How This Investor Built a Portfolio by House Hacking From City to City
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Michael and Emil speak with Chad Wales about how he built his investment portfolio by performing multiple house hacks across the country.
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Transcript
Emil:
Hey, everyone. Welcome back for another episode of The Remote Real Estate Investor. My name is Emil Shour, and today I'm joined by
Michael:
Michael Albaum.
Emil:
And in today's episode, we are joined by Chad Wales. And Chad is an investor who has moved around the country and has picked up rental properties along the way. He has a little bit of a unique story. And so we thought it'd be great to share it. So let's hop into his episode. Chad, welcome to the podcast, man. We're super excited to have you on.
Chad:
Thank you so much for having me. I'm really excited. Yeah.
Emil:
You are another friend of ours from the Twitter verse that has made his way onto the show. It seems, it seems like this is becoming a trend meeting people on Twitter, talking real estate, bring them on the podcast.
Chad:
Yeah. I've met a lot of people, um, in the real estate world. I also trade some options. So options trading and then just general like personal finance as well. And Tesla, I love Tesla. So there's a large Tesla community out there.
Michael:
You know, if our moms knew what we were doing, talking to all these Jews, they would have a field day with us.
Chad:
Yeah, they would.
Speaker 1:
Yes. Sometimes my wife is like, you just talked to people on the internet. I'm like, yeah, I know. It sounds weird when I say it aloud, but…
Chad:
I've actually had like phone calls with people.
Emil:
Yeah, like.
Michael:
I have too.
Emil:
It's a, it's a great way to network, meet people.
Chad:
And my wife always says, are you talking with your Twitter boyfriend again? And I'm like, yep.
Emil:
My wife says the same thing.
Michael:
That's great.
Emil:
All right. Cool man. So before we dive into your real estate investing story, give our listeners just a quick background, some info about you, where you live, what you do for a living. All that good stuff.
Chad:
Yeah. So I'm 32 years old. I have two kids. I have a two year old, a five month old. Um, I work as a product manager for a software company in Anne Arbor. Um, I have seen to be four rental properties with seven doors total, so.
Michael:
Right on.
Emil:
That's awesome. And so how did you take us, take us back. How did you get into real estate investing?
Chad:
I was telling you guys before that I lived in San Francisco for a couple of years and it kind of conditioned my wife and I too high rent prices. Right. So we were paying like 20, a hundred dollars a month. And that was like the cheapest that we could find right. For a one bedroom apartment in San Francisco, Nashville. So we left San Francisco to be closer to some family in Chicago and we wanted to buy a house and we bought a place that was like, our mortgage would be $2,800 a month. Right. Like we were conditioned to that, but we were living paycheck to paycheck, but it was kind of tight. Right. So I read rich dad, poor dad. Um, I think I actually had a hard time reading it. I do audio books and audio books have changed my life because I never read much until I started audio books. I, I think that's a debate for later on if it's really reading or not…
Emil:
That is a great debate.
Chad:
So I started telling a guy from work that I worked with in Chicago. I was like, yeah, I read this book, rich dad, poor dad. He's like, Oh yeah, I read that too. And then I started buying rental properties and I'm like, I'm here. I don't properties. Do you have, he's like, I have three, three unit buildings. And it just like blew my mind. Right? Like it's like a complete different dimension that I wasn't aware of that you didn't own rental property. Right.
Michael:
It's Plugged from the matrix.
Emil:
And you kind of think like it's always just reserved for this special group of really rich people. And then you meet your first like, you know, quote unquote average, Joe, who's investing in. It's like, I can do this.
Chad:
Yeah. He worked with me and he's probably made similar money than I did. Like how in the world did he do this? Right? So he, uh, he asked me if I wanted to go to a real estate investor, meet up. And Brie Schmidt is in Chicago. She's really well known in the multifamily community. Um, she runs a real estate investor meet up group and she's a realtor as well. She lives in praise multifamily in the North of Chicago. She actually does the South side as well. We looked kind of all over Chicago and had a great conversation with her. She was actually featured twice on the Bigger Pockets podcast. And she talked to us a little bit more. She's like, if you really want to get involved in this, like you're going to have to make some sacrifices. Right? You're not going to be able to have a walk in closet.
