ITF 92 | House Hacking

 

Moving out to live independently can be both an exciting and scary idea. Imagine how you would feel about buying your first home. But it doesn’t have to be daunting because you can leverage the power of house hacking! In this episode, Ian Jimeno shares how he stumbled upon a real estate seminar where he learned about a concept called “house hacking” and how he applied it with his first property: a duplex in the heart of San Diego, west of North Park where he lived in one of the units, rented out a room in the same unit, and rented out the other unit. Since then he has invested in other properties and has proven that real estate is an incredible investment, especially after seeing the price of his duplex in San Diego increase $200,000 over 2 years. Tune in and learn how you can start investing and be on your way to financial freedom!

Big News! Invest2FI has partnered with Rentredi for their property management where they can send applications, do background and credit checks, and take rental payments all in one software. And when you go to www.rentredi.com and use our CODE: INVEST2FI, you get 50% off on your first 6 months.

Do you want to be a real agent like us? Go to Kaplan Real Estate Education and get your license! You can use our CODE – Invest2 and get discounts!

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Shared Spaces For Financial Freedom – The Art Of House Hacking With Ian Jimeno

Z, how are you doing?

I’m great. What’s new with you, Craig? I just got to go right in there.

I sold one of my crappy properties. There is a little bit of a story behind it.

Was this one of the North Carolina properties?

No, it was a Denver property. It’s a funny story. This property had major structural issues. It needed about $100,000 to $150,000 worth of structural repairs. I was like, “I don’t want to do that.” I contacted a wholesaler and said, “You can take this property for $150,000 off of what it would cost, so you could make the repairs and sell it or do whatever you want with it.”

They agreed to all that stuff. The day before closing, they came to me and they said, “We didn’t realize there were structural issues,” I swear to God. They asked me for a $30,000 concession the day before closing, like hands tied behind my back. I was like, “Are you kidding me?” I didn’t know what to do. I had to accept because I like needed to offload this property.

What about saying no?

It gets better. I negotiated them down to $22,500. We signed in amend and all that stuff, so it’s happening. An hour later, the settlement statement goes out, which is the official closing document for those that don’t know. That $22,500 was not in there. The title forgot to put it in but the buyer signed it, the title signed it, and then I signed it. The total amend didn’t happen.

Those guys came and reneged on me. They ended up getting messed up in the future anyway. That’s a lesson learned. I came out on top of this one, fortunately. As real estate agents or as investors, make sure that you’re double-checking all those documents because people make mistakes. Title companies make mistakes. They have title insurance, so I’m sure he’s getting paid out and all that.

The title company is losing, not me or the buyer. That’s why I don’t feel that bad about it. He came and renegotiated on me last second and that was a low blow. I got the last laugh there. I thought that was cool, like a real estate case study and things that don’t always happen, but to learn from the mistakes of other people and that’s one of them.

That was a good story. Congrats on selling a problem property. It’s interesting how in some houses in the same area, one can be a gem, and then one can be attracting a lot of issues for whatever reason. It’s nice to offload those to simplify your life a little bit.

It is. Z, what is up with you? Tell me about your life.

I am here in a bathing suit because I ran back from the lake. It’s Juneteenth and apparently, Craig doesn’t like to acknowledge this as a holiday. I still had to work. I was enjoying my holiday.

You’re an entrepreneur. There’s no such thing as holidays when you’re an entrepreneur.

Is this about fire? Get a life.

I honestly forgot about Juneteenth. It hasn’t been programmed into my head yet as a holiday. I love all people of all diversity. Don’t take any offense to that. I work every day pretty much so. Speaking of working and financial independence and all this stuff, why don’t we bring our guest on, Mr. Ian Jimeno.

He Who is on the FI Team.

Invest2FI has now partnered with RentRedi because that is a software system that both me and Zeona use to do property for our rental properties. It makes things super easy. We can send applications and get background checks and credit checks. Tenants, when they come in, can pay automatically through there. They can send maintenance requests and everything you need to do for property management all in one place.

That’s why RentRedi is the thing that we’ve done. I have been using it for years. That’s why I reached out to them for a relationship on the show. I am super excited to have them on board. If you to RentRedi.com and use the word INVEST2FI, you’ll get 50% off of your six months. Sign up and use the coupon code. I can’t wait to see you there. Hit us up on Instagram and wherever, and let us know what you think of RentRedi because I think it’s an amazing software. I use it all the time and you can access it from your phone. Thank you so much and let’s get back to the episode.

Ian Jimeno, welcome to the show. How are you doing?

I’m doing fantastic. I can’t think of a better day to be on a show. I’m excited to be talking with you guys.

We’re super excited to have you on. It’s been a long time coming. We had to reschedule and all this crazy stuff. It’s good that we’re flexible. We’re here and finally able to get this thing done. Why don’t you kick us off from the beginning of your story and tell us where you first heard about financial independence?

I was born and raised in San Diego. You might pick up some anecdotes and some sayings that I say throughout. I might give that away. I lived here pretty much my whole life. I was coasting like the typical California vibes. I was not worried about too much, shooting the breeze, and living life as it comes by. I initially went to private school through elementary and high school, and it wasn’t for me, so I went to community college. I had no idea what I wanted to do then. I spent seven years in community college. During that time, I was over at Starbucks and I was like, “Part-time benefits? I’m staying here for a long time.”

