ITF 95 | Real Estate Market

If you are new to real estate, it’s important to know where to start. Choose your real estate market wisely and go take action. You want a location that’s affordable and familiar. Maybe, you already have a few contacts in there. Just always pick the easy route, especially if you are new. Once you get all those things done, then you can start house hacking and find more ways to earn money. Join Craig Curelop as he talks to Sean Allen about how he went from nothing to a million dollars in real estate. Sean is a Managing Partner at DAS Estates LLC and is the owner of Sean’s Resume Shop where he coaches people on their careers. Sean also helps clients with their first, second, or next real estate investment with his Real Goal Setter platform. Find out Sean found out about real estate and what market he started in. Learn his house hack strategy that he and his business partner are using to reach financial freedom. Get your freedom with real estate today!

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A Good Real Estate Market Is Your Path To Wealth With Sean Allen

I have the privilege of interviewing an amazing guest in this episode by the name of Sean Allen and hanging out with all of you readers. What is new with my life? We are recording this just after the 4th of July 2022. We had a wedding party back home for all of my Massachusetts friends and family that I grew up with and then had a fun time down the beach for the 4th of July, which is a tradition in my family.

If you don’t know anything about me or my family, the 4th of July for us is like Thanksgiving for everybody elsewhere. We don’t care that much about Thanksgiving. I rarely go home for Thanksgiving but on the 4th of July, I try never to miss it because it’s pretty special, and my family. That’s a little update on my life and what I have been doing if anyone is interested.

What’s even more interesting is our guest in this episode, Sean Allen, who has been on a similar journey as me, even though we just met. He’s got some successful out-of-state investments in North Carolina. He’s got some successful house hacks in an expensive area. He’s doing it with a partner, and it’s interesting to see his entire story and how it all lays out, and the success that he’s had. Let’s bring him on the show.

Sean Allen, welcome to the show, my friend. How are you doing?

I’m doing great. It’s good to see you, Craig.

It’s good to see you too. I hear and see that you are doing big and bad things. I can’t wait to dig into it but why don’t we take it way back to where it all started. When did you first hear about financial independence?

The first time I heard about financial independence, I read a book called Rich Dad Poor Dad. It was August 25th, 2010. Anyone can read it. It’s good for a 10 or 11-year-old to read. I didn’t read it until about 22, and the author, Robert, talks about his rich dad and his poor dad as examples. That was my first real introduction to this whole thing of financial independence.

I know a lot of people have started out with that book. In August of 2010, you are 22. Did you just get out of college at that time?

Yes. I got out of college with a Civil Engineering degree. I was stepping foot into my first class in business school.

You are starting off with that corporate mindset and going to college for four years, about to go to business school for another two years or whatever. Did something change right then and there in August of 2010 or did it take a couple of years?

It did.

You took action right away. What happened?

ITF 95 | Real Estate Market
Real Estate Market: When you’re getting started in real estate, pick an easy market. Go to an affordable area where you’re comfortable. A place where you already have a network of realtors and contractors.

I’m like, “I need to start a business.” The only thing I thought I could do was public speaking. I started a company called First Impression Speak Forever and created signs on 18×24 little foam boards. I put them all throughout town and started getting phone calls. What I found out was I didn’t have anything to say to anyone who wanted to hear. I didn’t do much public speaking at that time but at least I took the first leap in establishing the business and what that looks like.

You put up the signs. You didn’t say anything that anyone wanted to hear. What do you mean by that?

I put public speaking and then my phone number, and then people called. On the same day, people would call and say, “I’m a public speaker. I’m interested. Are you guys hiring?” I’m like, “No. I’m a public speaker. I’m trying to get hired to speak.” They are like, “I will send my resume anyway.” They sent me the resume, and I realized that their resume was horrible. I would say, “I could help you with your resume.” That was the beginning of my first business, which was later started as Sean’s Resume Shop, where I have helped over 350 clients with resumes and career coaching. That all came from reading that book, and he talks about, “Business is the quickest way to move your ship. Real estate is the most common way to wealth.”

Isn’t that funny how you started your business? It’s like the Post-it Notes. People started there. It was a total mistake. They got some tape on the back of a piece of paper and, “This makes a lot of sense.” You started a resume shop because you had a bunch of people apply for your job that never even existed, and they had horrible resumes. For some reason, did your college train you to have good resumes or how come yours is so good?

In college, I had a knack for helping out undergrad students with professional development, “What are you going to do after college? What are you going to do with your life?” I had that need to give back. When the resume came in, I went into autopilot. I was like, “I can work with this.” At first, I only charged $30 or something. After I worked with about ten clients in the first couple of months, I was like, “I’m enjoying doing this but this can bring in some income while I’m here in graduate school.” I gave it a shot.

That was a side also for you. Was it just a one-man show, and you did 350 and then decided it was done or did you end up hiring employees and scaling?

It was a one-man show for the first two years. In 2013, I started to bring in some consultants. A couple of my friends were looking for work and I was like, “I need some help with my client instinct. You are going to call. Here are the questions and the script. Every resume, you gloss over at first, and I will do the final edits. I had three contractors that I brought on in a span of a couple of years. I still do the resume writing, and I’m certified now. I’m certified in career coaching. We will talk about how I transitioned that into real estate coaching.

