ITF 99 | House Hacking

 

With plenty of opportunities to earn in real estate, it’s all about finding the right strategy that will work for your financial goals. Joining us today is Kenny Smith, a real estate investor and agent that’s killing the game in house hacking, Airbnb, and short-term rental space. In this episode, he chats with hosts Craig Curelop and Zeona McIntyre about maximizing profits using those strategies with practical tips and lessons based on his own experiences. Plus, get his insight on the long-term profitability of short-term rentals and why you might want to look into investing in medium-term rentals next. Be guided on your next real estate investment by tuning in.

We have an affiliate program added to the show, you can go to www.rentredi.com and use our CODE: INVEST2FI to get 50% off on your first 6 months.

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Another Affiliate – Kaplan Real Estate Education (we have the recording as well)

You can go to the website – https://www.kapre.com/ and use our CODE – Invest2

Air BnB Hosting course

This course is designed to walk you step by step from purchasing a property, setting it up to rent, to becoming an AirBNB SuperHost.

You can register here: https://www.stepbystepbnb.com/a/2147508384/zG79Sujh

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Maximizing Profit Through House Hacking With Kenny Smith

Z, how are you doing?

I am doing great. I got home. I’m no longer in France. I am no longer traveling Europe. I flew business class, which is awesome. I’m feeling pretty darn good. I’m good at travel points.

Tell us how you get business class.

You have to spend a lot of money on your credit cards, which is easy to do when you’re a realtor, as you probably know. We credit card hack to the minimum where we get one credit card per year. There are people I know that get 20 to 40 cards. They’re super into it but even with that and putting every expense that we ever have on those cards, it adds up. You get those big sign-on bonuses when you start. You have to use it before you close the card. I had 300,000 points. I was like, “We’re going to do it up.” We got free hotels and flew business class. I still had stuff that I had to do cashback. It is great.

I do even more minimal. I don’t even do credit card hacking anymore, but we spend so much on the business, not personally, that it ends up being equal to a free flight each month or maybe even two free flights each month domestically. We’re not going to France every month.

You should taste that business class life because once you start, I’m like, “How do I go back from this?”

I’ve never flown business class. I don’t want to go there. I’m not there yet. I’m not mentally prepared to go to business class yet.

It’s only worth it if you’re doing it overseas. Domestic is so short. It doesn’t matter. That was a nine-hour direct from Paris. It was nice.

Did your seat recline back all the way?

Yeah. The chef that prepared our meals was a nine-Michelin star chef. It was a lot.

You were like, “I don’t want to get off this plane.”

I was pretty into it.

That’s the only way you could be in a good mood the next day after a nine-hour flight coming back. Speaking of good moods, flying and business class, let me tell you about someone who is flying in real estate. We’ve got Mr. Kenny Smith on the show. Kenny is one of my favorite people because we like to joke around a lot about football. He’s an easy guy to talk to. He’s down to Earth but he’s crushing it out there both as a real estate agent and as a house hacker. I’m excited to hear his story.

Let’s bring him on.

Kenny Smith, what is up? Welcome to the show. How are you doing?

I’m good. How are you? Thanks for having me. I appreciate it.

Thanks so much for coming on. It has been a long time coming. We have had some talks and some good times. We helped you buy your first house with Micheala years ago.

It was December of 2020. It has been a busy couple of years.

I’m excited to get into it but why don’t we take it back even further than a few years and tell us when you first heard about financial independence and what made you make that switch?

I knew I always wanted to get into real estate and eventually make a whole bunch of money but I had no idea how to do it. I wasn’t reading any books or podcasts. I heard it was a good idea. Back in 2018, I was working for a beer company at the time. I sold beer for almost four years. I thought at the time that a condo was what I wanted to get into. I looked at single-family homes as scary, “There’s too much going on with this. What if a furnace breaks? What if this happens? I’m not going to have the money to replace this and that.” At the time, all I could afford was a condo.

I bought a 1-bedroom, 1-bath condo right by City Park here in Denver. It’s 617 square feet right by City Park. I knew I wanted to start small. I didn’t know what I wanted to do with this place eventually. I knew I wanted to rent it out. I wasn’t going to live there forever. That’s certainly the case but it wasn’t until 2020 with my fiancée, Micheala. We had heard about BiggerPockets through a buddy. He lives up in Fort Collins. He owns some property out in Alabama and other parts of the country. He told us about BiggerPockets. Micheala got on there and did all this homework.

I didn’t know much about it. I was like, “That’s a real estate platform.” At the time, we were renting a place in the Berkeley neighborhood. She found Craig on BiggerPockets. She was like, “It would be super cool if we found a five-bedroom place. You would be cool with living with four other people.” I was like, “I don’t know if I want to do that.” She’s like, “This guy Craig lived behind a curtain for a year. If he can put up with living behind a curtain, you can certainly live with four other people. If he could do it, we could do it.” That’s how we started the process and went from there.