Have you ever seen Van Wilder?

Yes, for sure.

Is that where you modeled your life after, like staying in college for as long as possible, going to parties, and being a professional college student?

If only I were as cool as Van Wilder, then it would be a spitting image, but I emulated him.

You look just like him.

I graduated in 2007. Finally, when I decided on what I wanted to do at a university, it was 2014 and I had built up all these credits. I was like at UC Santa Cruz. How about I become a Biology major? They’re like, “You don’t have enough math credits, but why don’t you guys do Geology?” I’m like, “Sure. I’ll do it. I just need a degree.” I ended up doing Geology and I graduated in 2016. I got a W-2 job. My initial salary was $55,000 and I was head over heels on that salary. I was stoked about it as an environmental consultant. Ultimately, I watched Playing with Fire. It was a movie almost like a documentary and it followed this Coronado couple.

It is Playing with Fire.

It related a lot to me and my girlfriend at the time, Kat. They’re from San Diego. We didn’t have any leased cars or pets at the time but we’re having all these liabilities and having nothing to save for income except for the W-2 jobs. Eventually, they ended up mitigating their expenses and all this good stuff and ended up being financially free within a certain number of years. They went hardcore on it. That’s the purpose of the movie, but it was great entertainment value. I thought it was good. It shot us to the next level of, “Let’s reach that. That sounds cool.”

Playing with fire is a pretty popular documentary in the FI space. I remember when it came out, I was there for the premiere viewing. It was at the Mr. Money Mustache Headquarters.

So was I.

ITF 92 | House Hacking
House Hacking: The aspect of even getting in the game at 6.5% or 7%, but you can always refinance later if the interest rates go down, you can always cash out or just refinance it.

 

Are we there together?

We were, yes. That was before we were buddies.

That was before I really knew you. Who would have thought? If you guys are looking for a documentary or intro to the space and see someone’s journey through it, it was good. It seems like it inspired you. To give the readers a frame of reference, you lived in San Diego your whole life. It sounds like you moved up the coast to the San Francisco area and went to UC Santa Cruz for a few years, studying Geology, which is beneficial for real estate investing. Did you get a job back down to San Diego as a geologist or an environmental consultant making $55,000?

Yes. To elaborate a little bit more about what I did in the geology space, when people go into geology, they think about oil and gas. I did not want to go into that industry because it’s like a feast or famine. I wanted something a little bit more stable. The environmental consultant position was proper for me. Santa Cruz being as environmental as they are didn’t have any oil and gas classes.

I did work with a lot of investors, commercial bankers, and brokers, where they had us do these phase one due diligence processes and phase two processes as well. I was like, “These guys are buying multifamily complexes, warehouses, and mixed-use buildings. This is amazing. Why are they doing this? How are they doing this? How does one person have so much money?” I found out that there were syndications, partners, and joint ventures. I was fascinated by it also. I ended up through a big old rabbit hole looking at BiggerPockets and going down the Google rabbit hole of fire and things like that.

Who would have thought that geology would get you focused on real estate? You’re doing phase one and phase two analyses. What does that mean exactly?

I’ll put a real-life term to it. It’s a little bit better to understand. I evaluate human health risks on a certain property. If someone wants to buy a big brewery that is 12,000 square feet like a big warehouse, right next door is a gas station. This gas station would have underground storage tanks. I would do some documentation and detective work and ask the regulatory agencies, “Have there been any leaks on it? Have there been any weird situations with vapor? Is there a human health risk with this property that my client is trying to buy?” That is the phase one portion of it. I look at all the documentation to see if there is a risk and how high that risk is.

Phase two would be like, “Yes, there is a risk,” and my client wants to pursue purchasing the property and I would be evaluating it as such. I would do groundwater, soil, and vapor sampling to make sure that they’re not liable for any cancerous risk, almost like radon in residential basements, but more on a superficial level.

This is a little bit of a side, but you mentioned San Diego a few times and BiggerPockets. Are you going to be going to the BiggerPockets conference in San Diego this year, 2022?

I bought that ticket within two hours of its release. I was so stoked.

Craig, are you speaking again?

I’m also speaking. I am on a panel this year. They downgraded me from speaker to panelist. It’s okay. I will still be there and it will be tons of fun, and I love San Diego. It’s an excuse to get down there.

Anybody reading, you still have time. Buy your tickets. We’ll see you all in San Diego.

I was fascinated by the whole BiggerPocket space. To be honest, my cousins got me into BiggerPockets because they also watched the documentary Playing with Fire. They also were ahead of the game in terms of real estate investing. That’s fascinating to me as well. A big shout-out to Dustin and Lindsay. They bought a single-family home over in San Antonio, Texas. I was like, “You’re not moving there, are you? Why are you buying real estate that you’re not going to live in?”

It turns out they got some pretty good cashflow off of it. They were telling me all the trials and tribulations of property management, managing the manager, and doing long-distance investing. I was fascinated by that as well. They told me all the benefits from it, from tax advantages to low pay down to that cashflow at its most basic essence. I was like, “I want a piece of this pie. This is something that I want to get into.”

