House Hacking Your Way To Financial Independence

Tap To Share

House hacking is a fantastic way to save money on your living expenses.

And by freeing up your income, you’re afforded more opportunities to make solid investment choices.

That’s why I invited Andrew Kerr from The House Hacking Podcast on to the show to share how he’s used house hacking to reach certain financial goals.

Read The Transcript

Speaker 1: 00:00

Michael Lacy: 00:27 Have you ever wondered what life would be like if you didn't have a mortgage or you weren't paying rent every month? I know I have and so today I wanted to bring on Andrew Kerr from the house hacking podcast to share how you can use house hacking to lower your housing expenses. Now Andrew has almost 20 years of experience in real estate and he's used real estate to help himself achieve financial independence, which is something we're definitely going to get into. Now Andrew is a fountain of knowledge on this topic of house hacking and just real estate investing in general. So first things, first I want to say Andrew, thank you for agreeing to come on the show and share your expertise with us. I'm just so excited to have you here today, but jump right into this. I mean, can you share what house hacking means for the neighbors out there who may not be familiar with the term?

Andrew Kerr: 01:19 Yeah, Michael, thanks for having me on. So really house hacking is this idea of you just make a slightly different choice with your housing. And for most people, you know, housing is probably the biggest line item in your budget. You know, on average most people spend a third of their budget in housing. So it's just looking at this housing choice and insane how for a short or even a long period of time, how can I make a different choice with my housing to reduce or eliminate that big third of my budget line item.

Michael Lacy: 01:54 Okay. And so then, I mean, you know, you've become kind of an expert in this field of house hacking. And so where did that motivation come from for you to get started with this?

Andrew Kerr: 02:04 Yeah, I always wanted to, or maybe I shouldn't say always wanted to, but for quite a while I wanted to jump into real estate investing and it was a good way to get started. But the thing I really love about house hacking is even if you never want to be a real estate investor, still do a house hacking. If you just have a desire to get ahead with your personal finances, if you want to have money to pay down debt, you want to have money to travel, you want to have money to save for retirement. If you do a house hack, it just frees up that money. And early on, that's what it was for me was, you know, I was 19 years old, I was in the mortgage industry, I was starting to make really good money. And I was like getting ready to move in with a friend and we were going to rent an apartment.

Andrew Kerr: 02:48 And we just sort of looked at it and I was like, well, why go spend this 800,000 a month and this is back in, you know, 2002 to rent a nice apartment. And I could buy a house and have a six $700 a month mortgage payment and I can have my friend pay rent to me. And now all of a sudden my cost would be roughly about the same, but now I'm living in a house. And so that's really how it started for me was just trying to think differently about it. And I was like, wow, I'm going to do this because now I get appreciation. I get a tax write off, I get the equity pay down and I get a nicer place than I could have rented. So that was just sort of how I got started on it.

Michael Lacy: 03:27 Okay. So you were 19 right? You said you're 19

Andrew Kerr: 03:32 and I was 20 when I actually bought the house and closed on it. So pretty unusual for most folks.

Michael Lacy: 03:38 Absolutely. So I mean talk to me about that process of finding the ideal home for a house hacking.

Andrew Kerr: 03:45 Yeah. So back then I didn't know what house hacking was and I want to say I didn't know really what the ideal place was. But you know, here I am, I'm 20 I know I don't want to do lawn care because growing up that was the chore that my dad gave me is when it's hot outside in the summer on Saturday you got to go cut the grass and you know, edge it. So I hated that I didn't want to do it. So what I found was a townhouse. I was like, that's great and I'm going to buy an end unit townhouse, only have to share one wall and then the HOA dues cover all the exterior stuff. And what I picked was I picked the floor plan that most of the retired people picked that had a first floor master bedroom and then two bedrooms and a bathroom upstairs.

