Beyond House Hacking:5X Your Cashflow & Expedite Your Rental Strategy!
Brandon Turner, one of the fantastic guys leading BiggerPockets, introduced a term to name and popularize a real estate investment strategy used successfully for years- "house hacking". In this blog I will introduce you to househacking on steroids (Beyond House Hacking), as I have used it to 5x my returns and lower risk for myself and my investors.
"First...What Is House Hacking?"
Househacking: a real estate investor occupies her rental-property (i.e. a house) for the first 12 months after purchase in order to get better mortgage terms (i.e. 3% down payment rather than 20%). This can be done with a house, duplex, triplex, or fourplex. For explanatory purposes, we'll focus on househacking a house. After she owns the house for 12 months, she moves out and rents out the house. Alternatively, during those first 12 months, she could rent out the spare bedrooms to pay the mortgage and hopefully make a profit. Then, after the first 12 months, she moves her and her roommates out and rents out the house. Either way, the househacking strategy scores her an investment property for about 1/4th to 1/7th the down payment. Incredible!
"Second...Then what is Beyond House Hacking?"
In a nutshell, Beyond House Hacking grabs all the strengths of househacking; patches up its shortcomings; cranks up its profitability, and turns it into a low/no cost, 5X cash-flow, lowered-risk, longterm rental income machine. In even a smaller nutshell- it's the dream strategy for anyone with up to 500 rental properties or for those wanting to buy their first rental property.
Photo by Alfred Schrock
"You gave me the nutshell version. I'm intrigued but still clueless. Can you expand?"
Let's do this- get ready to have your mind-blown with the strategy you could use to actually make those rental property dreams come true! This is simple. This is easy. This is different. The brain tries to take something it hasn't heard about and turn it into something it has. My suggestion for you, don't let it. This is different, and it's beautiful, and it'll make you a lot of money and give you (like I have) a wait list of investors and renters.
The Never Before Heard Strategy of Beyond House Hacking...3 Key Concepts To Win!
KEY CONCEPT #1: What It's NOT!
We take a single family house, we rent out the rooms. Easy right? Of course it's easy- this has been done with college housing, boarding houses, seniors, sobriety groups, and living coops. What do all these have in common and what's unattractive from an investor side? High turnover and higher drama. Maybe you are fine with that, but I am not.
People live in the above mentioned rent-by-the-room houses because of a temporary need: college, fixed income, support, or a cause. All this adds to high turnover, higher drama, and beat-up houses. Me personally, I'm not interested in any of it. I could make more money with rent-by-the-room, but I don't want the drama, fighting, turn-over, and my houses damaged.
Don't let your brain trick you, none of this is Beyond House Hacking...not even close!
KEY CONCEPT #2: High-Quality, High-Demand Rent-By-The-Room Households
Beyond House Hacking creates households where people aren't forced to live with others due to lower-finances but because they WANT to live with others. These are prestigious, high-quality homes with waiting lists. On average, renters stay 5 years because they love it and they are proud of their house. Renters are engineers, chefs, architects, service industry, and those just starting out. Why? The answer- healthy households. For 18 years we have successfully used household-planting to create healthy households.
Photo by Daniel Hjalmarsson
KEY CONCEPT #3: Household-Planting (know it or perish)
Household means the shared understanding, standards, culture, rules, and attitude between those sharing a roof. Many households we grew up in are unhealthy. Households are powerful though, and Household-Planting enables us to harness this power to make more money with less money and less risk. Household-planting enables us to realize our dreams faster and better. The households that we plant are not hierarchical (no one is in charge and everyone is equal). We find renters do not want to live long term in a house where someone is in charge (or the owner). Renters, like us all, flock towards stability, flexibility, freedom, and equality. Household-planting creates all this.
For you that means you'll have long term renters, higher-quality renters, better maintained properties, 5X cash flow, less risk, and most importantly you have the money to actually live your dreams!
See The Rest Of The Blog Series To Learn More
**Blog Post Main Picture: Photo by Tierra Mallorca**
Comments (5)
Get higher quality tenants. Thats what i gathered from it. The rest sounds like their marketing plan to achieve that.
I'm glad I'm not the only one skeptical about renting out my home to college students... Thank you for this article!
Kurt Alder, over 4 years ago
First!! (I think🤔🤔😀😀😀)!!
Or, judging by the lack of comments here, am I the only one who doesn’t understand what the hell the author’s talking about?
Please give real life examples of what you’re talking about. What you’re describing sounds kinda like co-living. Is it?
Thank you:)
Jerome Charles, over 4 years ago
Get higher quality tenants. Thats what i gathered from it. The rest sounds like their marketing plan to achieve that.
I'm glad I'm not the only one skeptical about renting out my home to college students... Thank you for this article!
Kurt Alder, over 4 years ago
@Kurt Alder you are the first- thanks so much for the comment, as what we are doing is exciting on the renter side an extremely exciting on the the investor side. And you nailed it- this is Co-Living! It sounds like I should use that term in this blog- I will see if I can update it. My Blog (which this post is a part of) is here: Co-Living: Up Your Net & Lower Risk if you're curious. We have just started blogging on this, as my investing networks have been chiding me to do for quite some time (thanks guys). This is co-living, except it's combined with Beyond-Househacking (lowering the purchase cash) and combined with Household-Planting (so it takes on a stability, prestige, higher net, and lowered risk). Our residents (tenants) cannot find this anywhere else they say, so the average stay is 5 years or more.
I hope to include a case-study to give a great example in a future post, so stay tuned and thanks again for reading!
Grant Shipman, over 4 years ago
@Jerome Charles I hear you there- college student ONLY housing can be rough. At best, fun for a season right :) I do have a friend who has used our model to setup college housing in University of Texas (Austin), and is on his 13 year of very successful and stable college housing. So that's a great exemption there!
I'm so thankful for your feedback. This isn't "find better tenants", so let's see if I can do a better job at getting the idea across. Creating a healthy household (through household-planting) beats finding better tenants every time. In my experience, good tenants will usually always be good, but if a healthy household is created (the tenant's environment) then the following happens:
-Good tenants are good
-Average tenants become good
-Below average tenants become average
-Bad tenants don't feel like this fit, so they self select out.
The key here is environment. A healthy household creates a healthy environment, and this creates healthy peer pressure for tenants to do better than they would do on their own. Our houses stay cleaner, better maintained, and less late rent. It reminds me why Domino's & McDonalds can hire a bunch of 16-24 year olds and have them do quite well- it's because they've created an environment that makes it easy for workers to succeed. Household-planting creates an environment that makes it easy for tenants to succeed. Did I do a better job explaining this time Jerome? I hope so (fingers crossed)
Grant Shipman, over 4 years ago