What year is this when you’re like, “I can do this? This is something that I want to do.”

That would be in early 2019. At that point in time, my wife and I were renting a 2-bed, 1-bath, 1/2 of a duplex, 850 square feet, for about $2,000 a month. After living from home for about 29 years of my life, because that’s a normal thing to do. Everyone in San Diego lives with their parents as long as possible and it’s also the demographic too. It’s hard to afford something out there. We didn’t want to move far out east, where it’s like 30 to 45 minutes to get to work. We want our own place and it makes total sense to us.

Once hearing the story from Dustin and Lindsay, I was like, “We need to find something to purchase and maybe make some money off of this,” because someone owns this whole duplex and he’s getting two units of one property. Everything started to combine and implode together, which made me think more that real estate might be the best course of action to reach that financial independence.

I’m wondering about the trials and tribulations that they were telling you about. That stuff didn’t scare you off? I imagine for a lot of people that get them going like, “I’m never going to do this because I heard one bad story in real estate.”

Not Uncle Tom losing his shirt on real estate. Even nowadays, I only hear less than 1% of all the investors I’ve ever talked to have such major problems where they don’t want to invest in real estate anymore and they want to sell. It didn’t scare me off because it is not high risk or high reward, but if it was easy, everyone would be doing it. I feel like I was having the gusto that like I was “young.” I was 29 at the time. Hearing about all these stories, I was like, “This makes total sense to me.”

If someone has a problem with the real estate, tenants, or property management, it’s a phone call away. What would I do if I were living in it? I would make a phone call. I never had a huge problem with it in the first place. All the people I was learning to talk to at that time didn’t have an issue with it in the first place, and they seemed to be generally happy people.

You’re saying that the cashflow, appreciation, tax advantages, loan pay, and all those things are way better than occasionally having to call and get a toilet fixed or something?

It makes total sense to me. The benefits outweighed the burden.

That’s pretty consistent across the board among all real estate investors. Why don’t we get into you’re the For Real Deal? The first real estate investment you’ve ever done, which it sounds like it might be in San Diego, California, which is a place where “You can’t house hack. It’s way too expensive.”

You can’t house hack in San Diego. There’s no way you could purchase anything there. It makes no sense.

California and taxes? No way. Landlord friendly? No. What did you do? Tell us.

How it all started was I went to this webinar or seminar at the time and it wasn’t COVID. It was at a Ballast Point and there was a real estate agent, Patrick. He said, “You might be buying a property in San Diego, but you’re not going to be cashflowing on day 1. There is a 99% chance you’re not going to be cashflowing.

I was like, “Do I still want to get into this? My cousins are cashflowing in Texas. This makes no sense to me. Why would I do this?” He explained all these things of refinancing cash out, refi, HELOCs, and getting in the game as the most important part. Eventually, I was like, “You’re talking about? Let’s know more about it and let’s go to some properties.”

After being in the game for several years, he found an off-market duplex over in the Normal Heights, North Park area. For Denverites out there, it’s almost the five-points rhino area, which is pretty desirable, walkable, and central to everything. I was like, “I can spend more money at the bar down the street.” For real, though, the whole duplex option made so much sense to us. We bought it at $815,000 and ended up house hacking it.

He didn’t call it house hacking, but it was the essence of house hacking, the whole rent-by-the-room situation. That’s exactly what we did. We rented out one of the rooms. Our 3-bed, 2-bath, which is one of the units, and the other unit, which was a studio, were rented out already, and we inherited that tenant. We love that tenant. It was honestly the screening process.

I want to highlight that you said getting in the game is the most important part because I talked to people a lot that are struggling on the first property. It’s common that no matter where you start, it always feels expensive and a stretch. I bet $815,000 was like $1 million to you. It was a lot. Even now, with people getting in at 7% interest rates or whatever they’re seeing out there, would you still say the same? I’m always telling people, “One day, you can refinance that to a lower rate. Getting your foot in the door and riding the escalator of equity up is important.” I’d love to hear your take on that before we continue with your For Real Deal.

Even getting in the game at 6.5% or 7%, you can always refinance later. If the interest rates go down, you can always cash-out refi or refinance it. It doesn’t matter. You can always have plays after that. Actually, we’re looking at HELOCs now on that same San Diego property so that we can find our next investment property. It would make so much sense not to have our own upfront capital to take the equity out of our property in San Diego to use on a separate property outside of California.

Also, what I like to tell people too is that this is the 30 years from now property. For example, back in the 1980s, that same property was about $200,000 and here we are now 400% on this property and I’m buying it now. In 2050, it’s going to be maybe $2 million or $3 million. We have no idea. At the same time, I am seeing real estate trends going up and I don’t see it going any other way.

You might be buying a property in San Diego, but you're not going to be cash flowing on day one. Getting in the game is the most important part. Click To Tweet

It’s funny. It’s all about recency bias and comparison. We’re comparing these 6% or 7% interest rates to the 2% and 3% we’ve experienced in the past few years, but if you look over the long period, 6% or 7% is as normal as it gets for mortgage rates. We’re not even in the high. We’re in the medium of mortgage rates, number one. Number two is that when you’re house hacking, you’re seeing returns on your investment in the hundreds of percent. A bad deal is 40%, 50%, or 60% oftentimes. You’re paying 6% for a mortgage, but you’re turning around and getting a 60% return on your investment.

