ITF 45 | Section 8

 

Avery Heilbron is a data analyst for a life insurance company whose journey to FI began after a serendipitous purchase in a bookstore. He started house hacking in Boston, Massachusetts—which is an expensive market—and saw success. Now, he has a Youtube channel and does coaching on the side.

In this episode, Avery shares the action steps he took for his first few properties and the lessons he learned after a negative experience with contractors. He dives deep into Section 8 and landlord-tenant laws, addressing some concerns that people have.

There are advantages to investing in expensive markets. Listen and learn because you, too, can achieve a lot by taking advantage of what is available to you.

Listen to the podcast here


 

House Hacking With Section 8 Success With Avery Heilbron

Z, what’s going on?

Not a lot, just enjoying a beautiful sunny day in Colorado.

I am enjoying our last beautiful sunny day here in Hawaii.

How do you feel about that?

People say things are bittersweet. I’m just bitter. I’m not ready to come yet.

Sometimes you are ready at the end of the trip but maybe you are like, “My thing is time to move here.”

Oftentimes, I’m super ready to leave somewhere but I love the day-to-day here of waking up. I go to the beach, I go to the gym, and then at the end of the day, everyone is offline because when it’s 6:00 PM here, it’s 10:00 PM in Colorado. You can watch the sunset over the beach. It’s such a nice way to start and end your day. I could get used to this day-to-day life but we’ve got to get back to reality. Colorado is not so bad either.

I don’t know if you have to get back to reality.

You are tempting me. Speaking of reality, we’ve got an amazing guest, Avery Heilbron. He has an amazing story. He is investing in a city that people say you can’t invest in. It’s near and dear to my heart, Boston, Massachusetts. I love how he figured out a way to cashflow like crazy in a high-appreciating market and he’s crushing it.

He impressed me with his numbers. I couldn’t believe it. I love seeing when people can technically be financially independent or retire off of two properties. Often, when people are looking at long-term rentals, they get bummed out because it’s like, “If I do the math and I’m making $200 per rental, I’m going to need twenty.” It’s great to see when it can just be two.

Sometimes the more expensive markets, you end up getting more cashflow because more people want to live there, so they are okay with living in a little bit of a unique apartment or situation. His first one was normal. It’s a duplex with the top being a split level. That’s a little awkward. That’s $2,400 for one unit he was getting.

Don’t be afraid of expensive markets because oftentimes, if you can get creative and figure things out, you can cashflow way better and that’s where you get the $1,000 a month in cashflow. In Denver, we have been getting $1,000 a month in cashflow but good luck getting that in North Carolina, Arkansas or wherever you are.

Keep reading if you are interested in Section 8 because we do a deep dive into it and it’s interesting.

Hopefully, we uncover all the unknown dust bunnies of Section 8. With that being said, let’s bring Avery to the show.

Avery Heilbron, welcome to the show. Avery, why don’t you tell us a little bit about how you discovered financial independence, when that was, and a little bit about your story?

First off, thanks for having me on. It’s much appreciated. It’s always fun to talk about this stuff. Going back in time, I graduated from school in May of 2018. After that, I started working like most people do after they are finished school. During the young professional thing where you are going out spending all your money, I always innately was not interested in that.

A couple of months in, I hopped in on a book called Retire on Real Estate by Kai Anderson. It mentioned BiggerPockets and the whole thing spun out from there where I was doing a bunch of research on BiggerPockets, listening to podcasts and everything. That was in about August of 2018, so a few months after I graduated from school. That’s when I started getting interested in financial independence. I always had a good knack for not enjoying spending my money on things that were wasted, even though that’s a lifestyle that you get sucked into a little bit right after school being that young professional. This book put me back on track.

What were you doing when you graduated? Were you a finance role guy? What was your story there?

I graduated with a Math and Stats degree, then I was working for the same corporation I work for, a life insurance company. I’m doing data scientist/data analyst work, so a lot of numbers, Excel, Python, SQL some good coding and everything, all that fun stuff.

ITF 45 | Section 8
Section 8: Don’t be afraid of expensive markets because if you get creative and figure things out, you can actually cash flow way better.

 

You probably realized quickly after starting, which a lot of us do, that you didn’t want to do that for the rest of your life and you wanted to make a change. What prompted you to pick up that book?

I had gone to the bookstore. My mom was out visiting my brother and me because he had gotten surgery, and then I had a men’s league soccer game and wrecked my ankle. I was working from home, which we were quite used to but hadn’t done that before. There were lots of downtimes. I always had an inkling towards finance books and learning a bit about money.

This was at this particular Barnes & Nobles. It was the only book available in the section. That’s why I gravitated towards it. The title, Retire on Real Estate sounded cool. I have never heard anything with real estate, retiring on it or anything like that, so I was like, “I will read that.” Lo and behold, it was a bit of a game-changer for me.