You start this business basically by accident. You start to scale it. You start to get some momentum. It’s definitely a thing. As an employer, I’ve seen a lot of bad resumes. I’ve seen my friends from different schools send me their resumes and I’m like, “What in God’s name? Did you just throw together a word document and like, “What?” In 2013, you got three people. What does that look like from a business perspective? What was your revenue? What were your margins? Is that profitable?

When I started, my expenses were very low because I spent about $40 on the signs. I put about 22 signs out, and some of them are probably still out there. I still get calls from a New York number. They are like, “Do you do resumes?” I’m like, “Yes.” My cost is very low. It was a service-based business. I did not have a website. I did not have anything. Everything I made was pretty much profit. To fast forward throughout those years, 2015 was probably my best year where I would spend about three hours per client. In one month, I did about twenty clients. Thanks to LinkedIn, Groupon, Facebook marketing, yellow pages, Yelp Business, and Yelp Regular. That year, I grossed $22,000 just for doing resumes.

Was that just a side hustle for you?

Yeah. I was a full-time engineer at that time in a community. I was exercising and having a social life. Anything else that any other 24, 25-year-old were doing but that was how I spent about 10, 15 hours a week on that side business.

You started off putting the signs out, and that was your marketing. You then got into the 21st century and started doing Facebook and all that. How much were you spending on those ads?

Your career and where you live are two of the most important things. They determine your standard of living. Click To Tweet

When I started, I was with traditional folks. I hired a resume writer in 2010 when I went back to school, and I didn’t like the interface. I didn’t like how they send you a questionnaire and type in everything and then, “Voila. There’s your resume.” It was very non-social, so I wanted to try the traditional approach. When it came to marketing, it was one of my strategies. I was like, “You are going to work directly with me.” It’s not going to be some robot somewhere in a different country.

I wanted the clients to come to me. I paid Yelp $400 per month. Yelp had marketing research that said, “For every dollar you spend on cost-per-click advertising, we will send you $4.” That’s exactly what happened. I would spend $400 on the advertising, and they would send me about $1,400 worth of gross business. It was about $1,100 profit with Yelp Marketing which was my best form of marketing.

I’ve never heard of anybody using Yelp Marketing. That’s interesting. That works.

If you’ve even gone on Yelp before and you’ve ever requested a quote from a plumber, electrician or writer, what happens is you will get paid to pay pages first. Those pages sponsor ads, and then sometimes, with a sponsored ad, you could remove competitors. If you say, “I want a plumber. I found Craig Plumbing. Let’s go there. Here are five others. Do you want to get quotes from these two?”

As a paid customer, you can remove those, and that’s what helped me because there is a decent amount of resume writers in any radius. There is career counseling, coaches and consultants, writers and editors. Me, I had that great neck when I was in Downey, California. I submitted it and got clients. It was very good. It was the best form of marketing to take the credits back to $6 or $7.

In your pitch and the thing that makes you different is that the client’s got to work directly with you versus a robot. Now, I know that in business, you really want to remove yourself from the business but you have pigeonholed yourself there. Did you get out of that?

Yes. That’s why we are talking because now I have @SeanTheRealGoalSetter. That’s on TikTok. That’s my handle but more importantly, I’m about to focus on how we help potential investors, current investors or homeowners become homeowners. There’s a way to do that. I pick up the phone and say, “Let’s talk through it.” There’s a way we can use technology via eBooks, courses, and other means like webinars and seminars. That’s how the business has transitioned over the past two years since 2021.

I can help them with the resume by focusing on a client who is like, “I want to buy a house. How do I do it?” “I got a ten-step plan for you. I’ve got a twelve-month plan for you. I got some videos for you. I got some cool TikToks. I got some dance moves. Whatever you need to be able to get that real estate investment.” I can work with them on it and not take the more traditional approach where it’s picking up the phone and talking about it.

I love that approach to real estate. It seems like not the smoothest transition. Can you explain how you went from building resumes to helping people in real estate?

Sean’s Resume Shop started in October 2013. I bought my first property in December of 2013. I didn’t know what I was doing. We can talk about the hurdles of a short sale. It was out of state. It took six months to close but that was the first property I bought. Fast forward, 5, 6 years later, in 2017 and 2018, I became more of a house hacking expert. I bought it. I lived in a part of the house and rented it out.

Meanwhile, I’m still doing the resumes on the side but live-in landlord and managing. Grown people who may act like kids sometimes but I’m doing resumes and working full-time while trying to exercise, have a good time, and spend time with family. The transition happened because my time was limited. I’m putting in 70-hour work weeks. I got to pull back on the fifteen hours of resumes and start to add maybe five hours on real estate. That’s when that transition started to happen.

I was like, “Let me do less of the resumes of the traditional phone call approach. Let me focus on how I coach clients through career development along with real estate because they go hand in hand. Your career and where you live are two of the most important things. It determines school districts and your standard of living. That’s what our transition started happening in 2018. I got a license to sell real estate in California in 2017. Now. I can start working with clients and help them buy and sell properties on the side. I had my investing and career coaching experience. That’s all mashed together.

ITF 95 | Real Estate Market
Real Estate Market: After you get the property appraised, you want to do all your inspections. Because once you get that property, if you find a dead body in the basement, that is your dead body now.

