Log In Sign Up
Bed and Breakfast House Hacking with Lauren Keen Aumond

Bed and Breakfast House Hacking with Lauren Keen Aumond

43 min read
Real Estate Rookie Podcast

As a Guest you have free article(s) left

Join BiggerPockets (for free!) and get access to real estate investing tips, market updates, and exclusive email content.

Sign in Already a member?

Lauren Keen Aumond was only 22 years old when she got her primary residence under contract, and 23 when she purchased it. She realized that the rents in her area were higher than the mortgage payment of buying a house, so she bought a home, leased out a room, and incidentally discovered house hacking. At 23 she was only paying $200 a month to own a home that would appreciate for many years to come.

This is when Lauren decided that real estate would become a bigger part in her life than she had planned. She then spent the next decade buying a second home, selling it, and cashing it in for a duplex. Now she owns a cash-flowing duplex plus her latest purchase, a house hacking bed and breakfast!

This home was situated on a decent sized lot, with a primary home, 2 cottages, and a mobile home! As a resourceful investor, Lauren decided the best way to make this a cash flowing property was to turn the two cottages into short-term rentals and buy a camper as a 4th unit on the property.

Lauren now juggles school, a full time job, small businesses, and her rental portfolio all at once. She goes into some seriously messy situations she’s been in with tenants, from evictions, to break-ins, and even utility siphoning. With all that being said, she still feels confident as ever to be a landlord, and isn’t looking back!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Ashley:
This is Real Estate Rookie show, number 42.

Lauren:
But because of that, it was on the income section of the MLS. And that had been on there for like eight months. So I think maybe a lot of people, if they were thinking about buying a home to live in, they probably didn’t even see it.

Ashley:
My name is Ashley Kehr and I am here with a married man, Tony Robinson. Congratulations.

Tony:
Ashley, thank you so much. It’s so weird, like I’m still getting used to this thing on my finger right now. Like I keep-

Ashley:
Oh yeah. Let’s see it, hold up the bling. Let everyone see it.

Tony:
Here you go. It’s so funny, I feel like when you were a kid and you’d get a loose tooth and you just like kept playing with it, like that’s how I feel with this ring on my finger now. So yeah.

Ashley:
So I have to ask, tell me all about your closing. So you were gone getting married and you closed on a property.

Tony:
And I closed on a property while I was out. So we closed on our third short-term rental, our second in Joshua Tree, California. And this one’s a little different than the first one, because it’s almost like a tiny house. It’s only like 391 square feet, so it’s literally just a little studio, but it sits on almost an entire acre. So we’ve got like a lot of land around it. So we’re excited for this and we think it’s going to bring kind of a different crowd than our first one. It’s got a bit more of like a modern finish and things like that, so we’re hoping to have it up and running the next couple of weeks here, but excited to keep adding to that short-term rental portfolio.

Ashley:
Yeah. I saw the pictures on Instagram, so if you guys haven’t seen them go look at Tony’s Instagram and it’s really cool. It’s a really unique, and it’s a brand new build too, right?

Tony:
Yep. Brand new build. And we got lucky because the guy that built this, he’s got multiple properties all over Joshua Tree that he’s in the process of building. So if this one goes well, we’ll probably pick up some more from him as well.

Ashley:
Okay. So share his name, his information, so we can all go and buy some too.

Tony:
That’s my secret weapon right now, so I’ll keep that one close to the chest.

Ashley:
Well, I’ve got some exciting news to share real quick, I still am like in shock over this. So the building, the four unit, two residential, two commercial that I put the liquor store in and we purchased it for 20,000. We put about 70,000 into it and it’s fully rented, running and we just got our appraisal back. It was done in October, the bank finally sent it to us. And so we had 90,000 into it and it appraised for $220,000. And I was like-

Tony:
Wow, that is crazy.

Ashley:
I had to scroll up to the top and make sure they sent me the one for the right property. Like we thought like maybe 120, maybe 150. But, so that was really exciting. Now we just got to figure out what we want to do with all that equity.

Tony:
Well, my next purchase will be in whatever you tell me to go buy, actually that’s what I’m buying, because obviously you’ve got like the magic touch, it looks like.

Ashley:
Well, I told my partner, today he’s meeting with someone to talk about buying their self storage units. I’m like, look at this deal that I had found, that $20,000 property that I figured out how to turn it into 220,000, so you need to bring a great deal to the table too.

Tony:
There you go, put some pressure on him. Whip him in the show, Ashley, there you go.

Ashley:
Yeah. So today we are talking with Lauren Keen Aumond and she is going to tell you all about a bed and breakfast she bought and how she’s turning that into an income producing property for herself and her primary residence. And not going to continue to run it as an Airbnb, oh I’m sorry, a bed and breakfast.

Tony:
I also really love Lauren’s story because she talks about, almost like a horror story with a tenant during COVID. And I think there’s some good lessons that we can all learn on perseverance and just how to kind of handle those situations. And she also talks about managing all this while having a W2 for both her and her husband. And I think a lot of people who are getting started can relate to that part as well.

Ashley:
Yeah. And she’s also a blogger, does podcasting. She is all about the financial independence movement, so it’s interesting to hear how real estate is helping her reach her goal in retiring by the age of 40. Hi Lauren, welcome to the show. Thank you so much for joining us. Would you be able to tell everyone a little bit about yourself?

Lauren:
Yeah, sure. So thanks for having me, Ashley and Tony. I’m excited to be here. I live in Tarpon Springs, Florida. So right now where I am sitting is in our house hack, we bought 119 year old home and has two vacation cottages in the back. So I’m sitting in one of those and we have, in addition to that, we have a duplex as well, and so that’s kind of our real estate background. I am married. My husband is my partner in all of this. And I do have a 9:00 to 5:00 job where I sell corporate training. And in our spare time, we like to go to the beach and go for a lot of walks, drink a lot of wine and also bike.

Ashley:
That’s awesome. How did you guys get started in real estate and what made you want a house hack?