It’s funny how one seamless trip into a Barnes & Noble will change your life by picking up that one book. That’s the great thing about reading. Why we probably always ask about what book you are reading is because reading does change your life one way or the other. This is the summer of 2018. What in that book prompted you to want to take action? What made it believable for you? You read a bunch of stuff in books and it almost feels like fiction. What made it feel real?

That book particularly, being able to go into BiggerPockets is what more made it feel real. From there, I discovered some of the books that had the actual strategies where I came upon house hacking and Brandon Turner’s No (and Low) Money Down book. As soon as I read the chapter on that, I said, “I will do that.” I continued reading and listening to podcasts but that’s when I started wanting to take action, do things and do that strategy. I did everything I could to get that to happen.

Where are you and where did you end up buying? That gives us a little bit of context on how much money you had to gather and how you did all that.

I’m outside of Boston in a town called Everett. It’s 2.5 to 3 miles outside of the city. At the time, I was living closer to the city. The first home that I purchased was $525,000. Those same duplexes in that area are probably $650,000 to $700,000, so it’s an expensive amount of money. That first purchase with the FHA loan 3.5% was around $18,000.

I was able to get the closing costs and stuff baked in. It’s not a cheap market out here and you hear people talking a lot about wanting to stay away from the expensive market because they don’t have the funds. I honestly love that I have been in an expensive market. It has been one of the best things for my financial independence journey.

What I will say about an expensive market that makes it great is that usually there’s a lot of appreciation potential. When you are first starting, everybody is thinking about the cashflow. They are thinking about how are they going to replace their income but appreciation is where you make your money in real estate. That’s what people realize over time but you don’t always have the luxury of waiting for that. It’s great that you have a good-paying job, so you could take advantage of the appreciation. It’s awesome.

There’s always that argument of appreciation versus cashflow and I have found a good balance where I’m at. There has been some good appreciation, especially in the last years so that’s a cherry on top.

People think Denver, Seattle, and Austin are expensive because those are tier two cities, which is what I like to call them. Maybe I’m biased because that’s where I’m from but I consider Boston a tier-one city where it’s expensive as hell. There are a lot of people and it’s a developed city. You did the exact right thing. You are not buying in Downtown Back Bay, Boston.

If you are buying 3 to 5 miles outside of Boston and Everett, and you are probably a short tea ride or a bus ride into the city, you can get much cheaper. I love that approach. It’s what I have done in Denver as well. As Denver gets more and more expensive, I am going out into the suburbs. You bought this duplex for $525,000, 3.5% down, which is an $80,000 down payment. What does this duplex look like? Was it a turnkey? Did you do rehab?

It was not turnkey. It was the least expensive multi in Everett that I was looking for and it’s listed at $550,000. That usually is a good indicator in the area that it’s not in the nicest condition. Someone had done a lot of good work to it in the ‘70s but since then, it had not gotten taken care of. There were nice square laminate tiles, wood paneling and yellow countertops. There are a lot of mouse poops everywhere. It smelled particularly bad. I walked into a lot of that. It wasn’t until the closing day that I thought about the fact that I had to live. I was more excited about being able to purchase.

We like to say that smells like money but it sounds like that’s right.

You’ve got a $25,000 discount because of the mouse poop, so you should be thanking that mouse. You had a master rehab you had to do. I want to know how you find those contractors, how you figured out the scope of work, and the numbers behind all that as well.

I ended up doing a lot of the work on the unit that I lived in myself. I hired myself as a contractor. Not that I had done any work before but YouTube came a long way there. For the upstairs, because I’ve got the place delivered vacant simultaneously, I wanted someone to do some work, so I could get tenants in. I went about this probably the worst way possible but good lessons in that.

I picked the cheapest contractor. I wanted simple paint and a new countertop. The upstairs had nice flooring, except the kitchen had those same square tiles, so I wanted them to do some vinyl planks right over it. It wasn’t crazy rehab but because I picked the cheapest contractor, things went wrong. For example, he had dental surgery that he must have known about in the middle of the whole thing. He was out for two weeks and then his partner would say, “Have you seen Mike?” I said, “What are you talking about? He’s your boss. Why would I have seen him? I’m at work.” He would say he’s only showing up for an hour.

It was weird stuff. I should have figured that out before I picked someone. In terms of total costs for paying them for upstairs, it was originally $6,500 and went up to $8,000 because there are a few more things. It wasn’t a crazy amount of rehab. I picked the cheapest one, so I ended up having also to pay a month of the mortgage. You could technically add that to the scope of work for the contractor.

I was wondering, why don’t people call for recommendations? I don’t do that. If a contractor comes to you out of the blue, why don’t you ask for them to tell you a couple of people that would recommend them that you could call a landlord reference? I’m surprised that that’s not done because you hear these bad stories all the time and I’m like, “Is there a better way?” There are places like Angi’s List.