Andrew Kerr: 04:29 And you know most retired folks, they do that. That way they don't have to walk upstairs when they're older and then when guests come they put the guests upstairs and I looked at it as Y could live downstairs and have my living room and then my friend can rent the room upstairs and use the other room as his living room. And then we only have to share the kitchen. So we old, we basically had our own floors and that was sort of that idea of how I, I found that property and why I chose it, but really with house hacking and that's where a lot of folks think house hacking is, is you buy a house and you have to rent rooms, but we really look at it and try to define it as you have that roommate or room rental style, house hacking. You could do a accessory dwelling unit, house hacking, or maybe you find that property that has that guest house pool house or has that detach garage that you can build an apartment above it. That's a considered an accessory dwelling unit. And then you have this sort of income suite, house sacking where you've got maybe an unfinished basement or a mother Omal suite that you turn into an apartment, you've got the small multifamily, so maybe a duplex, triplex or quad, you live in one unit, you run out the others. And those are sort of some of those main types of house hacking that we look at. And you can really sort of find which one's going to work, work best for you and your situation.

Michael Lacy: 05:46 Right, right. And so you started off kind of with the, the, the roommate method there. And so at that time you brought up a little earlier that the average person spends this huge chunk of their income on housing. So I mean, when you got your start, I mean, what percentage of your income was going towards housing, if you can recall that?

Andrew Kerr: 06:03 Oh, back then was crazy. Uh, it, it wasn't normal. A, my, my life was very weird at that time. So, you know, I didn't go to college. I started working right away. I was 100% commission. You know, when I was, the month I closed on my house, it was like a February, I think it was 2002 I was 20 years old. My commission check that month was like 12 grand after taxes. So very unusual. And I wish I could say I was super financial savvy and I saved it. I spent every last drop of it. So you know, at that time, you know, my rent would have been 10% of my income. But for, you know, the average person, like when I was looking at some of the stats in 2019 a two bedroom place, you know, rented for 12 to $1,300 a month across the U S so, you know, again, I was a little unusual. A lot of the house hackers that we talk with, you know, spend that 2030 or 40% of their, their income on housing.

Michael Lacy: 07:01 Right. And so, I mean, let's talk about, you know, how you find and screen your quality tenants. I mean, what's your process like for that? Cause I know that a lot of people have these thoughts of, you know, like I said, maybe they want to become a landlord or even maybe they want to become a house hack. And that's one of the, the initial barriers is, okay, how do I make sure that I'm getting the right quality people that are going to pay on time, they're going to do all those things. So what's that process been like for you?

Andrew Kerr: 07:25 Yeah, so I've, I've done it a couple of different ways, both with house hacks and then with just regular real estate that I've owned. And don't let it, if you don't want to manage tenants, don't let that scare you away from doing a house hack, get a property manager and they'll take care of all of that for you. But if you want to self manage, you know the first thing I do is I take really good quality pictures and then I try to write a nice advert and I'll post it in Craigslist, all put it on Facebook marketplace. And if you have a nice description that says like, you know we put in our listing for our third house right now and we're working on our fourth but we put very quiet building, very quiet location. You know, we try to, you can't discriminate against a lot of things, ages and races and backgrounds, but you know, if you start to put in your ad quiet building, quiet neighborhood, everyone works nine to five jobs, your average person that maybe works at a bar is up all night.

Andrew Kerr: 08:23 I'm like some party's going to say, Oh maybe I'm not going to go there. If it's a quiet building, a quiet street. So do that. If you do high quality pictures and have a decent place that's going to attract a higher level of tenant and then that's the first sort of first step. And then once you get 10 and sin is you got to set up your screening criteria. I use a organization called Cozi. Dot. O. They are a property management company for small landlords. It's free to use it as a landlord and they have an application process. So when I have tenants that prospective tenants that are interested, I give them my cozy link and then they fill out an application there and then cozy runs the background and credit check for me. And then that really sort of weeds out even more folks.

Andrew Kerr: 09:10 So the first step is do really good ads. Second step is meet people in person. You know, I was like the wait outside for folks. So when they pull up in their car, if the car's messy, there's trash falling out of the car everywhere. You're like, okay, if their cars that messy, maybe they're going to keep the property that messy. You know, how do they show up? You know, in a lot of States now marijuana is legal, but I've had tenants show up, they smell like marijuana, their eyes are blazed red. And I was like, you know, if you're showing up to meet a place and you, you're not presenting yourself well, there's probably going to be a bigger problem down the road. So you sort of can screen people that way and then you get to look at that credit and background check and that really helps as well.