You said it right. You took the two side hustles you had and you were like, “I know I’m not making as much with the resume stuff as I potentially could with real estate. I’m probably spending more time on resumes than I would real estate.” You are teaching people how to build a resume instead of that, you are taking the same skills that you have and teaching people how to do real estate.

This is a real estate show. Everybody who reads knows that it’s one of the best ways. This is a big house hacking show too. Funny enough, we have similar stories where I started house hacking in 2017 too, and did the whole rent-by-the-room thing and all that good stuff. Now we were in 2017, and you’ve got a couple of rental properties now. I want to go back to 2013 real quick. I want to talk about your first deal. On this show, we’ve got the For Real Deal, and that is the first deal that you’ve done intentionally as a real estate investor. If you remember the numbers, we would love to dive in and see what those are.

I do remember the numbers, yes. I have all the numbers. I’ve got dates for you and all kinds of good stuff.

Let’s get into that first one.

We will start in early 2013. I’m sitting in an office as an engineer. I’m talking to my coworker, who became friends and roommates, and we started investing in stock markets together. We didn’t do so well in the stock market. It wasn’t our thing but we vibed on real estate. He said, “Maybe we should do some real estate together?” I said, “Where do we do it?” He was from Chicago. I’m from North Carolina. He said, “What do you think about the Chicago market?” I said, “What do I think about the North Carolina market?”

Long story short, after about 10 meetings spread out over 10 months, we decided, “Let’s go to an area that’s affordable, that we are comfortable with, and we already have a network of realtors, contractors or whatever we need.” We decided on North Carolina, and since it’s in the South, it was a little bit more affordable than $500,000 from a property in California. We said, “How about $70,000? Is that doable?” I was like, “We could get a condo for $70,000 in North Carolina. We can split it 50/50, which means we need 20% down off some of that $70,000. You do the math. That’s $14,000. That is $7,000 from me and $7,000 from him. We said, “This could actually work. Let’s plan a trip to North Carolina.”

You got a partner, and it always helps you like that whole saying, “If you want to go fast, go alone. If you want to go far, partner up,” so you found a partner. Where in North Carolina did you look?

Greensboro, North Carolina, is where my school for undergrad so that’s where we are starting.

That’s where all your connections are. You said something there too. When you try to invest out of state, it’s hard to pick a market because you have every single market in the country at your fingertips. It’s like, “Which one do you pick,” but you went with easy. I tell everybody, “Go with easy. Go where you know people, where you’ve got contractors and property managers and real estate agents.” If you’ve got your network, just move forward there because there are deals in every market.

The market you pick is not that important. It’s more important that you take action and move forward. You are in Greensboro, North Carolina. You are buying this first property for $70,000. You and your buddy are splitting it and putting $14,000 total with $7,000 each into it as a down payment. Did you have to do any renovations to it or was it all fixed up?

We will take a step back because it was a little bit more difficult than that. We said, “$70,000 is what we are looking at.” We talked to our listing agent. We said, “Can you find us a property for 70,000?” “Sure.” He found three. There were 2-bedroom, 2-bathroom condos. None of them needed any work but then there was one that popped on the market. It was built in 2006. It was tagged as a short sale. I didn’t know what a short sale was but I knew that in May 2007, it sold for $90,000.

It was on the market for $51,000. I was like, “Something is going on. We like this.” That’s the one that we pursued. We made our offer on August 1st, 2013, and that started the process of purchasing our first investment property out of state. It was a short sale, and we live in California and North Carolina. It was the first one to do this as a partner together.

ITF 95 | Real Estate Market
Real Estate Market: If you have a partner, you can split the price and buy a three-bedroom house, live in one, and rent the other two. If you do that you’ll have a place to live while you get to house hack.

That’s a lot to get into in your first one. Can you describe what a short sale is and what makes it so difficult to get one of those?

A short sale is, as we know, they will say the market goes up and down. Everyone might be talking about buying in a dip, waiting for the crash or whatever. A property appreciates and depreciates but is not making any more land, so we are looking at the long trend. A short sale happens when let’s say, there is a certain market that is going up and down, and someone happens to buy it when it is on its way up.

This person bought it, and they may have taken out another mortgage. They may have taken a line of credit out of the equity. Let’s say, “I bought it for $60,000 but it’s now worth $90,000, so I’m going to borrow that $20,000 to pay some bills, buy a boat or whatever. Now, the mortgage is $50,000, and you have a second mortgage that’s another $20,000 because it’s worth $90,000.

When the market might come down a little bit, and other properties that were similar were selling for $50,000 when this house was listed, if they were to sell the house for $50,000, it would be short for paying off the total amount of mortgages, which is somewhere around $70,000 to $75,000. That person needed to sell because they had another job opportunity where they needed 30 days to leave, so they had to sell it. If they were to wait, maybe we would clean up the gutter.

That qualified as a short sale. What makes it difficult is now you’ve got all the people in the mix, and that is the bank. It has to be approved in both states. The bank has to approve to sell because someone is going to miss this out. Are they going to waive some of that mortgage, those liens, those bills not paid or are they going to play with the price? There’s a little bit more involvement than just the buyer and the seller when it comes to short sales.

In short, you are selling the house for less than what you owe on it, and you have to get a bank now to approve that sale because they are losing money on it. That’s where the obstacles come in. In 2013, there were probably a lot of those because we were fresh out of the 2008 and 2009 crashes. You bought it for $51,000 and not $70,000.