You're going to be further outside of the city. So my wife and I, we had a nice place, but had a walk in closet, like a huge master bathroom. And I'm like, we were living pretty comfortably in Lincoln park. Right. It's 15 minutes outside of Chicago to get to work. So six months later I had listened to like 250 Bigger Pockets podcasts. I read like three books. I started analyzing deals in, I got my wife onboard. So I got my wife to read rich dad, poor dad. I also got her to listen to a couple of Bigger Pockets podcast by Bree, who was our realtor. And my wife was like, okay, like I get it. This will be kind of fun. So we bought a place in Alberta park, which is, uh, the end of the Brown line. The L it was about an hour to get to work for me.
But it was a building that had been on the market for about six months. It seemed like the owners kind of did a flip and they did like 90% and then just left it. Right. They didn't add a garage. There's a few other things that just weren't completed. And we just kind kept making offers. Low at first, every week, we'd go up a little bit. Finally they accepted our offer and the numbers on paper didn't really work all the time that we would go see places. So my wife and I, we would go into them and we'd ask, how can we make this work? Right. It might not cash flow very well, but like how can we make it cashflow? So we added the garage, we get like 50 bucks a month for each space. Um, we added a couple rooms in the basement, a unit, the ground unit,
Michael:
Chad, what kind of building is this?
Chad:
It's a three-unit building. So we purchased it for 495,000. We put 5% down. I think our interest rate that we got was like 2.87%.
Emil:
How did you, how did you end up only having to put 5% down? I think most people are used to, if I want to go buy a rental property, I got to put 20% down minimum. How did you get away with 5%?
Chad:
Because we lived in, we got a lower interest rate. We only had to put 5% down and the way we were able to come up with that money, as we sold our condo in Chicago, um, we made like 40, 50 K off the sale of that. After living there for two years, actually an interesting point that I wanted to mention something that happened. So when we were selling your condo in Chicago, we had three offers and one of the authors had an escalation clause, like up to $25,000 over we'll pay three grand. Right? So we'll beat the highest and best offer and is based on the other offers, we would have only really made like maybe 10, 15 grand off of our place. We went back, we told all the offers highest and best. We weren't accepting escalation clauses. So they came back and made an offer 25 K over what their base offer was, which I thought was pretty cool.
Emil:
Wow.
Chad:
Does that make sense to you guys?
Michael:
Fantastic
Emil:
Just by doing a final and best everyone who had an offer in?
Chad:
Yeah. So one author had an escalation clause, right.
Michael:
But you tell them, we don't want that. We want your highest and best.
Chad:
Yeah. W we don't want this. Like, I feel like escalation clause is like, you know, the cheapskate route. We just want you to put your best offer forward. Right. We got three offers, like give us your highest and best. So that was a way that we made a lot more money off of the sale of our condo. And we use that money for a three unit that we purchased that we made some improvements to.
Emil:
Awesome.
Michael:
You mentioned that you lived there for two years. Why is that important?
Chad
Yep. Don't have to pay taxes when you sell.
Michael:
So for a married couple it's, I think 500,000. If you're single, it's 250 K if you've lived in the property, two out of the last five years, check with your accountant, tax professional on that to validate that. But that's what the rule says in my understanding,
Emil:
Meaning up to 500 K won't be taxed. Like if you sell for up to 500 or up to 500 K profit?
Michael:
Profit. Oh, nice. Your capital gains of 250 K is a single or 500 K as a married couple goes tax-free if you've lived there too at the last five years.
Emil:
That's awesome. Is that only on your first property that you lived in or?
Chad:
It's if you live in it for two years.
Emil:
All right.
Michael:
Any property that you've lived in for two years.
Emil:
Nice.
Michael:
And if you've lived in for less than two years, it's prorated.
Michael:
Oh, really? I didn't know that. Yeah. That's really good to know.
Chad:
Let's talk with your tax professional.
Emil:
Always our disclaimer every time we talk about tax stuff. We think, but you should check with your tax professional.
Chad:
This first rental that we bought. So it was a three bedroom, one bath upstairs, two bedroom, one bath on the main floor. And then it was one bedroom, one bath downstairs. Right. And we knew that we could get 1600 a month for a three bedroom, one bath, and the downstairs, we could get like 1100, right.