Lauren:
So my parents and his parents for that matter both have their kind of mom and pop type landlords. My parents have their primary home and a rental home that my mom bought as her primary, 30 something years ago. And so when I bought my first home, it was in 2012, I was 23, great recession, just graduated college. And when I bought my second home, I just decided to keep that one and rent that one out. And I thought I was going to do the American dream that I saw my parents have, worked till I was 65, live in that, what was my second primary home, but was now my primary and rent out the first one and use all of the tax benefits and things like that, with that. And then that’s how I got into reading BiggerPockets books and Rich Dad Poor Dad and all of that, and then realized I want to do a little more than that.

Tony:
Yeah. So I’m curious, Lauren, so you said that you were, how old, when you bought that first property?

Lauren:
22 when I went under contract, 23 when I closed.

Tony:
That’s really young, I think in a lot of places to get your first property. So I mean, I know for me at 23 I wasn’t quite thinking about buying my first real estate investment. Like was it your parents had kind of pushed you into that or I guess just walk us through the mindset that made you think that at 22, almost 23, that you should buy a property.

Lauren:
Yeah, that’s an excellent question. So again, it was great recession. I graduated from the University of Florida and I did get a job really quickly, but it was like in retail, nothing special as a retail manager. So I did have a decent job, so I had income and I started looking to move out of my parents’ house. I did move back in after school and I just didn’t want to be there. My sister, I love her, okay? But my sister was I think nine at the time, and when you’re 22 and like single you’re like, I don’t know, you don’t want to be living with your little sister. So I ended up looking for apartments and the apartments at the time, they were like just okay. And they were like $800, would have been what I was paying to live with a roommate in a 2-2, like in an old building.
And the housing market was so depressed at the time that a 321 car garage in St. Pete, St. Petersburg, Florida was $125,000. It needed a little bit of work, but the payment was literally going to be less than that and I could be by myself. I did end up getting a roommate, so sort of a house hack there before I of course knew what that was. So I ended up paying only $200 a month to live. So it really just ended up being the difference between … an apartment was literally more.

Ashley:
Was that your first like look into real estate as to, wow, there’s actually something to this or was there something else that really clicked with you as to, I want to keep doing this?

Lauren:
Yeah, it was, I really like real estate. It’s fun for me. I enjoy it. I do have a business finance degree and I’ve had an eight year career now selling corporate training. And I do enjoy that, but I do like the idea of having a hobby that makes money, frankly.

Tony:
Now, kind of walk us through how you got from that first property at 23 years old to where you are today, was it kind of a straight line? What were the steps in between?

Lauren:
Yeah, so when I started, when I was like 23, 24, 25, I started doing really well in sales and just started making more money and did the typical lifestyle creep thing, like got the BMW. And it was like, all right, let me get the bigger house. Right? So the house that I was living in, the first one, it was decent. It had a somewhat updated kitchen. I ended up doing both of the bathrooms and painting it inside and out. So it had a little bit of a facelift, but I wanted a two car garage instead of a one car garage, two sinks in the master bathroom, instead of one. I was then dating my now husband and so I was like, all right, let me just get a little bit bigger, a little bit nicer and about a 30, 40 year newer house.
And so we did that, and then it was actually my dad who said, “Are you going to sell the first house?” And I said, “Yeah, I’m planning to, so I can put 20% down on this second one.” I’d only put 10% down on the first. And he said, “Well, do you need to borrow money from me to keep that? I think you should do what you can to keep that house.” And so I did, I borrowed $28,000 from him, which was about, that allowed me to do the 20% down on the second house. And then I just rented the first one out and then that’s when I really got into, again, reading the BiggerPockets books. I read like, I think five of them, or so. And I read them all in that first year. And I started to realize, from a cash on cash return perspective and from a cashflow perspective, it was just an okay investment, you know?

Ashley:
How did that look? So you’ve started out with a roommate in your first house hack, and then you actually turn it into a rental and you’re a landlord. And you have this tenant in your property. Was there a big change into how you manage that unit?

Lauren:
I was worried that I was going to have an emotional attachment to it and putting tenants in there was going to be something that was hard for me, like they’re going to trash it or something. But we ended up with this old couple who sold their house and retired and wanted to rent. And so they were actually really easy. We did like, I think two inspections the whole time, and they kept the place super clean and were really easy. I did read, Heather and Brandon Turner’s book. And I probably would have gotten to the point where I put the binder together and hung the keys on the wall and did all of those things, but I didn’t quite get there, because I only did that for about a year and a half before I sold that and bought our duplex.

Ashley:
Let’s talk about the duplex a little bit.

Lauren:
Yeah, so-

Ashley:
Can you elaborate on the purchase of that?

Lauren:
Yeah. But again, I bought that first house for 125,000, I was able to sell it for 225,000. Again, it had been seven years, so it’s not quite the return that you would think it would be, but then we bought this duplex for 170,000. And so rather than having a house that was worth 225, bringing in 1400 in rent, we were able to buy a duplex for 170 that was bringing in 1800 in rent. So the numbers just worked out better. And it also, we got to keep our exposure to St. Pete. One of the BiggerPockets articles that I read recently came out in June 2020, said that St. Pete has had like a 58% rent increase or something in the last five years. So we got to keep our exposure to St. Petersburg, we just did it in a multifamily instead of a single family.

Tony:
Okay. I want to recap the numbers there a bit, Lauren, just to make sure I followed that. Can you repeat what you sold that first property for?

Lauren:
225.

Tony:
And you said you bought it for 125, right?

Lauren:
125, yeah.

Tony:
That’s a good spread. That’s a really good spread, even if it’s over a couple of years.

Lauren:
Well yeah. I did do two bathrooms, so that was a total of probably 15,000 and then with the paint and everything. So I’d probably put 20,000 into it, but yeah, still decent for sure.

Tony:
And then you sold that and you move into this duplex. Now, were you looking specifically for multifamily or what made you think that I want to go from a single unit to multiple?

