ITF 13 | First House Hack

 

Reid Ferguson was only a college student when he realized the perks of real estate investing. He stumbled upon the concept of house hacking and knew that he was in it for the long run. Together with his wife Alexa Ferguson, the real estate investor couple took a leap of faith when they bought their first property in Denver, and house hacked it.

Learn the basics of house hacking as Reid and Alexa walk us through their approach on the first property that they’ve house hacked. In this episode, you’ll relate to their stories as they’ll share the ups and downs of purchasing their property during the pandemic.

Why is house hacking the perfect foolproof strategy? Why is this the ideal strategy for young real estate investors? You’ll learn it all in this episode so don’t miss it.

Listen to the podcast here


 

The Emotions Of Your First House Hack With Reid And Alexa Ferguson

I’m here with my buddy, Nick Munch. Nick, what’s going on?

Everything’s good. How are you?

Things are good and picking up. I finally got my contractor back here working on my property that had that stop-work order put on it. Things are slowly but surely moving along and closing some deals. How about you?

Honestly, helping people out and finding some real estate. I’m in the process of getting a property myself so I’m working through that. The kids are off so I got two jobs.

The kids are out. Is it fall break? Is it just COVID-19 week?

It’s fall break. I hope there’s no at-home school anymore. I hope we don’t come to that. 2021 has flown by.

It’s the longest year but shortest year if you think about everything that’s happened but now that we’re here, it’s like, “Holy crap. Where has it gone?”

We got some pretty cool guests, Reid and Alexa. They had completed their first house hack and they’re in what we call the lull period waiting for the second one. They’re about to refinance on their house given the low-interest rates. It’s cool because we dive deep into this deal and talk about the emotions and ups and downs that went through purchasing a house in the middle of COVID. It’s a cool episode and I’m excited to bring them on.

I’m excited to know their story, talk about the numbers and jump right in.

Let’s get them on.

Welcome to the show Reid and Alexa, how are you guys doing?

I’m good. How are you?

I’m doing well.

Can’t complain. We’re still enjoying the last bit of 80s weather here in October in Denver which is a little bit unlikely but I’m sure it will get cold quickly soon.

It feels like the last few minutes. It’s getting cold as we speak.

Don't cut any corners when it comes to tenant screening. Click To Tweet

It was warm last night and usually once it’s warm at night you know it’s coming.

We’re here to talk about your journey on financial independence where you get to talk about the deal that you guys have done. We’ll get right into it. How did you all get started?

I did grad school in college and going into grad school, I was officially on my own financially. Mom and dad weren’t supportive at all. I realized I didn’t know that much about money or at least I didn’t think I did. I started looking into books on that. I started reading and I stumbled across Rich Dad Poor Dad. That was the beginning and kept trickling on to the next thing. That’s when I started finding Mr. Money Mustache, BiggerPockets and that kind of stuff. That was the start for me and then us being married, that naturally transferred over to her.

Super original. You read Rich Dad Poor Dad.

If you can’t beat them, join them.

That’s a great book. That’s the first one for a lot of people. It was weird, it was probably the fifteenth book for me that everyone was talking about and I still hadn’t read it. I was like, “I should read this darn book.” I finally did read it. Mr. Money Mustache, I’m sitting in his headquarters so you should check it out someday. You read Rich Dad Poor Dad and got on Mr. Money Mustache. What year was that when you first discovered financial independence?

That was at the beginning of 2019 and maybe the end of 2018.

You read Rich Dad Poor Dad and then what happened?

Since he was still in school at the time, we didn’t have a lot of money to our names. The first step for us for about a year was like, “Let’s get educated and do as much reading and learning as we can. Let’s have as many conversations as we can about this so that once we’re out of school and we have steady incomes, we can hit the ground running and begin our journey toward financial independence.” I was out of school at this point already but he was still finishing up this grad program. It started off with a ton of learning. Did we read anything else beyond that? We listened to a lot of BiggerPockets Podcast.