What happened to that 617 square feet condo? Did you end up buying that?

I bought it back in 2018. I’m still renting it. It has been a long-term rental. In early 2020 right when the pandemic hit, I decided to move in with Micheala. We got our place.

I want to give you a little tidbit because City Park is right by the big complex of all the hospitals. You should furnish that and make it a medium-term rental. Have you thought about doing that?

I have. I’m glad you brought that up. I got to a point where I didn’t want to deal with any issues with the property. I was like, “Let’s stick someone in there for a year.” It’s paying the mortgage. I wasn’t cashflowing anything, which is fine but once the lease ends in 2023, that’s exactly what it would be doing. I thought about maybe selling the property and using that money to buy another one but I figured the amount that rent has gone up over the last couple of years in that location. It’s right by Colorado and 9th. There are all these new bars, restaurants and new developments right down the street from Rose Medical Center. The National Jewish is right across the street. That’s exactly what I want to do.

You’re in a prime location. I have a place in City Park that’s 617 square feet but it’s on the North side of City Park. I was like, “Is this guy my neighbor?” That would have been funny. I want to hear about this. What did you buy that first property for? This is the real deal, even though it wasn’t super intentional. It was your first deal that you’re making money on. What’s the rent? What’s the mortgage? I’m curious to hear about what it’s worth.

It was listed for $175,000 at the time. This was pre-pandemic. Here’s the thing with the Denver market. People forget that it was still a very difficult market to buy in. It has been like that for several years. I lost out on a couple of 1-bedroom, 1-baths but my agent at the time talked to me about it, “They’re tearing down a part of the Rose Medical Center and putting in this new division of all these new bars, restaurants and everything. This is a great opportunity.”

The place is old. It was built in ’72. Not much upgraded. I went in there thinking, “I can put some sweat equity back into this place.” It was listed for $175,000. I got it for $180,000. At the time, I overpaid. It was a $5,000 difference but I was super excited to get it. For my mortgage at the time, I paid a 4.875% interest rate. Since then, I’ve refinanced down to 3.3%. I believe my mortgage is around $80,000 with an HOA fee of about $334. My monthly expenses are probably right around $1,215. I’m renting it out for $1,320.

You can be renting it out probably for $2,000 to $2,500 once it’s a medium-term rental. I want to throw it out there.

My fiancée is a travel nurse. She knows all about it. I know about Furnished Finder. She has traveled all over the country and stayed in all these different places. She’s the one that got me into all this. She told me about Furnished Finder. Looking at Furnished Finder and seeing what things are going for in the area, I know I can make a lot more money.

You still have to invest probably about $8,000 into furniture or maybe less. I did about that much for a two-bedroom so maybe it’s more like $5,000 but it pays you back and because you have your low-interest rate, it’s less exciting to sell because it’s nice to keep those low-interest rates. That was your first deal. Let’s fast-forward to where you went with Micheala. She convinced you to do this five-person house hack. How did that adventure go?

Once we found out about Craig on BiggerPockets, she knew she wanted to start looking at houses. I supported her but I did put an end to the 5 people in 1 house. We were living by ourselves at the time. I haven’t had a roommate in probably ten years. I’m old. I was like, “I don’t want another roommate.” What we wanted to find was that duplex. We would live on the top floor and then rent out a basement looking for that side entrance.

We didn’t know exactly if we wanted it to Airbnb right off the bat or do a medium-term rental or a long-term rental. We were trying to figure this out. We met up with Craig. Craig showed us some homes. I remember meeting him for the first time. We were looking at an unfinished room in a basement. He goes, “You can knock down this wall and put electrical here and plumbing here.”

I’m like, “What is this guy talking about? This is going to be expensive. There’s no way.” It all makes sense to me now but at the time, I was like, “This isn’t going to work.” We put it in a couple of offers on a couple of places. We did lose out on maybe 2 homes but it was the 3rd one that we bought. Micheala was the one who bought the place. I was there for moral support. We got a place in Westminster. It was right off 79th and Federal. That was in December 2020.

Here's the thing with the Denver market, people forget it's still a very difficult market to buy in. Click To Tweet

It was listed for $410,000. We got it for $430,000. It was a 5-bed, 2-bath. There are 3-1 upstairs and 2-1 downstairs. It pretty much had everything we were looking for. This thing was, for the most part, turnkey-ready. The division between upstairs and downstairs was already done. It had a side entrance, so you went up the driveway. The side entrance was right there. It had a full kitchen downstairs. They even did the laundry for upstairs and downstairs already, which is super rare.