Lauren:
Yeah, we didn’t move into that, we were still in my second house at that time, that was pure investment at that point. It was just, it was the numbers, when you’re looking at something, sitting on equity, 225,000, I was, I mean, we’re still in our 20s. My husband and I are in our 20s at that point and it didn’t make sense to be sitting on all of that equity and bringing in 1400 a month when we could basically get a place for 170, bring in … We did pay cash for it, so that we could safely put it in an LLC because it’s in an area that needs … it’s doing some gentrification, so we just wanted to be fully protected. So we did pay cash for it, so we still have equity sitting there, but obviously the cashflow numbers are a lot better.
So that’s really what it came down to, it was a numbers thing. It’s not a prettier property. It’s not a sexy property to own. There was a shooting on the street while we were under contract. Like it’s not nearly as beautiful as your first three bedroom, two bathroom home in a really nice area, but it really is about the numbers. And we think we’ll get some good appreciation because the rent, it basically has to go up. It’s about a mile from downtown St. Petersburg, so we feel pretty bullish on it.

Tony:
So I guess a couple of things I want to unpack there. First, I think you made a really good point about focusing on the numbers and not trying to be too emotional about the decisions on where to invest. And if you have the stomach and you have the skin to invest in maybe the C, C-, whatever grid you want to give a neighborhood, if you can do that, then move forward with it if it works for you. But I also want to comment Lauren, on the fact that you said you paid cash for this property, and you talked a little bit about like risk and things like that, but I guess just walk us through why you decided to put all of your money into this investment as opposed to getting a loan on it.

Lauren:
Yeah. We really did go back and forth on it. In St. Petersburg, and I know, I’ve listened to the podcast, I know you can invest out of your area and out of state and all of that, but this is the Real Estate Rookies podcast, right? I wasn’t ready to jump into that. So we did want to invest in our area so that we could pop over there if we need to. So because of that, the all multi-families basically are going to have multiple offers and the financing offer is just not going to cut it. You’re just not going to win. You’re not going to get that property. So we had the cash because I had sold the first property. So I got like 110,000 out of that, cash. And then I actually got sandwiched on the interstate, so I had a $40,000 settlement, and I really wanted to invest that money so that I could pay for my massages and the therapies that I will need for the rest of my life.
So we really were able to put those two things together and realize that, okay, we can at least pay cash and get the property. And we considered then refinancing, doing a cash out refi from there, but it gets complicated when you want to put it also in an LLC and having a loan on it. And we wouldn’t have had the income, we wouldn’t have the proven income to get a commercial loan or anything like that. So one thing kind of led to another and we ended up just keeping it in the LLC and keeping all of the cash there for now. Again, this has only been about 13 months since we bought the duplex.

Ashley:
I just want to touch on one thing right there, just the financing and the loan and the LLC. And just in case anyone’s not aware, there is some difference in the type of loan you are going to get if your property is in an LLC. There are some banks that will lend on the residential side. I used one once and they did I think a 20 year term, but it was at 7.35% fixed for 20 years. That was not a great deal. We refinanced out of that, but that really can make a difference. Some people which they will actually put it in their personal name, get the residential, the 30 year fixed mortgage on it. And then they will quitclaim deed the property to their LLC, which in most mortgage documents there is a clause saying that the bank can call the loan if you are to change who has title of the property.
So there are people that take their chance and risk and do that, but there’s definitely a big difference as to having the property in an LLC and what kind of financing you can get. For commercial, I mean, you might only get five year fixed and amortized only over 15 years, so that can really hurt your cashflow compared to having that fixed 30 year mortgage. So was some of that why you guys decided to do cash to just have those better terms and not have to do the commercial lending?

Lauren:
Yeah. I mean, we didn’t probably do the extent of the research that we should have done maybe to find a portfolio lender. If we would have done that and we would have thought that perhaps that would have stayed on their books, but I mean, even though the mortgage on this place that I’m in right now, we never even made a payment to the lender, right? They immediately packaged that and sold it or whatever. So we were pretty sure that they would call the note due. We felt like that was a real risk, so the other option is to not put it in an LLC. Get a big old umbrella and do it that way. But again, because of the area that the property is in, we didn’t want to do that. We were thinking about refinancing the home that we are in right now, this is the bed and breakfast house hack that we’re doing. And when we do that, we would like to finance a duplex. We do have an umbrella, but do it in a nicer area.

Tony:
And you mentioned the bed and breakfast, and I want to get to that. But before we do, I think the point for the listeners Lauren, is that there’s so many different ways to go about getting these deals done. And a lot of times people reach out and they say, I’m in this position, what should I do? And a lot of times, Ashley and I can’t give the exact specific answer that people are looking for, because it depends on your situation, it depends on your risk profile. It depends on what you’re comfortable with, but I think the cool thing about this show is that we hear so many different stories and so many different perspectives that eventually, for those of you that are listening, you might hear something that resonates with you. So thanks for sharing that, Lauren.
Now, I do want to talk about this bed and breakfast. Now, I hear it’s like a really, really old property and you guys are trying to renovate it, just give us some backstory on what it is, how you landed on it and what made you go this route as opposed to just a traditional kind of long-term rental.