I found BiggerPockets and started listening to a ton of podcasts in my last internship. Imagining internships every summer is the norm. Every morning when I go to work, I listen to podcasts and most afternoons coming back if I wasn’t trying to decompress too much from work. It was trying to get as much information while I was still in school. I didn’t do a part-time job. In my last semester even though I had fewer credit hours. I found a real estate meetup group and I went to that. I went to a bunch of house showings with the guy that led it. We had little socials and stuff in pre-COVID when you could hang out with people. That was like, “I decided no job. I’m going to make this my job. I won’t get any pay for it but hopefully, in the long run, I will pay off way more than another $1,000 for a semester.”

It’s funny because many people are stopped in their tracks by, “I’m going to wait until I know enough and I feel mentally prepared to take my first step.” Reid is not that at all. It was killing him to take this year of learning and then not being able to put anything into practice because we didn’t have the means yet or time. It wasn’t the right timing for us. It was half exciting and half frustrating to be learning all this life-changing information and not being able to put any of it into practice at that time.

I can only imagine. It’s funny, you were in grad school. A lot of entrepreneurs and real estate people poo-poo grad school because while you’re paying money, you’re wasting your time when you could be building your empire while you’re in grad school. You lost a couple of years there. How did that make you feel to go through?

It’s interesting having been in my new job for not even a year. I enjoyed it but it’s not my dream.

Do you regret going to grad school at all?

No, I don’t think so, at least not yet but it makes me think, “What if I didn’t? What if I didn’t like Engineering, got a simpler degree then found FI earlier and could take off with it?” It’s also nice to have a great job with a good income right off the bat. I can’t complain there.

ITF 13 | First House Hack
First House Hack: As you get more deals, you get busier and get more confidence, and sometimes you relax too much, and that’s what’s going to burn you.

 

If you’re reading, Reid’s bosses, he loves his job.

It is interesting because it’s such a big risk to go off on your own without that education and that stable job. It’s hard to qualify for a loan because you don’t have that income. If God forbid real estate fails you, at least you have a nice safety net. It depends on your risk levels. I always like to ask that question.

For me, grad school is a necessary thing for the engineering that I do. A lot of companies recommend it. I would have been left with a degree if I didn’t get it. It was a combined program. It was only a year more. It wasn’t that I wasted two more years and I lost my scholarship. It wasn’t as bad.

Alexa, Reid figured all this stuff out and he explained it to you. It didn’t sound like you’re pretty on board right away. Was the thing convincing?

Not really. He presented this idea of not working at a desk from 9:00 to 5:00 for the rest of our lives and not going the traditional route. All our friends at that time were graduating college and settling into their careers for the next 40 years or whatever it is.

Buying brand new cars and houses and being like, “I’m locked into this the next 5 years, 30 years,” or whatever your loan is.

Everyone’s gearing up for this long haul of like, “We’ll have fun again once you retire,” and I’m like, “Woof.” Reid tells me this and I’m like, “This is such a better way.” There are other avenues that we can take to free up our time and get more control back over the life we want to have. I was like, “I’m on board.” Our parents are fairly traditional in the way that they have to earn their money and operate their lives. It was different from the way we grew up and what we knew but I was totally on board to do what it takes now to get the life that we want in the future.

With that said, do you guys have a plan in place? How long do you plan on staying at your jobs? When do you plan on stopping and maybe doing real estate full-time? Is that in your future?

We got married at the beginning of 2021 and we got everything out of the way for COVID-19, thank goodness.

The last wedding before the world shut down.

I just finished school. We don’t plan on having kids anytime soon. Our goal is to house hack as many times as we can in the next few years. Realistically, try three times because the first one takes a little bit longer. Especially being young, we got to build up more savings to get into another house. That’s our goal. That way, it gives us another security blanket, money. That’s our income. If we want to step away from our income, we want to have something that supports us in case we struggle to find a job. The new job that we start that is more entrepreneurial isn’t going to make money for us real quick. That’s our goal there. You with real estate, that’s new.

I was talking to Craig about this a little bit. I started my course to become a real estate agent. We thought of it as a way for us to increase our income, get another stream of income and then the added benefit of us getting a deep understanding of the market where we’re trying to invest. That’s another thing that’s cooking and then we’ll see where it takes us, see how much I enjoy doing it and then go from there as far as when we decide to stay or leave our jobs.

Another dream is by the time we want to have kids, it would be ideal to be able to have at least one of our incomes completely covered by our real estate investments so that it frees up time for us to raise our kids and things like that. That’s also something that we have on the horizon. We’re taking one goal at a time and then going from there. Three houses in a few years is our short long-term goal.