I remember this one pretty clearly because I remembered the whole downstairs and the people prior to your Airbnb as well. The whole theme of the house was coffee. If I remember correctly, Micheala hates coffee. It had brownish walls with coffee bean photos on there. That is ironic and hilarious. I take it’s not coffee beans anymore.

I went down there and I was like, “I like it.” She goes, “This all has to go.”

I’m curious as to how much you spent on the furnishings for Airbnb. That’s something we don’t talk about too much. Were you creative there at all?

When we moved in, we knew that downstairs was going to be our number one priority. We wanted to get that done as quickly as we could because we wanted to start renting right away. We used a lot of the furniture from our prior rental. It was a hodgepodge. It had a little bit of everything but it worked. We made it work. When we moved in, we started furnishing downstairs right away. That was our first priority. We started taking pictures. We got it up on Airbnb.

We decided that’s the route we wanted to go. We wanted to maximize our profits, especially because it was our first house hack. We knew we wanted to do this again. We didn’t know how but we were like, “Let’s make as much money as we can.” We knew short-term rentals were the way to go. We ended up furnishing it. We still need to finish up the little things like paint, trim work and all these little things. We get it up on Airbnb. We had no idea what to expect.

We were paying $2,100 at a rental in Berkeley. Her mortgage was about $2,250. It’s the same. It’s awash. We were like, “If it doesn’t rent, it’s the same. We’re paying.” We didn’t know what to expect. We put it on Airbnb. Within three days, we started getting bookings like crazy. We listed it on December 21st. We had a booking the next day. I was freaking out because I was like, “Nothing is done. We still need to finish the paint and the trim. We still have all this stuff.” The pressure was on. We were off and running.

That’s one thing I love about Airbnbs because you can do work in between guests. When you have a long-term rental, a lot of times people lose two weeks or more of vacancy because they want to do the floors and paint the walls and everything. You have to wait until people are moving, which is usually halfway through the month or the end of the month.

With an Airbnb, you can do a couple of things and have a guest for a week. You have a two-day window. You’re like, “We’re going to go get a bunch of pillows and update some stuff.” How I’ve gotten used to doing stuff is not having many vacancies if you can help it. Whenever you have a free window, make it a little bit better. It sounds like that’s what you did.

That’s something we still do. We know that if there are projects that are coming up, we will wait until the off-season when it’s going to be a little bit slower in time block on certain days. We can go in and do that routine maintenance.

I like hearing that Westminster books up. If someone’s reading and they’re not used to the Denver area, Westminster is a commuter town between Boulder and Denver. It’s not too far from Denver, depending on where you’re at but sometimes it seems like people book there when they could be right in the heart of Denver. I’ve been hearing from lots of clients that they do well. That has worked out well for you.

It’s funny you bring that up because the neighborhoods we’re living in are not the nicest, I’ll say, but they’re nice enough. “People are going to come to stay with us. There’s a little bit of trash on the street. It’s not like you’re living with the Joneses down the street.” That was my concern right off the bat but surprisingly, one of the best things they like about our place is the location. We constantly get reviews about how much they love the location.

To your point, it’s so close to Denver. We’re only about a 10 to 12-minute drive downtown. You hop right on 25. It shoots right down there. We’re right off 36 as well. People love to go up to Boulder. What are the couple of things that people like to do when they come to Denver? One, they like to go check out downtown 16th Street Mall and do the touristy thing. They love to go to Boulder and Rocky Mountain National Park. We’re in that sweet spot. We’re super close to all of that. Surprisingly, I was worried about the location at first but it turned out to be a blessing.

Let’s go into the numbers a little bit. Your mortgage was about $2,250. You had a 2-1 downstairs. You used most of your furniture. What setup costs did you end up having? What is your Airbnb making you?

I’ll give you a rundown of some of the upfront expenses we had had since we have been operating because, realistically, we didn’t have too much when we moved in. It wasn’t until maybe the third week when stuff started happening that you had to plan for. We had a guest that checked out. She was running the dryer. It’s a gas-heated dryer. I go downstairs and the whole place reeks of gas.

I’m like, “This is a big problem.” I started freaking out a little bit. I called Xcel Energy. The guy came out that day. I couldn’t believe how quickly they come out but if it’s a gas leak, it’s pretty important. He pulls up and gets out of his car. He’s got his little gas reader or whatever it’s called. I meet him outside. I’m like, “Are you coming in?” He goes, “The readings are pretty strong.” I’m like, “That’s not good.” He’s like, “You will be okay though.” I’m like, “Should I get out of the house? What are we doing here?”

Finally, we go downstairs. He showed me where the leak was. It was from the gas line to the dryer. They didn’t have one fluid line from the dryer to the actual gas hookup. They had two. It was connected. You’re not supposed to have any type of connection between those lines. That’s where the leak was coming from. Right off the bat, that was $2,500.

