Using an Agent to Find Your First (or Next) Deal With Ryan Meinzer, Stephanie & Hero Cruz, and Rob Kishi

Brandon: This is the bigger pockets podcast show 359. What’s going on everyone this is Brandon Turner host of the BiggerPockets Podcast here with my co host David the agent man Greene. What’s up David agent man Green what’s going on?

David.: Secret agent man. Not much men to day we have amazing episode I’m super[crosstalk 01:25:22] about this so basically here’s what’s been happening, Brandon and I get a ton of people that come to us and say I can’t find a deal I can’t get started I want a house hack but I don’t know what I’m supposed to do. And what we realized is that people are trying to do a lot of the work, that Brandon and I don’t even do. We rely real estate agent to do that for us. We wanted to do a show where we took three people that I’ve helped with various forms of house hacking. And walk you guys through their stories, so that you could see what it looks like when you do it successfully. Now I get a ton of request for these kind of shows. ” David it’s great that you have the guy buys fifty houses a year but that’s not me, what about the person who’s bought one house because that’s where I’m at.”

David.: So you have spoken, and we have listened and we’ve brought in three clients of my own that I’m very familiar with their story to share with you guys what feeling they went through. What emotions they had how they tackled the hurdles that were in front of them. What was expected and what was different than what they expected so that you can learn from their successes.

Brandon: Yeah that’s it, obviously, these are David’s clients today so you’re going to hear a lot of I mean they love David obviously, because David is a really good real estate agent. So, don’t take this as David’s trying to say that you should work with David. What the whole point of this is like here’s how to get started, here’s a couple cool strategies including like a traditional house hack, an assistant living house hack, an ADU house hack, you’re going to learn about all those three today. But again like how to work with real estate agents to be able to get that. How do you get an agent to take you seriously? How do you get an agent that actually knows what they’re talking about. We talk about a lot of those things. Negotiation strategies for buying that first property. Hopefully, guys will get a lot out of this, I got a lot of these today I think you’ll really enjoy it quite a bit.

Brandon: But before we bring in the first guest let’s get today’s quick tip, biggerpockets.com is a website on a website there are navigation bars it’s like that little bar on top of most websites, BiggerPockets has one. If you go to it, one those drop down menus on there says network. If you go to that, and you hover over it you can actually click, find a real estate agent. If you click that it’ll know where you are like where your BiggerPockets profile is based at. Where you put your zip code when you sign for BPE. And if you don’t have a BPE, it might just know where you are based on ISP, you have or you put in a zip code. Anyway bottom line you can find agents in your area, and what’s super cool about that is you can see in that page you can see like how many comments those agents have. How active they’re in the forums.

Brandon: How many people have voted up what they’ve responded with. What’s really great about that is that you can see who’s actually an active member of BiggerPockets and they might know a little more about real estate investing than somebody who’s not. Now if you’re a real estate agent that’s a really good sign that maybe you should get signed on BiggerPockets, so that when people come they can say hey that person clearly knows [inaudible 01:28:02]. Quick tip if you don’t have an agent you have 24 hours from right now, go get an agent and make it happen. All right I put you on notice everybody 24 hours. I want to get to today’s interviews, We got three guest today we going to bring them in one at time and I’ll let David introduce the first.

David.: First up we have got Ryan Meinzer, Ryan, good morning to you how are you doing today?

Ryan: Good morning doing well how about you?

David.: I am doing fantastic, this is really going to be a fun show. So, you and I met, I believed you reach out to me through BiggerPockets is that right?

Ryan: I did.

David.: And you had said I want a house hack San Francisco, you actually had a good plan for the most part put together. You just wanted to kind of bounce things off me. And we actually had a lot of success with your deal, and we’re going to talk about that and share with the listeners. How we found a property for you, the struggles that we had. The obstacles we had to overcome. How you worked with me to kind of get through that. You really took the reigns with this, and put a plan together because you’re smart guy, and you did a smart thing. Why don’t you start off telling us what your plan was, and how you found the property that you ended up buying?

Ryan: For sure thanks for having me again I’m stroked to be here. I mean pretty much you guys did the heavy lifting for me just listening to the BiggerPockets. And that’s what made me decide definitively, that I had a house hack. And that was basically, what my plan was, I wanted to do it in San Francisco though. Most expensive market in the entire United States. However, through BiggerPockets, and some diligence I definitely found the right thing. Found the right way to house hack with you.

David.: How did you find the property that we’ve picked?

Ryan: There’s an open listings website, which makes it just super easy to find property. To get push notification on your iPhone. It’s a very intuitive app. I use that among a ton of other tools. I can’t even remember all the name of all the tools. I pretty much use everything under the sun. And then of course you, when I linked up with you started giving me listings to MLS with Kristin.

Brandon: What exactly were you looking for, you knew under house hack. Were you thinking in the beginning I want a single family, or I want a duplex, how set were you on what you wanted there, and what was you were looking for?

Ryan: From the whole like Grant Cardone, episodes you guys have like I was pretty set on not having a single family. Also, in San Francisco you needed easily one mill, one point two to even like make that happen when obviously I do not have. So, I pretty much knew that I had to do a multifamily, and when started looking at the multifamily even then at that point I didn’t have enough cash for that. I found this unique what I call an angle, and that is TIC tenancy in common in San Francisco. And they are priced 20% lower than market of the comparable if it was a condominium. And that was kind of the angle I took to kind of make this happen.

Brandon: Can you explain the tenancy in common thing, what type of property, is that a legal term for tenancy in common, there of is that like a certain property type?

Ryan: It’s a certain property type, and you can also I can say in a legal term, what it is it’s a joint tenancy between at least two people. So, if you have a duplex for example, two people own the property together but they respectfully finance their respective units. And you can have that separate agreement with CC&Rs and all that good stuff. To define their core ownership, and their core habitation.

Brandon: Okay very cool.

David.: So it’s away of holding title but most people find tenancy in common to be less desirable than holding title in a traditional standard. Where you’re like the sole owner of the property. And that was one the ways that Ryan, was able to find like a really good deal. Because he found a property that was priced less than how the condos were priced, but approved or zoned to be allowed to transfer into a condominium which would made the value of it to go up. Because Ryan, knew that he recognizes an opportunity here to buy a property for under market value. Which would then be worth more later. TIC’s they’re usually specific to certain areas. So, San Francisco has a lot of these you not going to see a lot of them in some of the mid western states I don’t think. But it was one the ways that Ryan was able to find something that he could add value to this deal.

Ryan: Yeah, exactly it’s kind of like a way instead of find a core partner to invest into a multifamily. Is kind of a way to do that without having to married in the same ownership with someone like that.

David.: Yeah, your goal basically, you wanted to buy a property in San Francisco, which is either the, or one of the most expensive housing markets in the country. Without having to spend very much money to live there. Why don’t you share a little about your plans when you found this property. I believe you came to me after you had already gone into the open house, and you kind of checked it out. What originally intended to do to reduce your living expenses?

Ryan: Yeah, for sure. Essentially house hacking in short just means that your roommates pay for your mortgage. Your principals. Interest, taxes, and of course, insurance PITI, that was the goal. We had to find a unique property like we mentioned TIC. We had to find an angle again to be competitive with the TIC, that is like the financing as well as everything else that we talked about. But the house hack situation was pretty straightforward, you find it was a two bedroom, two bath. But you and I David, we was an angle to make the dining room my bedroom. So pretty much that’s what I did.

Brandon: Is it really.

Ryan: Yeah, it was pretty straightforward. It wasn’t like any crazy rehab work, or anything like that.

Brandon: Did you pull just a Craig curl up, and just put like a sheet between the bedroom and the dining room, and the rest of the house?

Ryan: I did for the beginning.

Brandon: That’s funny.

David.: Exactly.

Ryan: We go a really fancy door.

Brandon: Fancy door.