Would you pay 6% to get a 60% return? I’ll do that all day long. That’s why house hacking makes perfect sense. If you’re flipping or doing more of a short-term play, you have to be a little bit more careful of your market risk when you leave the market, but for the long-term buy and hold and what you said on the long-term appreciation, it’s hard to lose.

We’re seeing the benefits of it. On our second refinance of that property, we got it appraised. It went from $815,000, the purchase price and in March of 2021, it appraised for $1.105 million. Over the course of a few, we appreciated about $300,000, something like that. It was insane even to see that number. Two commas in one purchase in one refi that was insane.

The two-comma club, but that goes to show you right there with real estate, you’re making $300,000 in a few years and it was exceptional. That $150,000 a year is like a pretty damn good salary for anybody anytime. That’s a real estate investment. I do want to take it back a little bit, though. You purchased this property at $815,000 and it sounds like you were making $55,000 a year, which to me is like, “How do you afford an $815,000 property when you’re only making $55,000 a year?” Connect those dots for us?

With us living at home for so long, we didn’t know what to do with all that money. We kept it in a savings account and in our stock portfolio. Being able to finance it at 3.5% down, FHA loan, that’s what we used. The all-in costs on day one were approximately $45,000 or maybe $50,000. We got married a couple of months before we purchased the property. We bought it in 2019 of June and we got married in March 2019. This has been floating in our heads prior to us getting married. Us combining our about $25,000 each wasn’t too much of a dent in our bank accounts.

What about qualifying on the debt-to-income ratio? Were you able to do that with your combined incomes?

Yes. At the time, Kat was on her way to becoming a more legit software engineer. She was making about $65,000 or something like that, so a grand total of about $110,000 or $120,000. I don’t know how it penciled out exactly, but we were approved for it.

What was your mortgage payment on that one?

Our mortgage payment initially was about $5,400.

That’s PITI, right?

Yes, PITI.

That’s Principal, Interest, Taxes, and Insurance for those that don’t know PITI. You were getting for what rent?

We’re getting approximately $2,700 in rent. The one-room that we were renting out in 3-beds, 2-baths, we were getting about $1,200 for that room. The other unit was about $1,500 at the time, so $2,700 cut it in half, which is nice.

You were paying $2,700 for your own place while building equity. How long did you live there?

We lived there until August of 2020, so for several months. Going back to us purchasing the property, everyone thought we were insane. Everyone thought it was like, “$815,000 is borderline $1 million. I don’t know how you can even afford this place.” Even after we told them, “We’re making income off of this place.” They’re like, “You’re still paying $2,700.” A lot of those people were calling us and saying, “We’re still living with our parents. We didn’t want to take the risk.” They were thinking that we were at the top of the market. I didn’t care if we were at the top or the bottom. I wanted to get in the game as much as what other people were saying too.

I want to further the point too that it doesn’t quite matter. In these more expensive markets, you’re probably not going to cashflow as you said in the beginning. You were paying $2,700, but you were living in a nice place and location, and you knew that in the long run, that was going to go well. You lived there for several months and then when you moved out, did you rent out your half?

For those of you who don’t know San Diego too well, it’s a big Navy town. A lot of military and Navy bases here. We were able to get two Navy tenants to stay in both of the units, which I liked because we have direct access to the commanding officer if they ever give us trouble, whether it’s like, “You’re not paying on time. You’re being a belligerent tenant,” or whatever. We could call up their commanding officer, which is nice.

I don’t know the exact ins and outs because we did some good screening processes in the meantime, but we moved out to Denver in August of 2020, which was a double-edged sword where at the time, I was getting my hours cut as an environmental consultant with the whole COVID situation starting in March 2020. We were like, “We got to reduce our cost of living. Maybe we want to try to look at the rest of America at the same time, as far as having a good time and maybe a lower cost of living as well.”

At the time, my parents were living in Denver and we ultimately decided to move to Denver. When we had that conversation with my parents, I heard that they were like, “We got a 3-bed, 2-bath that we’re living in right now,” that they owned. “You guys can stay in the basement.” I was like, “Basement, you say?” The whole concept of the basements was blowing our minds.

Here we are staying at a 1,300-square-foot place, paying $2,700 for this, sharing a room, and then going to a basement that we can call our own. That’s almost 2,000 square feet in this house we were staying at. I was like, “This is amazing,” being so used to the hardships of house hacking in San Diego, I was blown away by Denver’s basements.

I feel like you have to be a FI person to be excited about a basement. This is quintessential here. That doesn’t happen otherwise. That was my only comment.

Basements are amazing for house hacks. Did you say you bought that place in Parker?

Initially, when we moved out, we moved to the place that my parents purchased. After a while, it was about several months after winter, May of 2021. Me and my wife were looking at our own house hack to find in Denver. We were looking up in the north Denver area, like Arvada, Wheat Ridge, Westminster, North Glen, that area.