You want to do three deals in five years. You’ll find after deal 2, deal 3 that you’ll catch that bug even more. I guarantee you’ll do more than that because you’ll catch the bug. I wanted to get a little bit of background on Alexa because we know Reid is an engineer. Alexa, what is it that you do for your W-2 job?

I work for a public relations agency. We do public relations for law firms. That’s what occupies most of my time. It’s something that I thought, “Maybe I’m good at this,” so I went for it but I wouldn’t say it’s necessarily a passion of mine. That’s another reason why this alternate journey to building wealth is exciting. Since I’m not in love with my profession, necessarily, the idea of doing it for the next however many years until I retire is not exciting to me.

You need to know that you’re playing to win, not just playing to not lose. Click To Tweet

The whole three house hacks in a few years are a solid plan. That is more than going to put one of you in a position to take off from work and raise kids. I’m sure you guys are going to do more than just three but it’s a solid plan.

Three is when I felt that I was financially independent. That’s when I had my look at my third one. I’m doing the same strategy that you guys are doing so it wouldn’t surprise me at all. We’ve got a pretty good baseline as to who you are and all that kind of stuff. You have a whole bunch of research in the first year. It brings us towards the end of 2019 then what happened? What’s next?

I was in grad school. Most of my old roommates and stuff had graduated last. In the afternoons after class, if I wasn’t going to a real estate meetup or something. I was trying to run because I hate running. I don’t play as many sports. I don’t do it naturally. I’d run a bunch and listen to podcasts. I listened to your podcast, Craig, on BiggerPockets about house hacking. I was like, “We’re planning on moving to Denver. It’s pretty expensive there.” It felt like that was going to be hard to ever buy something as an investment because we don’t have the cash to put down as an investment.

We were in Florida at this point.

When I found this idea, I was like, “That makes way more sense. We can put down way less money. We have that.” We would check the box of where we have to live whether it’s a rental or we own it. I was like, “This seems a little bit dummy-proof. I’m interested.” I started looking more into it. I hear you had a book. When the book came out, I read that right away. I was like, “This still seems dummy-proof. I can’t figure out what’s the catch. This seems attainable for us.”

I’m not a big social media guy. I reached out to you on Instagram. I was like, “I’m moving to Denver. I read your books. I know you are in Denver so I feel like I have no reason not to ask you and reach out.” You were welcoming. We set up a call in early December 2020 or something and talked briefly about that. You connected me with financial guys and that was the next catalyst for us.

The first time we could put our feet to what we had been learning for the past year, it’s like, “Let’s do our first deal. Let’s buy our first house,” and then learning about the concept of house hacking gave us easy steps to move forward.

I’m a huge fan of house hacking but it’s hard to lose when you house hack because you’re putting such a small amount down relative to any other type of real estate investment. You’re eliminating your rent expense. Even if your rents are not covered, the worst thing that happens is you’re paying significantly less and you’re building equity in a place like Denver where it’s going to continue to go up. There’s no catch. You reached out to me, we had our conversation, started our relationship and introduced you to the lender. Talk a little bit about your search and what you were feeling at that time. I know you’re feeling excited because the time was finally here. Keep going.

I talked to you and to our parents a lot because we know our parents are conservative. We’re thankful for that. They’ve given us a great platform, paid for undergrad and college. None of us came out of school with any debt which is amazing even going through grad school. I talk to them and I want to hear what they said about it because they’re probably our biggest critics, not ourselves. They had some good questions for us to consider so we went through them.

There’s a little bit of frustration there because they’re like, “You’re getting married, just graduated, going to a new city and all these things. Maybe you shouldn’t try and buy a house right away.” I was like, “We will. It’s the right thing,” but also understanding some good points. We did that and we looked at our financials. We didn’t have any debt coming out, which is huge. We both have pretty old used cars. They worked well but didn’t cost us much. We were planning on only getting one car out here. That was another thing that we’re like, “Another good financial step.”

We knew that we had a good baseline to move forward. We moved to Denver and met Craig and then looked at our first houses. That was an interesting journey because it was our first house that we were thinking of buying and the first house that we’d ever looked at. We had to go through this journey of realizing that these are not our forever homes with the strategy that we’re taking. At first, we would find a house and be like, “I love this.” “I don’t love this.”