That’s correct. We offered $58,000, and after about two months of waiting, I was like, “What’s going to happen?” Everyone was like, “You are buying your first house.” “I think so. I don’t know.” After two months of waiting, $58,000 and we had to do everything else. We had to do a home inspection. We had to get some type of appraisal. In North Carolina, you need to do a radon inspection. We had to do the full loan approval.

What happened is the negotiation happened, and we settled on $51,000. We wondered, “Are we going to be responsible for these bills that aren’t paid?” The home was in default, and we got approval from the bank saying, “No, you are going to buy the property as is.” There were a couple of changes at the last minute. The appraisal came in ten days before we were supposed to close in October. We made the offer on August 1st, and it was $58,000 down by $51,000. The appraisal comes in at $53,000. He said, “$53,000, you get. You guys are ready to close.” That was October. We didn’t close in October. We didn’t close in November but on December 23rd.

I was excited. We were blessed with our first property. It was purchased for $53,000. It’s a 2 bedroom, 2 bathroom. It needed no renovations. I drove by with my parents. We walked in and I was like, “I can live here.” We got a property management company, and within a couple of months, the contract was signed, and we still own that profit to this day.

There is a lot of unpacking there. You bought this property for $53,000. What took it so long? What were some of the implications because you don’t hear too much about that when people are buying houses?

Since it was a short sale, we had to wait at the bank. Off the bat, it was a two-month wait. It wasn’t until October that it said, “This is a bank-approved short sale. You can continue with the process.” There are some fees that you incur while you are buying a property. You have to lock in an interest rate for a certain amount of time. You have 45 days, and every time that you extend it, especially if the rate is going up, you, as a buyer, are going to be paying for that.

That was difficult, and then the appraisal. That’s only $550 but that’s still money out the door. Why pay for an appraiser to estimate the value of the property when you don’t even know if it’s going to be accepted by the bank or if you are going even to get close to closing. We had to push the appraisal a little bit and wait for the right time.

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Finally, we got the bank approval in October. We got the property appraised. We paid for the bug inspection. We paid for a radon inspection. We paid for a home inspection. We are talking $1,500 at this point. This is typical stuff as a buyer. You want to do all your inspections because once you get that property if you find a dead body in the basement, it’s now your dead body that you have to deal with. We did all that. I’m talking October and November so that hopefully, by Thanksgiving, we are ready to close, and everything is good.

You said something there too that I liked that I’ve learned my lesson with is pay for your inspections. Don’t be cheap on inspections. I vowed now that I will do a full inspection every single time with the sewer scope, structural and radon, all of that stuff. I don’t care if I’m paying $2,000 for inspections because that will save you. I had a deal that blew up in my face with structural issues. I looked over the small crack near the window, and it ended up being a huge expense that I had to offload the property.

Do your inspections. That is a good form of advice. You closed on this thing on December 23rd. You found a bank to give you a loan because I know that’s a really small loan. You are talking about $40,000-ish. I know that banks oftentimes have minimum spends or minimum loan amounts. Did you find one that does $40,000 loans?

Yes. It was Bank of America. The reason why Bank of America was great with this is that it was a conventional loan. It was 20% down. This was not a, “I barely have enough for 3.5%.” We got some skin in the game. We got 20% and they also said, “There are two business partners. We are going to do a credit check on both of you. We are going to check your debt-to-income ratio both of you. That way, if Sean can’t afford this property, we are coming after David Shea on this because now we have two on the record.” That’s why this was easy. They were like, “We will take 20% in. They got two partners. They got income and some expenses. They are both on the mortgage under D.” They were happy. It was very easy once it was bank-approved. They stepped away and said, “We are looking forward to closing with you.”

What was your monthly payment on that thing?

Our monthly payment started at $340 a month.

Did you have HOA or anything like that or is that included?

We had $40 HOA. We were spending $380 and hired a property management company in North Carolina. They charged 10%. It was another $35 or so. Our monthly expenses are about $425 per month. We hired a property management company in January. It took him about 1 month or 2 then to do contracting and get the listing up. On February 1st, we had it on the market, and on March 14th, I will never forget. Did you ever hear a side note that people get their first paycheck? Do they get the dollar or the check framed to put it up somewhere?

Yeah.

We did that. We got our first rent check, and that was March 15th, 2014. That was $820. We are about $290 cashflow. We are paying $420 for a mortgage, interest, taxes, and HOA. $420 minus $820, it was about $300 profit.

You probably set some aside for expenses and all that kind of stuff too.

If you look at it yearly, it’s not a lot of money. A $300 a month profit is $3,600 per year. We set aside that $3,600 per year, and you factor in 20% vacancy adding in another $700 or more like $1,000 or $1,400 lost rent for maybe two months that if they move out the following year and it will take 1 month to 2 months to turn around. We factored that, and luckily, in the first four years, the tenant stayed for three years. The next tenant came right in, and they stayed for about two years but we also did not have any major expenses over $100 each year for that property.

ITF 95 | Real Estate Market
Real Estate Market: Look for markets where you can buy a primary residence legally. It needs to also be somewhat close to your primary work location. And lastly, it has to be a market that can get positive rental income and cash flow.