Lauren:
Yeah. So it all starts with learning and growing. When I’m 23, I buy my house and think, okay, I’m done, I have my real estate. And then over time, I’m like, okay, maybe I’ll have a rental like my parents do, but I’ll still have my primary. And then it’s like, well, that wasn’t cash flowing right, let’s get into the duplex. So one thing kind of led to another, and you start looking at your budget and you realize the biggest number on your budget is that mortgage and that mortgage on the second house that I bought, which was the primary, as of the beginning of 2020, that mortgage and with the flood insurance, because I’m in Florida, was $2,100. And that’s, you learn from Rich Dad Poor Dad, that’s a liability, not really an asset.
As somebody with a finance degree, I struggle with that because I know about balance sheets and things, but the point is we wanted to get that line item basically off. And there’s two ways to do that. One is to pay off the property. The other is to get it to pay for itself. So then I started talking to my husband, our lives had changed. We were both working from home and this is pre-COVID. We were both working from home. And so I was like, why are we living 20 minutes from Tampa and 20 minutes from St. Pete, we don’t need to be this close. We don’t need to be here. And at the end of the day at 5:00, we want to get out the door and do something. And we don’t want to get on a main road during rush hour, this is back when rush hour existed, right?
So we ended up being like, well, what if we moved? And then once you start thinking about moving, you start thinking, well, what else would I like to have? So we wanted bigger office space for both of us. We were sharing an office and that wasn’t fun. So we wanted office space for both of us. We wanted to be able to walk to restaurants and we wanted to be able to bike right out of our house. So we started looking at different towns, still in Pinellas County where I was born. And we looked at Tarpon Springs, Dunedin and Safety Harbor, all which are on bike trails, all which we could walk to really nice downtown areas.
And then you start thinking about all of that and you’re like, also, what if we could use, what is a primary mortgage loan, a conventional loan with an owner occupied loan and have some rental opportunities in the back. And so one thing kind of led to another, and once we laid our criteria out, Tarpon Springs quickly became the front runner. And then, we kind of narrowed it down to two properties and ended up with this one.

Ashley:
How did you find this property? Were you using a realtor or were you looking for off market deals?

Lauren:
Yeah, I have a realtor. Actually my friend is a wholesaler too, met her on BiggerPockets. She sent me a colleague request and we became friends, but she works for a wholesaler and I was telling her what we were doing and she said, “Well, have you seen this one?” So she actually pointed it out to me. This was a commercial bed and breakfast where the woman lived here and she ran … She lived actually, I think in this unit that I’m in and then rented out the house, we’re doing the opposite. But because of that, it was on the income section of the MLS. And it had, had been on there for like eight months. So I think maybe a lot of people, if they were thinking about buying a home to live in, they probably didn’t even see it.

Ashley:
So let’s talk about that. You see this house, what happens from there? How did you analyze this deal as a bed and breakfast?

Lauren:
Well, we knew that we were going to be moving into it. So we basically, one of the questions was when we get this appraised, is it going to be a residential property? So that was kind of one of the first questions we had to answer because in order to run the numbers, we had to know what the interest rate was, what we had to put down and what our options were there. We found out that if we lived in it, it was going to be a conventional loan. The problem is it is technically a duplex, which is a very strange thing where you have a 1500 square foot, 119 year old home, a converted garage apartment, which is what I’m in right now. Like a She shed and then it also had a mobile home on the property. So somehow that was a duplex, so that made comps really weird, but that’s still one to four units. You can still get a conventional loan if you’re going to be living in it.
And actually, I think probably if you’re going to finance it too, you would just have to put more down. But I mean, and not live in it. So we just ran the numbers and we made really conservative assumptions on what we could get for the back unit. The mobile home was in really rough shape, so we knew we were going to get rid of that. So then we just started to see what would our payment be if we did an FHA, what would our payment be at 5% down and all of those things.

Ashley:
And what did you decide on for that?

Tony:
Yeah.

Lauren:
We decided to do 20% down. I paid PMI on that first house because I put 10% down and I’m like, I’m not going to default. I don’t know. Normally I’m okay with paying interest and things like that and paying for insurance. But I really, I pretty much made a vow at that point that I wasn’t going to pay PMI again. So we did do a 20% down conventional loan.

Tony:
But are you guys planning to run this as a bed and breakfast again in the future, are these going to be like long-term rentals for you guys?

Lauren:
Well, it’s going to be Airbnb vacation rentals. It’s not going to be a bed and breakfast, we did not continue her commercial cooking license, which you actually have to have. So we’re just going to be living in the main house, which is a three, two and a half house and my husband’s office is really big. So there’s a guest space up there. If my sister comes and stays or his dad or whatever, and then there are the two little cottages in the back that we will rent out, but on a short-term basis. And the reason we wanted to do that and not long-term tenants is if we want to have a party like a 4th of July party or soon, a house warming party, if this renovation ever ends, we can block these and have our backyard to ourselves.

Tony:
How long are the renovations going to take for you guys?

Lauren:
We got our roof done. Our roof was uninsurable when we bought the place. It was original. If you can believe it, from 1901.

Tony:
Wow.

Lauren:
So we got that done in the middle of hurricane season, that was fun. And we got that done late July, and so it’s been going on since then, this is the final week. We’ve done floors, we refinished the 119 year old heart pine floors. Did the kitchen, did the master bathroom, painted inside and out, added closets upstairs because this house had one closet. That was an appraisal issue too, as you can imagine. And we did a huge yard remodel too.

Ashley:
Can you break down the numbers for us? What was the asking price on this property? What did you get it for? What is it going to rent for? What’s your mortgage payment, your cashflow, all of that?

Lauren:
Yep, sure. So it was originally listed in the summer of 2019 for 379. Again, on the income section of the MLS. It dropped periodically over time. And so we looked at the place on February 16th. That was the first time we ever looked at it. Again, pre-COVID. I’ll skip the drama with all of the … We went under contract on it the day before the world shut down. So we ended up backing out, not even doing the inspection, renegotiating a few weeks later and then renegotiating on the roof and the structure based on inspections. But there was a lot of … It went on forever. So we ended up getting the property for 285,000, with 5,000 in closing costs assistance. With the first appraisal, it appraised for 245. And that would have meant because the owner had three mortgages, she would have had to bring money to closing. So we then had to contest the appraisal and it did reappraise at 300,000.

Ashley:
Can you tell us a little bit about that? Contesting the appraisal, how did that go?

Lauren:
It was wild. Again, it’s a duplex. So if you can think about, there were quad, like a typical quad on that comp list, which they make their adjustments and do what they need to do to value it. But when you think about, it’s a really beautiful Victorian 1901 home with an enclosed garage in the back, and it’s really hard to find comps for that. So we called the lender and like, what do we do? We can’t even meet in the middle. We have to do $150,000 renovation to this thing. I can’t bring another 20,000 to closing, what do we need to do here?
And they contested the appraisal and then the appraisal company had to admit that it was deficient and they brought another appraiser out that had more experience apparently in the multi-family space and then ended up … And the first appraisal too. So she had to, the seller had to put two closets in upstairs and get rid of a porch or put a railing on this one porch. The second appraisal went up from 245 to 300, no questions asked, didn’t have to do any of that. Which of course we did.