Micheala and I were like, “What do we buy? We bought out eleven other houses.” We realized, “This is part of the process.” We had to put in a new central AC unit, which is about $5,000. We had to finish one of the privacy fences on the side of the house. We put in a new fence in the backyard and a paver patio. That was all about $5,000. The irrigation system is about $2,200. Out the door, since we bought the place, we’re probably right around $33,000 in renovation costs.

That’s a lot of upgrades. A lot of those things you probably didn’t need to do but these are things that we will pay you later, having a nice patio and things like that. It seems like you could have rented it and not done much of anything if you wanted to. Nightly rates are very seasonal but what’s the average that you’re making on that Airbnb?

I’ll talk about that downstairs unit first. It’s a 2-1. In that first year when we were living upstairs, we were getting in peak season about $149 during the week and maybe $169 on the weekends. We offered 10% for a weekly discount and 30% for a monthly discount. That’s what we were getting during peak season. I’ll take it a step back. We bought the place during COVID.

In the first month or two, we had a lot of short-term stays because it was over the holidays. We were getting good money. It was probably $149 at night or something like that but we wanted to offer that 30% discount on a monthly basis because we wanted to fill it. We did not know what we were getting ourselves into. We didn’t know what to expect given the area and everything else.

ITF 99 | House Hacking
House Hacking: As house hackers, we look at homes way differently than your everyday home buyer. You have to have an eye for it and know what to look out for.

 

We were like, “Let’s try to offer a big discount to get the place filled.” We did that. At the time of COVID, everyone was working from home. People wanted to travel and go to different places in Denver. It’s a super sought-after place to travel and work. That was probably from February to April or May. It was month-to-month stays with that 30% discount.

You would be $2,500 to $4,000 if you were doing it nightly.

When we were doing monthly, we were right around $1,900 to $2,100. Her mortgage was $2,250. It’s living for free. After those monthly stays, we realized we wanted to make more money. We knew the summer months were going to be the peak season. We decided we want to not shy away from monthly rentals but we didn’t want to offer that big of a discount. We wanted to keep it as a true STR and see how much money we could make.

I’m assuming since you have another house hack that you rent out the top as well. Is that true?

We do. That upstairs is a 3-1. We moved out and bought another house back after the first year. Since renting that top floor, that has done incredibly well. We’re getting about $169 during the week and $189 and the weekends for that during peak season and then maybe closer to $149 or $169 in the off-season. It has been incredibly profitable.

It’s safe to say you’re doing about $3,000 for the downstairs and maybe $4,000 to $5,000 for the upstairs a month. Months are easier for people to wrap their heads around because they don’t know how many days they’re booking and all of that. That means that on top of your $2,200 a month, you’re cashflowing $3,500 or something like that.

Breaking down the numbers for the first year, our cash-on-cash return was right around 69%, which is great. If you look at your net worth return on investment, we’re looking at right around 110%. That includes equity up the property buying down the mortgage and everything else. They argue.

When you left, did you leave all of your furniture upstairs and start fresh at the next place? That’s how I’ve always done. It seems easier.

We did most of it. I don’t have an eye for furniture. That’s my fiancée’s job. If it was up to me, there would be beer signs on the wall and all sorts of other interesting stuff. She has a knack for that. Going into furnishing upstairs, we bought all new stuff off Amazon and a couple of things off Facebook Marketplace. Going into it, we knew we were going to leave most of that stuff there besides our couch. We were able to furnish a couple of other things through Amazon and Facebook Marketplace.

What I love about that too is that if you use all the furniture you have for the bottom unit, which is what you did, then you have time. Upstairs, it’s not super comfortable to have your mattress on the floor and not have some end tables and lamps but you can get that stuff over time. When you get it over time, it’s so much cheaper because you can utilize things like Facebook Marketplace or garage sales. When you need to furnish a place in three days, you buy everything new. You don’t have the ability to save. That’s a great way to do it. Let’s go into this new house hack. The latest one that you’re living in, what month and year was that one purchased?

We purchased it pretty much exactly one year later, in December 2021. We took out an owner-occupied loan for the prior property. You’ve got to stay there for a year. This one was also in Westminster. Coincidentally, it’s three minutes down the road from our other one, which makes it very convenient. It makes it super nice. Since we only have a couple of house hacks, I’m the handyman. I’m a host. I have a full-time job. I’m doing everything. If something does come up, I’m able to pop over there and take care of whatever I need to take care of.

It’s a blessing and a curse.

Tell me about it. Micheala is over at the other house. Our fridge went out so she’s got to try to figure that situation out but it’s all part of the process.