We come to the conclusion, “If the numbers work, we can go ahead and put an offer on this house. We don’t have to belabor it for weeks and make sure that it’s the house for us because we’re not going to be in it for long.” It was funny. It was a learning curve and a lot of emotional ups and downs but helped us to go see those houses and then start putting offerings out. Also, in Denver, houses are snatched up over the weekend so you don’t have time to sit on them and wait a day. You need to move. It was definitely an emotional process.

It’s tough to make the largest investment of your life in a matter of an hour but it’s the nature of the beast. You know that almost every deal will work as long it’s the right setup and all that. I’m glad that you discovered that pretty quickly because I do run into a lot of people that are trying to find the best deal and saving maybe $50 a month on their mortgage. At the end of the day, they’re losing thousands of dollars a month in rent.

Being able to see that forest, the trees and now you’re able to get your second house hack that much sooner as well. You’re maybe $500,000 a month in cashflow at this place when you move out that now turns into $1,500 once you get the second place. Where the real power comes in is getting additional. What were you guys looking for in a house? What strategy did you want to go for? Describe the house that you ended up getting.

What we were looking for was something as close to a duplex as possible, multifamily but we knew we couldn’t afford probably a three-unit or anything larger than that. Even a duplex is more expensive than a single-family that works as a duplex. We’re looking for a single-family. One, we want a separate entry. We were planning on Airbnb originally. I didn’t want random people walking through our house all the time. We want to have a little bit of privacy in the first year of our marriage but then COVID hit so Airbnb wasn’t even an option. It was more an actual long-term rental. Separate entry, we want them to have their kitchen area. Once we got our house, it turned out that we had a full kitchen but we didn’t quite know that. That was pretty clutch especially with COVID.

ITF 13 | First House Hack
First House Hack: When you’re financially independent, you can pursue different jobs that would be fun for you and not just depend on W2 jobs for income.

 

We wanted to be as far as location. We’re fifteen minutes from downtown Denver which is dramatically cheaper than everything that’s right in Denver. We are close to the metro area. We’re happy with the location where we ended up being. That’s where we were looking to. Craig helped guide us in looking here. It’s close enough without paying the price for it. That was location-wise.

Our county has flexible Airbnb rules, which was a big thing for us originally and it might be something you still go back to. We’re not sure since COVID is still a thing.

Unincorporated Adams County is a lawless land. I do love that area.

We make jokes to our friends all the time that we live out in the Wild West.

Your neighbor will show up with a cowboy hat and two guns if you let your dog out or something.

We looked at three houses before this one.

We may put two offers but we texted two agents with you, like, “We want to submit an offer,” and they’re like, “It’s been taken off the market.” We’re like, “It was posted on the market a day ago.” We have friends that are looking to buy a home and they can’t get anything because everything is gone immediately, cash offers, $40,000 over-asking.

It is wild. The craziest time I’ve seen was before COVID. Prices were skyrocketing and all that stuff. What was the property that you ended up getting? What was the price? How did that all go down?

It’s a 4-bedroom, 2-bath, the same floor plan upstairs as downstairs, 2-1, 2-1. The downstairs has its kitchen which was a clutch to find out. There was an old refrigerator down there that wasn’t working. In our offer, we’re like, “Can you make sure this fridge is gone?” Sure enough, they did that. When I was doing the final walkthrough, the fridge was gone and I noticed there was a stove hook up. I was like, “I didn’t know that was there.” That was a lifesaver. Otherwise, the person downstairs would probably be sharing our kitchen which we wouldn’t have minded but it would have factored into who lived with us. It gives us a lot more options so that was great.

We live upstairs. We didn’t do anything to the upstairs. We just did some painting and downstairs we did more work. The house was listed for $360,000. We’re offering it $400,000 because that was the number we knew we were comfortable with and made sense to us. Our appraisal came back at $375,000 and we did have a contingency that we pay up to $5,000 difference in appraisal.

We ended up buying it for $300,000. I had to bring an extra $5,000 to closing which isn’t ideal but now that I hear about our friends not being able to get a house, I’m thankful we have a house and we enjoy our house so it was worth it. Now, it’s a little bit tricky. We got that. Our closing was weird with COVID. We got to wait for the sellers to find a new home.