That’s some of the upsides of getting a condo. There are oftentimes the big expenses taken care of by the HOA like the roof or the siding. There is a lot of exterior stuff. You are paying the HOA fee, obviously but it comes out of that. You are making $300 a month. Mind you, this is a $70,000 property. You are getting the 1% Rule and the 50% Rule. You are checking all the boxes that are all of the rules of thumb for 2014, and you hit them. How do you scale your real estate from there? What happens after that? You see the magic of real estate. You will probably get addicted, and then you are buying and buying.

That’s how it works. You get the real estate bug, start itching a little thing and you are like, “I want to get another one. Let’s go.”

It’s a disease for sure. We’ve got to think of a disease name for that like real estate-itis or something.

We were like, “We want to buy one every year.” I don’t know if that was realistic but we said, “Let’s give it a shot.” It’s a rinse and repeat. We went out again in 2015. In 2014, we rent it. In 2015, we went again and asked, “Can we find another property for $60,000 or less?” The answer was yes. There were three on the market. Long story short, we found another condo that we purchased. This one was great. It was brand new.

We walked in, and there were not even walls, just chords and metal hanging down. They had this offer where it’s like, “You can buy it and live in it or put 25% down as an investor.” You can have it for $61,000 for a 2 bedroom, 2 and a half bathroom condo with $80 HOA fees. We said, “Let’s do it.” We made an offer, and now it’s the second property also in Greensboro, North Carolina. We got it for $61,000. The mortgage is $350 per month, and the rent was about the same. Now, we have two properties that are cashflowed about $300 a month.

It sounds like you had to do a little bit of work to the second one if there was stuff hanging.

The second one was brand new construction.

When you looked at it, stuff was hanging but by the time you bought it, it was all set.

It was clean. I can eat my dinner off the floors, Craig.

Did you have to eat your dinner off those floors at all?

No, because we never saw it totally cleaned. We made an offer. Do you know what they call a dry close?

Yeah.

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In North Carolina, you need a real estate law company. They do all the transactions. In states like California, you have an escrow company, and they do everything. In North Carolina, we went there, and we looked at it. In July, we made an offer. In August, we closed, and we signed the paper. We have a picture of us singing paper, and we were like, “I guess we own it. I don’t know.” Our agent is up in two days. He’s like, “You can go on in Guilford County NorthCarolina.com. You type in your names, and you will see the owner of Swan Haven Lane in Greensboro, North Carolina.

Now, you’ve got two properties there. They are each cashflowing $300 a month. This is the magic of the cheaper markets. You get a smaller cashflow per month. It’s a little bit less bang for your buck for each deal but you are able to scoop up lots of deals. You can easily be able to pick up 2 in 2 years. Was that in 2015?

Yes. That was a property that we got in 2014 because this one was a little bit different. This one was our first-time house hacking. We did follow the investment strategy that we planned out. What happened was my business partner said, “I want to go back home. My family is in Chicago. I want to work.” My rent was $1,600 in 2012, then it was $1,500 in 2013, and in 2014, it was $800 because that was when we became roommates. I was cutting my costs. I was like, “I don’t want to go back to renting by myself. If I’m going to go back to drop in $1,600, I’m spending that extra money in Vegas having a good time.”

What I said was, “How about I buy a house, and we treat it as part of the business.” We put in the offer and split everything 50/50. We find a 3-bedroom and 2-bathroom. I live in one room, and we rent out the two. He said, “Yeah. That’s cool. Let’s do it.” Let’s put in an agreement. We will split like everything else, with only me on the mortgage. The other ones, it was two of us. We split and went in there. We closed in May of 2014 on a 3-bedroom, 2-bathroom property in Los Angeles, about 35 minutes from my job.

I lived in a room, did the numbers and said, “Our mortgage is $1,800. Let’s rent out two of the rooms at $900 each, and let’s include utilities. I will live in one room for free but I will pay you $300 a month.” We gave it a shot, and I did that for about nine months while we looked at another property in North Carolina. We brought that little later. I had a place to live, and now we were treating it as part of this agreement.

That was part of DAS Estates, LLC. That’s the name of our real estate company. That was the first property that we purchased that I lived in, and I managed it myself. Before, the other property was managed by property management. The next we got is property management it myself. I lived in it, and we started doing rooms for rent. That was the beginning of learning about house hacking.

What did you buy that property for in California?

We bought that for $262,000.

These are still different times where you are not buying properties that cheap but don’t let the times detract you from buying a property. When I was buying my first property in 2017, and you may think the same way when you were buying yours, “Holy crap. This is expensive. Three years ago, it was half this price.” I had a buddy that bought a duplex right next to mine three years prior for $110,000 less than I. I was like, “I’m getting so screwed here,” but now my property is worth double.

You are going to have the same feeling that is going to happen. It may not be the same time. The last few years have been good but maybe in the next 7 or 10 years, you are like, “I’m glad I bought then because if you buy years from now, it’s going to be a lot worse.” There’s never a bad time to get into real estate, if you want to ask me, as long as you are buying for cashflow and into buy and holds.

We set our budget for $300,000. We are like, “How much can we afford? 5% of $300,000 is $15,000. That’s $7,500 each.” We made a mistake, Craig, because we went to a property that was $330,000 but it needed $15,000 to $20,000 work but it was ten minutes away from Inglewood. We passed on that one. We don’t regret the other one we got but the property that we did look at that was out of our budget, that went double, and now it’s worth about $750,000 because of the SoFi Stadium, the Rams Stadium, was ten minutes down the street. It kicked us off a little bit but as you said, it’s the same thing.