ITF 45 | Section 8
Retire on Real Estate: Building Rental Income for a Safe and Secure Retirement

That is how I found this particular contractor, through Yelp, Angi’s List or something like that. I did call references that he had and they said good things.

Anybody who gives someone a good reference when it’s not true, they shouldn’t pay for that.

You also don’t know the scope of work. They may have done paint and cabinet or something for one person but when it’s a month-long project, he has no idea of how to budget, scope and all that. You also have to be mindful of, what did he do for you? Did he put up your mailbox? Did he renovate your entire kitchen? The scope of work is also different.

Like anything in real estate and anything in life, you can do whatever you can to mitigate your risks. Calling references is one way to mitigate your risk. You are never going to eliminate it, so you have to know that part of the game is losing and failing, getting yourself back up, and learning those lessons. Outside of time, which it sounds like maybe it was a two weeks delay, which honestly isn’t that bad, was there anything else that they did that wasn’t good?

He ended up taking the design into his own hands. I had called Home Depot to see if they had made the orders that he claimed that they made for the materials and they said that he hadn’t made any orders. It’s finished. It wasn’t necessarily the quality of the materials but it wasn’t what I wanted because I felt like I was under a time constraint of wanting to get things done, so I said, “Put it in.”

You could tell that he drove over to the Home Depot, grabbed what was available, and pretended he had already had it on hold at the store. That was the only other major thing in terms of timing. It was going longer and longer. He was paying his assistant by the day and I was paying him by the job, so you could tell that he was running out of money for this particular job, so he kept asking me to pay him. At one point, I said, “I’m not paying you until it’s done,” then he hurried up a little bit.

The payment is usually one of the most important things. What was that payment schedule for you? Did you do 50% upfront? How did that work?

He wanted weekly payments and it was split up into what he thought it would take, 3 or 4 weeks, so around the 25% schedule. The first deposit was around that 25%, so you could get the materials but the weekly payments ended up slowing down in terms of price because of how long it was taking and there was less that was done, so there was no need to pay for anything.

How did you feel going through all this? Were you stressed? That’s a big part of your first deal.

I was stressed because in my mind, thinking about it, “It’s probably not the correct way to go about it.” The first mortgage payment would be one and a half months later, so I’m thinking, “Four weeks. Two weeks to get tenants. Good to go. I don’t have to pay the mortgage.” I kept thinking about that and getting stressed about that. It was taking longer and longer. I’m realizing I’m going to have to pay for a month of the mortgage. I should have gone with the other contractor.

It was a little bit funny in the fact that I did the same amount of work downstairs, I finished before him and I had never done any contracting work. It was stressful about knowing that I would probably have to pay the mortgage but funny in the fact that I learned how to do this stuff on the fly and finish quicker. I don’t know how good of a job I did but I still finished faster.

Z, do you have anything to add to the story? I want to dive deep into the numbers.

I was curious if you are in that place or a different place because your background looks beautiful and I was like, “If that’s what you did, it looks good to me.”

I’m in a different place but I did do everything behind me.

We are going to want to talk about that second place but before we do, you mentioned you bought this property for $525,000 and you put $18,000 down. What was your mortgage payment? What are you getting for rents in that property?

I closed in March of 2019 and $3,307 was the mortgage. It was a 4-bed upstairs and a 2-bed downstairs. For the four-bedroom, I ended up getting $2,400. The market rent was probably around $2,500. The two-bed, I moved into. I also picked up a roommate for $800 and my girlfriend took the other side of the bed for $400 so that was $3,600 on a $3,300 mortgage.

You somehow scraped out living for free. If you didn’t feel like charging your girlfriend rent, you would be out of pocket a tiny bit and she would be living for free either way, it’s a win-win. They said you can house hack in an expensive city and here you are 3 miles outside. You did a traditional house hack, which is a lot harder to come by as the prices go north. Boston is funny because they have those unique buildings. They’ve got the triple-decker but it doesn’t sound like you’ve got a triple-decker. You’ve got a duplex but it’s an up-down duplex. Did you have any issues in that up-down duplex with noise complaints or anything like that?

No noise complaints or anything like that. I was living on the lower floor. I did end up renting it to a Section 8 tenant. She’s a single mom with four kids and I was thinking, “It’s going to be loud.” The top unit was bi-level and the third floor was where the kids slept. She probably was the one getting all the noise and not me. There were no real issues there. Everyone seemed happy with the place. That family moved from a smaller apartment to that apartment, so they were excited about that. My girlfriend was very grateful for the cheap rent. That worked out well.

I was hoping you could elaborate on Section 8 because I wonder if some readers don’t know what that is.