Ashley:
Did you have to pay extra to have a second appraisal done or what did you have to do on your end?

Lauren:
Yeah, we had to pay another 600 for the appraisal.

Ashley:
But worth it.

Lauren:
Worth it, but it was annoying.

Tony:
Yeah. I just want to add really quickly that like challenging appraisals, like I just did that for, I think the second time on the property that just closed on and we actually had three appraisals on that property. So the first one came in way over. Like we bought the property for I think 285, the appraisal came in at like 350 and then the appraiser actually came to us later and said that he messed up and he had to reappraise it and then appraised for, I think like $50,000 less than the purchase price. And then we had to challenge that appraisal as well. And then we had one that came back almost right at purchase price. So I’m just sharing this experience with the listeners, because I think it’s important to let people know that you can at times go back and successfully challenge an appraisal if it comes back [inaudible 00:27:43].

Lauren:
Right. And you have to kind of decide when is the right time to do that. My cousin just had a house appraised 5,000 less and it’s like, he just had to come up with the money. I mean, it wasn’t really worth the time and the effort to get the reappraisal. But when it’s a big swing, like what you had Tony or what I had, that makes a lot of sense.

Tony:
Now, what about the rest of the numbers here, Lauren? So we know what you bought it for. What are you projecting like [inaudible 00:28:08] to be once it’s like up and running as a short-term rental, what does that look like?

Lauren:
Yep. So that’s going to be, we’re going to be doing that in January, which is season here in Florida, right? Because it’s cold everywhere else and people want to come down here and we don’t know if the COVID restrictions that we maybe should. So we have, again, we have this unit that I’m in right now. It is a studio, it’s 520 square feet, full kitchen, bathroom. We lived back here for most of the renovation. I believe conservatively what we would take home after VRVO or Airbnb takes their cut is about $60 a night conservatively. Then in the other one, the other little unit next door, which is basically an efficiency where it’s going to have a microwave, a refrigerator, a bed, a TV, a desk and a bathroom, we think we’ll take home 40 conservatively on that.
And then, we haven’t really touched on this, but where the mobile home was, there was a 30 amp hookup, so we bought a camper and we’re going to rent that out too, which I think will be about what this one gets. Just cause it’s like kind of cool to be camping in downtown Tarpon Springs, in a really neat little camper. So to add all that up, if we had 50% vacancy, which I think is also conservative, that would be $2,400 a month.

Tony:
That’s beautiful. And then what’s your mortgage on this property? If you’re going to be bringing in 24, are we cash flowing like crazy? What does it look like?

Lauren:
Oh, right now it’s 1750. The insurance, it’s just insane on this place. We are not in a flood zone anymore, thank goodness. But it’s an old house and of course we’re going to be having short-term rental guests. And our insurance company is aware of that as they should be. So our insurance is like $4,900 a year. So that, that’s actually a pretty big portion of the payment. But again, we do feel like it’s worth it. So it’s 1750 right now. Again, we are thinking about refinancing. So we may get to the point where we’re pretty much breaking even, but again, we look at it as again, we own the duplex for cash. We almost look like we’re kind of financing maybe the duplex with this, if we’re breaking even on this, if that makes any sense.

Ashley:
And you’re living for free.

Lauren:
Yeah.

Ashley:
That’s awesome. For the short-term rentals, are you going to use any special software or are you having someone manage it or are you just doing it yourself with Excel? What does that look like?

Lauren:
We are planning on starting to interview companies to do it for us as much as possible. We’re on the fence about that. Again, we both do work from home, but when the world rights itself, we will be traveling for work and we have the camper. So we probably want to take that around. So we don’t really want to have to be here to even change the locks and things like that and change the bedding. I do have a cleaning service already lined up. They’ve given us quotes and things like that. And they’ve agreed to bill us monthly and things like that. So that’s a little bit TBD right now.

Tony:
Yeah. I just want to add one thing, Lauren, I work full-time. I’ve got all my investments as well, but we still self manage our short-term rentals and there’s so many different pieces of like software and processes you can put in place to really automate it, so that your actual communication with the guest is pretty minimal. So AirDNA, Smartbnb, we use like keyless entry codes. Like these are all different things we put into place that help us kind of manage this whole process and makes it doable even if you do have a full-time job. So I’ll challenge you and your husband to see if maybe you can use some of those things as well.

Lauren:
And we might start that way and see how it goes. I just wrote those two down that you mentioned and we’ll look into that. Thank you, Tony.

Tony:
No, absolutely. So we kind of already talked about the rookie deal, but I guess, is there anything else from your experience Lauren, buying this property, renovating it that you feel guests should here?

Lauren:
Yeah. I would say get some renovation experience under your belt before you break off a gigantic one. I did those two bathrooms in the first one, but I had never done a kitchen. I had never done a roof. Never done structure, never done a yard remodel. Any of that, that we had to do here. I think maybe we, I wouldn’t say we bit off more than we could chew, but I would say our eyes were bigger than our stomach a little bit. It’s been more work than I thought it would. I mean, talk about Tony having a full-time job. Right? But you think you hire a contractor and they are going to manage their people, but it’s not unusual a plumber will show up and be like, what do I need to do today?
And it’s like, okay, hold on. Let me just take a time out out of my job and walk you through what you need to do. So the money is one thing, we’re staying pretty much on budget, which has been a pleasant surprise, frankly. But there’s a lot of time involved with it too. So that’s a huge learning experience here. It’s a great idea for some equity into a place and all of that, but maybe start with something where you got to do like a bathroom or a kitchen.

Ashley:
What do you think it’s going to appraise for if you do go ahead and refinance once the renovation is complete?