After a while, my parents started to hear our conversations and understood what we were trying to accomplish here. They wanted to give us a business proposition. They’re like, “Why don’t we go have Z’s on the next property and we could call it home base? Wherever you guys go, we don’t plan on moving anywhere but here.”

We found a place in Parker and it’s a pretty cool neighborhood. It’s 4,400 square feet, more square footage I’ve ever heard of, in general. I’ve never lived in someplace that big. We split the mortgage and utilities. When they retire, we could take care of the home when they’re out traveling the world and when they’re older, we could stay with them. Also, at the same time, if we were to ever our kids, we have a babysitter in-house. It’s more than the splitting of rents, but also the utility savings of it all.

How exactly does that look like? Are they living there and you’re living there or are they helping you pay towards it?

In a way, we’re house hacking with my parents. The basement is unfinished right now. We don’t see an immediate ROI on finishing the basement at this point. It’s me, my wife, my mom, and my dad, all living here. Not too many people our age wants to live with their parents. Luckily, my parents are cool and they’re down the split everything with us. We all take care of the chores with the whole house. I don’t mind it at all, especially coming from San Diego and house hacking there.

How is this for your wife? You lived with your parents and you’re cool with that. I don’t want to live with my fiancé’s parents.

A lot of people’s in-laws are not as cool as ours. I dig Kat’s parents as well. Looking at it that way, she knew that living with the in-laws was not the most scenic route to financial independence, but at the same time, she knew the purpose of it all. She knew that we were staying here for another year, then we’d find another place. That was like the nomad house hacker lifestyle as Craig wrote in his book, The House Hacking Strategy, which was a pivotal book as well, trying to get our getting fired goal was. We knew that there was a means to an end.

Also, in the documentary, they go and live with the parents at a certain point. You guys were following the script and I commend you for that.

They had a harder time doing so than you guys did, though. You’re basically the expert at paying half your mortgage. You did it in San Diego and now you’re doing it in Denver. How long did you live in this Parker house with your parents? Are you still living there?

No. I moved onto house hack three. The length of time that we stayed was fourteen months. We bought this place in Parker in May of 2021 and moved out in July of 2022. May 2022 is when we purchased this next house hack. We finally moved in in June 2022.

We’re doing this in June 2022. You moved in to this third one. I have to ask you, when you moved out of your parents’ place, are you still obligated for a halftime mortgage? I suspect you’re not having someone random live with your parents to help you with that income.

ITF 92 | House Hacking
House Hacking: Don’t be afraid to not have all of your ducks in a row, if that prevents you from taking action. Gets your ducks in a row later. Eventually, they’ll cooperate with you.

 

We did not want to give that burden to them. We would rather have them be more comfortable in their potential forever home. We are still obligated to pay off that mortgage and give our halvsies of it, but at the same time, we know the next investment and other investments that maybe we could talk about later pays for that and significantly decreases that expense in the net worth spreadsheet. We knew going into it that we would still be obligated for that $1,500 per month, but we don’t pay as much in utilities anymore.

That $1,500 a month is an added expense to what your financial independence number is going to be. It’s still a great investment because you’re buying in an area with high appreciation. It’s like investing in the stock market or something like that. You’re parking your money somewhere in Parker. That is something to be said that not everybody would be willing to do. Why don’t we go into this third property here? Where did you buy it? How much did you buy it for? What do you plan to do with it?

Before I get into that, I did join the FI team as a real estate agent. I couldn’t resist. It was nice to be a part of the team that helped me out, even finding the partner home. Nick of the FI team helped us out, purchasing that property. I did not want to leave. I wanted to be more ingrained into the FI community. Whether it’d be the FI team or BiggerPockets Headquarters is here in Denver, it felt like the stars were aligned and being a part of it.

I ended up getting my license in September and it was a long time before I sold my first house, but within a few months dry spell of not selling anything, then in two months, I sold like five houses. I was like, “This is crazy.” When it rains, it pours. At that time, I got to know about neighborhoods and communities all around Denver.

I noticed that when I look at the Westminster, Sherrelwood, Thornton, and North Glen area, it made a lot of sense to invest in that area for a couple of reasons and maybe several reasons if I can pinpoint. It’s like in the center of almost everything. It’s right off the 36, 25, and 70, that trifecta highway area. It’s also right in between DIA, Denver International Airport, and the mountains. It’s also short-term rental friendly and it’s a quiet neighborhood. I saw a lot of potential in it and a lot of the other FI team members were attracted to that area too. I’m like, “They probably know something I don’t,” so we decided to look more into it.

It’s funny the Sherrelwood and Thornton in as well, I don’t want to say I was the trailblazer on that, but I remember I bought my first property in Sherrelwood back in 2019 or 2018. Everyone was like, “Sherrelwood is full of meth heads and full of that.” It seemed like the only pocket of Denver that didn’t explode at that time. At the time, I bought 6-bedroom, 3-bathroom houses for under $400,000. I was like, “If the location is great, the houses are great. I don’t understand why it’s not blowing up.” I was fortunate that right after I bought it, it blew up. It is still an amazing place to house hack.

