possibly can for my next down payment. And that's how I bought my fourplex. I was able to save up a bunch of money because I wasn't paying rent to anybody or my own mortgage. And I was able to buy a fourplex off market with the down payment that I had saved up. And again, you get better terms and rates if you owner occupy.

It's the magic.

Yeah, it really is. Banks love it. And I'm just like, cool, I'm going to keep doing this until I can't.

And I will say just, I think, get that line of credit before you need it. You want to be positioned right. Don't do it when you've got an offer out and you're all stressed out, like just have it there. Do it when you're like, hey, I'm just looking, just position yourself, right? Because it's not something you want to scramble and do, in my opinion.

Yeah, no, absolutely. Yeah. And I mean, my HELOC, I did my first HELOC that I did with KeyBank. I said, hey, I need this fast. Can you do it fast? And they're like, absolutely. So they did a desktop appraisal and they appraised my property for $10,000 more than I bought it for 2 years ago. So they— so stupid. So don't ever— in my experience, don't do a desktop appraisal because I got burnt really bad. And then it took about 2 and a half months total to close a home equity line of credit because then they had to start all over from scratch and get an appraiser, schedule that, and then the appraiser, instead of appraising it for $410,000, it came back at $550,000. So huge difference. Huge, massive difference.

Life-changing, right? Yeah.

Yeah. Yeah. And I mean, I told the lady at KeyBank, I said, I have receipts from Home Depot of just material more than $10,000. You guys gotta be kidding me.

Yeah. I mean, it's just, yeah. Yeah. That's, that's the perfect example of why do it when you're, yeah. So my first house that I bought in 2005, like I saw the equity going up and I was at the time single and I I don't know why I didn't dive into— I didn't do a lot of research, but I was just like, my equity. And so I then eventually pulled equity out, and then we got another line of credit that was like a backup. And then one day I was like, wait a minute, we have this line of credit just sitting there. Why don't we buy a house? And it was just kind of— I mean, just, it's there and you can tap it. And you can also walk lines of credit. They're not necessarily, you know, up and down. So there's just, again, and you're not paying for it unless you use it, but it's just equity. Like I wouldn't, I mean, I would never say pull line of credit, take a vacation, put it into an asset, right? Like it's, be careful. Don't, you know, say, oh, I have all this cash. Right. And I think that does happen.

So, yeah, no, that's a really good point. And I think that's probably the reason why I used my HELOC for a flip is because I was able to get the money in and out quickly. So I think that's probably the ideal use of a HELOC. The second usage would be like what you said, to buy another property, but the cash flow has to not only cover the mortgage, the first mortgage, it has to cover repairs of that place. Then you also have to make sure the cash flow pays back your HELOC ideally, right? Yeah. Because, because you're leveraged to your teeth and you have two loans going simultaneously and repairs are always an eventuality. So you want to make sure that like if you're doing that, be very careful because you don't want to, you know, I mean, obviously if you can pay back your own HELOC, great. And if you're just using it for a down payment or using it for whatever and you have the money to pay that every month, that's fine. But you can only do that so many times.

Yeah. No, I was always like, if the loans have to— like, if I'm going to get a rental, it's got to cover all the loans and then be a little cash flow positive. But I will say, I think when people think about investing, they have this fear like everything's going to break all at once. And I've had that happen. I've had the furnace go, I had termites, and I had a leak. And guess what? I figured I got a credit card out, I financed it. I didn't necessarily have that cash. So there are ways to like figure out repairs. Yes, you should be saving for CapEx, but I didn't know what I was doing when I started. And I was like, oh, termites, okay, I don't, you know, furnace, like, no, no, that, and that's a That's a great point.

That really is. And that's why I go back to my original strategy of save every single stinking penny that you make. Like, save it all because you just never know. You know what I mean? Like, you never know when you're gonna have a roof leak and yeah, you could throw a tarp over it. Maybe you can, you know, have a repair or something like that. But like, you gotta, you gotta be ready for that stuff.

I vividly remember the call. It was like the termites. And then I had, I was, I'm neurotic about getting my furnace checked and the guy looks at me, he's like, this is like unsafe. I'm I'm like, well, I didn't— how would I know that? And he was just super like rude. I'm like, sorry, I had— I was just all at the same time. And it was just like first rental, and then you just figure it out. Like, oh, a furnace isn't— you just get estimates and you can finance it if you need to. So anyway, but those things will come up when you don't expect them for sure.

Exactly. So having a line of credit is nice.

It is. Yeah. Or even, I mean, credit cards are not ideal, but you can, right? It's like not the worst use of them if you're in a bind, right? Because you need to—

yeah, I mean, a credit card gives you 29 days. To figure it out right before your first payment. Not saying you want to live life like that, but you know, but and when you're balancing out, right, you're building, using it.

I do want to go back to kind of this house hacking and rent by the room because I think, I think people talk about it. They don't really unpack like the logistics of it and like the dos and don'ts and pros and cons. If you're cool with that, I'd love to hear more.