Ryan: A sliding door, which meant I didn’t have to go through this permit junk. It’s actually a big project to however, it was very straightforward. And I got to design the store, to be pretty much my favorite thing in the entire house now. So, actually, turning into a blessing.

Brandon: That’s cool.

David.: That’s very cool

Brandon: Can you walk us through I mean like what was your payment like, and how much were rent out the room for, what did you at the end of the day had to pay to live there?

Ryan: Well in terms of like the purchase pricing kind of go through all that?

Brandon: Yeah, sure let’s go through that numbers yeah that would be great.

Ryan: The numbers, well purchase price I think there was David correct me if I’m wrong. But I think it was listed for like 95. We offered 800 and they accepted. So, it’s pretty sweet is a little 5000 on top.

Brandon: There you go, you batted for that and then what’s your mortgage payment look like on that?

Ryan: The PITI, Principle Insurance Taxes Insurance is about $4,400 and that’s being really conserved, it’s more like $4100 but-

Brandon: Sure, and then you were able to… you renting out one of the rooms in there or is there multiple you getting other rent out of that?

Ryan: Yeah, renting out two rooms. So, I got two roomies.

Brandon: Okay, what do they pay?

Ryan: The one room is like a master with its own bathroom, the other room had Jack and Jill style bathrooms. So, put around 200 bucks on top of the premium of the master. The master pays like $2200 and the other one pays about $2100 as well.

Brandon: That’s awesome.

Ryan: Actually, now that I think I’m frustrated with the price, I make sure I get $4400 income, so basically I think now I’m charging $2300 for the master, and $2100 for the other one.

Brandon: So you’re living for free that’s what you’re saying?

Ryan: I’m living for free.

Brandon: In San Francisco

Ryan: Yeah, I can do all that number crunching I want which I have [ina udible 00:15:44] that I’m living for free I know that for sure.

Brandon: Yeah that’s so cool. Ryan, can you walk us through I want to talk about working with David, we’re going to talk bad about David. David ear muffs. I want to know like working with David, not just boost his ego or whatever. I want to talk about working with an agent that understands investing. Had you tried working with other agents at all. Did you instantly, just say I want to work with David because he gets it. And what was that like working with an agent who knew what they’re talking about?

Ryan: Yeah for sure, I’m actually, an agent now in California. I was studying concurrently, while I reached out to David. And even though I am an agent I would absolutely use an agent again for my first deal no doubt about it. He was awesome he gave all the assurance that I needed to go through with the deal. He gave the confidence. He eased my nerves. We went through the numbers together. Like this was my first deal, although I’ve been listening the BiggerPockets a lot thought I had a good deal of the numbers, David, helped me refine those. We formulated the strategy together. We both found the place we got through the deal, and we made it happen. It was awesome I would do it again in a heart beat.

Brandon: Yeah that’s cool.

David.: One thing that was unique to Ryan’s situation, when you’re buying a condo or TIC, basically something least expensive, because San Francisco has really high price points. You’re going to have a lot of complications like CC&Rs Covenant code and Restriction, HOAs there’s all these rules that a lot cities have. And we had to read through a lot of documents to make sure that San Francisco would allow what he was doing. Not just would they allow it, but what will it have to look like for it to be allowed? What would the other people in the unit feel about what we’re going to be doing, or they cause a stink right?

David.: And that’s something that if you don’t have someone who’s experienced doing this that could be overwhelming. That alone stops a lot of people from taking action moving forward. Because that what if is so big, that seats over their head. But Ryan, is actually really talked about extremely smart guy. Very successful business man has started his own startups. Run his own companies. He’s really smart. Real estate scenario where he wasn’t as experienced in and that’s one of the benefits of having an agent is there someone that can help you decipher all of these questions that you don’t know if they’re going to be a big deal or not.

David.: And there’s stuff that I going to pop up in the escrow right? There’s things that the seller wanted from that we didn’t want to give to the seller. There’s things that we needed from the seller that the seller didn’t want to give to us. And having someone who’s a little experienced negotiating really helps. Ryan knew what he needed to feel good about this, but that doesn’t mean he’s got experience with actually going out to try that to make that happen. In my opinion, I think Ryan in this case Ryan, knew kind of everything that he needed to know. But I bet he still wouldn’t have taken action if he didn’t have an agent there. Because there’s that what if I step forward and I’m stepping on a landmine and I don’t know.

David.: And I think that a lot of listeners can really relate to that fear of I don’t know what I don’t know, and it keeps you from taking action.

Ryan: Totally, David, the action is there three things that you need to get your first place right? Save by spending less, learn to find an angle and the third like act daily. And David, you helped act on that point. And this is how I turn my dreams into reality.

Brandon: That’s cool.

David.: So, to break this one down you bought a TIC, so we were in for about $800000, when this would have been north of a million had this been a condo. We took the dining room, which you really don’t need when you’re a single guy with two roomies. And turned it into a bedroom. And now he can live free and rent out these rooms. And I think Ryan he could get more if he needed for the rent. He probably, like the roommates he has, which is a big piece of house hacking, if you don’t want to live with someone that you don’t like. Because you’re in the same place-

Ryan: Yes yeah I can definitely get a little more.

David.: And in the future he will I’m sure. And then there’s plans to convert it into a condo, which is going to put a lot of equity in his pocket when that actually comes around. And then maybe he rents out that third room, and goes and does this again the next year. So those were three angles like Ryan, described that we looked for that added value to the property they were going to build his wealth really big. Not to mention now he’s saving that $4400 a month that he would have been spending were he to live in San Francisco on his own. You take $4000 multiply by 12, what is that $48,000 a year a little more of that. Ryan is now saving that’s probably, going to be his down payment for the next property that he ends up going to buy. And the other thing we didn’t mention was this was a TIC, they’re usually really hard to get financing for.

David.: Because what you’re kind of doing like in this case there’s four units to it, you and three other people all have to go get a loan. In one loan in all four of your names, and every one agrees to pay 25% of it, which is kind of complicated and most of us don’t like that. But his particular unit we found a bank that would do what we call fractionalized financing. So they would allow Ryan, to get one fourth of the loan in his name somebody else get one forth in their own name, so you don’t have to worry about some the complications that come from it, which makes this a more desirable unit. Someone may pay more for a property that has fractionalized financing than one that doesn’t when a lot of them don’t. That’s another angle. And it just plays to what we talked about Brandon a lot of the time, which is the more tools you have in your tool belt[inaudible 00:21:05] the deal you can take down the more profitable you can make of it.

Brandon: Why did the place,,, You said fourplex is that what you said?

Ryan: It’s actually a duplex. The place right next is identical though so, that’s probably why.

Brandon: Why would they choose to do the… sell that model instead of just condowise it I don’t know if that’s a word, condowize it themselves?

Ryan: You need to convert a TIC, into a condo, which is pretty an [inaudible 00:21:32] process actually. It takes about a year both owners need to be living in it, owner occupied. And then you need to get through some kind of modifications if it’s not up to snuff to the current days permit type of requirements. And it does cost about, and you got to get a survey, which cost like an easy five grand. You got to get another inspection, you got to get an appraisal, you got to refinance it. It’s a process that is although a pretty straightforward process it can take a lot of time. And it was not a condo, like David mentioned once it advanced to a condo it jacks up the value by at least 15% to 20%, because then one of the major reasons is anyone trying to buy the place can get conventional financing. Where as we had to get unconventional financing.

Brandon: That makes sense. All right so I’m curious about overall this whole thing like the whole process like from beginning to the end. What would you say you’ve learned in that process like you can teach other people. Okay now I know this I didn’t know that before so, if you’re in my shoes a year ago or two years ago here’s what you should know, anything come to mind?