In February of the previous year, the owner bought that property for $120,000, and he put about $80,000 into it. He was $200,000. He sold it to us for $262,000. He made $62,000 in a matter of about six months. If you get a look at those numbers in Zillow or HotPads, they give you those prices too. You are going to see that it’s going to hurt your feelings but don’t let that discourage you because if you buy something for $262,000, you never know what it will be worth later on.

ITF 95 | Real Estate Market
Real Estate Market: When going into real estate, keep listening to podcasts, read books, and network. Don’t shy away from the huge sticker price. Real estate is the largest purchase of your life and it should be special.

Another tidbit is we get our properties licensed and officially appraised every 3 to 4 years instead of just trusting Zillow because even the Zillow CEO has said the algorithm is not 100% correct. That gives us a level of confidence to know the appreciation rate and how our properties are performing from a cashflow perspective and adding more value.

It sounds like you are looking at a return on equity. Do you look at that number at all?

Yes.

The only reason to get an appraisal is to understand what the value is so you can say, “What is this cashflow based on the equity, and can I take some equity out?” Have you done anything with your portfolio to scale even further like refinanced or HELOC or anything like that?

We have not done HELOCs. We have done refinancing a couple of times. We’ve done a couple of occupancy changes. I have not leveraged out of the equity just yet. That started with a $262,000 property. We had it appraised in November of 2021. It appraised at $530,000. It did, and they are already doubled. We are sitting on $287,000 equity in that property. In Greensboro, we have three condos.

We have the equity. We haven’t leveraged against the equity just yet, but it puts us in a position where if we want to, we can. More importantly, we also know that the strategy has worked with the cashflow on it, and we are getting appreciation. Not every market can do that. A lot of times in the South, you will get great cashflow but you won’t see 20% or 25% appreciation year-over-year.

I love that you are playing in both fields. I do the same thing, and it’s funny, I’ve got properties in North Carolina and Denver. In North Carolina, that’s straight cashflow play. I don’t care if that ever gets a dime of appreciation. That’s my Steady Eddy but you want to put your money into something that will appreciate too. In LA, it sounds like you’re getting both cashflow and appreciation. In almost every single market in the United States, you can get cashflow and appreciation. You just have to get a little bit more creative at these times. What does your portfolio look like now in 2022?

A lot of mortgages. We have over $1 million of mortgages.

“You are over $1 million in debt. What do you ever going to do?”

“$1.2 million.” It’s like, “Really?” “Of debts.” We purchased 7 properties of which were 4 condos, 1 duplex, and 2 single-family residentials. I still am a first-time home seller. I don’t know if that’s a term but I sold one of my first properties. We can talk about that. That’s another day I want to cover the details because that one was a little bit more modern times. That was a short-term rental with Airbnb, Vrbo, and all that. We can talk about that next but that one I bought and sold. Now, there are six properties. Three condos are in North Carolina, 1-single family in Los Angeles County, 1 condo in Orange County, and 1 duplex and San Bernardino County, California.

You are splitting between that Southern California area and North Carolina. Is your partner Mr. Shea still on all these deals with you?

We have three of the condos together as part of the business in North Carolina that he’s actively involved in and one of the single-family houses in Los Angeles County that is part of the business. The one then Anaheim, Orange County, I purchased on my own in 2018. The one that I sold, I bought that near Palm Springs. Shout out to Coachella. I bought that one in 2016 and sold it in 2021. I got the one that I bought in November of 2020, and that’s the duplex in San Bernardino. I have two properties myself, and then together, we have the four.

ITF 95 | Real Estate Market
Rich Dad Poor Dad: What The Rich Teach Their Kids About Money That The Poor And Middle Class Do Not!

I love the San Bernardino market and that Inland Empire Market. We are going to be expanding our team down that way too. Hint to anybody looking for house hacks in the real estate market hit us up. What made you pick these different markets? LA because you live there but why San Bernardino and Orange County?

Where you work is important because not only does it determine your transportation if you are going to live on a property. We did house hacking with primary residences. I lived in the LA house for four years until I bought another property as a primary residence in Anaheim, which is fifteen minutes away from my job. I wanted to look for markets where I can buy a primary residence legally that a bank would give me a loan, as well as that, are somewhat close to my primary work location. I work in an office.

Thirdly, it has to fit the numbers, and it has to be a market that I believe we can get rental income and cashflow positive. Those are the criteria, and I have had property in four different counties in California, and each offered different benefits. If you are close to Coachella, you are going to bring in a lot of party goers across the world. That’s probably a short-term rental.

If I did traditional rentals on that property, I would barely be able to cover a lot. Lastly, San Bernardino, the Inland Empire, it’s a way more affordable area than most. It’s out there with people who are okay with maybe not being right around the Metropolitan area. If they want to be on the outskirts, it’s a perfect option for them to be tenants. I will do a room for rent for that one as well. Those are the three criteria that I looked at and why I would choose those areas that are somewhat close to work, affordable, and the market matches strategy.

Proximity to work and your lifestyle is also super helpful, and if it works for you, it’s probably going to work for a lot of different other people as well. I don’t think you are special in that, “You are working a civil engineering job, and you want a cheap place to live.” There are a lot of people like that and are going to want the same exact thing that you want. You are now the landlord trying to put in value versus being the tenant. You started this journey in 2013. It sounds like you’ve built up quite the portfolio. Where is your passive income now? Have you hit that financial independence market? It sounds like you are pretty darn close, at least.