Yeah, yeah, absolutely. I won't say I'm an expert, but I did live with my renters for 2 years. So, so I learned a lot. I learned a lot. So, gosh, where to start with that? So, okay, first and foremost, I'll say I did rent to two of my buddies and it did not work out well. So, so when they, when people say, you know, don't mix friends, family, and business, or friends, family, and money, I now believe it. Everything ended amicably, but it just, there's this certain dichotomy, this landlord renter thing that it's a very fine line and you can't become friends because then friends are like, oh hey, I only got half the rent. Or, hey, you know, I, you know, I don't have time to do my chores this week. I'll get it next week. Or, or, hey, can I borrow your car? Can I borrow $20? You know, like, you can't, you can't be doing that with your renters. You just can't. It will not work. You will fail 9 times out of 10, 9.5 times out of 10. So I went down that road and it didn't work very well. So I ended up having to ask my friend to leave. Which was really, really tough. Luckily they found a better spot and everything worked out. And I, you know, I gave them like 60 days instead of 30. So I guess that's one thing is if you do find yourself in a tough spot, if you are living in the house and you're renting out by the room, and this is just between us landlords, you have way more rights with kicking people out or, and I won't say like just discriminate, but you can be more choosy because it's your house and you're living there. So there's, There's, you have way more rights. Look into it. I'm not a lawyer, right? Look at, but since you are living there and they are only renting the room, you have a lot more rights and leverage with, with, you know, what you choose to accept or, or whatever. Obviously follow fair housing rules for that particular situation. Talk to an attorney, all that stuff. But from what I've seen and what I've, you know, have in my forms, you know, you can be a little bit more choosy. You don't have to accept, you know, somebody who has, you know, 3 dogs, 5 kids, you know, 3 adults live, you know, in a room, right? Yeah. Like with a room, there's only so much that, that is, can physically happen. Right. So you, you know, you don't have to accept a whole family in a room or something like that. Okay. Um, but what really ended up working for me, and I, and I kind of hate to say this, is The household isn't one big happy family. It's a bunch of semi-antisocial people that just want to— I mean, everybody's nice and cordial, right? Everybody's nice and cordial. Like we have like a, there's a chore list and everybody does their thing, but it's, it's not like potlucks. It's not like the Brady family or anything like that. It's people who are living their lives that, that just need a place to live. And, and that's kind of what it is. So, I mean, I did try that, you know, create, cultivate that whole really nice housing type of where everybody gets along type of thing. But with, with 4 different people and, and the landlord, it's just really, it's really hard, hard to cultivate that. It really is. Um, you just, because there's so many different personalities and I'm meeting these people on Facebook Marketplace, Craigslist, their referrals of current renters. Right. So, you know, there's just too many different personalities. Maybe it'd be a little bit different in a 3-bed, 2-bath house or like a 2-1, like if it was you and another, like roommate or renter, you know, but there's, there's 4 people plus me. And now that I'm not there, there's 5 separate people that don't know each other from Adam all living in the same house. So it's really like when I give people the tour, I tell them, look, we're looking for calm. Cool, quiet individuals that want a peaceful place to live, that are, you know, that are clean, that, that take care of stuff and communicate well. If you think you're gonna have any problems with any of that stuff, don't waste your time because if everybody says you're the problem, I'm gonna ask you to leave. So you want to get along with everybody. You want to mind your own business. You want to do your own stuff. You want to be quiet during quiet hours. You don't want to have a bunch of friends over, like this is not the place to party. Because you have different people on different work schedules. So I just tell everybody like, this is the place you want to come and live and be as hyper respectful as you possibly can. Just because this isn't an apartment, it's a house. So you can't have people in and out all the time. You can't have multiple animals living here. You can't have guests, you know, or parties or whatever. This isn't the place for the Super Bowl party. It's because you have so many different people living here. You just have to be really hyper respectful of everybody sleeping. And working situation. So I just tell people that and, and I've, I've gotten really good about figuring out who's gonna be a good fit. 'Cause when I tell, when I say calm, cool, and quiet, that I know what to look for in a person.

Mm-hmm.

Um, and if they have a really hectic schedule, if they, you know, do nails or hair out of their house, if they're trying to run like some type of dropshipping business outta my garage or something like that, There's, there's just certain things that like you start talking to people and you listen to like, what does an average day in their life look like? And will that fit with what's already here? Um, I mean, I had, I had one person and I love dogs, right? I do. I had one person show up, um, because it was the downstairs and it has an amazing backyard, which I thought would be great for dogs. And I said, hey, dogs are welcome for sure. And this, but I said, you have to be The dog has to be calm, right? Has to be calm, right? Because there's other people who work from home there and there's neighbors and stuff like that. She shows up, the dog is about pulling her down the driveway, freaking out, right? The whole tour, the dog would not stop. He was just yanking on the chain and just acting all kinds of crazy. And the person was a really nice person, but I was like, hey, this dog. You know, like we, I don't think the other renters want to acclimate to 3, 5, 10 weeks of this dog learning about this new place and finally chilling out. Mm-hmm. You know, so it just ended up not working that way. Um, so I mean, there's a bunch of different stuff, right? Like people have to share washers and dryers, they have to share the kitchen, they have to share bathrooms. Like there's a bunch of things where you really have to work together as a team. And, um, I really try hard to find people that like work well. Um, I don't just throw any random person in there and it's really tough, you guys. Um, the reason why people are renting a room is there's two reasons. One, they're really frugal like me and they don't want to rent an apartment, or two, they have some type of situation where they can't get into an apartment. And it's normally that, it's normally that somebody has felonies, they have evictions, they have 10 dogs, they, 5 kids, like something, some type of crazy situation. And I've heard all of the stories. I've heard 'em all because peop— like, and I don't want to seem unsympathetic or anything like that to my renters. But generally the person looking to rent a room meets the lowest possible qualifications in the way of income and credit and a myriad of other things. And they have all kinds of things going on in their life. So I have to be extremely choosy. And there's a lot of people that think they can just get in because, oh, it's just a room. You know, you, you probably don't have any qualifications because you're a private small landlord and it's just a room. And I actually tell people this one guy, he said, geez, Brandon, you're asking more questions than a, than a job interview. And I said, yes, yes, because a job only has to deal with you for 8 hours. I have to deal with you for the rest. So yes, this is way more intensive than a job interview. And he said, well, if you gotta ask all these questions, I don't think I'm interested. And I was like, I don't think I'm interested either. Um, so you just, you, you really have to be careful. With who you deal with because it, and it's still an eviction, right? You can't just grab their stuff and throw them out on the street, right? There's still a process even though they're renting a room. Once you have a lease, oh, another thing, even though it's renting a room, have a lease agreement, have a very good lease agreement. It may seem like overkill, but it's not. You need to have all that stuff written down. Get good forms. I get my forms from Northwest Multifamily. I'm not a sponsor or anything like that. And just, yeah, even if it's just a roommate, even if it's your best friend, still please just have them write, sign a lease so everybody's on the same page with stuff. Um, yeah, that would be my advice with that. So it just, it's very difficult to clientele that you have to choose from. Don't expect 700, 800 credit scores with 6x the rent income because those people would go get an apartment. So yeah, so it's, you know, it's a little bit more difficult in that way. However, the reason why I did it, one is it house hacked and it allowed me to move on to bigger and better things. The second reason is it almost equals And Shona would know better than I. I would say it almost equals or comes close to midterm rentals or short-term rentals or something. The cash flow, there's no way for me to put a family in that house and cash flow as much as I do by the room. And I've even talked to a couple other managers, like rental managers, and said, hey, how can you best utilize this? How can I get the most income out of this? And I tell them what I'm currently doing. And they said, ah, man, even if you did like a midterm rental or short-term rental or something like that, you'd probably make like an extra, you know, $1,000 a week, maybe, or $1,000 a month, maybe, you know. So I'm like, ah, you know, even if I can make possibly an extra $1,000 or $2,000, do I want to furnish an entire house to do it and take the risk? See, I'm really risk-averse. I'll take the risk of like, okay, well, during the summer months it's amazing. During the winter months it's not so amazing. Like that fluctuation. Is just too scary for me as I build my base of rentals. Like, I think I want like a good solid base of cash flowing rentals before I do anything tricky or any, anything really cool. Like what Shona does.

Yeah. All that, right? I mean, you're maximizing it and that it's more work, but you're getting that much more money. So the risk is like worth it, right? Like I, vacancy gives me like hives. Like I just get, like, I get into hyper like market mode. I'm like, I'm going to blast this thing out.

I've seen you with vacancy because that's when you call me to go do a virtual tour for your property.

Yeah. I love that you stress the screening because I think oftentimes as small landlords we don't. So again, Metro Multifamily, I use Tenant Tech, like just use the forms and I do have an addendum specifically for rooms that you're kind of doing your house rules in. Are you just going with out-of-the-box forms?

