Updated almost 5 years ago on . Most recent reply
Beyond-Househacking: 5X'd My Cash Flow, Making Investors Swoon!
I've been asked by many of you how I'm still able to invest where I invest, with no money, get the 5X cash flow I get, and have a wait-list of investors.
I've never written about this publically until now. Below is the blog-post. I hope it is clear- we've been using it for years. Please let me know if you have questions or thoughts you'd like to share.
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@Grant Shipman , thank you for sharing your promising Real Estate investment strategy in the above post and in your Blog, “Up Your Net and Lower Your Risk”; https://www.biggerpockets.com/member-blogs/12319-co-living-up-your-net-and-lower-risk.
As I understand your strategy, you’re able to:
- purchase owner-occupied Single-Family Homes using all investor money (or mostly all investor money) -from a waiting list of eager investor partner’s.
- achieve monthly cash flows of up to $1000/home (which is 5X's the $200/mo cash flow that other investors seek but seldom achieve with SFH's).
- keep your administrative costs, vacancies and maintenance costs low by attracting high quality tenants who enjoy the prestige of high-quality homes and the healthy “household” that you are careful to plant.
If I understand your post correctly, -then what I perceive you to be doing is wonderful! The essential parts that I was able to identify were.
- Rent a single family house by the room.
- Select Desirable, High Quality Homes
- “Plant” High Demand “Households” (culture -lifestyle?).
Grant, what you are doing is of considerable interest to me. I am doing something similar (renting a 4/2 by the room), on a rural 3-acre property. And I have plans to expand my use of co-living arrangements by creating an in town 20-bedroom 24-bathroom tri-plex. My own plan is not focused so much on long term room renters. I expect to mix month to month rentals with short term rentals, a few dormitory style rooms and some RV spaces.
Despite my interest, I was only able to grasp what you’re doing by reading the other posts (and replies) in your blog. My recommendation is that you include a link to your blog in every post you make. The additional info in you blog is helpful to understanding what you’re doing. Including your 1st post “The 2003 Shift”. “In 2003 … the single-person household became the dominant household. … How can I get in front of this trend and make a **** ton of money by adding value?”
Another Blog post titled, “The Easiest Way to Get into Real Estate”, did an excellent job of describing the problem that many new investors have.
“Then I did my math- to support my goal of $5,000/month cash-flow, all I would need is…..25 rental houses or 50 multi-family doors. ****. Actually wait, I had no money, so I was going to do this with 50/50 partners, so this would require 50 houses or 100 multi-family doors. ….Can you relate?”
The same blog post went on to tantalize the reader with this promising note -but the details were left waiting.
“That’s what led to where I’m at now- each house gets $1,000/month cash-flow, 50% cash ROI, and the spread out risks of multi-families. Plus- I didn’t spend a dime out of my own pocket because investors all wanted in on the action I had! This is all due to the secrets of beyond-househacking + household-planting.”
Jerome Charles was spot on with his recommendation to provide examples of what you’re talking about. I’d love to see a quick summary of the income/expense figures from a typical property rented by the room (with a well planted “household”), compared to what the income/expense figures would look like for that property rented monthly? Your readers could see at a glance the significant difference your plan makes. Be careful though in your choice of words. I noticed that in this post your description of house hacking included the sentence, “… the househacking strategy scores her an investment property for about 1/4th of the cost.” Pretty sure you meant that by house-hacking, the investor could get into a home with ¼ of the down payment, or that by house-hacking her out of pocket costs would be ¼ of what a commercial mortgage would require.
Your idea of "planting households" interested me. Yet, the description of this key concept leaves me wondering just what actions you take and what procedures you follow to create the desired household environment which as described to Jerome is:
“Creating a healthy household (through household-planting) beats finding better tenants every time.”…
“Average tenants become good
-Below average tenants become average
-Bad tenants don't feel like this fit, so they self select out”
Since, the idea of planting households is a term of your choice and a key component of your strategy, it is hard for readers to grasp without more details. It would be great if you would use a future blog post to site examples of actions and methods that you or your team use to establish a non-hierarchical household with a shared culture and rules that create “healthy peer pressure for tenants to do better than they would do on their own.” (plant a household).
Of course, not everything can go into one post, but also helpful would be more information on how you select both the tenants and the homes that are most suitable for this strategy. Where do you advertise the space you have available in order to get the high-quality tenants you want? I’m guessing you don’t find most your “engineers, chefs, architects” from Craigslist? Do you find that larger homes are much better for renting by the room? and the more bathrooms the better? I can rent a room with private bath for 30% more than a room with a shared bath. I also find that renting rooms is most suitable, near down town, on a bus line, close to shopping, near a park etc. Quality schools are much less a concern. What do you look for in selecting a home for room rentals?
In regard to this question posed on your blog,
"2) If getting in front of a trend makes you rich, how do you you know whether it's a trend or not? " from the post "He Told Me Your Wrong". Here are companies that believe in the trend and are getting in front of it.
https://bedvetter.com/
https://bungalow.com/
https://bestselfmedia.com/krash/
https://www.grokhome.com/
https://www.ollie.co/
http://pureproject.org/
https://www.wework.com/
https://www.common.com/
https://www.welive.com/
https://parade.com/690685/paulaspencer/how-america-lives-creative-housing-options-for-boomers-veterans-millennials-and-more/
Grant, thanks for your posts and blog. Do you see other possible profit centers suited to your method of renting rooms? RV parking? Storage Lockers? Laundry Income? Commissary & Snacks? Rentals of Cars, Bikes, Equipment? Card Operated Gas Fireplace? (A NW thing), Utility Surcharges? I’d enjoy the details.