Ryan: Sure, I would just echo these three things like I said, I had always saved by spending less. That was the first thing, right? And then the second I was always like actively learning, figuring the stakes I was trying to become a real estate agent. But still I didn’t even know what to do, there’s infinite learning so always be learning. And then I really think that finding an angle like David and I spoke of, was really the kind of differentiator here with us. That angle being the property type, the financing, the bid, the negotiation. and then finally, just like acting. Everyone talks, and acting on a daily basis is what I did and is and one of those actions was calling David. That was one of the best calls ever.

Ryan: He got me to take my actions and like you said that there’s a lot that do not know. And then we just made this thing happen together.

Brandon: Very cool.

David.: And I would probably add on top of that so it was just stessful during the escrow. And you have to just accept that’s part of the deal, right? Fear is a piece of it. Uncertainty is a piece of it, anxiety, tension, stress. You can’t buy real estate without going through that, which is why a lot of people don’t. I know like Ryan it caught off guard, I was a little different than other things. Because there’s a lot you can’t control you don’t how it’s going to work out. But you handled it really well, and you got to come in the end with a lot of wealth waiting for you.

Ryan: Thanks yeah, just a piece of mind from having an agent a professional, that’s going through this millions of times. That alone is in it of itself worth that 3% or 6%. I don’t care this the biggest investment of your life and trying to do without an agent, that’s nuts to me. Especially for your first deal. That’s why it was a definitely the way to go.

David.: Awesome dude, all right last question that I have for you, can you tell us how your mindset has changed from before the deal to after the deal, and how you feel about real estate now going forward?

Ryan: Yeah David before the deal, it was like this impossible thing for me, it felt to buy a real estate, but going through the deal and actually making it happen. It was difficult but now that I’ve done it I am so sure that this is the way I’m going to have financial freedom. Is definitely, like how I’m going to get there. And I’m going to this over and over again for the rest of my life, as much as I can. That’s how my mindset has changed, this is definitely, the route to freedom for me. And that is what ultimately, going to make me happy in my life. Now you ask me the second part of the question remind we what that was?

David.: How has your mindset changed moving forward what’s different about you now?

Ryan: I’m just going to take more action by doing real estate. And now that I’m an agent, I’m going to be doing it even more sell with you David. This is definitely my path as I mentioned to financial freedom, no doubt about it real estate is the way to go.

David.: I love it. I believe people wanting to hear more about Ryan’s story you wrote a blog post on BPRE, I wrote one about your story. So, you can definitely check that out if you look at my blog articles. But what Ryan has found a way to do through the magic of house hacking is finding market in the most expensive market in the country, live in it for free. Once it’s converted to a condo I’m going guess he probably adds about $200000 to $250000 to his net worth from that one deal. As well as the $4400 a month you saving which in a year it’s close to $50000. And now he’s got that much more experience that much more confidence to go do the deal again the second time. That didn’t come at a price though, there’s fear, there’s apprehension, there’s some worry. There’s some work that had to be done. You had to go the city and do a lot of research on permitting. And find out what was allowed, what wasn’t allowed. What qualifies as commercial use because that was prohibited versus not.

David.: You definitely, earned it you didn’t just get the six pack, you had to go to the gym to do the crunches. But you got it and now you got that bag. And I know you’re going to build a lot more wealth buy more real estate so that was awesome, very glad I got to meet you.

Ryan: Yeah for sure thank you that’s exactly right.

Brandon: Yeah thank you Ryan.

David.: Last question for you Ryan where can people find out more about you?

Ryan: [inaudible 00:27:17] totally, you can find me ryanmeinzer.com. Now that I’m an agent you can go to rycare.com, people call me Ry sometimes so rycares.com.

Brandon: Sure. All right rycares that’s awesome. Well thank you Ryan for doing this now we’re going to bring in another guest here in a moment. But first David, I want to hear from you real quick. What was it that you liked about working with Ryan, just so people listening could be like if you’re trying to get an agent like a rock star agent how can they best appeal to a guy like you or an agent who understands what they are talking about, like what attracted you to Ryan?

David.: That is a really good question that you’re asking. One of the things that was unique about Ryan is it was clear I’m going to do this. I want your help to help me do it. As opposed to the buyer that comes to me and says, ” I want to do this but I’m scared to death make me feel good about it. Take away all my fears and then I’m going to move forward.” Which, is not something that I can humanly do. And it ends up being a waste of my time and I take the responsibility of other humans. They’re there only ones that can face their own fear. Ryan was different, Ryan was also very clear about what he needed to feel good moving forward. It wasn’t all easy but it was, ” Okay David, here’s CC&R restricts, here’s what I want to do how can I make it happen?”

David.: Then I was able to dig in there, and find out how is this to find, we can talk to attorneys. We can talk to the city permitting department, and find out this is what we’re going to do with this count. It was very clear to get the answers that we needed to make sure this was the right deal for him moving forward. Ryan also had blueprints drawn up, here’s a different configuration of how I can work out the house, which one do you think is the best. He didn’t come to me and say, “Hey David I want this to happen figure out a way to do it. You do it figure out what I need to feel good about this.” Because had I done that I still that don’t think that Ryan would have been comfortable moving forward, because we all want to believe it’s our own ideas that we’re taking when we taking action.

David.: That’s a problem a lot of people come to real estate agents, and they want them to be the miracle worker. Is you figure out a plan but you make me believe that it was my plan in the first place, and our brains reject that. And that wasn’t the case with Ryan. So with Ryan it really did feel like a partnership. Here’s the stuff he’s doing, here’s the stuff I’m doing, we’re doing it together both sides end up winning when we get to the finish line. And the next time we do it we be that much better. We’ve worked together before, I know more about he thinks he knows more about how I think, we know more about what to expect. And as you understand Brandon, those are the best relationships.

David.: When they’re usually beneficial. They’re partnerships, it’s not like an employee employer type of a situation. And I think that Ryan because of his previous success with business you kind of understood that more than a lot of people do and I think that’s why he had most success than most people will.

Brandon: Good answer, let’s move on to the next guest today. David you want to introduce them?

David.: All right let me introduce you guys. So next up we have two very close friends of mine. I really love getting to know these people. This is Hero and Stephanie. They had a unique situation so I believe I met this two when I was speaking at real estate meet up. And they had come to learn about whatever topic I was talking about. Long distant investing [inaudible 00:30:43] whatever it was. And they came up to introduce themselves after. And I think you guys saw me that your baby really likes listening to my voice right. That was the first thing we talked about.

Stephanie: Yeah.

Hero: [crosstalk 00:30:52] BiggerPockets podcast.

David.: Yeah, I got to meet my biggest fan that was kind of cool. And we scheduled a follow up call and they basically explained to me they were looking to buy an assistance living facility. So this is a house that you buy, and you convert to have typically elderly people come live in when thy can’t take care of themselves. They need some form of supervision, and assistance. But they’re not in the point that they need to be in a hospital or hospice care when there’s like nurse assigned to them all the time. They’re in this transition phase, where they need someone looking over them. Keeping them safe, and they have various needs. And all you guys discussed the various levels of care that there are how you charge. But you kind of running in a form I’m thinking a best way to describe it, like a medical facility in a sense without maybe providing some of the medical care more of the supervision of people.

David.: And you need a very specific property to make that work. You want more than one bedroom. You need all kinds of compliance issues with making sure that it is line with government regulations. And is very hard to find a property like that. And additionally, here on Stephanie, we’re trying to get into this with the low down payment. They want to find a house that they can use and FHA loans apply. So we had a lot of complications in being able to make this happen. And they had already been working with somebody else for a long time. Trying to find a property that would work. And they hadn’t had any success. That was kind of where I got introduced at that point. They told me what was going on, we went over their situation. And what we ended up doing, was breaking down their overall plan into several smaller steps that were much more manageable.

David.: I’ll let you guys jump in and explain what your frustration was like before we met. What it was like once we met, I never hear you guys perspective of what it was like working with me and then we’ll break down into the details after that?