Three months.

We had to renew our contracts every two weeks.

It was a 90-day closing which was painful.

Nothing was guaranteed. We were having to extend our rental with our landlord. He was gracious and flexible with us so I was thankful for that. There are a lot of unknowns.

Do what’s right, do it right, and do it right away. Click To Tweet

Especially because at this time, the pandemic had settled on America so everything was unknown.

We went under contract on February 3rd or 4th 2020. COVID closed Denver down in the middle of March 2020. We closed on May 4th 2020 and got to the house May 7th through 11th 2020 or something.

That’s absurd. What was going through your heads at that point? You’re under contract for a house. You can’t back out. COVID is hitting. The world is falling apart around you and you’re just sitting there.

It was crazy. We were like, “Should we look for another house because they’re taking so long?” They were like, “There’s a pandemic. Are people even letting people inside of their homes to look at?” We had no idea what to do. We were like, “We have this half under contract in a way. Let’s be thankful for that and do everything we can to make it go through.”

We felt like at any moment the rug can be pulled from under us. We have to be like, “Legally, that works and that sucks for us.”

That’s going to be terrible especially with the first purchase. I’m excited to know the numbers for the basement. You said you’re renting out the basement.

We did a little bit of what I call a facelift downstairs. We didn’t have to do anything major. We had the backsplash. We scrubbed the cabinets down like crazy. I don’t think it has ever been cleaned. They get that gunk on them above and that was everywhere. We spent hours and twelve magic erasers. I wore them down to nothing. They disintegrated in my hands. It was way more beneficial than paying thousands of dollars for new cabinets. We’re trying to take a cheap route.

It was a bunch of cosmetic things. We had to buy appliances for the whole downstairs kitchen. I try and buy things off Facebook all the time or Craigslist. We found this great deal through an older couple but somehow we broke the fridge, bringing it from their house to our house. That was $200. Trying to deal with Home Depot and Lowe’s to COVID was another nightmare. It took us months to get a fridge.

Did you guys know there were no refrigerators in the US when we were trying to buy one?

When we’re buying, it didn’t exist in the US anymore. I was like, “Why is it on the website?” We painted everything downstairs. It was red and we didn’t like it. There’s a new carpet down there. A lot of those are in good shape. We put it up for $1,400 a month and 50/50 utilities. The people that rent it now came back and they had another option that was $1,350 a month and 50/50 utilities. They’re like, “Does that work for you guys?” I’m like, “Yes.” We’re not going to say no to a good tenant over $50 a month. I’ve heard all the podcasts like, “Don’t be picky about a few dollars because if you lose a month’s rent, that’s going to take many more months of that slightly higher rate to catch up.” We took that $1,350. We knew they’re good tenants. They checked out on everything. I called and did all the steps. I didn’t want to be burned as a rookie. I don’t have any reason to be burned.

A vacancy is always a hidden expense but it’s probably one of your largest expenses. Every day that thing’s not rented, it’s going to be probably $30 to $50 a month, whatever your rent is. In your comment about getting burned, I’d caution you that as you get more deals, you get more confidence and you get busier. Sometimes you relax too much on the screening and stuff. That happened to me and I got burned for it. Don’t cut any corners when it comes to tenant screening. You’re $380,000 in. How much percentage down did you put? What was your down payment? How much was that rehab and all that to get an idea for your total down payment amount?

We did a conventional loan. We put 3% down so that’s $11,500. We had another $4,000 and all the closing costs and everything. It was about $15,000 down there at closing and then we put in another $9,000. Half of that was we added air conditioning because we’re from Florida and we thought, “Colorado doesn’t get that hot in the summer.” Temperature-wise, it’s not as humid but we wanted AC pretty bad. We got a pretty good deal through a friend’s contractor. That was a large portion of it. It’s about $9,000 in total.

Plus the $5,000 for the appraisal coverage too.

$30,000 over the first four months.

To give you a frame of reference on rehab costs because people always question that and I don’t think there are too many shows that go into it too much. In your basement, that $9,000, $4,500 of that is the AC. That leads to another $4,500 for refinishing the cabinets and probably $100 in magic erasers and then the backsplash, the appliances and all that stuff. If you guys are going to think about redoing a kitchen and giving it an uplift in a cheaper way, you can still budget maybe $1,000 or $2,000 to get that thing done. $30,000 all in. What’s your mortgage payment on that? You said you collected $1,350 in rent.