I mean, in the house rules it specifically says that they're renting the room. And they're responsible for that. And I— and it's actually, there's a clause in there that says since you're only renting the room, I, I as the landlord still have access to all common areas. So if I really wanted to, I could go walk in the front door without any type of notice.

Okay. Yeah.

So I can go to the living room, I can go to the kitchen, every— any spot other than their bedroom. So it still gives me a lot of autonomy to check up on my property and make sure nothing crazy has happened. Um, but I try not to do that, right? Like if they're not causing problems, if, if, if, you know, if things are running smoothly, um, I try to leave them alone, right? Because, you know, nobody wants their landlord just coming in and kicking it, you know, all the time, right? So, but, but, but I've lived there, so most of the people know me, like, because I've lived there. I think we've— I mean, the person who took my room, obviously I've never lived with, And then we have switched one other person, but 3 of the 5 people have lived with me, so they know what I'm looking for. They know the expectations, the cleanliness, that type of stuff. And I feel like they kind of keep that household standard for me, which I really appreciate.

That's awesome. Do you put locks on doors so everyone has like private doors, like smart locks or regular locks or what? Yep.

Um, just regular locks with a key for their own room. Um, I had somebody tell me that that was required. Required by law. I'm not sure, but I just know me personally, when I was living with strangers, I'm putting a lock on my door, you know, because when I'm not there, you know, like, I don't want any of my stuff to disappear. Um, you know, not saying that I would try to find those individuals that would do something like that, but you just never know. And, um, I just, I, I think it's, I mean, it's easy. What are they, like $30 or whatever?

It's pretty low tech, right?

Yeah, yeah, it's just give everybody a key. I give my front door key and then a room key. And, uh, you know, I mean it, yeah, it's a little bit of a hassle. Um, but I mean, it's, it's same with the house, right? Like the tenants are gonna give you the keys back, the garage door, the front door key and all that stuff. So totally, it's very similar. But yeah, I think it's very important to have locks on the, on the doors just to make people feel more comfortable with living with strangers.

That makes sense. And then one more thing, I know people ask me with midterms, like I'm assuming you're including utilities and billing them back, or how do you handle utilities? And internet?

Yeah, that's a good question. So, um, this was kind of trial by error. I didn't, um, I didn't really know the best way to go about it. Um, so I just kind of sat and I thought to myself, how can I make this easy as possible for me? Because I don't want to be dealing with this forever.

Mm-hmm.

So I had two options really, which was collect all the bills at the end of the month, divide them by 5. And add that to people's bill every month, or I could just pay it all myself.

Yeah.

So I decided instead of every month collecting all the bills, dividing it by 5, and adding that to people's rent, that I would just ask for more in rent and include all the utilities. Which, when I talk to people or I put my— make my posts, uh, when we're looking for somebody, I think people like that. Because can you imagine your rent changing every month based off the utility usage of you and 4 other people? So I basically just added a— I took what market value was for a room, which is in my area around $600-ish, and I just added $100. So bare minimum, if you're renting a room from me, it's going to be $700. Most people pay $750. The one guy who has his own private bathroom, like the master bathroom or master bedroom, he pays $850 because he has his own private bathroom. So it just, it was just easier for me to just eat it. And then I've actually done the math over, I think like 2 or 3 years since I've owned the property. And I think per month the utilities have averaged around $450. So plus or minus, I'm up $50 over a 2-year average of doing that. So I'm not trying to make money off of it. It's just so inconvenient to talk, to take all the bills, the garbage, the water, the gas, the electric, and every, at the end of every month, and then tell everybody what they need to pay. It's just way too crazy. So, yeah, I just, I just eat that and I pay all the utilities.

I think it's also, it's a benefit, right? Because people like to know what their nut is every month. Like people ask me for long terms. I'm like, I don't know. I've never lived there. I don't know how many showers hours are going to take. And I have duplexes where I split it and I'm like, oh, I gotta split the thing again. Like, I can't imagine 5, that would be like just silly.

So annoying. Right. And then times that by 5 properties.

Right.

Or whatever. Right. Because you like gotta think in your mind, eventually you want to scale, right?

Yeah. Yeah.

So, so yeah. So that I try to avoid that. Um, again, house, 5 different people, probably not the most ideal situation in the world, but I made it work. Um, but yeah. Yeah, just, just pay the utilities and add it onto the rent. And, and, and that's what I tell people is like, hey, look, your, your, your rent is this period. So it's $750 every month. Just don't leave the water running 24/7. Right. Because, because like if the utilities get outta hand, then I'm gonna change stuff. Right. But thus far I think people have been reasonable. So, you know, yeah.

That makes sense. And like yard maintenance, is that an issue? How do you handle that?

Yeah, no, luckily I've, um, since there's a downstairs and upstairs, I told the downstairs people, hey, you guys are responsible for the backyard, front, uh, upstairs people, you're responsible for the front yard. So it's not like one person's responsible for the whole thing. And I left a lawnmower there, an electric lawnmower. So I left an electric lawnmower and two extension cords. And basically I just said, hey, look, if it's, above, if it's like middle way, what is that? If it's halfway up your calf, it's time to mow.

So, you know, that's a pretty high bar.

Yeah, you know what I mean? Like, you know, yes. So, and I tell these people like, look, I'm not a landscaper, you're not a landscaper, I get it, nothing crazy. I'm not asking you to weed the place, I'm not asking you to trim the bushes or anything like that, just mow the yard. And last night I went there, um, after work and I took my leaf blower and I blew all the leaves off of the driveway. Two reasons. One, to show them that I still want the property to be cared for. And two, I don't want anybody to slip and fall and try to sue me. But I do have liability insurance. So if you do sue me, I have liability insurance.

Right. Leaf blowers are fun too. I was just talking to someone.

Yeah, I know. I love leaf blowers. Yeah.

Very satisfying, right?

Yeah. Yeah. Super, super fun. Yeah.

That was my first like homeowner experience, like firing up a gas mower and a leaf blower. I'm like, I made it.

Like, Yeah, yeah, exactly. And, and everybody's been pretty cool about that because it's really here in Oregon, right? It's only during the summertime really when grass grows crazy. So about 3 or 4 months and I just say, hey, during that time, please be on top of it. The rest of the year the grass ain't growing, don't worry about it.

Yeah, that's awesome. I have a guy I use and I just, I, I hire him, but I mean, if you can equally kind of define it, like one duplex, there's no real lines. I'm like, where do I draw that line? So Awesome.

Right. Yeah. Good point.

Well, that was really great. I'd love to next dive into your fourplex, like how you got it. It was off market, which is right, what everyone wants. And now you just—

That's what everybody wants. Off market means best deal ever.

Multi, all the things.