Lauren:
It’s going to depend on whether we can persuade the appraiser that it’s a single family home. If it’s a single family home in the range of 425 to 450, is what we’re hoping for, which will allow us to take a hundred thousand of our 150,000 that we put into the reno back out. And again, then allow us a pretty good safety net, but also allow us to finance a duplex. If it appraises again for a multi-family, there is one other property like this one, we actually looked at, that it has a lot bigger lot and it has an actual garage, but it’s sold for 540. So I’m hoping that we can use that as a comp, even if it ends up being a multi-family, but we’ll just have to see. I’m a little jaded on the whole appraisal thing, so.

Tony:
Yeah, right there with you Lauren. Now, I do want to ask a bit, so how has your experience been as a landlord through COVID? A lot of different investors have had different experiences. I was one of the lucky ones where all my tenants paid on time, we never had any issues. How has your experience been?

Lauren:
It was horrible.

Tony:
Okay, give us some insights on what happened.

Ashley:
Is there at least a good story behind it?

Lauren:
It’s wild. Again, with the duplex, I told you it’s in a little bit of a rough area, so we allowed for more vacancy and we do have a property manager there. And he’s absolutely fantastic. I owe him so much for 2020, but one side we had, I believe it was around a 65 year old male renting it and he was our only tenant. He had moved in a 26 year old girlfriend that we were unaware of. And he told us towards the end of March again, that we shut down for COVID basically mid-March. He told us he wasn’t going to make April’s rent, which not surprising, people in that area, they’re basically paycheck to paycheck. They miss one paycheck, they’re not going to pay their rent. It was not a surprise to us.
And we probably would have worked with him on it, except on April 4th, he was arrested for domestic violence against her because he told her to leave his place and tried to shut the door on her. And she stuck her arm in the door and he closed the door on her arm. And so he went to jail and she got a restraining order against him and put our property as her address, so he was not allowed to return and she immediately changed the locks.

Ashley:
I just did a landlord class that like talked about this, like as an example, as to like, what happens when there’s like a domestic disturbance at a house and who stays and who gets to go and everything like that. And there’s a lot to it, a lot more than I thought.

Lauren:
I mean, she’s not on the lease, right?

Ashley:
Right, yeah.

Lauren:
So we had to … because I have a good friend who’s a police officer, he’s like, no, on the police report her address is on here, so that’s where she lives. And that’s all well, and good. You can probably establish that she’s a tenant and maybe even use that lease to get her evicted if you were allowed to evict. But …

Tony:
So like what happens from there? Like she says that she lives here and is she still there, or?

Lauren:
So that was in April. And the police were called three times between then and June, she moved a homeless man in and bit him or something. I don’t exactly know what was going on there, but of course this is a duplex, we have another tenant there. And so she’s like Lauren, and I had never had her number before. She was just talking to the property manager, but I’m like, I better get involved here. She’s like, Lauren, what do we do? I’m like there, I want to get her out. You have no idea, but my lawyer wouldn’t even file the paperwork. He’s like, we just got to wait. And that’s what I told her. I said, I did tell her, “Hey, if she ever abandons the place, then we can come back in.”
So about in June, there was a pretty bad smell coming from the place. And our other tenant gave me a call and said, “I haven’t seen her in a long time.” I said, “Well, if it’s been more than 15 days and she’s abandoned it and we can come back.” She’s like, “I haven’t seen her in three weeks.” So we went in and so again, this is June, so we’ve lost April’s rent, May’s rent and June’s rent by this point. This is like late June. So we’re already going to definitely be out July at this point, right? And we go in there and the power and water had been shut off for a long time. And the utility companies are not supposed to be doing that, but she had utilities in her name somewhere else. So she couldn’t get these put in her name, if that makes any sense. I don’t know how that happens. So she did actually break both meters and start to steal the power and the water, which I didn’t know you could really do.

Ashley:
Resourceful.

Lauren:
She is, I’m telling you, if she did anything else but this, she’d be successful. But so because of the no water thing, you can imagine what the toilet looked like. And that had been tracked around the house and there were maggots and it smelled really bad. But we had the place back. And so it actually wasn’t that bad. She had broken a window to get in, I think initially, so we had that window fixed. And we had a cleaning company come in there and deep clean it, probably in hazmat suits. Our property manager wasn’t there, I wasn’t there, but it was about 300 bucks to get that done. And we didn’t even actually have to paint the walls, we just cleaned them and everything.
So nothing was really broken at that point. The following day, we had a feeling she might go there and she had broken back in the following day and smashed the stove and took some more of her stuff. And at that point we got a moving company and took her stuff and bought her two months in a storage unit and put her stuff in there.

Tony:
So I just want to make one quick comment, right? I think the story you just shared Lauren, is like the horror story that every would be real estate investor fears. So we just like lost half of our audience right now.

Lauren:
I know, sorry.

Tony:
But I think the point to make though, is that you go through this challenging experience, but at the end of the day, you still own an income producing asset. And even though you lost out on however many months it was, three, four months of income, that’s going to make up for itself because you’re going to hold this thing for how many years, right? Like how many years are you going to hold on to this? So you have to deal with the downs if you want to be able to experience the ups. And I love the resilience that you showed. I mean, at any point, were you thinking, let me just sell this thing, let me … I don’t want to be a real estate investor anymore?

Lauren:
We never really thought about selling it. I mean, remember one side was paying, we didn’t have a mortgage on it. So the pain wasn’t that bad. We had a $10,000 fund in there, so it really was pretty much paying for itself. I looked at the numbers recently, we do have someone else in there, started paying in September. So we lost six months of rent. We are going to be in the black on it, even with all of this. And I would tell people not to be too scared. This is the strangest thing to ever happen probably to landlords where there’s a federal moratorium on evictions or local or whatever they are. And my lawyer literally went about it, you think this happens, I’ll just file paperwork, right? Like we’ll evict. It’s not a big deal. And I think this is, I’m hoping just like a one in one hundred years event and they won’t have to deal with this, like I did.