Stephanie: Okay, well we were working with an agent probably, about eight to 10 weeks after that. We were looking for houses every day. We run like the basic platforms like, Realtor, Redfin, and I would get some email notifications from a realtor. And we would be at open houses every weekend.

Hero: Every weekend yeah.

Stephanie: For like eight to 10 weeks. And so at some point I guess, our realtor kind of just got tired of having that back and forth. It wasn’t like a realtor was driving us to all these houses. But it was maybe a realtor that wanted that quick and done deal. And then she talked to us about maybe your goals are too high, or something like-

Hero: Your criteria was very specific, and was kind of wasn’t in-line with our goals at that point. And we realized that well now I think it’s time to try finding someone new, or working with someone new. And sourcing another agent.

Stephanie: And that’s when you came in.

David.: Brandon, you can probably relate to this, that’s a struggle a lot of people have is the frustrations that build up when you’re not getting the result that you want. And you’re not sure whose fault it is. Is it my fault, my expectations are too high, is it my realtors fault because they’re not finding me a property. What the realtor supposed to do? What am I supposed to do? I hear the question on the forum all the time, and I don’t know if there’s actually an answer for what one person is supposed to do. Because, frankly, every client is different. Every realtor has different strengths. There isn’t really a set rule, and is very easy to become frustrated. And you see this a lot when you get on the agent’s side. Where you do the very same thing for two people one person thinks that you’re a Greek God, and you walk on water, and you can’t mess up. And the other person that you worked hard for and they think you sucked, and they hate and they really frustrated.

David.: I’m hoping that people can take out of this episode, like what it looks like when you get it right. Because, what I remember from what you guys told me was you’re trying to find something that had eight to 10 bedroom maybe. But a lot of rooms that didn’t need a ton of work. And you can get in there and buy with a lowdown option. And you were either getting out there or the houses weren’t working. And what we discussed was hey rather than getting that 10 bedroom house on your first deal, what if we get a four or five bedroom house you use your low down payment FHA loan, you get the kinks of your business worked out with maybe four clients instead of 10. So you develop the systems that you’re going to put together. You start the hiring process because that’s going to be tuff to learn.

David.: You find your facilitator, your administrator who’s going to do the work. You learn the regulations you kind of get like we did this with training wheels, once you’ve got that down and you’re established, not only will this paying your mortgage for you. But you guys should be making quite a bit of money every single month once it’s up and running. Then you go bigger on the next deal. You got more money coming in, you can cut more money down. You can be a little more aggressive. And you guys were like hey that sounds great other realtor never explain it like that to us, let’s do it. What’s funny is we came in you guys met. You brought the baby who’s super cute was very good the entire time. And you already had a list of like three homes that you’d that would work. And one that we ended up getting was a property that had already been used as an assistant living facility in the past.

David.: So the rehab portion was a lot more smaller right?

Stephanie: Yes, it was an assistant living previously, and then they try to turn it back into a single family home. So, assistant livings would need to have ramps and all that so they try to turn it back into one. It had five bedrooms and one office technically. So, then we would only need rehabs to maybe get the property into code for[crosstalk 00:36:33]

Hero: Back into compliance yes. And they did spruce up the bathrooms.

David.: Would have cost as much if we had bought a regular six bedroom house and try to turn the whole thing into something that would comply correct?

Hero: Correct, we would probably have to make more rooms so build up walls, and more egresses so exits. It probably would have cost-

Stephanie: More.

Hero: Definitely a lot more.

David.: That’s the only reason that I thought this house should aggressively go for. And then we were trying of course somebody else jumps in that’s always case. There’s always other buyers that want to get involved, but we were able to muscle them out and get it. Wrapped up in a contract.

Brandon: Did you fight them?

David.: I don’t think my clients do it.

Brandon: That’s good. Is kind of the whole David and Goliath story, David and Goliath went out there in stead of your armies fighting they send their like warrior and to fight.

David.: Yeah.

Hero: Yeah.

Brandon: I watch this movie on Netflix called the King. And they did the same thing they sent the kings out to go fight right. That’s what you do with an agent you give him the sword and let him just go whoever wins.

David.: It’s like trial by combat. Right?

Brandon: Exactly what it is.

Hero: Yeah just like the movie Troy.

Brandon: Yes exactly same thing. People call David Brad Pitt actually all the time. They get confused all the time like, ” Aren’t you Brad Pitt?”

David.: It gets annoying.

Brandon: Yeah I get that. If you put your shirt more often they would get so distracted. What I want to go to I want you to talk about finding the right agent is so key to invest in real estate, whether you trying to buy a house for yourself whether you’re trying to invest 50 millions dollar property it doesn’t matter. Like finding good broker good agent is vital. So, can you guys walk me through like what was the difference with David, and somebody else, what did you learn in that process? What would tell somebody else about finding an agency that would help others?

Stephanie: You can take it.

Hero: I think finding someone who’s in line what your goals are definitely helps a lot. Our previous realtor she was very organized, she was really a prom, she would meet us there on time and everything was great, we would go through so many houses. But unfortunately, I didn’t think she had the other aspect of what you see in the property. And if she would see the same thing in the property to make it more functional especially in for assistant living that wanting to start with. When we would spitball like ideas about we can make this into a room, and stuff like that the connection wasn’t quite there.

Brandon: That makes sense.

Stephanie: And with David I guess it was just much easier, because he understands real estate a lot better I guess than the other person. And just having that thing about house hacking, and how we can use that to our advantage. And just using that and leveraging that and making a plan from that. I think helped us a lot and also with David there’s a whole team. Is not just David but there’s other people behind him helping him have all the moving pieces just-

Hero: Work together the system.

Stephanie: So, it was just very easy.

Brandon: Well thank you guys.

David.: Why don’t to us a little bit about because this was a house hack combined with a business that you’re literally running. That’s one of the ways I think… you’re one of my favorite clients I’ve ever helped. Because I think this was a brilliant strategy you were able to buy more or less a business for three and a half percent down. Explain to us how assistant living facility works, why you were drawn to it how you want it to look at the end so that the listeners can get a better idea of what you’re doing?

Stephanie: The main reason that we really got into it is I’m a registered nurse by trade. And I actually do hospice nursing, so I go into a lot of these homes everyday. For my day job and I got drawn to it, every time I go I feel like always just complain in my heart like why can’t we have better homes, better equipped. better run facilities. And jumping in and listening to BiggerPockets I just felt like I myself can make a difference. I can do the best of both roads, and still do my nursing kind of in that term being an administrator owning the business. And also owning the real estate.

Brandon: So what kind of person lives in your assistant living like in your place are we talking developmentally disabled or are we talking elderly, hospice?

Stephanie: [crosstalk 00:42:03]

Brandon: No hospice or yes hospice?

Stephanie: We can do hospice too, it just depends on how much the state would approve us for. Usually like there’s in a residential living in California the maximum you can have for you not to get permits. Is to have six residents in the home. And then you can get permits into like two hospice patients.

Brandon: Interesting, so you say in California and I’m sure every state might be slightly different you can buy a large single family house. And then without having to be like permit something special. You can have up to six people living with you the state is paying, or they paying themselves either way you get paid?

Stephanie: There’s two ways to do it. It could be paid by the government but that’s a little bit more complicated. What we’re trying to is just to have-

Hero: Private paid.

Stephanie: … private paid rooms. So, that’s paid for by the patient the families from their pension of whatever.

Brandon: And how much work has it been for you guys to actually do on a daily basis are you cooking, cleaning, that kind of stuff? Or are they pretty much self sufficient on their own?

Stephanie: We are providing like cooking and cleaning, but we’re not doing it ourselves we plan to hire caregivers. Usually the thing is we have two caregivers in home. They take care of like cooking, and cleaning assisting them. And then most of the time these people have nurses that come in and out of the house kind of check on them, check on the medications and things like that. That’s what I actually do for my day job.