Yep. Yep. So yeah, so I'm glad you brought that up. That's kind of my crown jewel so far. Everybody tells me it was an amazing deal and I'm starting to believe them. So I used all the money that I saved because that's That's the strategy, save a bunch of money. So I used all the money that I saved to buy a 4-unit building, which is actually only 9 minutes away from my current residence. I have a house in Milwaukee and my fourplex in Gladstone. And basically what I did was I decided that year that I was like, okay, COVID's almost over. The moratorium stuff is over. People have to pay their rent and everything like that. So I feel more comfortable and safe that like, okay, I can buy a property now. So I decided in 2021, I was going to buy a fourplex. So what did I need? Well, if you do it traditionally, you're going to need 20% down. So I was like, nope, I ain't got that. I, I'm telling you guys, I do not have a bunch of money. All of this is me saving and working really hard. I have a full-time, I have a part-time, and I have a photography business. And I handyman all of my properties when I can. So super, super busy trying to save and make as much as I possibly can. So 20% was out of the question. So I was like, okay, what else can I do? FHA. That is the strategy. What is it? Federal Housing, whatever. FHA loan. That's what you want because you can do a minimum of 3.5% down. I will tell you that will not work in Oregon. You cannot put 3.5% down on a 4-unit building. It will not work. It will not pencil. The loan will not go through. I ended up having to put 10% down, which was still half, is still less than 20%. And trust me, the extra 10% is a huge difference. So by putting 10% down, um, I was able to qualify for an FHA loan. My credit is still good. I still have the same employment, right? I'm in sales. Um, so I was able to qualify for the loan. How did I find it? Well, there's a little secret that me and Shona keep to ourselves, but we're going to expose it right here on this podcast. This is an industry first. If you go to any title or escrow company and ask them for a list of whatever you're looking for. They'll give it to you for free. That is right. I went to a local title company called First American Title and I said, hey you guys, I'm an investor. I want to buy a 4-unit building. Can you gimme a list of every 4-unit building in Clackamas County and in Washington County? I specifically ignored Multnomah County because if you're in Oregon, you understand that Portland hates landlords. Shona knows that. So I stay out of Multnomah County. Yeah. Landlords are the worst, right? So I stay away from that, at least for now. So everything that I have is in Clackamas County. So what I did is they gave me a list of addresses and I used a program called batchskiptracing.com. So batchskiptracing.com, I put all of the addresses the title company gave me for free into their website and they gave me a list of all of the phone numbers associated with those owners of that property. So I picked up the phone and I started calling them and I told them, I said, hey, look, I am a small-time investor. I will owner-occupy it. I am pre-approved for a loan. I'm not a wholesaler. I'm not an institutional buyer who's trying to rip you off and get 70 cents on the dollar. I will pay you a fair and reasonable price, but I also need it to make sense. Because I'm getting a loan. And I had a couple people that were like, yeah, give me a million dollars. Hahaha. Right. Really what they were saying, you know, I know some investors are jerks or whatever. What they're really saying is I don't want to sell. And because their numbers were wildish, completely off, off what was possible. So I said, thank you anyways. I called a few other people who said, nope, not interested. I called a bunch of people, like 50, I'd say 50% of the numbers that I got were wrong. So I wasn't able to get ahold of those owners, but every number I called, I left a message and I said, hey, I'm looking for Mr. and Mrs. Smith, the owner of this fourplex. I have a question, call me back. And I had a couple people call me back. And here's the really cool thing. I found the owner of this fourplex my First day cold calling.

No way.

First day.

Lucky.

Yep. I called, I think I called off that list. I think I called maybe half of it. I called 50 or 60 people and he was in that first 50 or 60 people. I called him. He said, here's the price I want. That's a fair price. Click. Hung up on me. So, so I analyzed some stuff really quickly and I was like, okay, what does Zillow say? What does Redfin say? What is, you know, what is this, that, and the other? What do I think about the location? All this other stuff. Do I want to even own this and whatever? And I was interested in everything. I was like, okay, this all makes sense. So I called him back and I said, hey, I think your price makes sense depending on the rents and what you pay in utilities. I said, can you get me that information? And he said, yeah, I get this, I get this, I get this, I get this, and I pay for the water. And I said, how much is the water? And he said, ah, it's about $300. I called the utility company to verify. And then I also found out he had to pay for exterior, uh, exterior lights, which is like maybe $30 a month, but you need to know all that stuff. And I ran the numbers and it made sense. The property actually cash flowed without raising any rents.

That's impressive. That's rare.

Yes.

Right. Very rare.

At his price point, it's still only a couple hundred bucks, but it's still cash flowed without raising rents, which obviously wouldn't work because using an FHA loan, you have to owner occupy one of the properties. So, you know, then, then I would be living in there and not getting rent for myself. But anyways, it made sense. So I was just like, Overjoyed. And then I talked to my lender about it because this is off market. I learned my lesson the first time. I didn't need a real estate agent. They didn't help me at all anyways, so I saved the commission. So, so I went to my lender who had pre-approved me with an FHA loan, told her all about this and sent her over the signed contract. That's what I did, right? I used a contract from one of my buddies. I'm not a licensed agent, whatever. I didn't need 70-page contract. It was like a 3-page contract. With the price, the terms. I was going to have an inspection period and all that stuff. And I sent it over to my lender. We sent it over to the title company to get things rolling. And she basically said, you were this close to not making it work because FHA has a sustainability clause where the, where the rents have to cover the mortgage. It's, it's, it's required. And that's why it's so impressive that I got this deal because everybody I've talked to, literally everybody that knows anything about small multifamily has said you getting that with an FHA loan is almost unheard of because no, the, like when, when you buy the property, they, the owner always wants way more than it can sustain with the current rents because all us landlords hate raising the rents on people. We really do. So their rents are lower than what they should be and they're asking for market value. And that gap doesn't allow for financing with an FHA loan unless you put a lot, a lot of money down. That's why that 3.5% and it was a lot of work. I have a lot of different sources of income. COVID happened. Um, I think even, I think even on the original, uh, contract, we wrote the address wrong. He didn't know the actual correct address. So we had the loan company or the title company said, hey, this is the actual legal address of that property. Resign that. So all kinds of stupid stuff happened, but we made it work.

But if you would've known all that going into, right, you probably would've been like, there's no way I can get an FHA loan. But you just dove into it. You made the calls, you did the work. And I think that's the thing about just taking the action, right? It's like if you had known all of that, you'd want to talk yourself out of it. But like, there's no way I can get into multi, small multi.

I definitely got lucky. I mean, I found the right person at the right time. It was off market. Actually, what's really crazy is I bought it for $679,000 and it appraised for $710,000.

That's awesome.

So yeah. Yeah. And, and that's what everybody does. Like everybody look at Shona, everybody, like when somebody goes to get an appraisal on a property, the appraiser's job is to get as close to the purchase price as possible. That's whether that's right or wrong. I think it's messed up. I'm paying for an appraisal to get the actual value, not the contract price.

So close though.

Yeah.

Like really?