I’m getting close. We have 4 properties in the business, and then I have 2 properties on my own. The passive income on the business side is about $1,700 per month. We got the three condos, and then we have the property in LA. $1,700 on the business side, and with my two properties, I’m cashflowing about $900 per month per property. That’s about $1,800 passive income as well. That’s now, and I do have 1 vacancy because I have 2 rooms for rent and a duplex. There’s one vacancy that I have been trying to fill since March.

With that vacancy, I’m renting it now for $1,350 on one of the rooms. I want to bring in another $1,300 on this other room. When I bring that, that will go through directly to me. That will be an additional $1,300 added into the $1,800 cashflow or so. My freedom number is $3,500 per month. I’m not quite there but when this next income comes in, I will be probably a couple of hundred dollars shy of that.

You are keeping your expenses low, which is not something we talked too much about but through house hacking, I take it that you don’t drive like a Mercedes or anything like that, and you are a little bit more mindful. Is there anything you do in particular to keep your expenses low?

I got a whole checklist of things. I made some financial mistakes in my future but we are not going to talk about that now. We are going to talk about that the next time. I’m going to tell you some of the good things. I have never had a car note. My car is cash money only. Cash is king. The first car I got was when I was in high school as a junior with the help of my parents. My dad said, “Drive that car until it’s ten years old.” I was like, “Dad, you are crazy. No one does that.” Fourteen years later, he is like, “Sean, you need to get a new car. We are scared. It’s unsafe.” “It’s 40,000 miles, dad. That’s 340,000.” It went from 4 cylinders to 2 cylinders but guess what, Craig, I had a vehicle I could rely on to get from A to B that had been paid off for ten years. I’ve just had to pay for gas and insurance.

I can see that trend, so I bought a car in 2019. I went to an auction. I got it for $4,000. I got a Honda Genesis 2012. Again, if you can keep your expenses low, it allows you to free up more capital for savings and investments. I had no car note but I had $50,000 in school loan debt when I graduated from grad school in 2011. I paid $550 a month for six years. I didn’t like it because it’s only $225 per month plus the principal interest. I said, “I need a specific plan to pay these off. I paid it all off in 2016, but then I racked up $34,000 of credit card debt.

I paid it off on my 30th birthday on December 5th, 2018. I paid off all equivalents. I have no credit. I’m living for free and have no car note. Am I financially independent? I still travel. I still have a full-blown fiancée, and we like to do things together. My most expensive expenses like lodging and transportation or covered by the residual income from the rent.

That’s super important. You need to get those baselines covered first. Robert Kiyosaki talks about this and we talked about this too, where it’s like, “Let’s get your pace on financial independence, and then you start introducing leisure into your life like travel, vacations, weddings, and wedding rings, all that stuff. This all sounds great. I would love to hear about your success in all of that. We are going to head into the final part of our show, which is the final four but before we do, do you have any last words of advice for the audience?

Rich Dad’s CASHFLOW Quadrant: Rich Dad’s Guide To Financial Freedom

Continue reading blogs like this. It’s important to have your mind in the right area, environment, and network. Keep reading blogs like this, read some books, and listen to audiobooks. Talk to your network about real estate. Don’t shy away from the huge sticker price. It is the largest purchase of your life. It should be special. It’s like not buying a pair of shoes.

My advice is to stay in the know, read, listen, talk about it and always plan. Put together goals and continue reaching out to those who are already there where you want to be. Also, work with those who aspire to be what you want to be. To mentor and be a mentee for someone that’s in the area that you want to meet, especially real estate investing or whatever it may be like flips, short sales, foreclosures, tax liens, tax deeds, house hacking, rooms for rent, short-term rentals and all that.

We are heading into the final four. These are the same four questions that we ask everybody, and the first one is, what book are you reading now?

You mentioned one of my favorite authors. I had to go back, and I was going to say Rich Dad Poor Dad. I’m reading a second book. It’s a little bit older than most books. It talks about financial freedom. Have you heard of CASHFLOW Quadrant?

Yeah.

The reason why I’m rereading that now is because it’s important to talk about how do we become billionaires? If you read Rich Dad Poor Dad, it gives you some motivation but it doesn’t tell you how people will become billionaires. What is an asset and what is liability? I was on a journey last year to become a millionaire and hit that on December 19th, 2021. I don’t have any money but I have more than assets minus liabilities. If I have $1.2 million of debt and of mortgage loans, those are the liabilities but if I have $2.2 million of equity, properties, and investments, you do the math. That’s million-dollar net worth. You are now a first-level millionaire. That came from the book CASHFLOW. I was trying to figure out, “How do you do this?”

I focus on not just, “I need to make more money.” How do I invest in things? How do I increase income? How do I get the appreciation? How do I get the asset level up? I have been rereading that book and taking the key on how do you get from employee to business owner or employee to investor, or employee to self-employed where have your own business that you grow into a business that has a process. That’s a great book. I highly recommend it. It’s very easy, use some good visuals, and will challenge how we might have been taught to grow up and build those finances.

That is a classic. I love that book too. It sounds like you reread books multiple times.