See also  How Finding A Tribe Pushed Kristy To Pay Off $20,000

Andrew Kerr: 09:54 And what I do with the credit check is I like to have a minimum of six 20 credit score. I like to make sure that their previous rent, they've never been lay, they've never been foreclosed on. And then, you know, background check. If it's a small misdemeanor from a couple of years ago, that's fine. What I really look for is to make sure there's no sex offenders or violence type criminal cases. Then the last piece is the income is, you know, I want someone bringing in at least three times the rent. So if I'm renting a place for a thousand I like to see them bringing in $3,000 a month. So that's sort of that criteria that I use to help find really good tenants.

Michael Lacy: 10:32 And how do you keep the good quality tenants that you find? Are there, is there anything that that you do, especially as an owner that shows appreciation or anything like that that kind of shortens that curve with vacancies and all those sorts of things?

Andrew Kerr: 10:45 Yeah, absolutely. That's a great question. So I always try to make my property slightly nicer than the competition. So if I have a two bedroom, one bathroom apartment that I'm going to running. So like in our current house SAC, we've got a two bedroom, one bathroom downstairs. I looked at all the other two bedrooms in my area. We didn't want to have a super luxury apartment, but we also didn't have bottom of the barrel. So I sat, I found all the other apartments that were middle of the range and I made ours essentially 10% better, 10% better, and quality renovations, look, feel, layout, everything. And then I looked at what everyone else was running for and I looked at that average and I tried to be right at that average. So I had this idea of if my apartment is better quality than everyone else's and still a competitive rate, why is someone going to go leave?

Andrew Kerr: 11:38 Why? Why are they going to go spend the money on a moving truck, pack everything up, go through that headache, have to have extra money for a deposit at the new place and do first months rent the deposit. If it's like, well am I really gonna go do that to save $25 or $50 for a place that isn't as nice? Not many will people do that. So that's what I always do. And then just try to take care of your tenants. If there is a maintenance request, get it done as quick as you can or if you can't get it done right away, just communicate really well with your tenants. And you know, I think that's the biggest things, right? Tenants don't want to be bothered, but if they need something they want it fixed right away or at least be communicated with and then have just sort of competitive rates. And I, that's how I price my stuff. Competitive rate, slightly better quality than my competition.

Michael Lacy: 12:31 Great. And so another thing that you mentioned was, um, that, you know, sometimes it's good to have a property manager and so is that kind of the same process when you're talking about vetting tenants versus vetting property managers? I mean, what are some of the steps that a person could take to, to properly do that?

Andrew Kerr: 12:47 Yeah, so what I really love is I don't want the mom and pop property management and I don't want the giant property management firm. So if you have the giant property management firm, they have the super big office, they have multiple staff, they're going to be a bit price here in a bit expensive. And if you just have that mom and pop, the problem is if it's one person managing it, if they're sick or they're in the hospital or they're on vacation, they don't have the backup. So I like the property management companies where there's, you know, one owner and they've got maybe two people, one or two other people working for them. So there's a lease, some continent nuity if someone's out for whatever reason. And then the other thing I do is I always go meet a property manager at their office. I look at their website.

Andrew Kerr: 13:36 Does their website look like it's from 2001 or does it actually look like it's from, you know, 2020 I look at how they do the marketing for other properties. Cause if you go to a property management website, they're going to be listing other properties and then I go meet with them. Their office. Is their office neat and tidy? It doesn't have to be fancy, but is there just paper shuffled everywhere? Are there extra keys laying around? And then I look at what their fee schedule is. So property managers usually make money a couple of different ways. They make money as a percentage of the gross rent that's collected. So that could be, you know, six to 10%. So if your place is running for a thousand and they have a percent fee, they're going to take 80 bucks every month. Then they, some of them will charge an admin fee or some sort of yearly fee and then a lot of them will charge a lease up fee where the property is empty.