That’s hilarious that you sent her for that because if a fridge went out, I would have no idea. I would be like, “What do you mean? I’m not going.”

Our guests were like, “The freezer is working but the fridge part is not. It’s 60 degrees.” I’m like, “Have them unplug it and plug it back in.” It’s an older fridge.

I don’t think that works for fridges.

I have no idea. She’s asking me what she should do. I’m like, “I sell real estate. I’m not a fridge expert.”

Unfortunately, with appliances, I find that they’re more expensive generally to fix than to replace. What I usually do is get something from affordable used appliances, which you have all over Denver and swap it out. Maybe you put it in the garage and you have an extra beer fridge.

Going back to this other house, it was listed at $520,000. At the time, it was still a very hot market. I had gotten my real estate license so I represented myself in this transaction. We were able to get it for $505,000. I’ve got $15,000 off, which is awesome. I’m super happy about it.

Is that because of your commission or is that because you negotiated well and you’re interesting, awesome and clever?

I’m not sure. There wasn’t a lot of buzz on it for whatever reason. The thing is, as house hackers, we look at homes way differently than your everyday homebuyer. People aren’t looking at a side entrance and saying, “This is going to be a great house hack.” You have to have an eye for it and know what to look out for. For whatever reason, there wasn’t a lot of traction. It was a flip. I’ve gotten to know the guy pretty well. I know how he operates and everything.

It's critical when you're buying a house hack that you have a plan B and a plan C. Click To Tweet

They wanted to sell this quickly. They had some money tied into it. I knew that. I was able to negotiate down. We got it for $505,000, which was awesome. It’s another 5-2. It has a similar layout. It’s another ranch-style home. It was a 3-1upstairs and a 2-1 downstairs. A lot of it was renovated. They did put a new kitchen upstairs. The flooring is original hardwood from 1957 but it seems like they refinished it. They redid the upstairs bathroom. There’s a new carpet downstairs, new paint, new trims and stuff like that but there was still some work I had to do.

First and foremost, we knew we wanted to Airbnb the basement because it was so profitable and it worked out so well. We needed to separate that entrance. It wasn’t necessarily separated. There was a side entrance. It’s the same thing where you go up the driveway. The door is right on the side of the house but when you walked in, there was a small entryway right by the kitchen. That needed to be closed off. We had a wall up on both sides of that.

We put a little door in between our kitchen to downstairs. We needed a kitchen downstairs. It was a 2-bed, 1-bath downstairs but there was an empty room. It’s a concrete wall but it was right below the kitchen upstairs. The drain line was right there. We knew it would be super easy to tap into that but we had to do a lot of work. We had to fur it out, put drywall paint, run the plumbing and electrical and furnish it with cabinets.

What were your numbers on that? What was your monthly payment and then all the work that you did upfront to get it ready?

My monthly payment is $25.90. The market got hot. I had to pay a little bit more money for this home but it’s still a great interest rate at 3.2%, which was awesome. Out the door, it’s about $40,000 of renovations. That’s from the time I bought it until when we started renting it. It took about four months to get everything done. We are bringing in on a monthly basis in peak season about $4,000. Right when we started, it was closer to $3,200 to $3,500, which was in April.

Do you have any concerns about Westminster changing its laws? They have been talking about it a little bit. Usually, when a city changes, they grandfather in some of the people that were already doing it. What do you think about that? It’s going to change your cashflow a lot.

We have thought about that before buying both of these properties. We realized that from an STR standpoint, it’s possible we’re not going to be able to do this long-term but for us, that was Plan A. It’s critical when you’re buying a house hack that you have a Plan B and a Plan C because there are too many folks that buy house hacks that don’t have a kitchen downstairs. They live upstairs and want to Airbnb that basement. They bought that place with the whole idea that they’re going to STR the basement. What happens if STRs go away?

They’re stuck because no one is going to want to stay there for 30 days or more if there’s no kitchen. It’s not a viable option. For us, we knew that it was critical to put that because I considered it when I bought this house, “We have a third bedroom downstairs, at least the new one. Instead of a kitchen, let’s put a bedroom there. Let’s maximize our profits to have more people stay down there.”

That would have been a lot cheaper too, but in the back of my head, I was like, “I have to prepare if STRs do go away,” which is very possible because Westminster is the only municipality in Denver Metro that doesn’t have laws in place but we know they’re working on it. We have been in contact. Our team has been in contact with the folks that are putting these laws in place. Whether they grandfather us in or not, long-term, our goal is to switch to medium-term rental because it’s not viable long-term to go out and buy a bunch of STRs.

You can certainly do it but then you have to pay an STR management company. If they’re going to take anywhere from 15% to 25% of your profits, then what’s the point? Why wouldn’t you go right back to a medium-term rental? You’re not going to make as much money but it’s more manageable for us once we start to scale because we might do one more house hack with an STR in the basement. That’s it. I don’t think we can handle it anymore unless we switch those STRs to MTRs.