Like, did you know that though? I mean, right, right. Exactly. So the appraiser actually gets the contract, so they get to see the price you're buying it for and their job. Whether I think it's right or wrong, I think it's wrong. Their job is to try to get it as close to the contract price as possible, which is stupid. That's not the actual point of an appraisal. But anyways, he came back at $710,000, which is $30,000 more than the purchase price. And my lender, every other lender that I talked to, multiple real estate agents that I talked to, and other investors like, like you guys, everybody said that the fact that he had, he was so far away from the purchase price means you got a deal. And that was all based off of current rents. Since then, I've remodeled 2 of the units and I've raised the rent twice on the other 2 units. Those people hate me, but they still have a place to live.

Right.

So, and, and that's the really tough thing I hate. And that's really the, the hard thing about buying an owner-occupied property is, is generally if it's a multifamily, somebody's living in there and you're gonna have to kick 'em out. So that is the sad part of owner-occupying properties. And it's hard. It really is. I had to go to somebody, his life was totally normal until I bought the property. And then I had to send him paperwork saying, "Hey, you have 90 days to leave because I'm going to go live there." And he wasn't very happy. So yeah, so that was tough. And the other people, They're so below market value. So that's the other thing that's really tough is that they were so below market value. I raised the rent the maximum I could last year, and I'm raising it again the maximum I can this year, and they're still below market value. So should I, like, from an investor standpoint, should I have kicked them out and just renovated and got max rent? Probably. But I didn't want to come in here into a 4-unit building and kick everybody out, like one after another, just kick, keep kicking people. I didn't want to do that. Kicking one person out was hard enough. And then the other guy downstairs in the unit that I'm currently in now, his, his unit was messed up. He was paying the lowest amount of rent and he was growing pot in one of the rooms. Like he had like turned one of the rooms into a grow room and some other stuff. So I was just like, hey man, you know, this isn't going to work out. So I asked him to leave and I didn't. And the other two people were like legitimately frightened. Like, they were like, they talked to me and said, hey Brandon, we don't want to leave. And I'm like, okay, you know, um, the only way I can accommodate that is by raising rents. And, um, you know, they're not happy about it, but I basically told them those are the only choices that I have is you either have to ask you to leave or I need to raise the rent. So they're like understanding about it, obviously not happy, right? Because they're paying more for the same place. But I've been trying to do things right. I've been making it nicer. I've, you know, uh, you know, when things break, I put something new in there. You know, I try to be really responsive to their needs and stuff like that.

I think, yeah, I talked to a lot of landlords and they've had tenants for 15 years and they're like, you know, they've become friends. But I think you have to realize if you don't, the way I've tried to frame it is if you don't charge current rents, like you can't afford to maintain it and then things don't neglected and then you—

and then when you try to sell it and when you try to sell it to another investor, right? Because The only person who's going to buy like a duplex, triplex, or fourplex is somebody who has some type of investor mindset, right? So they have to be able to justify it because if your rents are so low that they have to raise it 2, 3, 4 times just to cash flow or break even, it's not worth it to do the deal. So you've priced yourself out of the market because people can't afford to buy your property because it's so low. There's no cash flow there. So you really have to keep up on that.

And I mean, just to maintain the property, because if you don't maintain it, it's not— it's not safe for anyone. Properties are very expensive, they're very risky, and things always go wrong. And if you don't maintain them, they, you know, then you become a slumlord, right? And that's why people hate landlords when they don't maintain things. My last house, The tenants had been there quite a while. They had very below market rent. And I think they didn't report fixes because they didn't want their rent to go up. So it was like this just silly situation because they didn't want the rent to go up. So it was the epitome of why you need to charge market rents and fix stuff.

And the other reason, the other thing too, which I'm going to implement starting January. So next month I'm going to give everybody, every, everybody in the house and all these units in the fourplex. I am doing a full-on inspection. I'm going into everybody's room. I'm going on the roof. I'm going under the crawl space. So yeah, starting January 1st, I'm going through all that stuff. I'm going to be looking for mold, water damage, smoke detectors, make sure that they haven't been tampered with, that they still work. Right.

That they're even up.

I've had, I've had multiple renters that are vaping or whatever. And they took them down, right? Like you're supposed to have one in each room or something like that. And I'm like, nope, nope, nope. In the lease agreement specifically says $250 fee for tampering with those. Very serious. And I gave one person a warning and I told everybody, I said, no, you guys do not touch that stuff. Very important. Your renter's insurance that I make you have will not pay for a burnt down house. I promise. So, so yeah, so I'm basically going through everybody's unit. I'm looking for damages. I'm looking for And this isn't to charge them more rent or anything. It's to say like, hey, if, if the faucet's leaking, it's causing damage, right? And I need to address it. If, if the toilet's leaking, it's causing damage and I need to address it. So these are things to protect my asset and hopefully make a better living environment for them. But it's very important to do those inspections. You got to look at the furnace, the HVAC, the water heater, all that stuff, right? Like all very important. You need to look at all of your things. So, so that's what I plan to do in January. Is it annoying? Is it— does it take up my time? It's probably going to take me an entire day to do all that stuff, right? And take pictures and video and make sure that I know what's going on in these units. But it's very important because like you said, I mean, tenants have this thing where like, oh, if they come over here and fix stuff, my rent's going up. That may or may not be true and it may go up anyways. So let us fix the stuff. Right? Because a leaky faucet turns into just tightening a bolt, right?

Versus—

or, or turns into severe water damage, which costs thousands of dollars to fix. So like, let us fix it the easy way first, because if it requires thousands of dollars to fix, yes, your rent's going to go up because you didn't tell us about it and it cost us thousands of dollars to fix it.

Completely. And you have to be proactive. Like, I get every year, I get my furnaces checked, I get the gutters cleaned. And yeah, I mean, I don't have to do that, but I'd rather be proactive, make sure it's safe. Because to your point, like, I've had leaky faucets and it was not pretty because they didn't tell me or they didn't think it was a big deal. I always tell people, if it squeaks, like, let me know. I want to know. It's the tiniest little thing. That's one thing, like, I think the benefit of maybe rent by room or midterm or whatever, STR, you're in there a lot more. So you get to see or you get eyes on your property versus if you've got someone there for like years. And you're not diligent on inspections. It's just kind of the pros and cons. So, yeah.

Good point. Yeah. I mean, there's, um, you know, cuz I have 5 people in one area, there's, there's more of a turnover, right? Mm-hmm. Because there's, you know, there's, you know, more people who have more chance to, to move or whatever. Um, but yeah, so I get to be in there more often. I do have access to common areas and, and I do a lot of the work myself, right? I was blowing off the driveway, I clean out the gutters, so I have to go through the house to put a, ladder on the deck, and so I get to like see what's going on. And you do your own work? Yeah, yeah, I got a leaf blower. What is it? What do you think it's for? Yeah, absolutely. Well, and I want to see my roof, right? Like, I don't— if you send a roofer up there, they're going to say you need a new roof, right?