Many people talk about staying away from the expensive market because of lack of funds. But in reality, working in that space is one giant leap towards financial independence. Click To Tweet

It’s a government housing assistance program. Typically, the way it’s rolled out is by a specific housing authority from town to town. There’s a Boston Housing Authority, as well as an Everett Housing Authority. It would be similar in most places but I’m only familiar with Boston. Essentially, a tenant will have a voucher that they have qualified for based on their income, dependents, and all of that stuff. It may or may not cover the full amount of rent. Some tenants will still have to pay a small portion if it doesn’t cover the amount of rent. On the first of the month, rather than your tenant paying you, the government pays you and it’s a direct deposit, so it’s cool.

It’s subsidized rent, so people are incentivized to keep it and keep the place well-kept. They also often can’t move because moving can be expensive. Sometimes they stay a long time in one unit so that can be another advantage. I have heard a lot of good things, even though some people are worried about the quality of tenants. Did you find that there were issues with that?

They are easily my most favorite tenant. One of my tenants is my brother, so hopefully, he doesn’t read this. They take the trash out and shovel the snow. They are a good family and very nice people. I can’t say enough good things about them. I’m happy I ended up with them.

Section 8 usually requires inspections. I don’t know if they are every year or just right before they move in. Was that tricky? I have heard that they can be nitpicky about the house.

There are a few things and some things I have learned after I listed that I had a two-bed available and I wanted a Section 8 tenant and didn’t get a Section 8 tenant in. They inspect them before moving in and some also require the city to do the same inspection, which is silly, in my opinion, because it’s the same inspection that they are doing twice. The other thing is they do the inspection once or twice a year depending on the authority and they only do the inspections if the unit is vacant. If someone is currently living in the unit, they can’t inspect.

I also knew that there were certain inspections in it. There should be inspections with Section 8. I have some questions revolving around, how do you market your place for Section 8? Is there a website you listed? Are there tenants that apply and you get to pick which one but it’s all Section 8? Does the Section 8 government tell you, “This is going to be your tenant?” How does that process work?

You can’t specifically market. You probably can but maybe it will not make sense. If you wanted a Section 8 tenant, the best way to do it is the housing authorities do have a list of how much they accept for rent for various bedroom types and they also include if utilities are not paid. For my two-bedroom that I have listed for rent, I listed for $2,000 because $2,025 was the max that Section 8 would pay.

In my description, I also say that vouchers are accepted. When people are reading through say, “Two-bed. My voucher is for $2,000. This one is okay.” In the listing, it says, “Vouchers are accepted.” Those two things are the major things that have gotten a lot of demand for Section 8 tenants. It also depends on the area. In this area, there’s a lot of strong demand for Section 8 renters so that’s a bit dependent on that.

Is there a screening process that goes into that? Does the government have Section 8 tenants? Does it work where the tenants that are looking for a place to live say, “I am qualified for Section 8. Can I use my voucher here with you?” Is that how that works?

Exactly. They are a regular tenant but they happen to have a voucher. The screening process for me is identical. The only thing that I will confirm is, which housing authority they are working with and the amount that their voucher is for. I confirm that all checks out, as well as things like security deposits. If there were broker fees, the housing authorities don’t accept those or don’t dole those out, so you still have to have that money. I ask them if they can handle those costs.

Let’s say you’ve got your Section 8 tenants and they say they are with the Everett Housing Authority. You may then contact Everett Housing Authority and the landlord of 123 Main Street like, “Jim and Lisa are moving in. Here’s my account info. Please wire the money to my bank account.” How does that setup?

You sign a lease and it’s your lease. There’s also not a lease but a contract with the housing authority, and then within that contract, you write in all of your routing information and bank information. That’s how you get paid.

I wanted to dig deep here on this Section 8 stuff because a lot of people are hesitant to do it. Sometimes it’s those little minutiae of details that people don’t know about that makes them hesitant, so I wanted to clear it up as much as we could. I appreciate you going in there. To recap, you’ve got this house for $525,000, $18,000 down. You are getting about $3,600 in rent, $3,300 mortgage payments, so you are cashflowing $300 a month over the mortgage. After reserve, it’s probably about breakeven, and then your rehab was $8,000. How much were you spending on rent before that or what you are able to rent out that bottom unit for when you moved out?

I was spending about $1,100, which was okay for the area. A lot of people were spending around $1,500, $1,600. I bought that unit specifically. Another thing that happened was I did refinance and I did increase the Section 8 tenants rent, so when I refinanced, it went to $2,850. The way rental increases work is one, you notify the tenant. My tenant pays 0% of the portion, so it doesn’t affect her, which is awesome. Section 8 does their rental analysis, so I asked for $2,600 and they came back $2,880. It went up to that. It’s not like I lobbied for it or anything. It’s how it happened.

They are giving you higher rent because they were like, “You are worth more.” Is that what happened?