Ashley:
I had a tenant that didn’t pay. And so they actually came up with some money a couple of weeks ago and they haven’t paid since March. And they actually got a grant where they’ll get, so they owed like 5,500, they came up with 3,500 from the grant and then they had another thousand. So they are $500 short. And I said, “You know what? Let’s just do it, let’s get it over with.” And I said, “But let’s do an inspection on the property and make sure that it’s not trashed inside and that we want them to stay,” and the inspection went great. But with accepting the grant money, you can’t evict them for six more months, no matter what the federal government does. And it’s like, okay, do I want to take this risk to get this money now or what? But it’s like, there’s no winning scenario here I feel like.

Lauren:
I feel like it actually worked out for us as best as it could with her abandoning the place and us just changing the locks and getting in there. It worked out and our property manager was great through it. And remember, all of this was going on while we were under contract for this place, having inspections, renegotiating multiple times, being short on the appraisal closing. So real estate was a big part of my days there for awhile.

Ashley:
Well, let’s move on to something hopefully more upbeat and happy. Let’s learn about a key player on your team. So who is your MVP, the person that you would call the most valuable player who has really helped you build your real estate portfolio?

Lauren:
I mean, that’s my husband for sure. The first couple of properties I paid for myself, but he’s an engineer. He’s great at DIY and he’s very supportive of me and really trusts me and my numbers. So he’s number one for sure. I mean, I could not have gone through this almost five or six month renovation without him. I mean, we’ve had moments where it’s like, did we do the right thing and we’re there to pick each other up. And luckily, if I’m feeling down, he doesn’t tend to be, we don’t really seem to line up on that, which has been just invaluable.

Ashley:
So how does someone find a husband like that?

Lauren:
Okay, cupid.

Tony:
Lauren, is there-

Ashley:
Tony, you work with your wife, like you guys do your portfolio together. My husband and I really, he’s not really involved in my real estate. He helps some, but maybe you both can give some great advice as to how to keep that great working relationship when your MVP is your spouse.

Tony:
Yeah. I think the one thing I’ll say is that you have to find a strategy that suits your kind of personalities. Like when we were focused just on long-term rentals, my fiance, she’s my wife now. My wife wasn’t interested in that at all, right? Like it just didn’t excite her, but now that we’re doing the short-term rentals, that’s something that she can get her, kind of sink her teeth into. And we obviously, we compliment each other because we’re married and so there’s things that she’s good at that I’m not so good at and vice versa. And we were able to apply those same kind of skill sets to the real estate business, so that’s what worked for us. Lauren, I’m curious how it works for you and your husband.

Lauren:
Something else that I’ve learned through all of this is I tend to handle the design of things. My husband being engineer, like he can’t put a room together until he sees it, so I kind of have to walk him through the vision and do the design and things like that. But there’s some things that he’s really passionate about, like crown molding. He was like, no, we’re putting crown on the cabinets. We’re putting crown in the living room and the dining room. And he’s really passionate about lighting, like under cabinet lighting in the kitchen and things like that. And I just use that as kind of an example of ways that we have complemented each other really well. And this project would not have turned out, the home and backyard I have, it’s really beautiful. We’re really lucky to live here now and it’s only because we compliment each other so well.

Tony:
Awesome. Now, I want to take this to the next segment here, because I’m curious what your answer will be, but we’re going to go to the rookie request line. And for those of you that are listening, if you want to have your question possibly mentioned on the show, give us a call at 888-5 ROOKIE, you can leave us a voicemail, we might use it on the next show. So, today’s question.

Speaker 4:
Hey Ashley, hey Tony. My name is [Jensey 00:44:24], I’m calling here from Fort Mill, South Carolina. And I guess I’m just kind of stuck right now. I purchased my first property about three months ago, personal property, where I’m living with my wife and I plan on house hacking my next property. But just because of the fact here, at least in the Fort Mill area or Charlotte area of North Carolina, it’s very, very hard to find multi-families. So I’m even possibly thinking on maybe not house hacking, maybe I guess buying as state property on my next property. What would you guys suggest and what do you think I should do to acquire my next property? Thank you. Have a good one, bye bye.

Lauren:
Yeah, I mean, that’s, it’s an excellent question. And you can do that. You can buy a primary home and then buy another separate property. I love the idea. Again, I said it earlier of using your owner occupied conventional loan with a great rate to basically finance a rental property by having it on your property. I’m not familiar with the Charlotte area, but if there are detached garages, I mean, you could convert that or an above garage apartment or something a little bit less conventional and you could buy maybe a trailer and get a 30 amp hookup for example, and rent that out. So there’s other ways to do it. You may need to get creative. Of course, I would say maybe it’s because I live next door to City Hall, but do things above board, get permits, make sure things are okay, because I think the worst thing you could do is spend, I don’t know, 50 grand or whatever it is to convert a garage and then have to tear it out because you didn’t do it the right way or above board.

Tony:
I love that advice on it. I think the only thing I’d add to that is that when people think house hack, they always think, like multifamily, but you can house hack with a single family home as well. Like my partner, that’s how he got started. He bought, him and his wife bought like a five bedroom house. So it was just the two of them and they rented out all of those extra bedrooms and I’ve seen so many people use that, that strategy as well. So Gen Z, if you’re thinking of house hacking, look at single families as well.

Lauren:
True.

Ashley:
Yeah. I really like both of your guys’ idea and one of the ways to really add value to a property is converting the basement. So in New York, almost every single house here has a basement and then you can also do the separate dwellings. I think those are getting more and more common in California, right Tony? Where people are putting a little separate dwelling in their backyard and renting those out. And then even just looking at a single family that maybe has a large room that has a separate entrance that you can convert to even a studio apartment and rent that out. And then like Lauren had said, putting a trailer on there, Felipe Mejia, our good friend, he used to, or he still does this, he’ll Airbnb his camper right into his driveway. And he gets people who are just pretty much passing through town, just need a place to stay for eight hours and then they’re gone. So you can even do that, use your RV. So yeah. Anything else? Did we miss any ways to add value to [inaudible 00:47:28]?