I need to do my gutters. Gutters are— they're high. I mean, you're— it's kind of a dangerous thing.

Yeah, yeah, for sure. Yeah, absolutely. Yeah, if I fell down and broke my neck, I'd never do it again. Hopefully I would, you know, hopefully I'd be all right. But yeah, so I mean, and eventually, but again, this is like, I just want to, you know, try to relate to people. Like, I'm doing this on a shoestring budget. I'm trying to save all the money I can. I'm doing the crappy things like cleaning, cleaning gutters. I mean, people charge what, $200 or $300 for that?

Oh, I mean, I've gotten quotes and I'm like, when we moved to our current house, it was new construction and I almost fell off the chair because I'm like, you're going to charge me what versus my handyman who's very real. What's like—

I didn't even know that. Yeah, exactly.

Yeah.

If you call somebody from Google who's a gutter cleaning professional, you're— yeah, you're hundreds of dollars.

Hundreds.

And that's—

yeah.

And that's your cash flow for the month.

You know what I mean?

You can't do that all the time. If you pay a licensed contractor to come in and do all your work all the time, you'll never be able to actually cash flow. Yeah.

Yeah. There's definitely a time and place for licensed subs, but, you know, build your team, have your people. And I like kind of independent people. I'll just text them. I've got my electrician, my plumber, I've got a pest guy. I love him. Yeah, right, guy, you know, because you get those corporate companies out there and they're just like, well, you've got some— they just give you this whole bloated estimate. And one pest guy, he literally asked out my tenant who was senior. I was like, you didn't just do that, you're fired.

That's crazy. Wow.

Yeah, he was just a little too friendly. I'm like, I don't need my pest guy to be chatting with my tenants, you know.

Oh my gosh, that's crazy.

And then he— I had, I had squirrels or something in the roof and there was something they're protected and he gave me this bid that was like thousands of dollars. I'm like, that's insane, I'm gonna call my guy. And he just went up there and set a trap and, you know, got them out. But right, things you deal with, like with— yeah, the squirrel. I've had— we all have stories.

We should have Oh yeah, no, I'm sorry. I, I have a huge deck on my fourplex. The upstairs people have a deck. The railing was wiggly when I bought it. Super important to fix, right? I had multiple quotes in the tens of thousands of dollars because they wanted to replace all of it. They wanted to do all new railing. And I was like, why can't you just fix the one that's there? And they're like, well, we can't guarantee the safety of that. And I'm like, so you can't, as, as professionals, you can't brace that? You can't find some way to make it safe? And they're like, well, we don't do that. So me and my handyman, I mean, probably all told, 3 days, less than $500 in materials.

Right.

And it is rock solid now. You could dropkick that thing and you'd be all right.

Yeah. And it just takes some time and—

Yeah, it just, it took some time, a lot of screws, you know, we replaced a bunch of stuff or whatever, right? But like less than $500 in materials and these people are trying to charge me me. Like, one of the quotes was like $12,000.

Yeah.

And I'm like, never— I'll never make any money on a rental if I'm— if I'm replacing railing for $12,000, right?

But I think that's people's worst fear. They think the toilet's gonna— they're gonna call, you're gonna get a call like 2:10 in the morning, the toilet's leaking, and I don't know, someone trashed the house. Like, there's so many like misconceptions about being a landlord. Yes, it's work, but I've never gotten a leaky toilet call. It's 2 in the morning. I don't know about you, like, usually it's reasonable, you know. I've had— I can tell you stories, I've had crazy stories, but I can figure it out, right?

I mean, the leaky toilet, okay, okay, Mr. and Mrs. Renter, you see that little knob down there on the bottom left of the toilet? Turn that all the way off, right?

Yeah, just— that's it.

I—

yeah, I actually had— when we had Airbnbs, um, we had under the sink, they had like the crappy white hoses and they just blew, and so the tenants I just like literally packed up and left, and, and then my co-host called me and there was water like spewing. It was like one of those moments I'm like, okay, I turned the water off and I got a bunch of towels, and you know, luckily I was right next door. But I mean, that was like the worst water situation, and it was fixable, right? It's just—

yeah, absolutely. So, so yeah, so I mean, house hacking, yes, you get to live there. Yes, you're living with strangers, You know, yes, it'll cash flow better. Yes, it's more management. Yes, you got to learn to live with people and they got to live with other people. You know what I mean? There's a bunch of pros and cons to that stuff. I mean, there's maintenance, there's tenant turnover, there's headaches, there's all this stuff. But I'm telling you, I bought an on-market at value with a realist, paid 6% interest or 6% commission. Like, you know, no discounts on anything. Everything was full price, the property, everything. And I still made it work. So house hacking is super invaluable. And it was, I did it for 2 years. And the only reason why I did it for 2 years is because of COVID I was concerned about like the market, the economy, and everything that was going on with a worldwide pandemic. But even then that allowed me to save more money. So I was able to put 10% down on this 4-unit building. And honestly, I have about 10% saved again. So I'm going to either go see if I can finagle another fourplex or do a duplex or something like that. And the greatest thing right now is, I mean, I don't have any partners. Everything's 100% on, under me and I have control over everything. And I'm right now, I'm just trying to build up my base. Like I want a solid, like $3,000, $5,000 a month. Cash flow, you know, where I feel comfortable, where my expenses are covered. And then I can start doing the tricky stuff like, oh, let's try a midterm rental. Let's try a short-term rental. Let me use Shona's amazing information about midterm rentals and that I could call on her at any point in time with all kinds of random questions and have a very successful midterm rental. So yeah, so I mean, house hacking, it's just, it's the super best way to do it. And nothing crazy. I used a normal loan. I got a regular house on market. Like, anybody can do that. I didn't even get a deal and it still worked out. So like, I mean, like John said, like everybody says, like, yes, you need to educate yourself. But I think at least for, at least for me, but I think for Shona as well, they don't teach you what you're going to truly experience as a landlord. In the books. Like nobody goes into the detail of the things you're gonna— like I remember putting in flooring one time and it was so wonky. We had to learn how to use self-leveling compound and then I had to figure out what type of self-leveling compound to use and how long it needed to sit. And I had to buy the trowel to smooth it out. Like there's in this one corner, like there's so many things that you're going to run into that you just, just go for it. Just do it. Just action, right? Just go buy something and you'll figure it out, right? There's nothing in a house that is unrepairable. There's nothing in a house that's going to set you back financially for 20 years. Like, you'll figure it out. Just run your numbers, talk to other investors, try to make it cash flow, and, you know, try to find a good deal if you can. But the most important thing is you're paying down your mortgage. That, that, that'll never go up. It's a 30-year fixed. I don't recommend, uh, especially new people do variable rate mortgages. I think they learned a lot from 2008, but like if you're a newbie, don't mess around with balloon payments. Don't try to time the market that way. You'll put, you could put yourself in a bad situation. So get a 30-year fixed and just, you know, and even if you end up not renting it out, you're a homeowner. Congratulations. You know what I mean? You'll get equity that way.