Yes. They do their rental analysis and it’s purely based on bedrooms and ZIP codes. You could have a 4-bed, 2-bath and a 4-bed, 1-bath and it would be the same. It could have decor from the ‘80s or be totally done up and it would be the same. It’s very interesting how they do their rental analysis.

You are getting $2,850, and then your mortgage went down to $2,850, so then the second unit is all gravy once you move out.

That one, I was getting $1,500, which was a little bit below market. When I purchased the second building that I’m in, it was May of 2020 right in the height of the pandemic, when I would have been looking for tenants and closing everything. There’s a ton of uncertainty about people being able to pay. I did get my brother in and he was moving anyway, so it worked well. I gave him some discounted rent. Come June 1st, 2020, that will be $1,800, which is still a little below market rent. All of it is covered by the upstairs, which is paid by the government, and then there’s the whole two-bedroom rent as well.

That is nuts, especially in an “expensive” market where you can’t get cashflow. You’ve got $1,800 a month over the mortgage and probably about $1,500 or so of cashflow. Not to mention you did some rehab, so you know things aren’t going to fall apart because a lot of it is new. If you say $1,500 a month in cashflow, that’s $20,000 a year or something crazy of cashflow. On your $18,000 investment plus another $8,000 of rehab, that cash-on-cash return on investment is insane, not to mention the appreciation and all that stuff that you get from a duplex. What would you think that duplex is worth?

ITF 45 | Section 8
Section 8: Rather than your Section 8 tenant paying you, the government pays you through direct deposit instead.

 

I talked to my real estate agent in January of 2021 and he said around $675,000 to $700,000 but honestly, it is probably even bumped up a little more.

We say it every time, that’s the power of house hacking right there. You throw in $18,000 and maybe you spent $30,000 with extra mortgage payments and materials for your unit but you are getting hundreds of thousands of dollars in return for a couple of years. The risk there is so low compared to the reward. That first deal is awesome. I do want to move on to the second one. Z, is there anything that you want to add to the first one?

No, I want to hear all about the second one. Generally, you do better the second time around. I don’t know how you are going to top that, so let’s see.

For the second one, I’m also in Everett. It’s about 1 mile away. It’s a three-family. It’s not a standard Boston triple-decker, which I would love to own one of those. It’s more of an interesting layout where the first floor is two units. The front unit is a studio. The unit I live in is a 1-bedroom and the upstairs is a 2-bedroom.

The first one, I purchased in March 2019. This one was May 2020. In March of 2020, I refinance the duplex, so I didn’t have an FHA loan anymore. I was able to use the FHA loan again. I was aggressively saving and had no housing payment, so I was able to get that 3.5% down payment. The purchase price was $678,000, and then an $8,000 closing credit, which covered essentially all of the closing costs.

You refinanced two months before buying the next place. Generally, that’s sometimes challenging to do to have a refinance as a primary and then buy another primary. Did you use the same lender or did they give you any flack about that?

It was the same person. They told me that I had to have 60 days between both closings and it turned out to be 67 days between the closing, so it’s a tight turnaround time.

You were able to refinance your FHA loan out into a conventional loan, which means you would have to get 20% or 25% equity in that property after that first year. How did you do that? Was that because of the rehab and the market was lucky? Is that repeatable?

For the product that I was able to get, I went with a local bank and they had said that I only needed 5% equity to get the conventional product. I ended up being over 15% equity after that year, so it was still good but there were no issues with appraisal funding.

Five percent and you didn’t have to live there. I have heard the 5% conventional but usually, it’s an owner-occupied loan. That one-year timer would then start over in March 2020 but that wasn’t the case with you.

I could call the lender and see what they said but they said it was all good as long as it’s 60 days.

You’ve got the second one and you are using the FHA loan again. It’s a triplex but it sounds like the units are smaller, studio, two-bed. How much did that one go for?

It’s $678,000. It was interesting because in January 2021, it was listed for $800,000, and then when I offered on it, it was $725,000. The guy who was listing it was doing it on his own as the seller. His friend was an attorney, so he was not well informed in terms of the price. It was probably worth about $700,000 maybe at the max when I had offered. It appraised as is as they usually do. It appraised at $678,000 but the appraiser has the contract in hand when they do that.

That one was $678,000, so my mortgage was $3,930 and it was a 2.75% interest rate, which is insane as the rates went down. $600 of that is PMI, which is good and bad. In terms of good, I can get in at 3.5% down, as well as the fact that when I refinance, I can get rid of all that but bad that you have to pay $600 a month in that. The studio was $1,500, upstairs was $2,000, and then my girlfriend is paying $400.

When you did the first refi on that initial property, did they do it for free? Within a year, sometimes lenders will do that where they will give you one for free but it won’t be as cheap as you could have gotten or as low of a rate. For example, if the rate was 3%, you could get a free one at 3.25%. I’m curious how that worked out for you.