You said a couple of great things. I like STRs and urban markets because you can very easily have a plan B and a Plan C. If you’re doing vacation rentals in a vacation-only market, often people don’t live there. Not that many people live there long term. They’re not going to pay your crazy high prices. With an STR in an urban market, you can make a little bit less and have it be medium-term.

That’s a great backup plan. There’s still a lot of demand for that. There’s one thing you said about a manager. People don’t consider this often but you can hire an assistant that does all your management for $25 an hour, which is a lot less than 25%. That’s how I’ve worked that out over time. When you have enough places, you need to have a little bit of volume but it sounds like you will be there soon.

Have you done anything with any smart pricing, automated messaging or anything like that to alleviate you from some of those recurring things?

We have. As far as automated messaging for Airbnb, it’s the best thing ever. I can’t tell you how awesome that is. I wish Vrbo would pick that up. They don’t. Maybe I don’t know how to do it but it’s frustrating when you get Vrbo bookings and you can’t set up those automated messages as far as when they book and explain to them the intro message, the day of check-in and then the day of checkout. It saves you a ton of time.

You just don’t know how to do it. I’ll send you some software after this. There are probably hundreds of software that people use for automation but you only need two. People will offer you to buy all kinds of things but it’s good to remember that you’re trying to be frugal. You’re running a business. You only need the basics. The basics are the pricing software and the auto messaging. I use Hospitable for auto messaging. You can connect all the channels that you use. If you’re using Airbnb and Vrbo, it all goes through Hospitable.

I have probably a series of seven messages that are the time of booking, two days before check-in, the day after check-in and those kinds of series of messages. They can get them all there. What’s great is if you book somebody on Furnished Finder because it’s not a marketing platform like the others and it’s offline, you can still plug them in manually by using their email. They will still get that whole series of messages. It is cool to have a system like that to try to make a little bit more of the MTR stuff automated because it’s more of the new kid on the block. It’s not as automated as the STR stuff.

To further elaborate on the pricing strategy, I lived in San Diego for three years before moving to Denver. I was a hotel revenue manager. My job was to do pricing and revenue strategies for a small family-owned hotel company. When we bought this first house hack and then the next one, I was like, “I used to do this for a living. Let me set the prices and see what happens but as we scale, am I going to want to do this for 5 or 7 different units? Absolutely not.” There has to be some type of automation. Here’s a shout-out to one of our other team members, Bryan Balducki. He talked to me about this. I was like, “I’ll have to look into it.” I haven’t gotten around to it quite yet.

I find that you’re not on top of it enough. You’re not going to know about every cool event that’s happening in Denver. You can’t. You’re going to miss out on a couple of times where you probably could have charged $100 more a night or something. I want to go back to you for creating the separate kitchen. Do you think you would do that again or when you are looking for your next house hack, look for something more done?

It was a lot of work. We did hire a GC to do the kitchen, the separate entrance and then a couple of other small things. Unfortunately, I didn’t. I didn’t vet the GC as well as I should have. It was not the best experience. He came in. He was a referral from one of my buddies. My buddy and I are still friends. If he’s reading this, we’re good. The work he did was fine. It was more of the timeline. He came in and said, “I would be able to get all this done in four weeks.”

It went on for about ten weeks. It was a lot longer than what was anticipated. It was the only thing that was holding us up from renting out. What was more frustrating than anything was he was a flipper. He kept using his flip that he was working on as an excuse for why he wasn’t showing up to my place to do the work. “It’s not my problem. You told me one thing. You should follow through.” It was not until after the project was done and we started renting that I read The BRRRR Strategy by David Greene.

He has a great section in there about incentivizing contractors. If that contractor gets it done early, you will give him back $100. If your STR is charging $150 a night, then it’s a win-win. You’re profiting $50 on the contrary if he is delayed. Every single day he’s delayed, you charge him an extra $100. It incentivizes him to get it done early. You can make more money if he gets done early. If he gets done late, you’re still covered.

ITF 99 | House Hacking
House Hacking: It’s just not viable long-term to go out and buy a bunch of STRs.

 

That is great. I need to get around to reading that book. One of the things that I like about buying places turnkey is that you don’t lose all that time. It took you about four months to get this place up and running. A lot of that gets rolled into your loan. Interest rates are not super favorable but I don’t think that will always be the case. It’s nice to say, “I close on this home on a Friday and I could have it rented on Tuesday if I worked my butt off over the weekend and got it all furnished.” There’s a difference there. It depends on your preference as an investor.