One thing I want to go back on is what you said about your journey as a real estate agent as your first few months were dry and when it rains, it pours. That is a super common thing. Anyone thinking about becoming a real estate agent out there, it’s super common because your first three months, you’re not that good yet. You’re still ramping. Two, that’s when all you’re doing is lead-generating. It takes a few months for those leads to come to fruition.

In those few months, you started to service those leads and stopped doing lead generation. You then start to go through another slow period. You go through these cycles. I know this isn’t a show for real estate agents, but if you are real estate agents, as I tell all my guys, too, just keep doing your lead gen, even when you’re busy. That should never ever stop. I wanted to throw that out there.

I love that you guys are blowing up Sherrelwood. I feel like all three of us are going to get a bunch of calls and people are going to be excited about it, but Airbnb’s potential there is very good.

It all made sense. I’m preaching to the choir here. Looking at it from that perspective, I really invest in that area as well, but the thing is, with all of our investments and down payment, after a while, I realized that Sherrelwood was the next investment to go to. We still wanted to house hack. I found it to be the best return on investment of it all.

The thing is that I did not have capital in my bank account to invest in this next property. Even with 5% down, still a couple of tens of tens of thousands of dollars for the upfront costs, down payment, closing costs, and things like that, even being a real estate agent. After doing some research on multifamily syndications and things like that, we decided to employ that same model for this house hack number three.

For those of you who don’t know, syndication is a way to pool investors’ money to invest in a bigger asset. In this case, it’s not a 50-unit property or even 20-unit property. It’s just a single-family home. The thing is that I saw that this single-family home had the potential to separate the basement from the main floor to create two units.

Have a separate entrance in the backyard and a keypad entrance. I was like, “We could set up a door and separate the two units.” We can make some big bucks from having it as a house hack as a short-term rental upstairs. Once we move out, we can have both of them operating as short-term rentals. When I did the projections, it made a lot of sense to us. It’s a matter of getting the capital.

To clarify, a lot of times, houses in Denver are a little bit older and they have like this unofficial duplex setup. They’ll have a downstairs basement unit, but sometimes they don’t have a door. Did yours have a door or did you have to dig one out and make it?

This one had a doorframe and all we had to do was put in the hinges and the door itself. That took a lot of work because I’m not too handy. I’d rather employ someone else who’s good at it, but I decided to try my hand at it and learn the process. Lo and behold, it took a lot more time than I wanted to. It was a learning experience for everyone, including my dad.

This is more recent. I want to talk about to date. 2022 has been a crazy year for buyers in how it was hard to get a deal. What did you buy this one for? What do you expect to get on Airbnb? Let’s get into some of those numbers.

We bought it for $615,000. It was a fully flipped or rehabbed property, and we liked it. We wanted that day one rentability. My partners liked it as well. What we were projected to get for average daily rate in the summertime, we were looking at $160 per night, but then during winter time, we’re looking at maybe $70 or $75. We average it out to about $110, $120 a night for the year. Eventually, that positioned ourselves with the mortgage coming out to be about $3,550. We were projected to get about $3,900 during the summer months for the main floor.

We also decided like, “What if we go back to the Parker house? My parents are still living there, every once in a while. During winter, try to rent it out every other weekend or something like that to make as much income as possible in the basement unit.” $3,900 is what we’re projected as of right now on Airbnb. If everything goes well, we might have more accurate numbers. We weren’t expecting to cashflow within the first month, about $300, which was nice for short-term rentals. I’m a believer now.

Not only are you cashflowing, but you’re also living for free. Whenever you do this thing again, you can leave, Airbnb the bottom unit or rent out the bottom unit, and everything there is profit. That’s all this gravy. It’s a basement unit, so you probably won’t get $4,000. Z is the expert there. She might be able to give you an exact number, but let’s say $2,000 to be super conservative. That’s still a great cashflowing property. Is there anything you have to add there?

I don’t want us to forget how he got there because he said that he had to pull investors’ money. When you’re buying a property as an owner-occupant, sometimes you have to do some tricky things with gift funds or have the money seasoned in your bank account. We want to go over that before we get any deeper into this deal.

That’s something that I do, like the hard buying, because a lot of my buyers see their bank account and they’re like, “I can’t afford anything,” and that seems to be the bottom-line period, no discussion. Here I am, trying to become this harbinger of work with other people’s money, the OPN. It doesn’t have to be like you’re begging for money. You’re giving them an opportunity to be an investor in this property.

What ended up happening was we contacted my cousins from San Diego and my sister-in-law from New York and they’re both real estate-ish savvy, more on the San Diego side. Shout out to the Reiko, Mark, Jackie, and Latoya. They all knew that real estate was a powerful tool to get to financial independence. We pitched to them that if they invested enough money to take care of the down payment and the closing costs, and maybe someone reserves as well, we would give that 10% cash-on-cash return and third equity in the property.

I know it seems a little bit generous at this point in time, but with this being our first deal with partnerships and working with partners, we want to make sure that they feel comfortable going into it. Knowing that they can get 10% guaranteed at the end of the year made a lot of sense to them, and they get the equity play as well.