The interest rates went from my original loan of 4.125% to 3.375% in March of 2020 but it wasn’t free. I baked all of the closing costs into the loan. I went back to square one in terms of how much debt I owed.

To recap, you moved over your numbers but I added them up. You’ve got about $3,900 coming in rent on a $3,930 mortgage payment, so I’m noticing a trend where you are trying to get as close as you can to cover that mortgage payment and you are not increasing your girlfriend’s rent. You are cashflowing there. Do you know what you would end up renting that one-bedroom out for?

Yes. I already have a lease signed and everything. It’s for $1,800.

We need to go buy in Everett.

ITF 45 | Section 8
Section 8: People you get through Section 8 are just regular tenants, but they happen to have a voucher. The only thing you need to confirm is their housing authority and the amount that their voucher is for.

 

I always stayed clear of Massachusetts because the Landlord Laws weren’t good and it felt expensive. Have you run into any issues with those Landlord-Tenant Rules or Laws? What makes it not as good?

There are a lot of nitpicky things. The biggest thing would be that, if someone is not paying rent and you want to get them out, you have little say in the matter of getting them out because there are so many rules. As soon as it turns to winter, you are not evicting anyone. If they have kids, it’s even longer as well. There’s a lot of difficulty in that and you are paying for legal fees the entire time. It sucks for that.

Isn’t your winter nine months? It’s like, “When is it not winter?”

It’s most of the time. There is a very short window to be able to evict someone and most people go the route of, “I will pay you to leave,” which ends up being cheaper.

Honestly, it’s better for the tenant because if your both are unhappy, they probably want to go. They don’t have anywhere to go. If you can pay their security deposit or something for the next place then, by all means, kick them out. Overall, you’ve got $5,300 of rent on a $3,900 mortgage. It’s cashflowing you almost $1,000 a month after reserves and all that. The other one is doing the same. After your two properties, you’ve got about $2,000 a month of passive income. That’s two wildly successful house hacks and you repeated it. Do you think that is continuously repeatable in the Boston suburbs?

It has gotten a little bit more difficult. Especially in 2021, I have several friends who are trying to do it. Even when I was doing it, people didn’t have the same numbers. I don’t know why I’ve got so lucky or things worked out the way they did. It seems a little bit more difficult, especially with a supply shortage. Everyone wants to house hack in three towns in the Boston area and Everett is one of them, so there’s a high price point. People are pushing the numbers up a lot.

If you can get creative and not just do the traditional House Act if you were living on your couch, you did an Airbnb, I’m sure that it could be lucrative, especially if you live in it for a few years because the rental increases a significant number, especially if your mortgage is staying the same. If you go the fix it up and refinance route, you can get rid of all that PMI. There are still ways for it to work. It just might not work perfectly right away.

If you go that Section 8 route where they are going to come in like, “We are going to increase your rent by $500,” even though you only requested $300. That’s amazing. You finished number two quickly. You are mid-pandemic, summer 2020. What’s happened since then? Are you wrapping up for the third one?

The answer is yes to that. Over 2020, I have been trying to figure out, “What was the best thing for me to do.” In January of 2020, before I purchased the three-family, I had a 23-unit under contract and was planning to do the whole syndication thing but I backed out of that specific property as well as the partnership for a couple of reasons. After that, I had been trying to figure out other ways to make an income especially with all the extra time at home. I started a YouTube channel and started getting paid for it, which is cool.

When I have been doing some coaching, I landed a corporate wellness finance gig for large insurance companies. Maybe that will be some avenue. For my third purchase, my girlfriend is doing her PhD in North Carolina at Duke University. We are closing on a single-family fixer-upper two-bedroom that will rent out one of the rooms. Quasi-house hack in terms of getting some rent but not the multifamily that I have been doing.

I imagine down there the pricing is a little better for you.

We ended up at $345, which if you bought a single-family home for that here, it would be no good or far away. That’s also five minutes from the main strip of the town down there, so it would be like buying in Back Bay here.

It sounded like you brushed over having done some rehab in the second place. Do you feel confident with your skills?

I feel good about everything. On this unit, I did a few cabinets. I hung some cabinets to add some countertop space, put in window screens, did a lot of electric work, painted, the faucet, backsplash, and bathroom stuff. At the new place, there’s a good amount of work. I will have to learn how to do windows, as well as some less sexy stuff like patching a driveway in concrete and some basement repair. I feel confident that I could do everything that doesn’t involve a gas line or getting on the roof.

That’s awesome that you were able to figure that all out through YouTube. I suspect that’s part of your inspiration to start your own YouTube channel. Before we talk about your YouTube channel, I want to ask, do you enjoy doing these rehabs? Do you enjoy fixing up houses? Is there going to be a point where you are going to maybe hire this out to contractors, have them do it, and then you go do other things?