Yes, because the first time I did the audiobook, it sounded good but I didn’t realize that there was a full-blown chart that said, “Most millionaires are made by going from self-employed to a business owner.” I didn’t catch that in the audiobook the first time. I’m reading it and highlighting it.

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

The best piece of advice I’ve ever received was the 5PS, Proper Planning Prevents Poor Performance. Have you heard about it before?

I think maybe but I like it.

There is also another version. Proper Planning Prevents Piss Poor Performance.

It’s the 6Ps. Do you have the 7Ps?

I can, but it has a bad word in it I’m not allowed to say. That’s the best advice. I now plan out everything. I have lots of plans. It may not be the best plan but I have a plan for 12 months, 6 months and 3 months. When I say plan, it’s financial plan and budget. What investments I’m looking at for next year? I’m interested in buying a boat and start a chartering business. What’s the plan? Write it out. You got to be written plans. When I got that advice, I was in high school. I looked at it as financial life, but now, I treat almost everything like it’s a project. For my next real estate investment, I have a 12-month plan, 6-month, and 3-month plan. What should I be doing at each stage to line up with the next goal?

Another thing that reminds me of, and it’s the same thing but different words. I heard John Wooden, who is a legendary basketball coach for UCLA. He says, “Failure to prepare is preparing for failure,” and that always stuck with me. I think Benjamin Franklin might’ve said it too. Ben Franklin probably said it first but I heard it first from John Wooden. Question three, what is your why?

My why is so I could spend time with the people I love and care about. That’s the end goal. It’s not about making money. It’s not about being invested in having necessarily all these multiple streams of income. It’s so that way you could be financially free, financially independent. What does that mean? The why is my vision to I wake up in the morning and I could go to my daughter’s dance recital. I could go to my daughter’s sports game or my son’s this or that. I might have seven streams of income. I have the ability to spend time to travel and spend time with them. That’s the why.

As we might’ve said before, real estate is the most common way to wealth. A small business is the fastest way to wealth because if you work both sides of those angles slowly, especially if now with a great career that you enjoy, the new skills and networking. You collaborate with others and other people who are like-minded. It makes life better. The why is to get to that ultimate point where I can spend time with family and friends. The money comes in and funds a lifestyle that we appreciate and love very much.

The final question, are you afraid of horror movies?

No. I enjoy horror movies. I get scared very easily but I grew up as a sci-fi person. Shout-out to Twilight Zone, Outer Limits, and X-Files more into the 2000s like the Screams, the Saws and the Friday the 13th, and The Blair Witch Project. It goes on and on.

I grew up loving horror movies. My wife now doesn’t like them, so I don’t watch them too much anymore. If I watch it, I would probably get super scared and not be able to sleep. It’s a learned trait, and you definitely can lose it if you don’t use it. Sean, where can people find out more about you?

She’s like, “You got to get on TikTok. On January 1st, 2022, I started posting on TikTok every day. Find me @SeanTheRealGoalSetter on TikTok. I do everything from fitness, traveling, and real estate. You can DM me. You can set up Linktree and do all that. I’m on Linked @SeanMAllenPMP.

Thank you so much for coming to the show. Give Sean a follow-up and some love. If you liked this episode, reach out to him or me. Let us know how everything went.  Sean, thanks so much for coming on again. We will talk soon.

That was Sean Allen. I liked Sean. He seemed like a cool down to earth guy that’s super relatable. Anybody can do exactly what he did. Go find some cheaper properties out of state where you know people. Start investing there simultaneously while house hacking in your current market, especially if it’s a more expensive market. He’s from LA so he’s going into the LA area but I know people in Denver are doing this in Seattle and a bunch of other great areas as well.

Wherever you find yourself, take a look and see if you can potentially buy a house hack. Even if you are in an expensive area like San Francisco or New York, I bet you there’s a location within an hour of where you live where you could easily get some house hacks. Ask yourself, how can you replicate exactly what Sean is doing? It’s super relatable. He achieved a million-dollar net worth in 7 or 8 years, which is great. It started from nothing and got to a million dollars. I admire his success and what he’s doing. I know he’s trying to teach us a lot of other people doing this as well.

If you liked this episode and the show, please give us a five-star rating and review on iTunes. It helps me and Z out. It helps this whole show out, and everybody is reading so that we can get better guests because we need to grow the show. Again, keep on crushing it like we have been doing. Please hit us up on Instagram. I’m the @TheFIguy. Zeona is @ZeonaMacIntyre. Let us know how we are doing, and if you left us a rating and review, we would love to see it. Thanks so much, and we will see you all next time.

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About Sean Allen

ITF 95 | Real Estate MarketWith a 11+ year successful career in Project Management in the Oil and Gas industry, Sean is a process-orientated professional who enjoys building teams driven to succeed with environmental, social, and governance in mind.

He is a highly effective communicator with exceptional interpersonal skills to frame, analyze, and communicate problems and solutions within the Construction Projects, Professional Development, and the Real Estate Industries.

Skilled at analyzing and translating information into a clear and concise approach, Allen executes customized real estate coaching programs with positive energy and strategic goal development. His “Real Goal Setter” coaching platform offers personalized sessions designed to prepare clients for their first, second, or next real estate investment.

Sean is a licensed real estate agent and Realtor in CA with residential investment properties in 3 counties in California and condos in Greensboro, North Carolina.