ITF 13 | First House Hack
First House Hack: It’s so hard to lose when you house hack because you’re putting such a small amount down relative to any other type of real estate investment.

 

Our principal interest, taxes, insurance, all of it is $2,280 a month. We pay $2,200 a month. It’s a little bit easier for us. Numbers-wise, the lady closing is like, “Pay a few more dollars. It’ll be short now.” I’m like, “Great idea. It is enough for us. It doesn’t matter.” That’s what we do to make numbers nicer.

You’re paying $1,000 or so especially because you’ve got your own house that you’re also building equity. What were you paying in rent prior to this?

We were living in Sunnyside which is pretty close to downtown Denver. We had an upstairs unit, 1 bedroom and 1 bathroom. It was like a shotgun.

It was like an attic.

It was pretty small but met our needs. We were paying $1,675 a month plus $80 in utilities because some of that was for rent. It was pretty cheap compared to what we saw.

Even though you’re paying that $900, you’re saving about $800 a month better than what you were before and then you’ll probably move out here to get your next one. What do you think you can rent that top unit out for?

We’re thinking something around $1,500 because it is a little bit nicer and bigger. It uses the space better because there’s no laundry room stuff downstairs. We’re refinancing too so that will shave $200 off of our mortgage because we got better rates now. The rates are still low and my credit has improved a little bit. I didn’t have a credit card and that was a big thing on our credit score. Once we move out and we have the refinance, we’re thinking we’ll make close to $900 a month.

There’s one caveat to that refinance. I suspect you don’t have 20% equity yet. Once you hit that refinance, you do have to live there for another year.

Which we took into consideration. It’s like, “Is that going to slow us down from being able to get into the next house? Are we not going to have the money yet and it doesn’t matter?” In our mind, we don’t think we’ll have enough money to buy another house within one year. We thought, “Push us back 6 or 8 months.” It doesn’t make a difference to us because we want to build up savings for both of us in the unit or each house and also build up cash to go to the next house. We think it’ll take us about as long as that time to allow us to get out. It works out pretty well.

How much in reserves do you want to have? You said you want to save for each unit or each house. Do you have a number in mind?

Everything online says 3 to 6 months. I picked 4.5 months because it’s the middle so 4.5 months times whatever the rent is for downstairs, it’s $6,000 or $7,000. Once we leave, we’d start renting out the upstairs as well. We’ll want to build it up over a little bit higher to cover both of those rents.

Anything else that we didn’t touch upon that you guys want to share?

Your credit score. It eats at me at night. They’re like, “You don’t need a credit card. You’re in college.” I was like, “Yeah but don’t I have to build credit for when I want to buy something in the future.” “You’re not going to be buying a house or whatever,” and I wasn’t. At that time, I had no idea. I would never think I was about to buy a house in the next year, two years or whatever but you never know.

Keep your credit score as good as you can because this one we’re going to refinance, I was like, “I’m a few points away from being at the top.” She’s got a credit card under her parents and then her own so she has great credit. I’ve been building mine up. Not having enough time, it’s hard to build it up any faster. It takes time. I was a couple of points away from that top bracket and that saves you a couple of $100 a month. To me, that makes a big difference. I’m like, “Should we wait a little bit longer?” The rates might climb and then you start playing a game that’s dangerous. Have good credit.

People always think that getting your credit pulled is a massive hit to your credit score. It’s a small hit and then it comes back in a couple of months. I probably had my credit pulled fifteen times in 2021 and it’s still well into the high 700. If you’re on the cusp, maybe you’d think twice about it but if you’re significantly up there then you’re good. One last question is where are you going to go? You’re going to reset here once you refinance. You got a year. Your goal is three properties in five years then that’s when you want to have kids and at least relax a little bit. Do you have a goal of when you want to be done?

You want to have a little bit more say in what you do, when you do it, or how you do it. Click To Tweet

Be done with our W-2 jobs?

Yeah so none of you are working.