I have enjoyed it and it has been something fun that my girlfriend and I have done together. That has been a fun part of it. Do I enjoy it? It’s a tough question because I enjoy it when it’s over and it looks good but most of the time it sucks to do it when you are doing it. If I had some odd projects here or there on the home that I was living in, I would probably enjoy doing that. I would love to never have to do any of the work myself. That would be ideal.

I’m curious why you went with a single-family. Are there not many multi-units in that area? In some areas like where I live, it’s pretty rare.

There was nothing in terms of multi-stock. There was 1 two-family that came on. I offered $20,000 over but was beat out by more than $20,000 than that on a cash offer. It’s not competitive. It’s mainly single-family homes in the area.

Did you buy this house sight unseen? Tell us a little bit about how that went for you.

I found a real estate agent person who invested for ten years online and they were great about the whole remote buying process. They took video tours of everything. With their background, I trusted that they wouldn’t miss things that were important on the home like actual structural issues and not just telling me that the backsplash is ugly or something. That was mainly the most valuable thing in terms of purchasing the home. Sight unseen but I did have a video as well as the realtor’s eyes on everything.

Sometimes the videos are as good as being there. We have helped a lot of people buy from out of state. You take a video, talk to the video and make sure that you are showing the water heater and the furnace. Make sure you are showing the foundation and all that is good. One question I had was that you’ve got a small place a 2 bed, 1 bath. Did you think about getting a larger one like a 4 or 5 bedroom and renting out all those other rooms to completely cover your mortgage or maybe you could split the house up?

It’s a 2-bed, 2-bath. In terms of that, we wanted to end up in that main area. Boston is cool because I feel like you can buy a house within a few miles of the city. No matter what, you are good. I noticed in this particular town in Durham that unless you were within these four streets, it was not the same in terms of appreciation people wanting to live there and the numbers of renting out the place afterward. I wanted to focus on getting into that area. If you were looking at 4 or 5-bedroom homes within that nicer part of town, that was in the $750,000 range so that’s probably more than I wanted to spend. Plus, the numbers would have been not so great in terms of mortgages and rents.

There is a very short window to evict tenants. Most people just go the short route of paying them to move out, which ends up being cheaper. Click To Tweet

I want to make one more point about the sight unseen buying because Craig and I have done a lot of that. One thing that I tell people a lot is, “You don’t have trained eyes.” If I walk through a house, as much as I have done it, unless there’s a big old obvious spot on the wall or something, you are not going to know. It’s getting and trusting that inspection, which would happen the same if you were local or far away. The videos are great. Whatever your agent can tell you about smells, mold or anything in person are great too but it’s having that inspection. It’s not that different than buying in town, so you don’t have to be afraid to do that.

I felt the same way that it was similar. It was nice that I didn’t have to get up off my couch to do any of it.

Sometimes it’s nice buying away because you can’t fix and do it yourself. You are forced to figure out how to find people. It becomes a more scalable and passive business.

Just to know a little bit about it because you are closing soon, do you know what your mortgage is going to be and what you are going to be able to rent that extra room out? Do you know what it’s going to cost you to live in that place?

Mortgage was $1,600 or $1,700. I can’t remember exactly. With that specific room, if we did a grad student renter, it would probably be about $800 or so depending on how much work we do to it but it will probably look quite nice once it’s done. Maybe even more though. I don’t know the rents super well yet and what I could charge but they would have a private bedroom, private bathroom and everything. Those are all very good things.

You will charge me $400 as usual. That’s not bad.

You are cutting your mortgage in half, which is great and your rental income from your properties in Boston will more than cover your housing expense there. In a way, at least your passive income is covering your housing expenses and you are that much closer to financial independence. With that being said, what do you think is your number? What are you trying to get to?

That’s always a hard question to answer. It’s too addicting to stop for me, not wanting to continue doing real estate deals, anything like that, or figuring out more ways to make money or learn about all that stuff not necessarily because I’m addicted to wanting more money but it’s a fun experience. At least every year, I try to add some type of income stream, whether it’s another property or something like YouTube or whatever. I could not stop working, so I don’t have a great answer for the number.

I would argue that you are financially independent because if you have kept yourself that student-level spending, which I don’t know if you have but $2,500 in cashflow, what you have from those first two houses, even if you are paying a $400 rent to yourself in this next place, a lot of people can live off of that. You are still working, so it sounds like you are close if you want it to be and you will never stop working. You are probably in a great spot.

I’m feeling good about it all. No complaints on my end.

You are in a good place to take risks. Maybe you are making $80,000 or $90,000 a year but how do you get a career job that makes $200,000 to $300,000, then you expedite your investing even further, and then it all snowballs up? It’s good stuff. Let’s head into The Final Four. Z, kick us off.

What are you reading?