David.: Let me make sure I get this straight and you guys correct me if I’m wrong, because here’s what’s fascinating about this model. You buy the real estate with low money down. And convert it to be in compliance for assistance living facility. Then you hire and administrator who his license is going to run your business and that person oversees the caretakers and provide whatever care you’re offering. The family members of your patients will pay you to keep them there. And here’s what’s so cool a lot of people don’t realize. It’s actually the administrators license that is on the line if something goes wrong, not the person who owns the real estate. So, while they own the business, it’s like owning a construction company but you had a license contractor who’s on the hook if something breaks, and fall apart somebody gets hurt not yourself right?

David.: I love that model because all you have to understand is how the numbers breakdown and how to hire the people, now in your case Stephanie you actually are a caretaker so you going to do some of the work yourself. But when you get 10 of these properties you probably won’t be you probably just be managing the other caretakers. Can you share a little bit with us about how someone will pay for the type of property maybe not your house specifically house like this one just the typical numbers of what someone would pay and then what’s it going to cost to run the business?

Stephanie: You mean what the patients and family would pay?

David.: Yeah, what the families going to pay per patient, and then how much you have to pay caretakers and everybody to run the business?

Stephanie: Usually I would say just an average up here in Northern California, the paysca… or the amount of money that is… probably around $4500 to $6500 it go from those prices and it just depends on how much care they need. And also for the caregivers. You pay them like minimum wage.

David.: So if you’ve got like five bedrooms, and you guys are living in the sixth one that was like an office. That’s $25000 or so in gross revenue. And then what would you estimate that you’re going to have to pay in wages and supplies?

Stephanie: Right now what my plans is since still a start up I wanted to learn the whole business so I’m working as an administrator, so I’m not paying that in salary I’m paying myself. And then for the caregivers in wages and in groceries, it probably be around let’s say $15000 to $20000. And then if we have six patients in the house then that would pay us about $6500 times six.

Brandon: Wow.

David.: So you’re potentially at $15000 to $20000 in the cost operate and up to $35000 or so in gross revenue giving you a profit what is that $20000 to $25000 or so. When you’re full[crosstalk 00:46:31] right now that’s a pretty nice profit. And of course, that’s monthly. That’s not necessarily the same as someone who’s renting out rooms and they do not work. When we talk about house hacking normally they’re just paying you money to live in the space you’re providing nothing but a place to live. There’s some work that goes into this, you’re running your business that’s why you’re getting more money.

Stephanie: There’s a lot of work actually.

David.: A ton right? What I wouldn’t want to do, everywhere you ever meet these people they have huge hearts these are some of my favorite clients that I’ve ever worked with.

Stephanie: Thank you.

David.: And I’m not just saying that because their baby liked me a lot I really mean that. And they’re doing God’s work. Taking care of people that really need help, they probably wouldn’t get not attention at all. Stephanie that’s what really what motivates her to want to this is she sees the lack of care that a lot of people get when they’re in their twilight years of their life and that bothers her. But that’s really good cash, if you’re making $25000 a month per house, and you end up getting four houses you can be making $1.2 million in profit. Just to manage for systemic facilities.

Stephanie: Maybe a little less than that because there’s a lot like insurance that we didn’t take into account that question, so…

David.: Okay, very good point. However, we got in on this property for three and a half percent down. Right? And when you guys want to buy your next property you can probably also do it for 5% down. It’s a way that you can start a business if you understanding of how this stuff works. For very little capital upfront and just more time. But it’s a very cool twist on house hacking that I don’t think we’ve talked about before.

Hero: Yeah.

David.: So what are you guys excited about when it comes to the future and how you want this model to grow up?

Stephanie: The real reason why we’re doing this is for freedom of time and financial freedom too since we have that little one. I’m really excited to just be able to grow this business for ourselves, and not basing our schedules off of our nine to five jobs. And scaling it up to something bigger where we can give opportunities for other people who were once just caregivers. And they can work as administrators and make more money. And run our business so that we can teach them what we know, and give them more opportunities. And then growing our portfolio and growing our business at the same time. It’s a win-win not just for us but we’re able to help a lot other people.

Hero: Especially the caregivers I feel like caregivers sometimes in the industry are very-

David.: Taken advantage of.

Hero: Yeah, it definitely, give more shine to them because they do a lot. They really do all the work there.

Stephanie: It entails to run the business basically, if they provide great care for our patients then everything’s going to run smoothly. And I feel like they deserve to be-

Hero: Have the same opportunities that we potentially could have, and they part of America too. Piece of the pie.

David.: That’s awesome so the patients benefit, the caretaker employees benefit, you guys benefit, the real estate benefits and if you have a good agent the agent benefits. That’s exactly what you want a deal to look like. Can you guy share a little bit for the people listening who are struggling either getting started of finding the right agents to help them. What did it feel like when you knew okay this is the right person and I know I’m going to be successful?

Stephanie: Go ahead.

Hero: The amount of the confidence like we came into your office there in Brentwood, we sat down and we instantly knew-

Stephanie: There was this whole presentation. There was a power point and you guys bought toys for my son too.

Hero: So, kudos to you guys.

Stephanie: But really you and Brandon are mentors for this whole deal.

Brandon: Thanks.

Stephanie: Just really listening to you guys and having David Greene as a realtor it just[crosstalk 00:50:45]

Hero: It’s like that we going to know a rock star who knows rock stars, that whole ordeal. And funny thing is when we went to the meet up listen to him as the guest speaker. One funny thing sorry David, but he asked, ” Is anyone in this room have used my team in real estate?” And unfortunately, there were no hands that raised. So we looked at each was like –

Stephanie: Why don’t we have just David Greene-

Hero: We’ll call him next week.

Brandon: That’s funny.

Hero: So, yeah that’s kind of how it started, and when he went through the long distant investing and the bearing. During that time we just knew that we got to talk to him. We got to make sure that we get our names out there and speak to him personally.

Stephanie: And then they say surround yourself with like minded people, and surround yourself with successful people so you kind of get to where they are, and that’s what we did.

Brandon: That’s great.

Stephanie: That’s why we’re here.

Brandon: That’s awesome.

David.: So you take action you went to a meet up. You followed up at the meet up with what you saw. You met with an agent who explained to you here’s what the plan is. Here’s what we’re going to do. Here’s what it look like and we provided a lot of information and education upfront, which is what I think a good agent does. And now let me sum up what your deal looks like so that people know what to look for in a deal. You were looking for an assistant living facility, which is a business because that would generate more income than a typical renting out the rooms that people provide for themselves. You went with the property that had already for the most part been rehabbed to be in compliance with what you wanted. And you save yourself a ton of money on construction cost as well as a ton of time for what would have had to happen.

David.: You don’t have hard money lending fees during this period of time because you bought it as a house hack. And you only had to put down three and a half percent. So, that saved you a lot of money too. You’re using it as a house hack so you’re also eliminating your living expenses to help with this business, your rent what your mortgage would have been that’s something that you had to factor into this that you’re saving as well. And then you took your big goal and you split it into several smaller chunks. Size pieces that you could actually manage and you took what was a huge chunk and you broke it up into little steps of a stair that you’re going to be ascending together. And when you put all that together you’re going to end up with a very profitable business that should be very emotionally gratifying. And a lot of success, and that’s why I wanted you guys to be on the show so that other people could see this is what it looks like when you do it right.

Hero: We thank you for having us.

Stephanie: Thank you.

David.: All right guys thank you so much for sharing your story this is been enlightening for a lot of different people, how can people find of get a hold of you if want to find out more about to learn more about what you’re doing?

Stephanie: We’re still working on our website, but you can get a hold of us in our email nurturehood N-U-R-T-U-R-E-H-O-O-D [email protected]. And if you want to see cute pictures of my little one you can follow we on Instagram it’s pheeiiigh P-H-E-E-I-I-I-G-H.