One thing for us is I don’t think we plan on not working because we enjoy working. We’re hard workers and it’s a part of us. It feels weird to do some job half-heartedly for the rest of our life. It is freeing us up to pursue a job that’s more of a dream or something more entrepreneurial where there is no guarantee of a steady income and that concept of working for the man for the rest of your life. We want to have a little bit more say in what we do, when we do it and how we did it. It’s a hard question.

You don’t need to answer it. I’m just curious if you had dreams or anything like that. The idea of everyone that’s not financially dependent, they’re playing not to lose. They’re going to their job because if they lose it, they’re broke. Whereas once you get that financial dependence, you’re then able to take that risk where you might work for two years and you could make $1 million or you can make nothing. At that point, you’re playing to win. That’s a good place and a good position to be in.

I would answer your question with, as soon as possible, we want to go hard and fast at this in order to get to that point where we are independent and can do what Reid is talking about, pursuing different jobs that we always thought would be fun. “I want to go be a ski instructor for the winter season this year.” That sounds cool and not have to depend on our W-2 jobs to have that freedom.

We’re Airbnb-ing our house when we leave to go back to family weddings. We’re trying to save money and move quickly because once we have kids, it gets harder. We’re even considering our next house. Living in a larger house and having real roommates where share all the spaces and whatever because my brother lives with a married couple in Washington DC and he loves it. It’s no different. There’s a stigma that when you’re married, you can’t live with other people. It’s not true.

It’s the same as if you were not married. You maybe take the master bedroom or something so you have a little bit of privacy. The best way to do it here in Denver is the rent by the room.

We’re thinking that we might try to make our next properties that to try to speed things up a little bit.

We’re getting into the final part of the show which is called The Final Four.

You are a reader. Are there any books that you’re reading?

I’m reading a book called The ONE Thing. It’s a great book and liking it. I feel like it applies to all facets of life from work to personal life to real estate investing. A broad concept of focusing your attention on one thing at a time will produce results in nothing much faster.

I read that in grad school and still do that every morning. I write down goals in long term and then breaking it down in shorter increments, “What am I going to do now to get to that goal way ahead?” It’s great. I’m listening to Your Money or Your Life and it’s taking me a while, honestly. It’s not as revolutionary as I expected because a lot of is on budgeting and that’s on my parents ingrained in us as kids.

Are you reading the newer version or the older version?

The newer one.

If you read that one when you first learn about financial dependency, that will break it that way but you’re past that point.

ITF 13 | First House Hack
First House Hack: It’s tough to make the largest investment of your life in a matter of an hour. But it’s the nature of the beast and almost every deal will work as long as it’s the right setup.

 

I thought the ones that are up next.

I would also add that I’ve been on the fourth Harry Potter book for a year now.

It’s so long.

I don’t think I’ve ever tried to read a Harry Potter book.

You got to.

I’ll have to give it a shot.

I read the sixth one and that’s it, which is super random. It was before the sixth movie came out but I haven’t seen the first five. I have to go read the six books to catch up. I went down to the sixth movie and it was bad compared to the book. I was like, “I’m never reading the books.”

I hear that all the time. The books are better than the actual movie itself.

The second question is what is the best piece of advice you’ve ever received?

We talked about this. We’re in a campus Christian ministry in college together and they had a panel this one time of business people and how they handled their faith in business. This one guy gave a quote and it was, “Do what’s right, do it right and do it right away.” Everybody probably knows in their head what’s right or wrong to do for them in their scenario but we struggle.

If you’re going to do it, don’t have a poor attitude or don’t half-ass it, cut corners, whatever. Be thorough if you’re checking attendance and all that and then do it right away because the longer you wait, it is going to start reading like, “Why didn’t I do that earlier?” That’s what it was for us. We could wait longer to do a house hack but why not start now and get the ball rolling? It might not be a home run right off the bat but no one’s expecting that. I don’t think so.

That’s great. I haven’t heard that one before.

From that same talk in college which is funny, it was impactful for us for whatever reason but another quote that came out of that one that we both like is, “Win the battle of the morning.” Successful people win the battle of the morning. Successful people get up early, start grinding and do what they need to do whether it’s working out to begin or it’s not a sluggish proactive way to live. That’s been one we tried to live by too.