We’re talking a lot about your investments and house hacks. I’m curious as to what you’re doing for work during these times and how you’re qualifying for these loans.

I’ve worked a number of different sales jobs. I’ve sold everything from windows to beer. I sold beer for four years. I was selling commercial roofs. How I got approved for the second house hack was through the money I earned through my roofing job. Keep in mind that in the first house we got, my fiancé was on that loan. She didn’t have that factor toward getting our second house hack and neither did I. The only debt I had was my condo. The lender looked at that rental income as income to combat that debt, which we were able to get approved on and get financed.

You got your real estate license. What made you go from being a roofing salesman to start selling real estate?

I’ve been wanting to get into real estate for a number of years. It was always like, “Maybe next year. It was expensive. It’s going to take some time to get my license and everything else.” It wasn’t until we decided we wanted to do this house hack thing that it made sense for me. I was like, “Why don’t I get my license?” You start looking at properties. Down the road, once we buy more properties, I can use my license to buy these properties. I get my commission back.

It will help get us into the next property without having to pay any type of down payment or at least cover the majority of the closing costs. That’s what I did. I didn’t realize how much I loved it until I got my license and realized that this is what I wanted to do. Since then, I’ve left my roofing company. I’ve been selling real estate full time and helping other people find their house hack.

I love how most of Craig’s agents first bought a house with Craig and then became agents. It’s the wheel.

You realize it’s fun to start helping other people. Once it has impacted your life positively, you’re like, “How can I get this on as many people as possible?”

It’s also addicting to be in deals. If you can only buy one house hack a year, you’re like, “Let me be in all these other people’s deals negotiating and seeing houses.” It’s fun. We’re going to move into the final part of our show. Do you have any final words of wisdom for our readers?

Get started. That’s important. There are too many people that try to analyze everything way too much. It doesn’t allow them to take any action. Start small. I started with a one-bedroom condo. We were able to get this house hack. A year later, because of that 1st house hack or that condo, we were able to get our 2nd. It’s this snowball effect. Do your homework with a great agent that knows exactly what they’re doing and what to look out for but at the end of the day, you got to take action if you want to make this thing work.

We’re going to move into the Final Four. The first question is, what are you reading?

I’m reading a couple of books. I finished The Compound Effect. If you’ve read that one before, it’s a fantastic book. It’s about doing the little things on a daily basis that will get you to where you want to be. One I’ve been waiting to read for quite a while is Never Split the Difference by Chris Voss. It’s a good book so far. He was a former FBI negotiator. It talks about negotiation skills and how you can use them in everyday life.

That one is so meaty that I almost want to listen to it like every year. I’m like, “I should try that.”

He’s a great storyteller.

What is the best piece of advice you’ve ever received?

To keep it simple, life is relatively short. If you’re not happy with where you’re at or where you want to be, then change it. Every day you’re not moving towards something you want to do is another day wasted to realize your true potential. That sounded so cliché but it’s so true. I don’t think I realized that until I got a little bit older. It’s good advice.

It reminds me of some advice that I got way back in college. One of my mentors said, “Every single day, you’re either going to get better or worse. You’re never going to stay the same.” Make sure that you’re always getting a little bit better every day. You will see tremendous effects, which is like The Compound Effect, which is the book you read. Look at this all funneling together.

Question number three, what is your why?

To keep it simple again, I want to enjoy life on my terms, not on someone else’s. That’s why I’ve gotten into financial independence and working for myself. My fiancée and I want to have kids in a couple of years. I want to be able to spend as much time with them as I can. I don’t want to have a job or someone else telling me that I can’t or I have to stick to a certain schedule. I want to see the world and travel as much as I can. I don’t want to do that 2 weeks or 3 weeks out of the year.

The great thing about house hacking with Airbnb is that you’re getting so much cashflow off of these couple of houses that you could be financially independent when you turn your place into a medium-term rental or that first one or even at the end of this year when you get your next house hack and you start renting that out. It doesn’t take a long time and one million properties. That’s pretty awesome.

This is the last question. This is what I made up for you. You probably have an idea of where I’m going with this. Would you rather watch the Bills lose four Super Bowls in a row or watch Tom Brady win four Super Bowls in a row?

If you're not happy with where you're at or where you want to be, then change it. Every day you're not moving towards something you want to do is another day wasted. Click To Tweet

I knew something like this was coming. For those of you who don’t know, I am a huge Bills fan and Craig is a big Patriots fan. I was born in 1988. Their run of four straight losses was in ’90, ’91, ’92 and ’93. I don’t remember them. I’m fine with that but all the people I talked to said it was the worst thing ever. Name another team that is going to go to four straight Super Bowls win or loss. It has never been done. I don’t think it will ever happen again.