Brandon: All right.

David.: Everybody please go follow them and like that little tyke of theirs he’s a cutie.

Brandon: That’s funny.

Stephanie: Thank you.

Hero: Thank you very much.

David.: Thank you guys very much it was great.

Hero: Appreciate it.

Stephanie: Thanks for having us.

Brandon: I can do it. All right that was awesome. That’s a cool strategy I never thought it before like the idea of the combining house hacking with assistant living very cool strategy. And now I think it’s time to bring in Rob, you want to introduce him?

David.: Yes Rob Kishi welcome to the podcast how are you doing today?

Rob Kishi: I’m doing great, thanks for having me guys.

David.: Awesome men my pleasure. Rob, found me I’m trying to remember was at it from a meet up or did you get my information from the BiggerPockets site?

Rob Kishi: Initially, it was a meet up, that my manager actually recommended I go to. And shout out to Nate O’Neil if you’re watching this much love. And then that meetup really sparked my interest in real estate saw the value in it. And the timing was right to kind of lining up for my first house and I thought it would make sense work with you.

David.: I hope that people are seeing the patterns here, in taking action going to a meetup pursuing your interest, and real estate leading to big things happening. Now Rob reached and he wanted a house hack, which frankly Brandon and I talked about this. I don’t know why everybody isn’t house hacking? Unless you have a really big family and you can’t just put other people in the property or you can’t find multifamily property. It’s silly to be paying 100% of your mortgage when other people would be happy to be able to lower their own expenses it’s really just a win-win for both sides. The person renting the rooms, the units they save money, you save money because of sharing this living expenses. And Rob is a smart guy so he wanted to take advantage of that. Now today’s show we’re talking more about my clients because I know these stories that’s why I’m bringing them in.

David.: But I don’t live everywhere in the country right? There’s real estate agents that are all over the place that you want to be asking are you familiar with house hacking? Could you explain to me how house hacking would work, Rob, do you mind sharing what it was that we talked about that made you feel comfortable like this guy gets what I want to do, and he can help me do it?

Rob Kishi: I think all the content that you guys have definitely, provided a lot of reassurance. Clearly, it’s something that you have a lot of experience with, and really not something that I saw a ton of from other agents. I didn’t a research on other guys but it definitely, felt like this was the right play to link up with you. And the Bay Area is a pretty competitive place, I know that I needed the right folks in my team to get the deal done.

David.: That’s exactly right I mean in general most buyer clients that I work in the Bay Area you’re going to try several times and fail before you get something in the contract because there’s so much competition. And that is a natural we call it barrier to entry. But every time you find barriers to entry you know on the other side of that you’re usually going to have big wealth coming because it was so much harder to do. In Rob’s case you actually had a couple of factors you trying to work into this you wanted to find a place that you could live in and save money on. You really didn’t want something that was going to be a really big rehab. You didn’t want for your very first deal to take on a huge project. You have a good job you make pretty good money you don’t want a distraction from what you were doing.

David.: You wanted something that would minimally impact your life. You also wanted other several people in your life who don’t understand real estate investing to prove of that, I think a lot of people out there are actually struggling with this too. Sometimes it’s a spouse sometimes it’s a family member. But every body usually has an opinion of what’s best for us and trying to satisfy all those makes more complicated. And you wanted something that you could really add value to yourself. In this case we ended up finding a property that was zoned for multiple family even though wasn’t already set up for multifamily so there’s some value hidden in there. But you had a really big wish list, tell us a little bit why those things were important to you and what your plan was?

Rob Kishi: I think one of the biggest reasons I fell in love with the idea of house hacking, just kind of passive value and the passive income that it creates really big believer, and that’s kind of the key to financial freedom. So, I was pretty committed to doing something in that fashion. I actually, did the deal with my mom. She’s a 50% owner in it. She lives in Hawaii, didn’t have that kind of on the ground connection with the houses.

David.: Nice.

Brandon: Smart woman.

Rob Kishi: Yeah, we’re all born and raised out there. It was a little bit of a challenge kind of went back and forth, doing all the communication with her and kind of making sure that her concerns, and her expectations are met. My brother, is also in the house with us, he has a bigger dog so yard was important having that space. But what was really cool about the property we landed on was the fact that it was zoned for a four unit complex. Is a lot of potential there it actually has a detached garage that we’re planning to convert into an ADU. The space for another ADU if we want to do that in the long-term, a lot of really good things about it. And it was in the price range that we were looking for. We were going to open houses literally every weekend for about four, five months.

Rob Kishi: Driving across the bridge from San Francisco to Oakland in that traffic every single weekend it was brutal. And if you guys are in the Bay Area you’ll know that things go very quickly, and they go for much more than listed. So, every time we were interested in a house found ourselves in the middle of a huge bidding war. And so that was a little bit of an awakening, but I think after the first couple of months we really kind of reset our expectations. And then really had a much clear view on what we were looking for what we wanted. And when those things did come up we were able to move quickly.

David.: That’s… go ahead Brandon.

Brandon: I was going to go into the property itself but if you had something ahead before that feel free?

David.: No go ahead.

Brandon: Okay, what did you find, what was the property you ended up buying?

Rob Kishi: So, it’s a single family home, two bedrooms two bath, there’s a detached garage and again tons of yard space. The future state the big vision is rent out the master, and actually living in the smallest room to try and maximize on the rental income. Convert the detached garage into an ADU, rent that one out and then build another ADU on the other side of the property and rent that one as well. There a few different entrances, so the separate ADU will have its own kind of gate entrance. And just a lot of space to work with. And the house itself was in pretty good shape. Inspection came back pretty clean. The sellers they did quite a bit work on it so as David mentioned earlier low rehab it was pretty much turn key outside of a few minor things.

Brandon: Yeah that’s great. So the plan was you said your mom came in with you, what’s her role in that is she making cash off it she eventually going to live there, how does that playing in there?

Rob Kishi: She’s participating as an investor, I think it was really cool because we were able to do this kind of together as a dual project together. There was ups and downs throughout the process and I heard you guys talking about it earlier. There’s a lot of fear, uncertainty, doubt, stress that kind of comes along with buying a house especially with my mom being hundreds of miles away across the Pacific. I can only imagine what she was going through. But it definitely, bought closer and I’m really happy we did it together. It’s something that we can have together for years and years to come. And we’re already excited to talk about what’s the next house going to look like?

Brandon: That’s cool.

Rob Kishi: Where next one going to be? And so it’s a really fun thing.

Brandon: Okay that’s very cool. What did you pay for the property?

Rob Kishi: It was listed just under 600 grand. I think we made an offer little over that maybe 620 I’m not really sure David keep me honest here. We did want to go a little over asking simply to lock it down. And there was a lot of negotiations involved there much love David again for helping out with that. And we got I think around 620 initially and then the appraisal actually came back a lot lower. It came in like $600,000 and so there was even more negotiations that needed to be done. Again David, was just a guru in that space really take care of business I think we ended up landing at around 610, which around kind of our best case scenario after talking through initially.

Brandon: Let me jump into David, how do you deal as an agent because this is something a lot of people are dealing with is… first of all let’s talk about this. People for a long time we bout real estate that was way under price I wouldn’t pay like over asking like five years ago. That was silly like the property was listed at 200 grand you offer 170 because that was the market we’re in so a lot of us got accustomed to that, today I bristle at the thought of pain over asking ever. Yet why is that not such a big deal because David you talk about this a lot. Why is it not such a big deal to pay over asking?

David.: So the first thing you need to understand that you’re not getting a deal if you pay less than asking, and getting ripped off if you paid more than asking. Asking is an arbitrary number that get thrown out there. And the armature focus is on the least price and that’s all that they see. And you see a lot of clients, “Oh that’s sold for 600, I can get if for 595 I got a good deal.” What if all the Comps were at 550, right you pay $45000 more than what you needed to. The first thing that you want to understand is the way that properties are valued. Is a combination of what the rest of people are willing to pay, where we say the market dictates its worth. And what an appraiser would say it’s valued at. And when we write our offers for our clients we always include a contingency so if there’s a lower appraisal we get to back out off a deal. Which gives us negotiating power when that does comes up.

David.: Now in this particular case we got super lucky that the appraisal came in low because there was a lot of Comps that were priced much higher than what we paid for this house. We just got an appraiser who was irritated with the fact that the prices were going up in the Bay Area, and they wanted to do something about it. So it gave us some leverage to knock some money off. But the first thing you got to realize is don’t too simplistic to think that because you paid less than the asked price you somehow got a good deal. You want to look at comparable sales and you want to look at which market is trending, for the last nine years, eight years. Every house is sold than a little more than the one before it. Comps have been steadily rising. What we do is we look at what other houses have sold for and we base our offer off of that as well as, ” If we’re going to pay 610 for this house is there other houses that we could pay less for that would work the same way.

David.: No, there’s not, every other house is 650, so if we back out of this deal because we couldn’t get for 600 and then we’ll have to pay 620 all we’re doing is winning that battle to lose the war because we’re going to pay 650 for another house. That’s the first thing you want to look at. The second thing that you want to ask yourself what is this house worth to you? Now in this case this was perfect for Rob because it’s zoned for multifamily. It already has a garage built that he can then go finish. It’s got electrical already rent to it, it’s really close to the house so you can tie in to the plumbing and make this an ADU for relatively low money. It’s got space to build another ADU on it, and what we haven’t mentioned yet was that the actual main house can easily be split into two. And a second kitchen put in to where he could turn the main house into two different units and increase his rent by 30% to 40% just from that one small move.

David.: So he’s going to be able to turn this thing into a fourplex making it worth more to him that it would be to someone who doesn’t want a house hack. That person is not worth as much to them so it’s another thing you want to ask yourself like Stephanie and Hero. They could have paid more for that assistant living facility than they did, they didn’t have to but they could have because the rehab was already done. So someone who doesn’t want to use it for assistant living facility it’s only worth so much but to them it’s a lot more because they’re saving a lot of money there. Another thing that Rob understood he had the right mindset his ego wasn’t controlling his decisions. He was looking at it wholistically and he understood this is going to be a great deal for me especially if I look back thirty years from now with how much money that that’s generated.

David.: Now when it comes to negotiating appraisal that was the other question that you ask me, it’s not the same all the time. What a good agent does is they understand that people make decisions based on emotions. They don’t make decision just based on information. So, when the appraisal come in low you have to look it from the seller’s side. This is a house that they had done a massive amount of rehab work to. It’s like spotless this was like a model home. Their expectations was that they’re going to sell it for more than we had got it under contract for. So they were already disappointed now they get hit with the lower appraisal even more disappointment. Their initial response when someone feel they’re being taken advantage of is to dig in their heels and say. ” I’m not giving you anything.”

David.: Would it make any sense to try to play hard ball when they had their heels dug in. So I explained to Rob, ” Hey, dude we can back out of this deal and the only thing they could is put their house back on the market and rent to the same problem with somebody else. Let’s not ask them for anything, let’s just wait let’s give them a week. Let’s give them 10 days and see how long they can hang in there. Because they’re marinating in their stress and eventually they’re going to cave. They’re going to break long before we do because we’ve got all the details on our side. And another thing is we negotiated a couple of thousand dollars for repairs before we even bought up the appraisal because if they took a hair cut on the appraised value. They weren’t going to give any money for repairs.

David.: And Rob to his credit hang in there. It’s stressing buying a house if you don’t know how it’s going to work out. You just want an answer you want to be done with it. But if we had pushed them I think they would have said no. So in stead we just waited and waited and finally the agent came back and he was like, ” We need to get this thing sold the hard money costs are killing me what can we do to make this happen?” And they wanted to drop the price like two grand. I wanted them to come all the way to 610. I think I was actually in Hawaii visiting you Brandon when all this was going on. I just told the guy well that’s not going to work let me know when you got something that can work for my client, and eventually they broke.

David.: But the point I want to make is that, that only happened because rob could handle the emotions of uncertainty, and anxiety, and fear. He was very good maybe it’s a Hawaii background where he just super chill and be like, ” Okay David, that’s what we got to do, let’s just wait.” And he rode that wave so to speak and we ended up getting the money. But that’s how negotiating works it’s not just everything’s on paper and it’s all logical. There’s a lot of emotions that go into it.

Brandon: Yeah that makes a lot of sense. Rob you got into the process you bought the property for like 600, 610 what’s your mortgage look like and what can you rent out all the bedroom for the ADUs how does that financial break down look?

Rob Kishi: So we’re still somewhere near the house I think we moved it in only three or four months ago. So, we were taking care kind of the main house the things that we wanted to do furnish that place up. So we just started listing the master looking for somewhere probably, around $1200 to $1300 hopefully we see how it goes. My brother’s in the other room so he has that ‘ohana discount. We only charge him like $800 probably, a little more in the future. Hopefully, the ADU is going to rent for at least 15 to 18.

Brandon: That’s awesome.

Rob Kishi: The mortgage itself I think if you include the insurance and all the other stuff it’s right under $3,000. I chose to just pay that separately so that my monthly sum up to $2200.

Brandon: Okay, so total expense on the thing are probably lays at mortgage on 22 all the tax and insurance. You might be running 3000 maybe some water, sewer, garbage in there somewhere. But potentially, let’s say that you were able to get even like the minimum numbers you just said there 1500 + 1200 + 800 that is $3500 right? So potentially all your totals be basically again living for free at this point.

David.: And that was before he if he wasn’t to split the main house into two units, which could increase that even more, and the second ADU potentially as well.

Brandon: And the second adu.

Rob Kishi: So there’s a huge potential that’s what really got me excited about this place I think I’m going to hold on to this for a long time. And just really kind of excited about real estate in general, it’s just definitely something that I plan to do for the rest of my life and I think this is a good way to start it off.

Brandon: Can we talk about ADUs for a second. The term ADU can you explain what that is between the two of you. What’s an ADU and California has recently passed a new law about ADUs right? It that a thing you guys know?

Rob Kishi: I heard about it David can probably speak more towards it, but an ADU essentially is a Detached Dwelling Unit especially like an in[inaudible 01:12:08] or a separate little house. It will normally have a mini kitchen there, mini bathroom anywhere from a large bedroom to medium sized bedroom maybe there’s even space for small living area. But it’s really cool way to offer a tenant a lot of privacy and help drive cashflow for ourselves.

Brandon: It’s really a fantastic, it’s basically like state sponsored or state encouraged house hacking. Hawaii has been doing it for along time. Everybody in Hawaii has an ADU. In fact Hawaii has just passed a new law in the works but I’m not sure what stage is in but is going to pass. Sounds like where we can now have two ADU legally. And the reason why because it really fixes a lot of problems. A lot of people I won’t going to buy a house, that’s just a given so they go in there and rent something. There no places renting it’s really hard to find place to rent. The government is like let’s just have a bunch of home owners build little houses on their property if they have big enough property so it’s not weird. And now there’s housing for the masses. That’s affordable housing for the masses small little units and it also sets the purchase price for people.

Brandon: For example, I live here in my house here in Maui and I have 1.7 million dollar house, and I could live for free if I wanted to just by ADU in the thing. And so it helps everybody across the board. Helps state, helps government, helps me, helps the tenant, helps every body so it’s good to see that California has recently passed the ADU laws, or they’re changing them I’m not sure if it’s the whole state or part of it. But a lot of states are probably getting the idea like, ” Oh this is actually a good idea.” So if you live in one of those areas and you can put one of those in ADUs are fantastic.