Michael:
For the one bed, one bath.
Chad:
Yeah. We could put in two more bedrooms and we could get like $500 more a month, right.
Emil:
Total or each?
Chad:
Total, so for the one bedroom, one bath, we put in two bedrooms and that increased the cash flow $400 a month.
Emil:
Got it.
Chad:
So we went into it and we were like, how can we make this work? Right. Because we were getting outbid by all these other places that are cash investor. So this one place we kept coming back to and we also were like, okay, let's put in garage and we can make a hundred bucks a month. Can we charge pet fees? We can get $50 a month per pet. So when we ran the numbers, initially we were going to name, you know, two, $300 a month cashflow. But once we made some investments, you know, added some rooms, started charging, pet fees, um, garage fees, you know, now we're making eight, $900 cash flow a month. You know, it looks a little bit more lucrative. Right. And because we lived in, it was a house hack. We were making money while we were living there. Right. So we went from paying a mortgage every month and being like, you know, stress financially to actually getting paid to live somewhere, which is pretty sweet. Right.
Michael:
That's the dream.
Emil:
I was, as you were talking, all that, I was, uh, I was writing down the numbers. So it started out with 16, a hundred for the three bed, 1100 for the one bed, one bath. So $2,700. When you looked at the deal on paper, in terms of rent?
Chad:
So Rents all in, before we made the additions?
Emil:
Correct?
Chad:
Yeah.
Emil:
Okay. So $495,000 purchase price. So most people would see this and be like, Oh, it's only like the rent is only half the purchase price and maybe a lot of investors skip it, but you saw, okay. We can make some additions. You brought that you added a couple bedrooms brought that second. Basically. You made it another three bed bath, right? Yep. So brought that to 1500. So now you're at 3,100, stay with me, everybody. And then you add a garage pet fee. So what did that bring monthly rent to
Chad
Our monthly rents are now 48, 50 a month for that building.
Emil:
Wow. Okay.
Michael:
Holy smokes.
Emil:
So you, you brought it from a half a percent property to basically a 1% property because you saw the potential there while being able to live in it.
Chad:
Correct.
Emil:
That's awesome. That's, that's where a lot of people probably just skip over and not seeing the potential. And this is where I think, you know, people find good deals is in what they can create. Not in just how the property stands.
Chad:
Yeah. You gotta be creative. Right. I mean, if we found a 1% deal, it was gone. So when was paying cash for it, right. We couldn't compete.
Emil:
Right. And for anyone who, uh, is curious what the 1% rule it's a, uh, real estate investing rule or benchmark that says if my monthly rent is at least 1% of the purchase price. So in this case, it was, you wanted your rent to be 400, 4,950 per month because the purchase price was 495,000. That it'll cashflow. That's what the 1% rule says. And if anyone who is curious about learning more about these benchmarks and a couple of other ones, check out episode 25 of our podcast for more detail on that, but sorry, go ahead, Chad.
Chad:
So something also to think about is if you live in your interest rate is much lower, right? She, your monthly mortgage, principal and interest are lower as well. So you don't even really have to hit the 1% because your monthly payment is so much slower. So I think that if we would have bought this place as an investment, we would have had to put 25% down because of some multifamily and our interest rate would probably be like 5%. Right. But we got 2.875. So yeah, we're able to hit the 1% rule with that low of the interest rate. A lot more cash is going into our pocket at the end of every month. Right.
Michael:
So you rents after the addition was 3,100, and then you talked about pet fees and garages. So there's an additional like $1,700 a month in rent that you make. And they're like 20 cats running around this place?
Chad:
Well, that's after we moved out. Right. Because our unit that we lived in were
Michael:
okay, that's the piece that was missing. I was like, Holy smokes. It was 3,100. And then they're living in a unit making 48 50. That's insane.
Chad
Yeah. Hopefully that wasn't confusing for everybody.
Michael:
Got it. So you moved out of that middle unit now you're renting it out. Now the building total is 48 50.
Chad:
Correct.
Michael:
Got it.
Chad:
That would have been real nice making 4850 cashflow living there. I think I mentioned earlier that it was like 300 a month living there.
Michael:
No, I missed that part. I'm sorry. So when you were living there in the middle unit, you were paying $300 a month?