I love that you’re zooming out and seeing the big picture here. You’re sacrificing some profit up front in this one deal to build a rapport, relationship, and trust with these partners, so that way, someday, when you’re doing your 3rd, 4th, 5th, 6th, 10th deal, then you’re going to be like, “We’ll give you 6% or 7%.” You’ll have a lot cheaper money because they know, like, and trust you and have invested with you. I love that you can see through that. I do have a question on this, though. How did you set this up? Was it an LLC? Was it a partnership? Did you have a lawyer review this? Did you do this the right way or did you do this the scrappy way?

Initially, it’s scrappy. We knew going into it that we did want to set up some LLCs and we are in the process individually. Between each couple, there’s a couple in San Diego, a couple here, which is me and Kat in Denver, and then a couple in New York. We each set up our own LLCs. Now, we have a group LLC like an operating agreement.

For this property specifically, we have an LLC specifically for this one. A lot of LLCs going around, but nonetheless, it was the best way for us to be protected and as far as like tax advantages and things like that, we want to make sure that we’re making the right play and setting things up appropriately first of all. Granted, this is all the first property that we’re partnering with. It’s a learning process and we have yet to transfer it over to the LLC, but it’s in the works.

That’s traditionally how it goes when you’re first starting out. You trust that you’re not going to get sued by your partner and eventually, you get things sorted out and all that, but don’t be afraid to not have all of your ducks in a row if that prevents you from taking action. Gets your ducks in a row later. Eventually, they’ll cooperate with you.

I’m glad that Kat is keeping me on track. I’m more of the ready-fire-aim guy and I’ll build a parachute as I’m falling. Here’s Kat making sure that everything is set up appropriately for tax season or those distributions are made for our partners. It’s a lot of like vision work, but also what is practical and how do we stay legal at the same time.

To recap this property, you bought the thing for $615,000 totally turnkey, not a lot of rehabs. You just had to add a little door. You’ve got $3,900 in rent coming in from one unit and $3,500 as your mortgage payment. Maybe, you were doing $500 for reserves and all that stuff. Let’s say you’re breaking even on the top. Once you move out, you’ll probably have $1,500 to $2,000 of cashflow on this property in Denver, an appreciating area.

People always ask me, “How do you cashflow so much in Denver?” This is iconic and one of the many ways you can cashflow like crazy in an appreciating market. Wherever you are, Denver, Austin, Seattle, San Diego, or wherever you are like, you got to get creative. You’ve done such a fantastic job of doing that.

Thanks, man. The biggest thing, too, is ever since I read Rich Dad Poor Dad, which is like a coming of age book for anyone getting into fire. Back when I read it, when I was in college in 2018, the most standout quote from that book is, “Can I afford it? Don’t ask that. It’s how can I afford this.” There’s always a frame of mind and your thoughts become your emotions, become your actions. When you start to believe that you can’t afford it, you truly can’t afford it. You miss 100% of the shots you can’t take. Not to get all like theoretical here, but at the same time, it is a mindset shift getting into real estate investing and making sure that you’re setting yourself up for success.

We are going to need to head into the final part of our show, which is the Final Four. You threw some wisdom at us with Rich Dad Poor Dad. Any last things you want to give us before we head into the final part of the show?

I’m more excited about the Final Four at this point. I’m stoked.

Just do it. Especially when you're younger. Go on those business ventures, do things that scare you because you got time to recover. Click To Tweet

Let’s get into it. The Final Four.

Ian, what are you reading right now?

This is my third time reading this book, 4-Hour Workweek. Kat and I have some grandiose plans of living in Amsterdam for a year and don’t want to work too much over there. I want to live. Being able to be on my laptop for only four hours out of the week, I feel like Tim Ferris is onto something here.

Amsterdam, Holland has a Netherlands-American friendly treaty. Do you know about that?

I had no idea.

They have a thing that makes it easy to live there as an American. You can look it up.

I like to see them more.

You can totally work.

One of my buddies moved to the Netherlands. I wonder if that’s why. I don’t even know about that. What is the best piece of advice you’ve ever received?

It wasn’t personal, but it does speak to me. I’m a huge fan of Michael Jordan. His personal coach, Tim Grover, had this one quote that got me motivated. “If you don’t want to pay the bill to win, wait until you see the bill for regret.” I want to win. At this point in time, I might be on the younger side. A lot of real estate investors say that I’m young. I don’t feel it too much. I’m at that middle-aged portion, but at the same time, do it now while you’re on the younger side, the mid-20s, or 18 years old.

Shout out to Taylor Thompson for getting two properties. This dude’s a maniac. What I’m trying to say is, “Do it,” especially when you’re younger, go on those business ventures. Do things that scare you because you got time to recover. A lot of people that are elderly are looking more at the conservative portfolio because they can’t take those risks anymore. Have fun with it and make sure you take those risks because it could pan out.

I love that advice. Reread that. Take the risk now because you’ll have more to lose in a year from now than you will right now.

Question number three, what is your why?

My why is not working. I want to do the things that I want to do with whom I want, wherever I want. It’s more eloquently said in other places, but at the same time, Kat and I want to do the things we want to do. For example, Kat wants to work for a non-profit, and having a non-profit salary is not in the books at this point in time when you’re not on fire. It’s hard to take care of your family if you were to have kids, or things like that, or someone who’s sick. It’s hard to do that when you’re working a W-2. That’s just not as profitable.