Well, because where you do, like it's a stepping stone, right? You owner occupy it and then instead of when you're ready to upgrade, you just pull your equity out, you keep it as a rental, and then you've got two properties and you can do that a couple of times. Right. That's just so there's so many ways to approach it.

And I think, yeah, absolutely.

People are so terrified of doing that. I'm like, how did you sell your house? Like, it's just, you're just, anyway, it's not for everyone. When you also, I think you said you're not, I mean, I think we're all, we are, we take very calculated risks, right? It's definitely, we run our numbers, we know there's some risk, but the upside is so big, right? And the worst case is you sell it. I mean, like, You know, try it out. You'll probably figure it out and be really glad you kept your property or started your journey.

So yeah, absolutely. The worst deal today is the best deal 20 years from now.

I mean, yeah.

You know, the first deal, I didn't really know what I was doing. I just knew I could make a cash flow, right? I went on Craigslist and Facebook Marketplace and I'm like, well, what do rooms rent for? Ah, about $600. So I times $600 times 5. Because when I left, it needed a cash flow. And then I was like, okay, well, I'll add the $100 to cover the utilities. Oh, I'm going to cash flow. This is great. And then I build equity while I wait. Or like you said, your primary residence, buy a home, live in it for a couple of years, and then say, okay, hey, I'm going to do a cash-out refi or whatever, or I've saved up more money, keep it as a rental, and then go buy another house. So, I mean, there's a bunch of ways you can do it. You don't have to live with strangers, right? I mean, it just it helped me grow faster. And I mean, and there's even faster ways to do it. You can find a person who owns a 100-unit building who will seller finance it to you for nothing down.

Totally out there.

Let me know when you find that. I will help you analyze the deal. Let me know.

But or, or, you know, find a place with that, like a deal. Like when I was looking, I was like, I want a mother-in-law, which was very hard to find. But you can have a basement unit, right? So you can have that set separation. Like, you may not want— there's so many ways to, like, capitalize or add value to a property, you know?

Yeah, no, I mean, the place that I bought was actually a split level, so I could have put a door and locked it and rented out just the downstairs, and it would have offset my mortgage. Wouldn't have paid the whole thing, but it would have offset the mortgage substantially, and I could have just lived upstairs and had somebody live downstairs, or vice versa.

And it would have been super private. Like, I had a door going to the upstairs, and just having that door door. So I, and I was like, I don't share my living room. You have your upstairs. I'm not going to go up there and hang out. It's like, yeah, very clear on like what, because I was just, you know, living with strangers. And it was like, I knew I was, I was just, this was, and it paid off. I mean, it really was like the, my starter house, right, that kept on giving, man. That house is like the appreciation and the equity.

I mean, yes. Yeah. And I mean, you still own it, right? You can do cash-out refinance. You probably have a home equity line of credit on it.

Oh, so it's bought 2 houses and I pulled equity out of it and it still has equity because I bought it so long ago, right?

I mean, yeah.

So it's just—

and hey, everybody, I want you to listen to that. That right there is probably one of the most important things you can learn. She bought the house so long ago, so she held on to it that it's been the appreciation, the cash flow. She has been able to leverage that asset multiple times. See, I'm only 29, right? So I didn't buy a house when I was 18. But you know, I wish I did. I really did. Right. But if you buy a house and hold onto that, hold onto that thing, you can leverage that so many times over and over and over again to keep helping you buy properties. So that's, that's my biggest thing against flipping is it's really cool. It's a great way to get some quick cash, but you've given up the asset.

It is not investing. It's like wholesaling and flipping are not investing. Great capital building, but you're not building a legacy. You're not building stepping stones.

Right. Yeah. It's great. Great for capital. Yeah. If you do it right, you'll make a lot of money quick, which is great. But trust me, if you hold, if they held onto that for 5, 10 years, the equity and everything would be, I would say, probably comparable to what they got from the flip. And then they still have the property. So if you just wait 5 years, you know, But yeah, no, I think, I think that's kind of like my pitch on house hacking is that it will absolutely change your life. It will give you the ability to buy more properties. It will teach you so many things, living with new people, figuring out schedules, how to handle, okay, who's going to clean the floors? Whose dishes are those? You know, who's going to clean the microwave? All this stupid stuff, right? Stupid stuff. It really is. But, um, you know, but it worked. It, it made sense financially. I am far better off than I would've been if I wouldn't have done it. Um, I don't wanna say how much better off, but far better off if I was still a renter.

Oh my gosh. Right. And you made that investment and you, it's kind of a sacrifice cuz it's uncomfortable and it's just, you know, you don't have your house to yourself. I mean, I did times, I said like where I went and was like, hiding in my room. So I didn't want to talk to anyone. Like, I just— but I knew, I knew on some level this was, was well worth it. So yeah, anyone starting out, it's such an approachable strategy. And again, you can find like an ADU or a split level if you have a family, you know, and there's so many creative ways.

So yeah, exactly. And I leveraged that into a fourplex. So right, so I'm technically still house hacking. I live in the building with my renters. So I went from living in a room to a unit. And then hopefully I'll be able to stop living with my renters eventually. Right. But it just, it's so lucrative to owner-occupy stuff. It's, you get the best rates, you get the best deals, you get the best terms. It's, it's hard to pass up if you can, if you can swing it. And if you're willing to make those sacrifices for the first couple years, I mean, if, if I did nothing else and I let my renters pay down my properties, I would have $1 million worth of paid off properties in 30 years, right? And that's if, and that's if they didn't appreciate, right?

Yeah. Which they are, right? Yeah.

Right. You know what I mean? So if I did nothing else, so I mean, and I'm only 29, right? So I mean, there's, I'm gonna have you on again. You're gonna be like, yeah, like 5 years from now. Let me come back 5 years from now. Yeah. And we'll readdress this and be like, okay, cool. Now I have like 5 fourplexes and a 20-plex. And, uh, in my 20-unit building, 5 of them are midterm rentals. The other 5 are short-term short-term rentals and—

Yeah. And the other point I just want to make, I'm, it's owner occupied is 1 year minimum, right? Before you can move on.

Is that correct?

Yes.

Which gives you enough time to build up capital for the next property.

Exactly.

Well, if you want to get technical, you have to intend to live there for 1 year. So if circumstances changes, if you have a baby, if your job changes, if you know, you have an illness in the family or something, you know, you just have to intend to live there when you sign the paper. I mean, live there for a year, get to know the renters, handpick the people you want to live there, you know, whether they're above you or in rooms or whatever, you know, work on the property, save up money for your next, your next— you got to live somewhere, so might as well live in your rental, right? And make it work for you and save up money. So I think that's the best strategy for people who are cash-strapped like myself. Is get those low down payments with, you know, 3.5% down, 10% down. If you, if you buy a second home, it's 5%, you know what I mean? So those low down payments really, really matter when you don't have unlimited capital to keep putting 20% down on stuff.