Tony:
No, I feel that might’ve been our most valuable, like MVP answer since I’ve been on the show, so that was a good one.

Lauren:
Yeah. I think we all really contributed there and good point on the basement. In Florida, that would have never crossed my mind, so that’s a good add.

Ashley:
Okay. So we’re going to move on to our random questions here. So Tony and I just kind of pick off a list or we create some as we’ve listened to your story, Lauren. So I’ll put Tony on the spot today to go first. Go ahead, Tony.

Tony:
So I guess my question Lauren is, is about how you balance kind of everything you have going on real estate wise with work. I know I get this question a lot, like how do you balance having a family and a full-time job and your real estate investing? So what do you feel that you do Lauren that helps you kind of manage your time effectively?

Lauren:
Well, this has been, I wouldn’t say there’s been a lot of balance through the renovation, especially in the last few weeks. My husband in the evening, he’ll replace a toilet or something, and I’ll be washing curtains to put them back up. There hasn’t been a lot of balance in the last few weeks, but what I do, it’s not very sexy, but every Thursday I make a to-do list for the following week and I put everything on there. I have two podcasts, myself, two websites, I’m in a graduate program for a personal financial planning certificate from Boston University. And then of course I have like the full-time job and the rental stuff that we do. So it’s really just about making lists and scheduling time for me.

Ashley:
For my question, I want to ask a little bit about your financial independence, blogging and personal finance. What is your personal goal and how is real estate helping you reach that?

Lauren:
Yeah, we would like to retire at 40, but we’re not typical fire aficionados where we spend very little. I mean, we do because we both have actually very good W2 jobs, are really blessed, especially in these times, we do save about 50% of what we make. And I say save, I’m including putting money into this house as an investment in that case. Right? And our 401ks and Roth IRAs and stuff like that. So we would like to retire at 40 and some of what started all of this craziness was we created our spreadsheet and we started planning things out and the retirement time was going to be, our time and date was going to be 50. And I was like, well, how can we shave some time off of this? And house hacking seemed like the best way to do it.

Tony:
I love that approach, right? And I bring this up all the time, but everyone’s got different goals and everyone has different timelines. And again, we get a lot of questions about how do I do this? How do I do that? But it’s all about what your goals are. And if for you, your goal is to retire by 40, then you’re going to have a different strategy than someone who’s investing to retire at 65. So again, for those of you that are listening, you always kind of want to take bits and pieces from each person’s story, but you got to apply them to your own unique path. So, yeah.

Lauren:
Right. And I would add to that, there’s things here called Florida basements. And that’s where after I think in 1974, we weren’t allowed to build on the ground level because of flooding. So there’s things called Florida basements where they build houses on stilts and then people will enclose them and rent them out. We looked at a beautiful house on the water with like a “Florida basement” that was, it looked like we could rent it out. And we really kind of fell in love with this place, because it was beautiful and it was on the water. And we realized we probably, we could rent it out, but we’d be really rolling the dice with that.
And when you have your goals and when you have your why, you’re able to really filter your decisions through that. And we pretty quickly were like, it’s not worth spending $550,000 on this place and risking that we can’t get any money in there. We started looking because we want to accomplish our goals. We want to have a rental ability for sure, and when you have your why and you have your goals, are you able to filter that? And it actually became a really easy decision for us to not pursue that property.

Ashley:
That’s such great advice, thank you for sharing that with us. So Lauren, tell us where we can learn some more information about you, get in contact with you.

Lauren:
Yeah. So I have a website, it’s realadultingiseasy.com and I’m on Twitter @AdultingIsEasy. I do a lot of personal finance things there. Really, it’s about educating myself about personal finance and my sister who’s 14 years younger than me. I’m trying to teach her things that she’s not learning in school. So that’s really how that all started. So that’s a good repository of personal finance information. If you’re more interested in this particular house and the renovation, and even Tarpon Springs, Florida, specifically, you can go to vacationtarponsprings.com and we are Vacation Tarpon on Instagram.

Ashley:
And we will link all of that in the show notes at biggerpockets.com/rookie42. Well, Lauren, thank you so much for joining us today and providing us with so much value. I know everyone is going to be searching for those income producing properties. Now on the other side of the MLS, so thank you for joining us.

Lauren:
Thank you so much for having me, it was fun.

Ashley:
I’m Ashley Kehr at Wealth From Rentals and he’s Tony Robinson, at Tony J. Robinson. Thank you guys and we’ll see you next week.

 

Watch the Podcast Here

This Show Sponsored By

Rent To RetirementRent to Retirement offers fully turnkey properties that are already renovated, leased and managed… allowing you to invest with confidence out of state. You can choose from single family or multifamily in a bunch of different markets to maximize cash flow, appreciation and equity. Plus they have a network of lenders to help with financing, including self-directed IRA loans.

So visit renttoretirement.com or call Or call 800 311 6781 to learn more about how you can get started investing in some of the best cash flow markets today.

policygenius life insurance logoPolicygenius saves their home & auto customers an average of $1,127 a year by shopping top-rated insurers in one place. If you’re thinking $1,127 is a weirdly specific amount, you’re right. But they crunched the numbers and that’s just what it is. In fact, crunching numbers is one of the things Policygenius does best. Their insurance marketplace makes it easy to compare rates from the top home and auto insurance companies to find you the best price.

So if you’re a homeowner, head to Policygenius.com right now to get started.

In This Episode We Cover:

  • Why house hacking is great for young real estate investors
  • Why you need to focus on the numbers, not emotions in a deal
  • Different financing options for multi-family properties
  • Creative ways to house hack a property with different units on one lot
  • How to get multiple appraisals (if the first doesn’t cut it)
  • Dealing with very troublesome tenants (especially during COVID)
  • Why you shouldn’t give up even if a property’s numbers fall short
  • And SO much more!

Links from the Show

Lauren’s MVP

  • Her Husband: Aric

Books Mentioned in this Show:

Connect with Lauren: