The Ultimate Real Estate Shortcut to Wealth and Freedom through House Hacking with Dan McDonald

[0:00] Welcome to the REI Agent, a holistic approach to life through real estate. I’m Matthias, an agent and investor. And I’m Erica, a licensed therapist. Join us as we interview guests that also strive to live bold and fulfilled lives through business and real estate investing. Tune in every week for interviews with real estate agents and investors. Ready to level up? Let’s do it.

[0:24] Welcome back to the REI Agent podcast. This is Matthias. My guest today is Dan McDonald. Dan is a house hacking expert out of Boston, Massachusetts. He has done it himself and now he is niching into that space to help his clients buy these properties. House hacking is really simple. It’s basically leveraging your primary residency and renting out part of it. So that could be that you’re buying a multifamily. That could be that you’re buying a house and renting out rooms. It really depends on what you’re comfortable with, what your market has, and what you can afford. So it’s a really, really good strategy for getting started because, you know, if you buy a primary residency, the terms are just better.

[1:08] Okay. So even if you’re putting 20% down, which you don’t have to usually, you will have a cheaper interest rate than usually what a primary residency would be. On top of that, sorry, an investment property would be. So on top of that, usually you can put less down. And so it’s an easier lower bar to entry. So you could be putting down three and a half percent, five percent, even a hundred percent. If you are in certain areas like USDA rural areas, or if you maybe are a veteran, you could have a VA loan do that for you. And that’s important because that would allow you then to rinse and repeat. You could more quickly save up for the first one and then more quickly save up for the next one. And you can see how you could start building up a portfolio that way.

[1:54] But in that conversation with Dan, and it just reminded me of my own personal journey, we talked about debt and kind of like this fear around it. And I thought it was a good thing to talk about now, kind of leverage and my journey in it. If you’ve followed this podcast, if you listen to some of our early episodes, Eric and I both kind of went through the Dave Ramsey school when we were newlyweds. We added up all our debt in the airport on the way back from our honeymoon. She had over $100,000 and I had about 20. So mostly student loans. And so we, you know, I primarily was like, I don’t want this hanging over our head. I want to pay this off as fast as we can. And so we really buckled down and we paid it off in about three years, not making very much money.

[2:47] So it was a lot of sacrifice, a lot of dedication, a lot of extra hours, a lot of extra work. Really what got me into real estate, I don’t regret any of that. I don’t regret going through that process, paying all that stuff down. I might not have put our first house on a 15-year mortgage. In hindsight, it was a better interest rate. The payment was about the same because we were losing PMI. And just it was FHA to conventional and we lost PMI. So like our payment was roughly the same to get onto a 15-year mortgage. But our house is really not cash flowed well since we kept it as a rental since. So all that being said, I really, for the most part, don’t regret that whole period of time. But my relationship with debt has really changed, has really grown over the course of the years.

[3:36] And it’s been this lingering thing inside of me about debt being kind of bad. I wanted to keep my expenses low, et cetera. And in the podcast, I mentioned this. But the last time we refinanced our house, our current primary residency, we got like a 2.7% interest rate. Something just absurdly low, right? And the lender asked me, hey, do you want to take out more than what you owe? Because we’re just wrapping in the closing costs of the loan and whatever our old balance was. And I was like, no, I want to keep my payments low. I want to make my payments low. I don’t want that. And I don’t know how much we could have gotten, but if we could have gotten another $50,000 to $100,000 at 2.7% rate locked in at 30 years, we could have bought a couple investment properties with that extra capital.

[4:28] And it really could have been a really good thing. Mathematically makes a lot of sense. Even though I’m saying this and I understand that, I still have a little bit of a reservation to it because I do really like having a lower monthly payment because part of our goals are to help make our investments kind of pay for our living expenses. And that’s one of the goals is you want to be able to be flexible. You don’t need to work for income, right? Not trying to retire, but you have a different sense of freedom if you’re pretty well covered with passive investing. So it’s just an interesting balance. I think one of my favorite ways to talk about leverage, though, with real estate is to compare two different asset classes.

[5:17] So let’s break that down for a minute. If you are looking at investing in $500,000 into a house versus stocks or trying to control $500,000 of a house versus stocks. The stocks, you’d have to put $500,000 in to be able to buy $500,000 worth of stocks. With a house, let’s just say you have to put 20% down. Now, obviously, this is different if you’re primary residency, right? So with the house hacking model, this number even gets crazier because you can do like 3.5% or 5%. But for this example, let’s just do 20%. So $100,000 to buy a $500,000 house. Now, let’s say over a period of time, they both go up 20%. So both are now worth $600,000. With the stocks, you have earned 20% return, right? You’ve got your money has gone up 20% since you put it in.

[6:11] With your house, it’s gone up 100% because you put in $100,000 and $100,000, it’s worth $100,000 more now. And so that’s the crazy part about leverage is that it’s really unique to real estate as far as it being good debt. So that’s a huge advantage to it. Now, you mix in somebody else paying your mortgage on top of all that. It’s really crazy. So if you’re house hacking that $500,000 house and you don’t have a mortgage payment because your tenants are paying for that, now you are essentially, you put up the $100,000, but you’re not making any debt service payments and it’s going up. So when it goes up that 20%, you’ve just been kind of coasting in order to get to that $600,000, that 100% appreciation value.

[7:02] So it’s a really cool strategy. And that’s one of the reasons I love real estate is that it’s just unique compared to other things. And the use of leverage really helps that. Now, of course, there are things that can happen. There are problems that happen with real estate. Certainly, markets can go down and you could be underwater. There are all sorts of things. So it is a balance. I think it’s really understanding your personal risk tolerance, understanding how you want to proceed. You can probably learn to get more risky or get more advanced with your strategies, debt being involved as you kind of build up a stable base. And so I think there’s nothing wrong. Again, I don’t regret paying off those student loans.

[7:49] We’re super glad that we don’t have them anymore. And honestly, we became much more lendable because we didn’t have any debt. So just made our ability to buy rental property, primary residency, all that stuff easier. So again, don’t regret it. But our relationship with that has definitely matured over time. And it’s something that everybody should think about. I would say there’s not a one-size-fits-all. I would consider Dave Ramsey kind of a one-on-one in finance where it’s, you know, I think there’s proven ways to be successful that way. But it’s also not as sophisticated as other investing strategies are. And it just kind of, again, depends on what you’re willing to do. I don’t think that he’s completely wrong.

[8:38] Some people will say that. I don’t think that he’s completely wrong. And I think it’s a good thing for some people, especially if they are in a really bad position and need that clear steps and clear guidelines of how to have their personal finance. But that being said, I think it can also be something that you can grow out of and you can get a little bit more advanced and you can still not be super risky with your investments. For example, putting your house on a 30-year fixed mortgage is not necessarily a terrible thing. As he would say, you should only do a 15. So, you do pay more in interest, but you are also then able to do more with your capital by either borrowing more or having lower payments.

[9:25] So, just food for thought. If you have any of those thoughts about this kind of your debt tolerance, what you believe, I’d love to hear them. Feel free to give me a comment somewhere wherever you’re listening to this. I’d love to chat back and forth. I know YouTube definitely has the common option. So, yeah, without further ado, we have Dan McDonald.

[9:50] Welcome back to the REI Agent. I have the honor of having Dan McDonald here. Dan, thanks so much for joining us. Yeah, thanks for having me. You are coming out of Boston, is that correct? Yep, yep, just a little bit north of the city. Okay, and have you also been having a terrible winter or a great winter, depending on your perspective? Terrible winter. Terrible winter. It’s been, honestly, the last couple years. I mean, I grew up in New England, so I’d like to say I’m used to it, but I’m not. And the last couple years have been fairly mellow. But this year, it’s just like a never-ending cold tundra and a sheet of ice. And, yeah, it’s tough. It’s tough. Yeah, I think I’m normally pretty chill and go with the flow with things.

[10:38] And weather usually doesn’t really impact me. And my wife is a therapist, and she recently, or when we got together, she discussed what, you know, seasonal depression disorder was and how she probably had it. And I, you know, I feel like I’m feeling that. Like, I get it now. Yeah, I don’t think you’re alone. I think it’s between that and, you know, the realization that I probably should have invented ice melt and I wouldn’t have to do anything ever again. But other than that, yeah, it’s been tough. Yeah, totally. But, hey, hopefully we won’t have too many. I think next week for us is going to warm up. And I always look forward to those weeks where it’s warm again. But I’m hoping that it won’t be one of those, like, the next week you get a ton of snow again and it just kicks you in the face.

[11:27] So, yeah, enough about the weather. Dan, you are an awesome person to talk to. I think one of the strategies I love to tell people to get into is house hacking, especially if they’re, you know, kind of in a more easy, like a life phase where they have less tying them down. So, if you’re young getting started in real estate, it can be a really awesome strategy to start building up a portfolio. But tell us a little bit about how you got into real estate in general and then kind of your path into house hacking. Yeah, so essentially for me, I’ve always, including growing up and stuff, have definitely been interested in the idea of real estate and investing. You know, I believe it’s always been something great to just diversify your portfolio.

[12:19] So, it’s always been in the back of my mind. But it wasn’t until I finished grad school, came back to Boston and just really started diving into real estate investing and telling myself, man, this is something I want to do in like 10 or 20 years when I get all this money and I can actually buy something. And then I started to learn more about house hacking and just the idea of like, yeah, I don’t need all this money. And granted, you still need money, but I don’t need as much money as I thought I did. In fact, I don’t need anywhere near as much as I thought I did, even in an expensive city like myself. And so, it really just kind of came like this. That was it. That was that signal, that like burning desire where it’s like, okay, this is what I want to do.

[13:03] I’m tired of paying someone else’s mortgage. I, you know, see how this can work for me and my lifestyle. And I just went full steam ahead on it. Okay. What did you study? So, I was a psychology undergrad and they got my master’s at the University of Georgia in marketing research. So, nothing real estate related, you know, completely unrelated. But, you know, I’m a person who believes that you can have multiple streams of income and revenue and, you know, diversify your life just as much as your portfolio. Yeah, totally. Totally. I agree with that. And I was just talking about like the differences in education systems in Europe and here and how you’re kind of like on different tracks from like middle school on where you’re kind of going on the university route versus like a trade route.

[13:59] And I was in that conversation, I was asking, like, I wonder what percentage of people actually like use their undergrad degree in their career that they end up in. And it’s not that it’s not helpful. I think, you know, I studied psychology as well, but and, you know, I very much value my college education, but it’s just interesting. Yeah, for sure. And it almost feels like college might be kind of like the new high school. And then maybe more people would actually use their grad degree if they pursue further education. But I’m guessing that’s obviously not everybody either. So, yeah. But anyway, yeah. Yeah. So that’s what you said that the Boston area is a little bit more expensive. I’m curious about what your your median sales price would be roughly.

[14:49] If somebody’s looking to get a house hack, what kind of price range are they looking at? Yeah. So how Boston’s basically set up is it’s a small city. It’s an awesome city. You know, I’m obviously biased towards that. If you’re within kind of those city limits or pretty much in the neighborhoods that surround it. I mean, if you’re looking at a duplex, like you’re looking at at least 800,000, like an up and the closer you are, the more work it’s going to need and the more expensive it’s going to be. So, you know, my my wife and I started looking and we were looking in those those city limits per se. And, you know, we were putting in offers. We were putting in pretty high offers on, you know, houses that needed a lot more work, but they were closer to the train and everything.

[15:39] And then we started to branch out a little bit. So now we’re about 30 minute train ride to the city. You know, so still a great area if you’re commuting or anything like that, but it’s definitely a bit more of the burbs. And, you know, that now also, I mean, if you’re looking at multifamilies, you’re looking at 600 up, 600, 700 up. And and honestly, everything within an I would say within an hour of Boston is likely going to need work. Like it’s very rare that you find turnkey multifamilies and we can go into, you know, why I don’t think that’s a problem anyway. I encourage, you know, something that needs a little love. But yeah, it’s it’s it’s expensive. But rent’s also insane here, too. So it makes up for it.

[16:29] Yeah, totally. Absolutely. So as far as affordability goes, would you say that it’s within reach for people typically like to be able to do house hacking? I mean, I know that there’s going to be a renter class kind of there’s going to be that base as well. But have you found it to be pretty affordable for your clients? Yeah, I absolutely do. I do not think it takes, you know, with I often recommend it, especially for someone who’s, you know, a newer rookie and and looking to get to build their portfolio. But you really don’t need as much as you think. I mean, I was making when I bought my first place like fifty thousand dollars a year or something. And I mean, we did have my wife’s income, too.

[17:14] So that’s definitely a little bit of a cheat code. Not going to not going to hold up on that. But we weren’t high income earners back then or anything. And, you know, I’ve worked with other people, too, who are making OK living, you know, in the grand scheme of things, probably a little bit better than than, you know, the medians. But like for Boston, you know, they’re making OK money and they’re still figuring it out because, you know, they realize that they could be paying three, four thousand dollars a month in rent. So, you know, that’s a that’s a little bit easier to get that subsidized if you start looking at those multifamilies and it’s not as scary. So, yeah, I do think it absolutely is still doable.

[17:57] OK, that’s good to know, because I think that, you know, it really depends on your market. If I’m looking at, you know, across the whole country, there’s such a vast difference from, you know, mid Midwest to to like, you know, L.A. or San Diego or something. And and so I would imagine those markets or those markets are still a little bit higher than Boston. But but certainly that sounds like a more expensive market certainly is more expensive than ours, which is more of a tertiary market. And we’re about two hours south of D.C. and that is also a very expensive market. So typically the coasts tend to be a little bit more expensive if you want to make it oversimplified. But but yeah, it’s good to know that there is opportunity there.

[18:41] And I would imagine then that it’s more of an appreciation. It’s better for appreciation than some of the other markets would be. Is that correct? Oh, yeah, absolutely. I mean, I’ve, you know, built up at this point kind of a community and friendships from, you know, people who are investing, you know, in different places across the country. And yeah, it’s a big difference. Like, I mean, I, you know, put down seventy five thousand dollars and I know people who bought houses for seventy five thousand dollars. So, you know, it’s it’s definitely not, you know, it’s it’s it may take you a little longer, you know, still very doable. And also like, yeah, you’re going to get that appreciation back.

[19:23] I mean, some of those you do have to think, you know, and I tell myself this, too, even as an investor and also people who are looking, you know, people still want to live in the Boston area. You know, people are maybe I’m not as willing anymore to pay those crazy prices, but there likely will always be people who will. It’s still a place where people do fairly well in terms of salaries. You have a ton of schools. And, you know, like I said, the hour kind of the hour outside bubble, people are still very interested in living there. So, you know, it’s expensive, but it’s expensive for a reason. Right. Like, well, so you kind of have to think about that now. So yeah, exactly. I do. You know, and demand has not really slowed down here.

[20:06] So it’s still in a kind of a little bit of a different league than its own in terms of appreciation and people just wanting to get stuff. Yeah. Yeah. I would say one of the things that I like to think about to do is kind of I think often a goal for people can be if you get in the investing space is kind of replace your income or cover your expenses. At least, you know, try to have a cash flow that is going to cover your mortgage. You know, there’s different check marks you can get. Okay, let’s get mortgage. Let’s get insurance. And if you’re a realtor, you have terrible insurance probably. Or it’s very expensive. So there’s like these different kind of goal posts maybe along the way. And I think that, you know, if you are in one of these markets, like we’re talking about, the higher appreciation, more expensive markets, you’re not going to have as strong of cash flow typically as you could maybe get in another market.

[20:57] However, if you are kind of you have the opportunity of buying something with a, you know, your primary residency, the lower down payment. Right. So you have the opportunity to get into something that you understand better probably. Right. You understand your market better than you might in another investing out of state. And so you could build up that appreciation. You can, you know, get your first house hack, for example. You can maybe move on to another one and then let that one, you know, appreciate more and more. Let that pay for itself. And then you’ll find yourself in a position where you might be able to either just tap into that equity and use a HELOC or something like that if it makes sense.

[21:34] Or you could always sell. And you take advantage of that appreciation. And maybe you could take that if you look at your return of equity multiplier. And if you have $200,000 of equity in this place that you bought a couple years ago and you’re only making $200 a month on it or something, you know what I mean? You might realize that that’s a pretty bad return, but you could take it, you could sell it and move it into something, another product out of state or whatever, or a fancier kind of investment strategy that would then cash flow better. So there’s routes to achieve those goals. It’s just kind of the different way to get there depending on where you’re investing and where you’re living.

[22:15] Yeah, exactly. And that’s definitely what I try to tell people too is like in terms of house hacking, it can be so, it’s so personal to your situation and what you actually want and what you’re really trying to accomplish. Because there are people who are just out there saying like, look, like I love what I do. I’m going to do it for the rest of my life or whatever. I want this to be my retirement account. You know, I don’t want to have to put so much into my 401k or maybe I am putting into my 401k, but I’m nervous. I just want another boost of income too, you know, later on in life. And that’s totally fine too. Or, you know, yeah, like you said, you have people who are like, I really want to replace my income.

[22:53] Like you can make that work too. And house hacking, you know, the thing that I think is so powerful about it is it’s just so customizable to anyone. You know, no two house hacks have to be the same or usually are the same. And you can absolutely shape it however you want. You can get as comfortable or uncomfortable as you want. You can turn so many different dials that it’s just, you know, I really think it’s great for a rookie investor across the board just because, yeah, like you said, like building up some of that equity, that appreciation, maybe a little cash flow here and there. And then, hey, yeah, maybe you do sell. Maybe move on to the next thing. Maybe you 1031 exchange, whatever it is.

[23:32] You know, you can just do so much. And it gets better and better as you go. Like the cash flow gets better, rents increase. And so that stuff gets better. Also, you know, just having control over assets. Like that’s such a powerful thing that people don’t always think about. Like right now, interest rates are high. And people are like, I don’t want to, this is not the right time to get in the market. But like, you know, I had a friend who refinanced like 30 houses. When the rates drop low, he wouldn’t have been able to buy 30 houses in that period of time, especially not at the prices he got them for. So having control over assets is just incredibly powerful over time. So, yeah, I completely agree with you.

[24:18] I’d be curious. Can you walk me through a little bit about your personal house hacking, what you all have done and what that’s looked like? Yeah. So for me, it was with my, well, she was my fiance back then, wife now. But my wife and I, you know, knew that we wanted to buy something, want to own something. And I was in a unique position because she didn’t really care about the real estate investing part. She didn’t really think about it like that. She thought, oh, we’re buying a house. Let’s buy that traditional starter home. Like perfect. Like I’m all on board. So it took some time to really kind of convince her like, no, actually, I want to go a different route. And I want to be a little different here.

[24:58] And I know it’s going to seem weird at first. And it may take some time to actually see the benefits, which it did. But it’s going to be great for us. And it’s going to be great for our future family. And that’s exactly kind of how it rolled out. So we found this, you know, duplex with matching units, two bed, one bath. Like I said, needed work. No surprise there. Just about 30 minutes north of the city. And, you know, I convinced her like, okay, hey, we got to put some love into this. Let’s make it our own. Let’s make it a comfortable living situation. Like we’ve never, we haven’t lived in an apartment with a brand new bathroom or anything before. Like now’s our time, you know, like we haven’t got to paint our walls or design it, whatever we want.

[25:40] Like, let’s do that. And that was a bit of the compromise there that we needed to make to get her on board. And, you know, so that was great. We lived in that for two years. Had a tenant in there who’s actually still the same tenant. This was back in 2020. She’s been phenomenal. And we could slowly start to see that appreciation. I mean, the appreciation was a little quicker than real life should probably be. But we saw appreciation pretty quickly. But then we could also see, you know, the numbers getting better and better. You know, like you said, like didn’t start off a home. It didn’t start off a home run deal by any means. And, you know, technically, is it still a home run deal? No, but it did get us on base.

[26:25] It got us in the game. And it allowed us to move into another one, which we currently are house hacking down the road, you know, two years later. So now I have two duplexes within a street away from each other, which is great for self-managing. And that first one is pretty much self-sufficient. You know, we got it to a place where I spend barely no time there. And it’s, you know, rarely a headache, which obviously can change at any moment. But it’s rarely a headache. And it’s just that extra income. So and the appreciation, which I’m more after kind of here. But, yeah, it’s been really well. And then this one, you know, we likely won’t house hack ourselves again into another multifamily. My wife is kind of like, all right, after two duplexes, I want a single family.

[27:18] And I was like, all right, you know what, like, I’ll take what I can get. Like, that’s still that’s still better than most people, you know. So I’m like, all right, I’ll take that. So, you know, someday I would maybe like to have some sort of ADU or something or an in-law suite or something like that. We could maybe house hack technically. But, yeah, for now, it’s just these two duplexes. And when we get into that next home, we’ll keep this one and rent it out, too. Or maybe by then, who knows? Maybe by then we’ll want to take those profits and put it into something bigger or, you know, different. But, yeah, right now we’re, you know, sitting on first one’s 2.9 interest rate and this one’s four.

[27:55] So, you know, kind of hard to want to change anything about it, honestly. Yeah, no, totally. One of the things that I tell my clients all the time if they’re thinking about keeping their house, it could be just a single family house, right? They want to keep it as a rental or a townhouse or whatever. Is that, you know, and I think I didn’t listen to this. And that’s why I tell everybody. And I don’t think any of my clients listen to this, which is to get a HELOC. So when you live in your house, if it’s your primary residency, you can get a home equity line of credit. And your terms are going to be a lot better. So, for example, I was lucky enough to find one on our current primary residency where we got 100% of our equity access to it with interest-only payments.

[28:43] And so that’s huge. If I were to move now, that would stay in place. However, if I moved first or if I applied for a mortgage and then tried to get the HELOC with the same company, they would be like, we can’t give you this because we know you’re trying to buy another house. And so, like, that’s one thing I think that people often don’t see the urgency of is to set up that HELOC until they’re like, oh, I’m going to buy something else. And you don’t have to access those funds. You don’t have to touch that equity. But it’s really nice to have, especially if you are spending a large down payment on your new house and then your cash reserves are going down. You can have a little bit of a buffer.

[29:23] Let’s say you have $100,000 in an equity line now. You can use that if, okay, what if the HVAC goes out and, like, we’re not ready to pay for that or to go out or whatever? Then you have a bit of a buffer that you can kind of borrow from yourself and pay down. And then also what got us started in our investing, which has been flips and renovations, that kind of stuff as well, was having access to that capital. I can now go to the courthouse steps and bid on a piece of real estate that needs cash to buy. And that’s just the flexibility that having access to that capital can provide. So that’s a little PSA. I feel like I say that to everybody, and it’s rarely – it’s always, crap, I didn’t do that before.

[30:08] They are busy buying their next house. Yeah, and I did do that, and I did – that’s how I got the second one. I took a HELOC out on that first one. And, yeah, like you said, it can literally be – you can never use it, or you can use it, or you can have it as just a peace of mind. You know, it was something that I definitely was going to do. And it’s – yeah, it was definitely a game changer in terms of getting that second one. Gave some capital there and everything. You used part of it for your down payment? Is that what you’re saying? I did, yes. I did. So, yeah, really, that was helpful. What was your strategy then for paying that down? Did you analyze how the numbers looked with having the extra payment with the HELOC, et cetera?

[30:54] Like, what – tell me more about that. Yeah, so one of my rookie mistakes, which I wish I thought about a little bit better, was just how much interest rates would change on it. That’s the only thing. Two things that I kind of regret. One, I regret not actually taking out as much as I could. At the time, we were living in that first house, and I just told myself, and it was a little bit of a mindset issue there, but it was like, oh, I don’t want access. Like, I could have done, like, 100K. And I was like, I don’t want access to that much money. That makes me too nervous. Yeah. I don’t want to risk it. I don’t want to, you know, like – and I’ve never even, like, been that type of person to kind of spend irresponsibly or anything.

[31:35] But I still was just like, you know what, let’s not tempt fate here. And so, you know, I only did 50 or 55. And so I do regret that. I wish that I just did that. So, again, I could say, like, I have that, you know, that lining in case things do start to happen. But then also, too, like, when I first did it, I mean, my interest rate on it was, like, 4% or something. And now it has gone up to 9%. So I would tell anyone, you know, in thinking about that for sure, definitely plan for that. You know, make that a part of your payment structure. Make your thoughts there, you know. So – and then you have to ask yourself again, and this is just house hacking in general and debt and leverage in general and investing in general.

[32:21] But how comfortable are you with it? You know, does that mean – does that make you nervous to have that debt? You know, does that – is that something that you just – are you going to want to pay it off as soon as possible? Okay, then make a plan for it. Are you cool if it sits there for a little while? Like, are you not concerned? Are you making enough that it’s worth it still? You know, so that becomes a bit more of a personal issue and your, you know, preference on debt. But for us, it was really just this makes sense for where we were in life and where we wanted to be. We wanted a bigger space. We wanted to, like, start our family, which, you know, we did and everything. So we needed more room.

[32:57] We wanted to have that be a full rental. We weren’t at a position where, like, I – where we really could afford a single-family monthly payment, you know. It would have been a lot. We needed the help with, you know, subsidizing our mortgage and stuff, which is exactly what this did. So it’s really kind of, like, again, it’s just so personal. And you have to figure out what it actually means to you to use that. I think you’re – a really good point you made is, like, so, yeah, accessing – having access to it gives you options down the road. And choosing how much you use of it is different. Like, that’s what you’re talking about. Like, that’s how much, you know, you need to feel, like, personally, like, are you okay with?

[33:43] One of the things that I did that I think is dumb was I refinanced, you know. We went – our current house, you know, we had started off with maybe, like, a 5% or 4.5% interest rate. Then it went down to 3.5%. And now we’re at, like, 2.7% or something. So we refinance, like, every year for, like, three years in a row. And anyway, so – but, you know, the last one, I – you know, they were like, do you want to take out more? Do you want to take out the max? And I was also, like, had that debt aversion. And in hindsight, it’s so dumb. When will we ever see that kind of rate again? And that would have been locked in, 30-year fix, right? I don’t know how much more I could have gotten for it, but it just – you know, that is something that could have, you know, accelerated us a little bit further.

[34:29] But at the same time, I really appreciate my monthly payment. I really like where it’s at. It’s easier to replace. So there’s – it is – like you said, it’s very personal on your – how you view debt, how you feel secure. And so I think that’s true. You really need to focus on what makes you feel secure and what you’re comfortable with. And optimizing everything, leveraging everything isn’t always the best route for you. Yeah. Yeah. So now you’re focusing on niching into helping others house hack. So tell me a little bit about that. Yeah. So honestly, you know, like I said, when I had that initial kind of light bulb moment, you know, that this was great and that, you know, this was actually doable in such an expensive place, such an expensive state in general, I was like – I became pretty passionate about it.

[35:25] I became pretty passionate about telling others about it. And, you know, and so for me, you know, getting that license has really been focusing in on like I love working with house hackers. I – that is, you know, where I want my position to be. That is, you know, if you’re in, you know, the North Shore area of Massachusetts and stuff, I want you to think of me. You know, I want you to come to me and say, all right, how can we do this and stuff? And I think those – you know, not that I don’t want to help everyone get a home or help investors, you know, build their portfolio or something. But I think there’s just something so special about starting your portfolio, about seeing those changes and about that mindset it takes, you know, to really understand like, okay, like, yeah, this is – it’s going to be tough.

[36:10] This is – I’m going to put in the work. I’m going to put in the, you know, the time and the effort. And, you know, likely if you’re younger, you’re probably going to put in more money than you ever thought you would. But, you know, it’s one of those things where it’s just – it’s really fun to help people there. And that’s why, you know, I love talking about it. And even people will come to me, you know, like on Instagram and stuff who aren’t in my area or whatever, but they’ll still have questions and stuff. And I just love talking about this stuff. I could talk about it all day. And it’s fun when you start to really help someone locally and they’re like, oh, yeah, like this is starting to make sense.

[36:45] And, you know, I’m feeding into that too and stuff. So, yeah. So, it’s been fun. That’s awesome. I’m curious if you could like give an elevator pitch. Like let’s say, you know, you’re renting – your rent cost is this. If you were to buy a single family house or just whatever, if you’re going to buy, your mortgage would be this. If you go this route, your cost is going to be this, XYZ roughly. And then you end up – ending your payment will be this. It’s to compare and contrast so that people kind of understand what real world numbers look like for this kind of thing. Yeah. Yeah. So, I mean, from a very oversimplified perspective, what I really try to tell people at the end of the day is because we’re also in such an expensive area is, hey, would you be excited to pay your current rent right now that you’re paying, that current number, say it’s $2,000 a month.

[37:39] Would you be excited to pay $2,000 a month or less if you owned the property? Is that something that would, you know, excite you? And then most people are like, yeah. Like obvious – like, you know, most of the time it’s an obvious yes. There’s, of course, people who don’t want to own or whatever or love renting or love, you know, all that stuff. And that’s totally fine too. Most people are like, yeah, like, of course I would, like, rather own it, you know, and, you know, because most people can wrap their head around the fact that, like, okay, yeah, at least if I’m owning it, like I’m paying, you know, myself in a way and, like, you know, things like that, appreciating. Like, most people do understand the basic concept there.

[38:16] So, usually when I say that to them, it’s like, yeah, well, duh. Like, okay. It’s like, all right. Well, cool. Like, have you heard of this? Have you heard of house hacking? Are you familiar with the term or, like, the concept? Yes, no. Okay, cool. Well, from a standpoint of, let’s say, you know, when I tip, just because my location, I typically push or encourage more, like, multifamily route. Now, obviously, rent by the room is super, like, advantageous too today, especially in this area and everything. But, you know, it’s, I like to keep it kind of as high level and simplistic as possible. You know, most people can understand, like, oh, one unit’s rented and I live in the other one. Cool. I get that.

[38:58] That’s what I’m doing now. Okay, cool. When you throw in rent by the room, like, it can make you a lot more money and it can be great for you. But it’s a little more, it’s a little more advanced. You’re going to have to think a little bit more about it. So, from a simple term, all right, well, you know, right now you’re living in a duplex and the other side’s rented or whatever. What’s happening is your landlord is getting that money, obviously. Well, what if that became you? What if you could live, you know, in a place, in a place you desired, an area you desired, in a house you’re excited about and have someone else help pay for that? You know, like, when in life is there an investment that someone else is paying for you?

[39:41] You know, like, it’s, it’s, that’s the craziest thought is it’s like someone’s paying for my house? Like, that’s nuts. Yeah. You know, so I try to break down the numbers as simple as possible. It’s like, what are you paying now in rent? You know, do I think you could beat that? And most of the time it is yes. You know, and then what do you, what do you need to get there? Okay, let’s talk that. Well, realistically, three and a half to 5% down is what I’m seeing pretty much across the board. Sure. Because house hackers are relatively younger, starting off, like, they don’t have, you know, the 20% and definitely don’t around here. And I can’t blame them for that. So, you know, three to 5% of that down payment.

[40:24] Can we get to that? And most of the time it is yes. Because most of the time they don’t realize too, like, oh, wow, like three and a half percent or 5%. I mean, my first one was $500,000. Like, that’s like 17 or $18,000. I think I put as, as the down payment or whatever, like not, that’s not chump change by any means, but that’s doable for even the, you know, common man, you know, the, you know, everyday person. Like, it’s like, yeah, like most people, if they want to figure it out, they can come up with 20 grand. You know, again, time is on, you know, your, is in your control. You know, yeah, if you want to get there in a couple months, yeah, you’re going to have to be pretty drastic. If you want to get there in a year, yeah, I think you could do it.

[41:07] So it’s really just breaking that down as much as possible, just keeping it simple there. Like, okay, do I think you can pay less than your rent or the same? And would that be good for you? And then also, you know, do I think you could come up with the three to 5%? And then of course, closing costs, you know, to, to get this house? Yes. Then it’s a good fit. Then it’s going to be a good relationship. Then it’s going to be something that, because honestly, it’s not that hard to get someone into house hacking. It’s, it’s an in, in, into the mindset, to the idea of it. You know, it’s not, it’s, it’s, yeah, it makes sense. And people are already, you know, living in an area where like, okay, there could be someone in the upstairs unit or downstairs or whatever, like they’re used to that.

[41:51] So it’s not like you’re asking someone to be crazy unless they want to. There’s people who are like, we’ll live in the basement and rent out, you know, the units and stuff. And sure, whatever. But literally like, it’s not very foreign of an idea. So it’s really not as hard as a pitch as, you know, other things could be. So, so walk me through. So one of the units would have to be available to move in. So we’re looking at leases that, you know, I would imagine most, most duplexes aren’t being sold vacant. Is that accurate? Honestly, around here, a majority of them are. Oh, okay. Or they at least have one unit available. So, yeah, it’s, it’s, it hasn’t really been an issue that I’ve seen much yet.

[42:37] There has been a handful of times where people have had to deal with tenants or maybe inherited tenants and stuff. And in a perfect world, yes, I would rather you find a place that doesn’t have tenants. So you can start fresh, make sure everything’s, you know, great. Because I mean, you could be buying a place that someone’s had for a hundred years and like they, you know, have slacked in their tenant, you know, screening and stuff like that. So for the, for the most part around here, you’ll see most of them with, with either it’s ending soon or vacant. So, yeah. That’s, that’s helpful. I mean, that’s helpful from the standpoint that you would need to be able to move into the house within a couple months of purchasing it for those lower down payment primary residency loans typically.

[43:24] But on the flip side, if there is a unit that’s occupied and there’s a signed lease and deposit, et cetera, you could also use that to help balance out your DTI, your debt to income ratio. So that could be an advantage, especially in a higher priced market. Yeah. Yeah, absolutely. I mean, that, that did happen. I mean, I helped someone last year who was, it worked out that the, the one bedroom that they were planning on moving in anyway was vacant. So they, you know, that didn’t cause any issues for the owner occupied, you know, rules and regulations around that. And then the downstairs was a three bedroom that was fully rented and had the lease ending shortly after when we would have closed.

[44:07] So it was like, it actually worked out pretty nicely because, you know, he, he could decide like, okay, are they going to stay? Are they going to move? Should I find someone else? But from a lending perspective, they were like, oh, cool. This is already making that much. Like, yeah, no, that makes, that makes a lot of sense. It’s a, it’s kind of a win-win. I mean, but you’re right. There is, there’s risk. I think inheriting tenants, even if they’re good, there’s a weird transition that happens. And I think it can be a little bit challenging, but certainly doable. And I think it’s certainly something to consider if you are bumping up against that DTI where you’re not going to quite be able to afford something like a duplex.

[44:44] I don’t know what the rules are like in Boston, but what about, have you explored any short-term rentals or midterm rentals as part of the house hacking strategy? Yeah. So I actually also own a co-hosting business for short-term rentals, but they’re actually in Florida and Tennessee, not in Massachusetts, which is funny. But Massachusetts is definitely like, I’m not going to lie to you. It’s, it’s not super landlord friendly. Um, and you know, knock on wood, I haven’t been in this situation yet. That’s, that’s scared me enough to be like, okay, never again. Um, but it is definitely less landlord friendly than other States. Okay. Now it’s going to be very specific to town. It’s going to be like my town, for example, is literally they’ll let you short-term rental for 90 days or less.