Me, I want to become an educator. I spent so many years in community college and honestly, they were the best years of my life because of the professors. When I went to university over at Santa Cruz, no offense to Santa Cruz, but they are so used to academia. They are so used to writing grants and papers, and I did not connect with them on a service level.

Here are people in community college, the professors coming in from their 9:00 to 5:00 job and I’m taking night classes and I’m getting industry experience from these guys. I wanted to still be a real estate agent and become an educator for financial literacy and financial independence. Shout out to Dan Sheeks for doing that. I reached out to him. Dan, if you’re reading this, I still want to hit you up and have some coffee with you. I know Taylor Thompson’s making some big moves and he was a SheekFreak, so I want to be an older SheekFreak.

He’s on the show twice and he’s got a book First to A Million published by BiggerPockets. He is amazing and such a good friend of mine and such a good dude helping young people achieve financial independence. This is our final real-ish question. What are some of the nicknames you have for customers or coworkers?

I worked for Starbucks for a couple of years of my life. I had so many nicknames. People would give you their names in person, but then I would write it on the cups, whatever nickname I wanted to give them. Whether it’s like a movie we saw, like Dumb and Dumber would come in, but they wouldn’t take offense to that because it’s a great movie first of all. Number one best movie, King Mike and Shorty, but those are the ones that come to mind and they love it. I love the tips they gave, for sure, if this one has nicknames.

It’s always fun to make fun of those situations. Where can people find out more about you?

I got an Instagram account. You guys should follow at @Ian.RealEstateAgent. I like to post meme reels but also educational reels as well. Also, a website, IanJimenoDenverAgent.com. I got blog posts, articles, and videos. I’m on YouTube as well, Ian.RealEstateAgent. Come here for the memes, but stay for the education.

I love your taglines. Thank you so much for coming to the show. Go check out Ian and all of his areas where he educates people and he is a pretty funny dude as well. Thanks so much for coming on and it was great having you. We will see you next time.

Thank you so much. I enjoyed it.

If you’re thinking about becoming a real estate agent like us, you might want to go to Kaplan. That’s where I got my license and I found that they made all those really dull information interesting and very memorable. If you’re looking at getting your license, see if they have your state. They cover a lot of states but not all of them. If you want to get a little discount, here’s our code INVEST2. Thanks, guys.

That was Ian Jimeno. Z, what did you think of Ian?

He is cool. I met him once and he’s super nice. I loved his creative ideas. It was so cool how he’s house hacking in San Diego, where people would say, “You totally can’t house hack,” and then he transitioned to a cheaper house hack, so instead of $2,700, he was paying $1,500, which is awesome, and making the ultimate sacrifice of living with his parents with his wife, crazy. Now, living a basement and loving life. He’s excited about those basements.

He has got crazy positive energy, which I love. It’s infectious. It’s hard to be done talking with Ian and being in a bad mood. He’s got such a positive outlook on life. He’s made the best. You need that mentality when you’re house hacking because oftentimes, you’re not living in the best situations, but you got to know that it’s the short-term sacrifice for the long-term gain. He has seen that. He’s made very calculated decisions. He’s some great properties in Denver and one in San Diego. He’s going to continue to grow and I’m excited to continue to follow along in his journey.

I believe it.

That about wraps it up. For those reading, if you haven’t already, please leave us a rating and review on iTunes and let us know when you did shoot us a message on Instagram. We totally appreciate it. Thank you, guys, all so much for reading all the way to the end.

A little bitty plug if you guys were excited about Airbnb investing as Ian did. You can see how much power and money can be made in Airbnb investing. I have a Facebook group. Check it out. It’s called Airbnb Investing, and so we’ll see you there.

We will see you all. Thank you so much, Z. Join that Facebook group. Leave us a rating and review, share this episode with your friends if you liked it, and we’ll see you all next time.

 

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About Ian Jimeno

ITF 92 | House HackingIan was born and raised in San Diego, California, where many believe that it’s too expensive to buy real estate. By serendipitous chance, Ian stumbled upon a real estate seminar where the real estate agent was talking about a concept called “house hacking”. Intrigued, Ian worked with the agent and bought his first property: a duplex in the heart of San Diego, west of North Park. He lived in one of the units, rented out a room in the same unit, and rented out the other unit; AKA House Hacked.

After becoming comfortable with the numbers and analytical portions of real estate, Ian found the asset class to be very forgiving, especially when you start from house hacking. He partnered with his dad and bought a single-family property in San Antonio, Texas, and also invested as a limited partner in a multifamily syndication in Austin, Texas. Back in 2020 during COVID, Ian and his wife moved to Parker and are currently house hacking in the Parker area.

Through the growing pains of learning how to become a successful landlord and business-owner, Ian has found real estate to be an incredible investment, especially after seeing the price of his duplex in San Diego increase $200,000 over 2 years, along with all the tax benefits and control you have over the asset! Ian wants to clear the murky waters and educate the masses before they invest in real estate. He can’t wait to get others invested in real estate and increase their wealth through the power of tax savings, loan paydown, potential cash flow, and hedging against inflation!