Andrew Kerr: 14:30 If a tenant moves in, we're going to take a quarter to a half to a full month's worth of rent. And what happens is if you have someone that takes a really big lease-up fee and charges a high ongoing fee, you know, if they take a full month's rent just to place a tenant and the tenant only lasts a, you're already down, you know, a large chunk of your income right there just from that. And then you've got them taking eight or 10% every month. So those are the things that I look at as sort of what's their outward appearance, their website, their marketing, how do they manage their office? Are they tidy, do they look like they're organized, you know, pay attention to the details and then what's actually their, their fee structure.

Michael Lacy: 15:15 So, I mean when we talk fee structure, what are some of the things that that you personally are aiming for or that you'd like to see?

Andrew Kerr: 15:23 Yeah, my, my favorite thing is I don't mind a small annual fee if I know it's going to technology and service. So like I just sold my last affordable housing, or sorry, not affordable housing. My college housing unit, uh, spring of 2019, that property manager, she charged $150 a year. Whether you had one property with her or you had 50 and that went to help paying for the software that she used. It was really good cutting edge technology tenants could log in, I could log in as an owner and pull my, all my own reports. So to me I said, you know, 150 bucks that helps her cover the cost of that platform. I'm good with that. The other thing I really liked about her is she didn't charge any lease-up fee. This is hard to find, but if you can find a property manager that doesn't charge a lease up fee that saves you a ton of money and it keeps a lot more profit in your pocket. And then, you know, she only charged me 7% I think it was, but you know, I had quite a few units with her and been using her for years and years and years. So you know, if you can find someone that does know lease up fee a little to no yearly admin fee and then somewhere in the, you know, seven 8% range of collected gross rents, that that would be the ideal property manager to go with as far as the fee structure.

Michael Lacy: 16:45 Okay. So let's go back kinda to that, that first deal that you did in your late teens, early twenties there. I mean, what is the biggest lesson that you think you took away from that deal? Because obviously you didn't just stop there, right? This is something that you've continued to do over time.

Andrew Kerr: 16:59 Yeah. Really from that experience there was no takeaways because I was so young and I didn't know what I was doing and I always had friends living with me. I actually learned more from my second house hack, third house hack and then the multiple other real estate deals that I did and the biggest thing I've learned was to have ironclad leases outside of house hacking. I invested a lot of college housing in affordable housing on the affordable housing side. I probably represented myself for evictions on 20 plus evictions and I essentially won all of them without any issues because I had ironclad leases. And what I found when I started networking with other folks, whenever they had problems, they had bad leases or they didn't use leases and then they didn't enforce the lease. And I found that when I had those ironclad leases and even if I wanted to give someone some Slack, I still delivered the late notices on time. That prevented me from from having some some issues, you know that was one big lesson learned. And then the other thing was have really good property insurance and make sure your insurance is adjusted to cover that rental income and having tenants in your property. You know, unfortunately over my investing career I've had two different property fires and having good insurance really, really saved me, um, from potentially financial ruin. So those were the sort of two big pieces that I've mentioned is on the leasing side and then insurance side.

Michael Lacy: 18:27 Sure. So let's dig into the leasing side a little bit. I mean because you mentioned ironclad leases and you talked about the evictions and things like that, but what are some other things that you will put in a lease that give you that added protection?

Andrew Kerr: 18:39 Yeah, so I love using, and I've used it for the longest time, it's called like easy landlord forms.com they do leases in all 50 States. They have all these addendums in there. And really the stuff that I've added in, I've learned about over the years, they already have the templates in there. So I do things like no waterbeds are allowed simply because if someone puts in a water bed and it leaks, that's going to cause a ton, a ton of damage, put things in there where a pet rider, so someone's going to have a pet, you put it in there. I've put it in things like guest policies where you know someone's allowed to stay for five nights. After that they, they're considered a tenant and really this isn't where, Hey Michael, you and I are friends. You're going to come crash with me for two or three weeks.