I don’t think so. That was a cop-out answer because you didn’t answer. We will say you want to see Tom Brady win the next four. Where can people find out more about you?

My Instagram is @KennySmithRealtor. If you want to check out our website, I’m on TheFITeam.com working under Craig here.

We’re going to Cabo in a few months. Kenny, thank you so much for coming to the show. It was inspiring to hear your story. I’ve been there with you since the beginning. I would love to see you and Micheala grow and prosper. You’re working on number three here soon. This is great. Thanks so much for coming on and sharing. We will talk soon.

Thanks. I appreciate it.

That was Kenny Smith. Zeona, do you like how I can say his last name?

I am so proud of you. When I first jumped on with him, I was like, “What’s your name?” It just said, “Smith.” On the top corner, I saw that it said, “Kenny.” I was like, “I’m so dumb.” It’s easy to pronounce. I’m so glad. Kenny is easygoing and kind. He has a relatable story. I loved how he didn’t over-fluff it.

He was honest about how much work they were able to put into things and what they would do going forward. There’s a lot of good advice in there. It’s exciting to see where he’s going to go with the medium-term strategy. I love talking about that. It’s a cool newer strategy. A lot of people are getting into it. It’s nice to see people taking advantage of that good cashflow.

Kenny is such a straight shooter. I love that. Here’s one thing that I’m curious about. This might be a selfish question. Are there property managers for short-term or medium-term rentals?

Maybe. I do know one. She has about 100 that she manages. She’s in Savannah so she’s not going to be local to Denver. She only charges 10%, which is pretty awesome. You don’t need to be local. I could find you somebody if you were wanting to change one of yours. That would be local to Colorado.

I’ve got two one-bedrooms North of City Park. You said that was a good area for medium-term rental. Maybe I can get a little bit more. That was my first little baby.

They’re your little cuties. I do love that you pointed that out. A lot of people get overwhelmed. They think, “I want to house hack. The first thing I need to buy is going to be a five-bedroom house, which is often pretty expensive.” It’s great when you can even start with a 1-bedroom place and then maybe the next place you buy is a 2-bedroom place. You don’t have to buy super expensive stuff to get started. That’s how I started as well. My Airbnb has one bedroom. You build up over time.

It’s all about the strategy that you want to do. Oftentimes if you don’t want to live with somebody, you can buy a property, live there for a year, move out and rent it out. You’re not reducing your living expenses. You’re still collecting rental properties year-over-year. Over time, that’s going to help you out. Is there anything else you want to tell everybody before we head out of here?

Our book is coming out. It’s going to be on medium-term rentals. It’s called 30-Day Stay. I wrote a book with Sarah Weaver. It is going to be available for pre-order in mid-September 2022. I will be shooting it out to everybody. If you follow us on Instagram, you will be the first to know. If you are coming to BPCON, we’re going to have some early books there. We will be doing a book signing, which is pretty fun. You can come to hang out with Sarah and me.

You already are a rockstar but you’re going to be in the rockstar Hall of Fame once the book comes out. You would be a big celeb. Pre-order the book. Pick up the book. It’s going to be great. If you’re in short-term rentals at all, it’s going to be amazing. If you haven’t already, please leave us a rating or a review on iTunes. It tremendously helps us get the show out to as many people as we can and spread that word and that level of financial independence. If you’re reading to the end, thanks so much for reading. We will see you next time.

 

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About Kenny Smith

ITF 99 | House HackingKenny is originally from the great state of Ohio, where he grew up in Columbus. After graduating from The Ohio State University with a Bachelors Degree in Hospitality Management, and Minor in Business Administration, Kenny moved out to San Diego for a few years to start his career in the hospitality industry. After realizing his heart lie in the Rocky Mountains, he made the move to Denver, CO to start a new journey.

Kenny expanded his career experience by selling everything from windows, to roofs, and even beer. Ultimately, his passion always lay in Real Estate. That passion started with a one-bedroom condo which he renovated himself, and is currently renting out, while building equity and having someone pay off his mortgage. Kenny’s girlfriend also became eager to learn more about investing in real estate, and in December 2020, she purchased her own house hack. Kenny and her have been running an Airbnb business in which they short-term rent their 2-bedroom suite basement out in their single family home. Kenny is currently working on buying his next house hack in 2021.

After being eager to learn and develop his knowledge and skills in financial independence and ultimately building a real estate portfolio, he knew the next step was to get his license. He has learned so much about real estate investing, and can’t wait to pass that along to his clients. Kenny is so excited to have a career in which he gets to live and breathe real estate, and ultimately help others realize their own real estate dreams and goals!

When he’s not helping his clients bring their real estate dreams to fruition, he loves hiking, snowboarding, camping, going to breweries, watching football, smoking meats, and his girlfriend and their golden retriever “Nix”.