[45:35] Or if it’s owner occupied, it’s a different situation that can change from the next town over. That’s five minutes away. It’s, you know, it’s, uh, you have to be, you have to be willing to do your homework. Essentially, you have to be willing to call the town and really make sure it’s okay. And, and, you know, I’ll say from the house hacking standpoint, it’s, it’s likely going to be easier because you just, not that you get away with things, but you just get so much more wiggle room when you’re owner occupying a property that you will likely be able to do it. Um, you know, again, it’s just figuring out, is the town cool with it and figuring out if it really even works in your town. Medium term rentals are a different ball game just because it’s like, yeah, it’s going to depend that the rules aren’t as harsh.

[46:19] The town is likely not going to, you know, ban them or anything. But, um, so it’s definitely one of those things where like, you just have to really hone in on the town and the property. It makes sense because even if you could short-term rental that house, it doesn’t make sense. Is it going to get it? You know, is it going to be better? Because me, for example, honestly, I would have a harder time filling my duplex with a short-term rental versus what I, what I realistically pull in. So it’s, it’s, it’s, it’s would be a lot more effort and a little bit more of a scare, a lot more of a scare because it’d be so many, you know, turnovers and everything. But, um, that, that extra income wouldn’t be great enough.

[47:00] Now, some places like vacation areas or whatever, it could be substantially different. You know, the, the short-term rental could blow your long-term rental out of the water. But that’s just, that’s just where I, you know, encourage people be, you have to become a market expert just as much as your agent. You have to be just as willing to do the homework as I am because you need to understand all expectations and reality because it isn’t, it isn’t just as easy as, especially in Airbnb, especially from a co-hosting perspective these days. Like it is not as easy as it was in 2020 to throw up a piece of crap and make a ton of money and expect everything to be easy. Now it is insanely competitive.

[47:46] It’s tough and you have to be willing to play that game. So, you know, it’s, it’s, it’s a lot to think about. And again, personalizing your, your, your situation. So if you’re ready for that, then hell yeah, more power to you. Um, but you definitely have to be ready, ready to tackle any challenges. I like, I always like to go into endeavors, um, seeing, you know, different, different, different strategies. Right. So if they’re having like plan ABC, whatever, you know, that, that’s something I think is, is wise to do. Um, and you know, in this circumstance, you could, you could always have that as a possibility down the road, but if it still makes sense as a long-term rental, there’s not as much risk.

[48:26] Like if it only works, if you’re making some, you know, theoretical figure, uh, with the short-term rental being, uh, the other half, then it’s a bit, it’s more of a risk. I mean, you got to also furnish the place. So you’re adding extra costs to it. Um, I could see, I could see like, you know, let’s, okay, let’s just find a place that could make sense as a midterm or short-term rental in the future, but let’s make it a long-term rental to start. And let’s just kind of get a, get, get capital back. Let’s kind of like, you know, be able to build things back and start planning for that. Um, midterm rentals can really work well if you have like a connection to something that would fill it. Um, so having a contract, um, so that’s something you could theoretically work on and then, you know, proceed to, to make, if you, if you have like a hospital or, you know, that’s, that’s the easy, most understood one or a military base that you have a contact that says, yeah, we would be able to feed you, you know, this many months, usually, um, out of the year.

[49:22] Then, you know, it couldn’t be a lot less of a scary jump to, to make after you’ve already bought it. Um, but yeah, having it be a good, um, you know, long-term rental as well as, is just, is just great. Cause another big risk is they could change the laws. Like you, like you talked about it, it’s very area to specific. And so you could have them crack down on what your, your business plan is. And if it doesn’t work the other way, you could be in hot waters. Yeah. And I, I mean, we are, I think we are seeing that happen with people, you know, like there was a lot of people buying places thinking that they’d make the perfect Airbnb. And then these towns are, you know, like, uh, nevermind, we don’t want our whole town to be a vacation spot or whatever.

[50:03] And, um, you know, and so we’re starting, you can clearly tell these days when something comes up that, oh, this was, this was purchased as an Airbnb in hopes that it would make them a ton of money. And something happened or it was harder than they thought. And, you know, so you just have to be really willing. So, yeah, like I said, I mean, that’s, I think that’s what you said there is crucial. Like, let it like, make sure it’s a good long-term rental because that’s going to be like the top, not easiest, but that’s going to be that security boost at the top that it’s like, okay, it works as a long-term rental. Then I’ll talk to you about short-term, but if it’s not even working as a long-term rental, maybe this isn’t the best fit.

[50:44] Yeah. No, that makes a lot of sense. The other thing I wanted to throw in there about the equity line situation, um, if somebody is going, moving to their second, uh, you know, uh, house hack opportunity, um, they could, in theory, choose to, you know, have all the money ready to go for their, uh, purchase, uh, without the equity line, or maybe even with the equity line a little bit. And then they could use their equity line to fund repairs in the house, um, or updates, and then they could refinance and theoretically get the money back. Um, and that’s, you know, the whole nother strategy that, you know, we can get into as well as BRRRS, um, which is super powerful when you get good at that, when you start seeing those opportunities, um, it is, you know, you can almost rinse and repeat.

[51:32] You, you, you, all the capital you use to put into a property, you can get back out of a refinance. And now you have this free, um, yeah, property that you’re, you’re renting out. Um, so that’s just, again, I think that’s the power of equity. That’s the power of an appreciation market. When you start building up capital, um, that you have an equity lines or however you’re, you’re, you’re accessing it. Um, you, you really start having some new, uh, fun opportunities. You can, you can take on new challenges, do things more creatively thing. You can get more sophisticated, uh, but house hacking is an amazing way to start. And, um, yeah, my wife wasn’t willing.

[52:14] We, we don’t really have the duplexes very often. Uh, our market is a lot more single family. Um, so it would have, it would have been a stretch price-wise for us for sure. Um, and, and B, it just, there wasn’t very many opportunities, but we, we were paying, you know, roughly the same amount, maybe a little bit more, but we had it on a 15 year mortgage, um, for our, our, you know, our monthly expenses were about the same. It went from buying at the time. Right. And we kept the house. And so, you know, now we had this rental and that’s certainly another possibility, but house hacking just makes it, uh, much sweeter from the beginning. Yeah, it’s definitely, you know, and it, it, it takes away some of those risks too.