See also  How Eliminating $490,000 In Debt Brought This Family Closer Together

Andrew Kerr: 19:27 This is I'm letting my bum friend move in and he stays permanently and now all of a sudden you as a landlord, we're running to one tenant, now you're running to two or you're running to three and if you're covering any of the utilities, all of a sudden those utility costs are going to go up. The wear and tear on the property are going to go up. So I do that like five day guest policy simply because if I see someone violate it and it looks like someone's moving in, I'm going to go back to them and I'm going to charge them some more money for that extra person in there.

Michael Lacy: 19:59 Gotcha. That makes total sense. And so I want to go kind of into your current portfolio because at the beginning of this you mentioned that there were a few different ways to house hack. And so what does that ratio look like for you now between, uh, you know, a room rental versus some of the alternative methods now you mentioned?

Andrew Kerr: 20:16 Yeah. So the first house hack was a room rental, second house hack was another room rental. The third house hack I did was this small multifamily and this was a pretty big project where we bought a property, gutted to the studs and turned it into three higher end apartments with a guest suite Outback. So it was this sort of big combo. And with that property, we live in a two bedroom, one bathroom upstairs, and then downstairs we have a one bedroom apartment in a two bedroom apartment. Those cover all of our mortgage and then some of the taxes and insurance and then our guest house that we put up on like Airbnb or we're going to rent to traveling nurses. We actually, that covers the rest of our taxes insurance and makes us a couple grand a year. So you know with this third house act we've covered all of our housing expenses and we pocket, you know, some money every year.

Andrew Kerr: 21:10 So it's a pretty creative way. And then we just bought a about two months ago, bought another property which will be our fourth house hack. We're doing some renovations on it, it's a duplex or essentially renovating our side before we move into it. Um, and that's the only sort of properties I own left. You know, in 2016 I was up to 40 rental units and I essentially sold them all off and went from being active investing, the passive investing and I put all that money into syndications where, you know, someone might go out and want to buy a 200 unit apartment complex and I'll be one of the investors on that. That way, it's a lot more hands off. But you know, probably in 2016 95% of my sort of net worth was in real estate. And now I've pushed that down to about 80% of my net worth is in real estate. The other 20% sand, you know, the IRA, my Vanguard brokerage account, you know, the stocks, bonds and equity side of things.

Michael Lacy: 22:11 Gotcha. And so are you looking to kind of keep it right there or are you trying to scale back further? Ramp it up? I mean, what kind of, what are your goals now?

Andrew Kerr: 22:18 Yeah, I'm not scaling back the real estate anymore. I'm still investing in real estate. Where I'd really love to see is more of a 50, 50 split and you know, 50% real estate, 50% in equities, you know, stocks, bonds, and then you know, down the road, invest in some other businesses where, you know, if someone's starting up a franchise, help invest in that franchise, uh, just to help get several different streams of income going. But I feel like I'm a couple of years away from that. Um, but you know, unfortunately real estate, unfortunately, unfortunately real estate is such a great way to make money. If I come across a new deal, I seem to pull money from my brokerage account to put it into real estate. So

Michael Lacy: 23:02 that's how it works. Yeah. So you find these deals, let's talk about how you finance them. I mean, what are, what are some of the ways that you purchase these properties?

Andrew Kerr: 23:12 Yeah, so I'll, we can talk on my third house hack and then my fourth house act cause they're super relevant. So this third house hack is the one we're living in right now. We actually bought it with hard money. And for folks that are listening that don't know what hard money is, it's essentially a private lender that will lend about 80% of the purchase price and they fund almost a hundred percent of the rehab costs. Now they want you to have some real estate experience. They move really quickly. And because they have this sort of attractive piece, they charge usually one to two points and they charge a higher rate of 10 to 12% but a lot of times you can close those loans in 10 to 12 days versus a traditional mortgage. You know, your 30 to 45 days and most banks on a traditional mortgage won't lend on a property that needs a ton of work.

Andrew Kerr: 24:06 So the property when we bought it, you know it had broken sewer lines, it had old knob and tube wiring. It essentially needed to be gutted to this stud. So we bought it with hard money, did all the renovations and then refinance to a traditional 30 year mortgage. And then we used an equity line on the property to pull back out the majority of our cash. So like we bought it for two 70 and some change. There's about 250,000 in renovations. And when we are done it appraised for like six 15 or six 25. So you know, we were all in in that five 25, five 50 range and we created some value there. And then when we refinanced it between our first mortgage and equity line, about four 50, so we only had, you know, about 60, 75,000 of a, of our own money left in it.

Andrew Kerr: 24:57 Uh, but we pulled back out a good chunk so we could then put it into a new deal. So that's how we did that. That third one, um, and the fourth one, because we had a pile of cash and we wanted to buy another property that needed work, I actually used an FHA loan with an FHA loan. If you're buying it, uh, you're going to live in the property. We only had to put three and a half percent down on this property. So it was great cause I bought this property I think we put down is like 2020 K but then our other big chunk of change we're sitting on, we're using for about 100,000 in renovations on the property and then we're done. We're going to do the same thing. We're going to refinance and pull a majority of our cash out. So there's a lot of different ways you can do a house hack. And then what I always really recommend if you want to buy a property and don't have a ton of cash, you can look at an FHA loan because you only need that three and a half percent down to buy a property.

Michael Lacy: 25:52 You know, as you, as you look back throughout your tenure doing this house hacking, I mean, what has that freed you up to do, you know, financially, professionally, all that and what have been some of the benefits outside of just the real estate, you know, building that portfolio.

Andrew Kerr: 26:07 I mean the biggest thing is, you know, for folks that are listening are really into the personal finance space. You know, in 2016 house hacking gave me more money to then invest in real estate and invest in brokerage accounts. It essentially got me to where in 2016 I got to what folks in the personal finance space call lean fire where I had zero housing costs. I didn't really have automobile costs, I didn't have any other debt outside of real estate and I had enough income coming in to cover my costs if I wanted to leave my job. Um, so it just really gave me that ability to sort of build my financial foundation and accelerate my path to that basic level of financial independence.

Michael Lacy: 26:51 And so now you know with where you are again, what are some of the, the future goals that you have? Are you looking to just to keep growing with this thing? Are you scaling back your career even more? I mean, just kind of a, what are some of the things you're looking forward to do over the next three to five years or so?

Andrew Kerr: 27:08 Yeah, there's a couple of things. So when I got to sort of lean fire back in 2016 I realized this is great, but as my wife calls me, she says I'm bougie. So I, uh, I'm working towards fat fire. So like we love to travel internationally. You know, I've been to 34, 35 countries. My wife has been to 40 plus countries. You know, when we travel overseas, we love the travel business class. We do a lot of that via like travel rewards and credit card churning that in those signup bonuses. Uh, so we love to travel, but the idea is to work towards fat fire. And then, you know, part of why I really went heavy in real estate early on was so I could do the nonprofit work that I've been doing this past decade. You know, I was in the mortgage banking where I was making great money in my early twenties but then in my late twenties and my thirties, I was doing disaster response work.

Andrew Kerr: 28:02 I was working for nonprofits, I was doing aid work in places like Haiti to Indonesia, making very little money. And I loved that, but it didn't give me the financial security that it needed. So I'm still love doing this nonprofit work. And I have this goal out there where I want to raise $25 million for charity. Um, I'm somewhere around 17, 17, $18 million that I've raised for charity over the past decade. So, you know, I want to get the fat fire, I want to hit that $25 million Mark race for charity. And then my wife and I, we also want to join the travelers century club. I don't know if we'll hit that in the next three to five years, but essentially once you've traveled to a hundred countries, you know, you, you can be part of that travel or century club. So we might get a little closer there. I don't think we're going to get to a hundred in the next three to five years. I think that's a 10 year goal. But yeah. So those are the sort of three things that, that we're working on.

Michael Lacy: 28:58 Yeah. So you said something there, you mentioned it a couple times. You said fat fire. Can you explain that to the people who may not be familiar with that is,

See also  How To Monetize Your Skills And Your Knowledge

Andrew Kerr: 29:06 yeah, so there's this basic idea of you have lean fire, you have fire and you have fat fire. So it really varies depending on the person. So lean fire is you have your basics, you know your, what I call your big five expenses. It's, you're paying your taxes, paying your housing, paying your automobile, paying your, your food and your health care. So you've got that covered. Fire is okay, now you've got some comfort you can go out to eat, you can maybe do a small vacation here or there. You can give a little bit of charity, fat fire. For me, the Target's about $250,000 a year. So this lets us, you know, put money in the nieces and nephews, five 29 accounts, help build that up for them. This lets us give a lot of money to charity every single year. This lets us travel, you know, this just has the ability for us to where we feel comfortable to not have to really worry about, you know, finances.