And, and there's a limited period in your life where you can like kind of move around more quickly and you like, we don't have W-2s anymore. We are the hardest people to finance. It's just like, okay, yeah, you got, yeah, just a total pain in the butt. Like, you want my first one? Like, what else do you want to prove that I— like, it's—

yeah, and that's what I tell— that's what I tell all my friends. Keep your W-2. It is— I mean, it is— it's stupid. You can make way more if you worked for yourself or had your own business, but you become unlendable for at least 2 years.

Yeah, if you don't have any assets, right? If you have a W-2 and you're owner-occupied, man, like, leverage that as many times as I can't.

Exactly. Yeah. So that's what I'm doing and that's what I tell all my friends, like W-2 owner occupied, W-2 owner occupied.

It's the, it's the secret thing. Well, this has been so fun. A couple, uh, wrap-up questions. Your top business or life advice you'd give someone maybe starting out like yourself, like clearly you're doing it, you're living the dream.

Um, living the dream. Yeah, exactly. Um, hustle. Yeah. Hustle, hustling. Absolutely. I mean, Life or business advice? Life advice, be frugal. Business advice, save a bunch of money. Okay.

Yeah.

You'll, you'll never go wrong with those two things. You'll never, if you do those things, um, fight the lifestyle creep. Um, you know, I, I could, I could live a lot more lavishly than I could have 3 years ago and I choose not to cuz I'm reinvesting it. I'm going to use that money to buy another property.

Mm-hmm.

I could, you know, get a Tesla. I could, I mean, not to brag, I mean, I could buy a Tesla, like not the most expensive one, but I could buy a Tesla almost in cash, but instead I'd rather buy a property. So, you know, use that money to buy assets and the assets will pay for the things that you want. So that's my business advice. Take assets, throw the cash cash flow that they throw off, use that to buy the things that you want.

That is, that's where it's at. All right, what is your superpower?

I would say since I make a lot of cold calls, uh, persistence, determination, and a little bit of stupidity. And I say that because it takes a lot of mental fortitude. Maybe that's, maybe that's what it is, mental fortitude. To make hundreds of phone calls, uh, a day.

Yeah.

Um, and then do it the next day and then do it for weeks and do it for months. So, um, uh, that was my job before COVID cold calling. And then during COVID I was cold calling for my business to drum up, you know, uh, photography opportunities. And then I started working with a flipper and wholesaling. And now I'm cold calling being a wholesaler. So it's a sales is a really valuable skill. And I've basically everything I've produced is by picking up the phone and that's really, really hard for people. And honestly, I hate it, but it provides me a lot of opportunities. So mental fortitude, that's probably my superpower.

I love it. I mean, it's, I think that's the scariest thing to like talk to, you get, you get that lead and you have to talk to the seller and it's just, it's terrifying. I still get like nervous and they're always just super nice and it's like, oh, that was a great conversation. Conversation, but I have to just like psych myself up to call an inbound lead back from a letter.

And I'm just calling these people out of the blue. Hey, do you want to sell your house? I've been called a lot of things. Yesterday I was called interesting. I was called interesting yesterday, and I don't know if that is a good thing or a bad thing.

I'm sure you've been called a lot, a lot worse things.

A few things. Yeah. Yeah.

Okay.

Not everybody's like that. That's like, that's like 5% of the phone calls.

Yeah. But you mean you have to push through that and then the upside, right? Yeah. Um, no, I, I've realized like my background's in marketing and I don't know a lot about sales, but I'm realizing that's a hat that I need to learn more about because it's a real skill and it's different than marketing. It's a whole different animal. Yeah.

I don't know anything about marketing. I don't. I think me and Shona, we would be a good team cuz I, I, I have the sales background. I do like almost like 7, 8 years in the sales game, but I don't really know anything about marketing. So, um, they're totally two different things, but they work really well together.

They— and I, I think because I was in marketing, I assumed I understood sales, and I'm realizing it is very different, and it's not— does not come naturally at all. Yeah. Um, all right, a book or a podcast that you'd recommend other than this podcast?

Um, because obviously that's the first one we want people to listen to. That's where they're going to get all the gold.

Thank you.

Um, I mean, I mean, I hate to be redundant. I'm sure everybody have heard this a million times. Rich Dad Poor Dad was the book that started me originally. Um, uh, BiggerPockets podcast. You're going to run into hundreds of thousands of people that have answered and been through what you're about to go through. So if you want to know what it's like, talk to those, you know, talk to those people, the BiggerPockets forum and that type of stuff. I'm not a member. I don't promote them. I've just been on their forums. I've learned a lot. So yeah, but Rich Dad Poor Dad, if that doesn't give you a mentality shift, if that doesn't take you from consumer to investor, I don't know what will. So I would start with that. And I mean, hey, not everybody's cut out to be a real estate investor. I mean, it is tough. It really is. My tenants will hate you. Neighbors will hate you. You know, you're cold calling people to find more deals. Those people are gonna hate you. Like, I mean, it's, it's tough. It really is.

That book I think is pivotal. I mean, it's, it's, there's a reason why everyone talks about it, right? It just—

Yes. If you haven't read it, just do it. Just because everybody tells you to do it. This is the one thing to actually, yeah, do that. Read that book.

I've made my son listen to it. He's 11. I'm like, you're gonna get this concept.

Yep. Yep. Cat, what is that? They have the Cashflow Game or whatever.

We played that.

Yeah.

He, I mean, I'm like, this is just brilliant. It just, it's, there's teaching in this very real way. All right. Last question, like plug your business. How can people find you, work with you, all that good stuff?

Yeah. I mean, I'm on Facebook, um, Brandon Hendrick. You can find me there. Uh, Instagram, I think I have an Instagram for my Virtual Tours OR business. So Virtual Tours OR, that's what Shono was referring to. I have a real estate photography business. Uh, I think those are probably the two biggest platforms. And yeah, I'm absolutely totally open to helping anybody. If you want to run numbers, if you want me to tell you what I think about a deal, if you want a JV, if you have some money, but don't know what to do with it, more than happy to help you figure out something. I'm really focusing on the small to mid range multifamily. So 4 units, 20 units, that sweet spot is kind of where I think I'm going to find my niche. And that's, that's kind of where I'm going. So if anybody has any interest in that, feel free to reach out to me. And then of course, my email, pnwrentals1@gmail.com, and you can send me anything you have, whether it be deals or questions, more than happy to help.

Awesome. Well, Brandon, thanks so much. This is, this has been really fun. Thank you so much for listening. I hope you found it valuable. Please take a minute to hit the subscribe or follow button. It really helps other people find this and share it with a wider audience. We also appreciate 5-star reviews. Also, please take a screenshot and tag us on your favorite social platform. We're at Cedar and Porch. The show was brought to you by the Midterm Rental Playbook course, your blueprint to setting up a successful midterm rental. Learn more at themidtermrentalplaybook.com, link in the show notes.