Write down your long-term goals, and break it down to shorter increments to get to that goal way ahead. Click To Tweet

It’s funny I wrote that down every morning in my journal and I don’t remember that as the most impactful thing.

It’s ingrained in you and you’re taking it for granted. Have you guys read The Miracle Morning? You’ve got to read that book. That’s life-changing, especially if you’re morning people. Nick, you’re up next.

I know we talked about it but what is your why? What are you doing this for? What’s your end goal?

We plan to have kids in the future. That’s something we look forward to, Lord willing. We have good relationships with our parents so we want to have that with our kids in the future. We think a huge part of that is having time and availability. The biggest thing in life is the relationships you have with people. If you don’t have time, you can’t invest in relationships.

Many people struggle that time because in America it’s all about being busy and working and that’s not what we want. We want to have availability to be there for people. We want to have availability to go do fun stuff as a family or as a couple with friends. That’s our why, time. Every five books you read, it’s always talking about time being the one resource you can’t get back. It’s limited. You can get as many miles you on the road if you work hard enough but you can’t get it all the time in the world. That’s it for us. It’s freedom with our time.

It’s funny too because you and I talk about our why all the time and maybe that’s more brought on by me. I need it a little bit more because it motivates everything we’re doing. I’m working a full-time job and then I started on my real estate license. I want to get it done pretty quickly so it’s this added thing to my plate. It’s a busy time.

When we talk about the why it’s like, “I’m going to push. I’m going to go after work to a coffee shop and knock out a couple of hours of this course because we have this dream ahead of us that we want our life to look different from everyone else in our lives who’s wasting away at a desk.” There are people who love their jobs and if that’s fulfilling for you then that’s great but it isn’t for us. The why is something we talk about often to keep ourselves motivated in the day-to-day things we’re doing.

It’s super important to always be discussing that or always thinking about your why because that end goal is what motivates you and keeps you going so I love that answer.

You guys have talked a lot about your future kids. You guys probably maybe have already been discussed names. What are the worst names you would get your child?

ITF 13 | First House Hack
First House Hack: Don’t be picky about a few dollars because if you lose a month’s rent, that’s going to take so many more months of that slightly higher rate to catch up.

 

What’s that one you like? Roman?

No. There’s some college basketball player. His name is Julius Randle. I was like, “That name sounds powerful and strong. I’m going to name my son Julius one day.” She heard that and dragged on me like, “Are you kidding me? You’re going to name your child Julius?”

Julius is acceptable if there are no other ones. No girl names?

I don’t think so.

Your middle name is Pauline.

It’s named after a relative, bless her but I don’t like it.

Thank you for coming to the show. Where can people find out more about you?

We have a new budding Instagram account, REI.d_And_Alexa, which none of my friends from back home get but it’s Real Estate Investing.

No one understands it but it makes a lot of sense.

Once you see it, you can’t unsee it.

Thanks for coming to the show. It’s been a pleasure. It’s great catching up with you two. I’m sure we’ll be in touch here as you continue to persist in getting your license. It’s always good to stay in touch.

Thank you so much.

That was Reid and Alexa. Those guys are doing it right. They figured out what type of strategy works for them. They decided they wanted to have their own private space and quickly, they were able to make that decision on a house to get in. They could continuously reset that clock and methodically pick up a house hack every year in the next few years. I’m confident that they’re going to hit their goal of financial independence so one of them can quit their job.

Reid had mentioned that the first year of having to wait to buy that first property was hard for him to do but it’s important to get that foundation. It’s good because that year, he was able to self-educate, listen to podcasts, read books and have a better understanding of how to go about buying his first property. When he reached out to you, who else would be a better person to reach out to you in the Denver market? He got the help he needed. They both got into a great house hack and they’re going to be cashflowing about $900 once they run out of that top unit. It’s a great first property especially when they’re paying $1,700 for an attic previously. Great show. I loved talking to them. It was a great time.

Renting is cheap out here so it’s good to get into that property, start having other people paying you rent instead of you paying someone else rent and start building that wealth because after you get to number 2, 3 and 4, that’s when it starts to become fun. I’m about ready to bounce here. Nick, have you got anything else for us?

No, I’m good. I’m excited for our guest next episode. I love chatting so I appreciate the time.

We’ll see you again next episode. Until then, have yourself a good one.

Sounds good.

 

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