Michael Lacy: 30:06 Okay. So I want to go into, um, some of the tools that you've used to help educate yourself as you've grown in this house hacking field. I mean, are there any books or anything like that that you know, where some of the favorites for you that, that really helped you, I guess grow and expand?

Andrew Kerr: 30:23 Yup. You know, one of the biggest resources out there is bigger pockets. They've got the website, the forum million plus members that are in those forums every single week. They've got a podcast and that's through all the different real estate niches. And then they've got a great series of books, everything on how to buy property with little or no money down to how to basically house hack, how to manage tenants. So those are some really great resources to, to look at. And I've really loved a lot of those. You know, the early one that I read that really sort of changed my mindset mindset was the rich dad, poor dad, which I think a lot of folks that really get into personal finance that really gets them to start to think differently about assets and liabilities.

Michael Lacy: 31:09 Perfect. Perfect. So, Andrew, I mean, I do want to ask you, I mean, do you have any, uh, any advice or any tips for someone that's heard this for the first time? I'd been introduced to this for the first time that is maybe interested now they're looking to get started and what are some practical things that that person can do, uh, to get on the right path and get on the right track with this?

Andrew Kerr: 31:30 Yeah, so if you're looking at doing a house hacking, the very first thing you should do is go pull your credit report cause you're gonna have to get alone. And the loans are really determined off of, you know, your income and your credit. So first thing you should do is go pull a credit report with all three credit bureaus and just see where your credit scores are. Because if you have any issues, you've got time to fix those. Then the next thing you want to do is start to figure out what's the right type of house hack for you. Is it, I'm okay having roommates or am I engaged and getting ready to be married or I'm going to, you know, we are married or we now have kids. And then decide on that style of house hack that you want to do. And then once you sort of know that, start to get financed with the bank and then find a investor friendly real estate agent.

Andrew Kerr: 32:20 And those are sort of the big three steps. And then you can go to the real estate and say, look, my credit's good. I've got preapproved for alone. Here's the type of property that I'm looking for. We're looking for a small multifamily property, a two unit or three unit or four unit because we want to live in one unit and run out the others. And now you give that criteria to that real estate agent and she knows what he or she's going to be looking for, uh, for you. So that's really the best way to get started. And then a sort of shameless plug, listen to my podcast so you can hear all the different case studies and best practices.

Michael Lacy: 32:54 I do want to leave you with this question and that is, can you walk us through what has been your most creative house hacking scenario?

Andrew Kerr: 33:02 Yeah, it was this third house hack, so I'll give you a little more detail. We touched on earlier, but we lived down in new Orleans and we love new Orleans for so many reasons, but one of them is the architecture. So we bought this old 1920s Cornerstore. It had broken sewer lines, knob and tube wiring. Most folks when they walked the property they realized, Hey, there's this big building that was the Cornerstore, but now there's this old barn sort of garage building that's useless. And they couldn't figure it out. And it scared a lot of people off because it had those broken sewer lines that had that knob and tube electrical, which a lot of insurance companies don't like to insure. And to me, I saw that as opportunity and what we ended up doing is buying it, converting it into sort of three higher end apartments.

Andrew Kerr: 33:54 And then we, we converted that farm building into a one car garage with a guest house. And the really cool thing with that guest house is most people walked in and said, Oh, it's really tall, but there's not enough space to build a staircase. But what most folks didn't realize is if you actually read the code, you could put it in a spiral staircase and that would get you access to that second floor. And that let us build on this 500 square foot studio guest house in that sort of garage building, this, this little guest house carriage house, you know, and that 500 square feet, if you have a property that's appraising at about 200 square feet, you know, added about, you know, 80 a hundred thousand dollars of value on the house, uh, for us. And that was what most people were really overlooking that income potential on there. But you know, this property we're living in grosses us about $40,000 a year with us living in one unit. So that really just covers all our costs and leave us a bit of money left. So that's really the most creative house hack that, that we've done so far.