[52:57] So even if you’re like, kind of like, man, I want to dip my toe in the water, but I don’t really know if I want to be like a full blown real, you know, investor for life and make this kind of my calling or whatever. Like this kind of, this is, I think the safest way to do that because yeah, you may love it and be like, cool, I’m going to keep doing this. This is going to be my strategy. Or you may hate it and be like, man, I don’t care about real estate. I don’t want to do this anymore. Okay, cool. Sell it. You know, either way you need a place to live no matter what. So at the end of the day, you need a place to live. Why not have someone else help pay for that, cover that and take that stepping stone into really seeing like, okay, which Avenue do I want to go in real estate?

[53:41] If any, you know, and I mean, you can house hack one place and never again. That’s okay. That doesn’t have to, I mean, I do know people who literally just did that, that one time. And that’s it. And that’s all they really, and they kept it, you know, that’s all they’re really, you know, doing. And they like, I see the value in it, but that’s just not me. All right. Well, that works. Buy your single family home or whatever after that. And, and, and now you have a duplex that you, you wouldn’t have had otherwise. And, uh, it’s really a lot harder to like, try to save it for that single family house. It’s going to stretch you and keep your, your expenses higher and then go back and buy a duplex.

[54:14] Um, so it’s, it’s really just, yeah. Getting that, that ball rolling. Um, and yeah, you’re right. It’s, it’s not for everybody, but man, I don’t think anybody would hate having like, you know, fast forward 30 years and you have, you know, three, uh, quads or duplexes or whatever paid for. And they’re managed by somebody else if you want it, but they’re just bringing in appreciation and cashflow every month. So, yeah, for sure. Uh, Dan, what I got to ask about, uh, you, you got really into the investing space. Uh, I’m imagining you dove into podcasts and all that kind of stuff. We always like to ask about favorite books, fundamental books, things that you currently are enjoying. Um, or do you think, you know, would be great for other people to read?

[54:58] Uh, so do you have one? Yeah, I, you know, I’m going to give credit where credit’s due. Um, the, the, the book that even made this possible and a realization for me to understand that this was even a thing was the house hacking strategy by Craig Kerlop. Um, that is a great, simple read for the basic fundamentals around this. And that was definitely the book that made me kind of be like, Oh, like that’s, that’s, that’s cool. That’s good. And it, you know, it’s simple. It keeps things, it’s, you know, it’s definitely a bit of a how to manual and it gives you some examples and stuff. And, um, he started off that route and everything. And, um, you know, it, it was, it was very good and kind of just getting you kind of prepared for those more tactical things about it.

[55:42] Um, but I do also, I mean, I continuously read and stuff and, um, you know, if you’re on more of the mindset train, I’m currently reading the purpose code, um, which is a newer book, which, um, so far I, I like, I’m not all the way there yet, but I think it is great for agent or investor or just person in general who is trying to kind of figure out like if they really like this stuff, if it’s really bringing them joy and like why you don’t have to necessarily be so focused on just like, okay, I’m not just going to chase money. Like I’m going to fill my cup essentially. And how do I want to do that? So that’s got me thinking a lot more essentially like, all right, what are, what are some other things?

[56:22] You know, I, I love how I love helping people, you know, house hack and talk about it and stuff, but what are other like little things that can, you know, also make me happy that I may, I may not be giving enough attention to. And, um, you know, that could go a long way and they don’t have to be these big, crazy goals. It can just be the little things that kind of keep you going and keep you energized. So that’s a good one. I’m currently reading that right now. So yeah. What was that one more time? The purpose code. Purpose code. Okay. Yes. Yeah. Yeah. And I love it. That’s, I mean, that’s really what we’re all about. We, we, I think that the, you know, while we invest as we sell real estate, you know, it’s, it’s kind of about affording us more time, affording us more flexibility, affording us less stress to, uh, try to financial stress at least, uh, to, you know, to, to, to enjoy life, um, and to be able to travel and give our family experiences.

[57:14] So I love it. That’s awesome. I’ll have to check it out. Yeah. Yeah. And the house hacking one, was that, uh, out into the bigger pockets umbrella or is that, uh, it’s his own. Uh, it’s his, it’s his own. Um, uh, it’s probably, he worked for bigger pockets, um, and it, it, they probably helped publish it, but yeah, it’s just called the house hacking strategy by Craig Curlop. And, um, yeah, you can find it on Amazon or bigger pockets or whatever. So. Okay, cool. Those are great. Uh, Dan, if somebody, uh, wants to follow along, uh, your journey or your social media or has wants to buy something in, uh, your area, what’s the best place to find you? Yeah. Yeah. So I’m definitely most active on Instagram.

[57:54] Um, my handle is house hack and hustle. Um, so definitely most active there. Like I’ll read all my DMS and stuff and, um, probably the easiest place to get ahold of me. So, you know, usually there I’m talking about, I’m talking about my, my own journey for sure. Uh, the ins and outs and the goods and the bads, uh, and just so you can follow along there. My house hacking journey. Um, also the co-hosting business stuff I do too. So, you know, I’m, I’m, I’m, I talk a lot about that, uh, also. So yeah, so definitely love to help people, you know, locally around here house hack. And then, um, yeah, if you do have a short term rental that you’re kind of need some, some help on there too. Um, you know, always willing to help there.

[58:36] So, yeah. Awesome. Well, Dan, it’s been awesome talking to you. Uh, there’s such an applicable thing for people wanting to get their first investment properties. So like you said, you gotta have a place to live. So why not kind of maximize it? Right. Yeah. Uh, but yeah, thank you so much for being on. It’s been a fun conversation. Yeah. Thanks for having me. Thanks for listening to the REI agent. If you enjoyed this episode, hit subscribe to catch new shows every week. Visit REI agent.com for more content until next time. Keep building the life you want. All content in the show is not investment advice or mental health therapy. It is intended for entertainment purposes only.