David.: Go ahead rob.

Rob Kishi: I just want to say interestingly, in the four five months me and my brother were doing these open houses. We were really looking at homes where pretty build ADUs or already finished Attached Dwelling Units. And they were going for like north of 800 grand. And so we looked at this property and thought we can convert that ourselves hire all the subcontractors and get that work done probably for no more than 100 at most. And automatically get that value build in.

Brandon: What’s cool about the ADU thing, depending on the area of course, a lot of people say well 1% deal are really hard to find. 2% is impossible to find. But 2% deals are not impossible to find when it comes to necessarily build in an ADU, or 1% is definitely, not hard. Again prices are going to differ everywhere but let’s say you spend 150 grand, build in a really nice ADU and everything rents for $2000 a month, $2500 a month depending on again the area similar cost to build but very drastically different rent. Like in Hawaii I can rent an ADU for $3000 a month out here. If I’m in Ohio, I’m going to rent the same ADU for $800.

Brandon: Again you got to look at the market but it’s a great way if you’re an expensive market to really drive a value and that’s just a great way to invest in real estate in expensive market where prices are appreciated. And then when you go sell the property someday, now you got a really cool sales thing, “Hey, you can pay more for this property because it has an ADU you can offset the rent you can house hack.” And there a lot of people that have a lot of interest in that.

David.: It can be impossible to find a 2% property but not to make it[crosstalk 01:15:27] and that’s something you talk about a lot is don’t be lazy let your mind take one step further than what’s right in front of your face. And have some creative vision like what Rob to see how to make this happen. If you guys want to do some more research on the law we’re talking about it’s Assembly Bill 68, so you can look that up. What it basically did was removed a lot of the regulations against ADUs on property, so for a long time people didn’t want someone to be able to put additional dwelling units on their property because they were afraid of all “You’re bringing tenants into the neighbor hood is going to lower the value.” But now what people are realizing is there’s so much demand that those tenants are usually the same type of person as a home owner.

David.: So people want that they’re like please let the people build ADU so that I can have a place that I can rent. That’s what I really need. And I think were going to see in the markets where there’s a lot of demand, which is typically, closely tied to the employment industry right? Where jobs are going to like Bay Area, Southern California LA, they have this problem down there it’s really bad. There’s a lot of opportunity but there not enough housing. They’re letting you build an ADU on a single family lot as well as a separate junior ADU. There are laws about how big it can be, what you can do and how many. You have to look that up and I think that duplexes are even allowed to add two ADU to those lots as well making it like a four unit property.

David.: Brandon, you made a very good point it cost the same to build it in California more less as it does in Indiana. But the rent you get I so much more. What Rob’s going to get for his ADU, and here’s the other thing that we don’t talk about. In areas with high demand rents go up every year significantly right? So what starts off as $1800 you’ll calculate it as $1800 but in five years it might be $2500 or $2300 it significant jumps every single year, which just makes owning real estate that much better over the long-term. And I think you can testify to that too Brandon. The best moves we made were properties that when we bought them that we maybe didn’t realize how good they were going to turn out, but looking at the fact five, 10 years later you’re like, “wow can you believe how good this has worked out.”

Brandon: Yeah definitely.

David.: All right well thank you Rob, I’m very happy for you earned it men that was a stressful thing that when you mentioned trying to manage all the different pieces and keep everyone happy. And looking at from different angle, is there anything that you would share about why you’re glad that you worked with an agent and what advice you can give people for what they should look for when they go find an agent to help them do the same?

Rob Kishi: Yeah definitely, first of all I want to say thank David for all the help it was really ADU big part of why we chose this house that we landed on couldn’t be more happy about it. I think your agents essentially in someways the captain of your team. You want to align your self with the folks that know the market they know their industry, and specifically they know what you’re looking for. Further advice this is my first house, so if anyone looking for a first house and when you do it’s going to be an emotional rollercoaster. There’s a lot of moving part, and even more it’s really important to have a good agent. There have those resources whether it be family members core workers, agents know people that have experience there and people that can help kind of answer questions put your concerns at ease and just stay positive.

Rob Kishi: It took us a little bit of time but in the end it’s all worth it and there’s so much potential in this place that I’m really excited about the year to come.

David.: Awesome brother, could you tell us how people can find more about you if they want to get in touch?

Rob Kishi: Sure, probably the best way is Facebook or linked in so any of those platforms you can find me Rob Kishi.

David.: Rob Kishi, And thanks again to Nate O’Neil, for introducing to real estate and always being a big supporter of everything I do. That guy is awesome every time I turn around at a meet up he’s there with his big smile patiently seating in the back.

Brandon: That’s awesome. All right that was awesome everybody so again thank you all who came today to watch this or listen to this episode of the three house hackers we have like a traditional house hack we then had a-

David.: Assistant living facility.

Brandon: Assistant living facility house hack, and then an ADU house hack we could call it kind of three different ways to be able to get started on the journey towards financial freedom so very cool. David I’ll let you kind of wrap things up then.

David.: Well if you guys want to learn more about the whole process of house hacking you can definitely check out the book that Craig Curelop, wrote, what’s the full title Brandon?

Brandon: The house hacking strategy.

David.: The house hacking strategy, very good book I would highly recommend that for anybody if not house hacking I’m telling you’re sleeping on real estate this is a cheap way to get in. It’s a cheap way to learn. It’s an easy way to kind of learn the ropes of real estate investing and build up your confidence. What I’ve heard from every single guest today was now that I’ve done it, I can’t wait to do my next one. Before you do the deal, do I really want to do this, it’s a scary do I want to get into, right? Then how much is that worth to have confidence that you want to get in and get the next deal because you actually go through it.

Brandon: Yeah that’s true. Very cool. All right well we do have a pro member spotlight today I want to make sure we hit before we get out of here. So today’s pro member shout out goes to Dave Malone in Nashville Tennessee. He’s on a tear he’s done two[Bardios 01:20:40] and just the past couple of months with no money out of pockets. Very cool so check out the deal in more details by going to show biggerpockets.com/show359. And hey, if you’re BiggerPockets pro member you’re to be featured here on this spotlight section just send us info about your latest deal email us a [email protected] with the word pro deal in the subject line and with that before we get out of here last thing we’re talking about pro members we just about to put a spotlight, but we actually have a new membership on BiggerPockets that doesn’t apply to everybody but it’s going to apply a ton to some of you and that is our premium membership. So what the premium membership is a new level of membership a new tier of membership for people who are vendors at BiggerPockets podcast, meaning you’re a real estate agent, or you’re a lender or like a hard money lender. Or some kind of vendor specifically agent and lenders. You guys might want to look in this it’s called BiggerPockets premium, you can learn more about it but helps you basically connect with people on BiggerPockets.

Brandon: Millions of people come to BP, every single month being a premium member helps you connect better with them. So, you can make good connections good networking and attract new clients for your business so again biggerpockets.com/ premium to get more info there.

David.: And if you’re not a vendor and you want to find good vendors that’s where I would start you have a much better chance of finding a good person if you go the premium links there. So, thank you very much I really enjoyed this episode it was cool getting to share how a newbie can get started and how simple it can be if you get the right people around you and you take action. Brandon do you have anything else you want to say?

Brandon: I don’t think so just that I hope people take the steps and put it into action. So go out there find a real estate agent. If you don’t have a real estate agent go find one. And in fact if you go to biggerpockets.com in the navigation bar I think it’s under network, it says find an agent right there, you can also click find a lender. Find an agent and then go there, and looking your area it will show you all the bigger pockets agents that are in your area. Find some talk to them send them a private message get in touch. Because finding a good agent is one of those important things you can do if you want to be a house hacker. Because you can find deals in the MLS today so get that real estate agent and get that thing going. So there you go.

David.: Awesome buddy thanks for sharing that. This is David Greene for Brandon the ADU animal Turner signing off.