I have taken a little bit of a break from any finance or business book, so I’m reading a book about the North Carolina area called Me Talk Pretty by David Sedaris. The last business book or finance-related book that I read was The Infinite Machine by Camila Russo and it’s all about the invention of Ethereum. It’s interesting.

What is the best piece of advice you have ever received?

Probably the best piece of advice was, only invest in things that you know or understand. A lot of people lost a lot of money in things that they invested that they didn’t understand. That has always been something that I have followed along, especially being able to invest in yourself once you know yourself well enough.

It’s a good trend to invest in Ethereum.

Investing in crypto is something that most people don’t understand and it’s exactly why I don’t recommend it. What is your why aside from sad hustling because it sounds like that’s what you like to do?

I’m originally from Vancouver, Canada. My brother is out in Boston and my sister is in the LA area, so I have family all over. I would love to be at a point where I could travel or go see friends and family whenever I wanted on my schedule without having to worry about someone telling me I can or cannot, or have to do it at a certain time. That’s the why.

What are three things you could buy at a grocery store to make the cashier give you a weird look?

Maybe a chocolate cake, some body wash and a lot of bananas.

That would be a weird look for me. No judgment. I wonder if those cashiers have training like, “You can’t make any faces despite whatever combination of things people are putting in there.”

No weird comments.

ITF 45 | Section 8
The Infinite Machine: How an Army of Crypto-hackers Is Building the Next Internet with Ethereum

It’s like, “Shut up and scan.” Z, anything to add to the cashier comment?

It’s not to the cashier comment but, Avery, I have a bonus question for you. I am curious how you get all the volume in your hair because I am a girl who does not do hair stuff. I don’t know how to use a blow dryer, so I’m assuming you are blow-drying your hair. It looks awesome, tell us.

I do blow-dry it. I used to get a little bit annoyed because it would fall, so I had to do some more research. I dipped my toes a little bit into some moves that would maybe make it more voluminous but I stopped doing that. It’s mainly just the hairdryer and some clay.

Avery, where can people find out more about you? You talked about your YouTube channel. Anywhere else?

BiggerPockets, LinkedIn, and my YouTube channel, they are all my first and last name. Instagram is @_AveryHeilbron. Any of those places.

If you are interested in investing in Boston or even if you are going to be in North Carolina, Durham area, reach out to Avery and see if you can connect. That’s pretty much it.

Thanks for coming on.

I appreciate you.

That was Avery. Z, what do you think?

I loved it. He was clever. Even though he made some mistakes with this contractor, it seemed like he ran the numbers well, which is not that surprising because he said he’s a data analyst. We would hope he would be good at that. He has gotten lucky and it looks like these properties are going to be great for years to come. Hopefully, you can hold on to him.

He did a little bit of luck but he was smart enough to take action on the luck that he got. He knew to buy the property. $18,000 when you are at a college is no small amount of money. I would imagine he put a large portion of his life savings into that first house hack knowing, “This pencil is out. Let’s see how this goes.” He made some mistakes like we all have and you have to be ready to jump in and get to it. Years later, he’s almost financially independent.

Even though people don’t know what’s to come and a lot of people are like, “What if the appreciation goes down? What if the pricing of homes goes down?” He’s still got a great cashflow coming in and in a market where there’s so much demand for people to live there. That’s a perfect mix. As long as you hold on to it for years, he’s not going to lose.

He’s already won and he will continue to win if he keeps deploying that strategy. It’s going to be an interesting twist as he moves into North Carolina, so it’s exciting to see how that works for him. I am about ready to enjoy my last few hours here in Hawaii. Any parting words you want to say to everyone, Z?

Please share us with your friends and leave a comment if you love the show.

That’s it. We will see you all next episode.

 

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About Avery Heilbron

ITF 45 | Section 8I am a Canadian living in America pursuing a different kind of dream. The dream of time freedom. I currently reside in Boston, MA with my girlfriend Mia.

We take on many fun projects together and like to discuss finances so we can set ourselves up to have the best life. We are both frugal, but spend money on things that we care about and make us happy.

I am a Data Analyst/Scientist for a large insurance company. I get 25 paid vacation days and work 40 hour weeks from home. This gives me a lot of time to educate myself and become a better person.

I love fitness, hiking, and making really good food.

I love being efficient. I love my time. I love doing what I want to do.

Right after I graduated from university I found out the best way to marry all of those loves. I want to do everything I can so I can get the most out of my relationships and do what I want to in this life.

I have realized that having as many streams of income as possible is the best way to achieve my best life. Financial security is what allows you to focus on what’s important. If you set yourself up to not live paycheck to paycheck and have cash flowing assets then you only need to focus on what is important. Money isn’t the most important thing, but it is the vehicle to allow you to do what you deem most important. With abundance you can give your money away, travel freely, take classes, invest in your education, start a business, and infinitely many more things. Your time and your money are yours. Taking control of your life means taking control of your finances.