Michael Lacy: 34:59 Man, that is fantastic. That's Epic. I love it. I love it. So final question that I have for you is, I know we, I mean you just kind of plugged it a little bit, but let the people know one more time where they can find you if they want to follow along and get more insight and tips from you.

Andrew Kerr: 35:15 Yeah. So our podcast is the house hacking podcast on Facebook and Instagram. It's the house hacking podcast. Check out the podcast. We're right in the middle of season one here in January, 2020 the whole first season is going through all those different styles of house hacking. And each week is a new case study of someone that's done a house. We've got single women, single men, we've got newly engaged couples, we've got folks that are married and have a family, have multiple kids that are house hacking. We essentially, you're going to have a case study for almost every example out there. So come in and sort of do a pick and choose your own adventure and say, Oh, the room rental house hacking sounds great. Or the income suite house hacking star sounds great. You know, go listen to those couple episodes and you can start to pick up on what worked for them and you know, what were some of the challenges that they had. So you can learn how to do a house hack yourself. And then the last thing I want to say again is even if you don't want to be a real estate investor and you're just trying to get ahead financially, do a house hack for three, five, 10 years, it can make a huge change to your financial situation. And then never invest in real estate again. Just go back to own a primary residence and having saved all that money for a long time.

Michael Lacy: 36:33 Well, Andrew, thank you so much for agreeing to stop by the neighborhood and share your house hacking story and tips and insights with all the neighbors out there. I'll be sure to link to Andrew's social media profiles, his websites, and all of the great tools and books and all that that he mentioned today. So be sure to check that out@winningtowealthdotcomslashepisodefifteenthatiswinningtowealth.com slash episode 15 if you learned something today that you didn't know coming into this episode, I want to ask you to do one thing and that is to hit the share button on whatever platform you listen to this on and share it on your social media. That is how we spread the word about the show and how other people who are looking for this type of information find it is through your actions. So if you wouldn't mind supporting in that way, I'd be very appreciative of it. Also, if you want to dialogue with likeminded people about this episode, be sure to stop by the neighborhood. The neighborhood is our place where we talk all things money, completely open, completely honest and it's just a great place to be. Um, you know, if you have financial goals that you're looking to hit, or if you just have any general financial questions that you need an answer to, you can find the neighborhood@winningtowealthdotcomslashneighborsthatiswinningtowealth.com slash neighbors. Thanks again for listening to another episode of the wealthy neighbor show. We'll talk soon.

Speaker 1: 38:12 [inaudible].

Key Moments To Listen For

House Hacking Defined By Andrew [1:19]

Andrew’s Motivation To Start House Hacking [1:54]

Finding The Ideal Property For A House Hack [3:38]

How To Screen Tenants & Keep Good Ones [7:01]

Hiring And Vetting A Property Manager [12:30]

How To Use A Lease To Protect Yourself [16:44]

Andrew’s Current Goals After¬† Reaching FI [22:11]

The Financing of A House Hack [23:01]

How House Hacking Can Benefit Your Career [25:51]

The Stages Of Financial Independence [29:00]

Tips To Get Started With House Hacking [31:12]

Andrew’s Most Creative House Hack [32:54]

Resources Mentioned

Listen To The House Hacking Podcast

Rich Dad, Poor Dad Book

BiggerPockets Website



Connect With Andrew

Andrew’s Website

Download Andrew’s Ultimate Guide To House Hacking

Find Andrew On Facebook

Find Andrew On Instagram

Find Andrew On Twitter

Find Andrew On YouTube

How Andrew Kerr uses a strategy known as house hacking to cover his living expenses and reach financial independence. Retire early using real estate.

Like this article?

Share on facebook
Share on Facebook
Share on twitter
Share on Twitter
Share on linkedin
Share on Linkdin
Share on pinterest
Share on Pinterest

Leave a comment