Chad:
When you were getting paid $300.
Michael:
You were making $300 a month from living there. Got it. Got it. Got it. Okay. Thanks for clarifying. Cause my head just like couldn't wrap around what was going on.
Emil:
I just jumped forward. I was like, wow. 48.
Michael:
Okay, cool. So even at the 3,100, plus the pet fees and the garage fees and all the other value add type stuff, you were still making, you're still cashflow positive whilst living there.
Chad:
Correct.
Michael:
Perfect. Love it.
Chad:
Yeah. Which is a good place to be in. And that kind of helped us. We got the bug after that. Right. I think living there, it, first of all, helped build relationships with our tenants. Right. So, I mean, we have some great tenants. They've been there since we bought the place. If something goes wrong, they call me. Right. I know you guys talked a lot about having property managers, but we manage our properties all by ourselves. Right. And I don't live in Chicago anymore. So how am I managing a building in Chicago? I listened to bigger pockets. And someone on there said all a property manager does is answer the phone in the middle of the night.
And you're going to pay them eight to 10% for that. Right. So I actually had a test a couple of months back, if I can get through this, I do not need a property manager. So I tendency in the ground unit, they said about two weeks ago, there are some black stuff that started growing on the walls. I'm like, Oh my gosh, like the worst thing that could happen being out of state, you know, I don't know where it's coming from. I don't know why, but I have a contractor that I use. Right. So I told my contractor, Hey, I got some mold growing. Can you go kind of find the source? Like I'll pay you your hourly rate. Like whatever it is, we found three sources of water. We had there's water coming from a drain pipe. There's condensation from waterline in the ceiling.
And then there's a foundation crack, all of a sudden done 15 K I didn't have to go out there. Insurance covered some of it because we had a water backup coverage, but I called service master. They went out, they kind of took all mold out. I got my contractor to go in and put new drywall and insulation. And so I had about 10 K out of pocket costs, which sounds crazy. But I'm glad that it's over and my tenants are safe and they're living in a good place. Right. So it probably blew up my cashflow for a year.
Emil:
We'd like to talk about it on this show, it's not always Rose colored glasses. When it comes to real estate investing, it's not perpetual cashflow. Like things go wrong. These are buildings. They have issues just like anyone has in the apartment. Dave lived in or the house they live in. These things need repairs and maintenance. So these things happen. It's all part of it. And uh, I'm glad you highlighted that cause it's good for people to know, like these things happen. It's not like totally uncommon. So how did you, you were not living in Chicago when all that stuff happened?
Chad:
No, this was a couple of months ago.
Emil:
Wow. And I just was able to do it all. I had a plumber I worked with in the past. They called him, um, I had a great contractor that went out there and took care of it. I have a close relationship with my tenants too. So, uh, I was able to work through it with them as well.
Emil:
Yeah, I think that helps that you, you live there, you like, you probably vetted a lot of your tenants, met them and have a relationship with them to kind of be able to manage from distance. That helps a lot.
Chad:
Yeah. So that cashflow that we were making kind of helped us buy a next place. So by that point, my wife was pregnant. We were in Chicago, but we wanted to be closer to family. You know, we didn't really have a mortgage. So we were able to save up a lot of money. We purchased a home in Ann Arbor for 240,000. It needed a little bit of work, but in our average real estate market was very, very hot at the time. The place that we made an offer on had, I think it was like 13 different offers at the same time. I mean insane. Right? So some lessons that I learned from Bigger Pockets podcasts, we put together like a really nice cover letter that talked about my wife and I, our dog, how we could see ourselves living there, a dog running in the backyard daughter, she's going to grow up there and we put in a strong offer. Right. But we built a relationship with the seller. Like, you know, she probably didn't have that connection with anyone else. Right. It was all just numbers. So we had the right number and we had that connection. So we were able to win that deal.
Emil:
Was this a single family, by the way?
Chad:
This is a single family. Yeah. So we moved to Ann Arbor, Michigan single family, this place, we, we put about 20 cane into it, new hardwood floors. We had the cabinets painted new countertops. Uh, one of the rooms had like this burgundy carpet. We ripped that out, put hardwood floors in there. And then I did a little bit of work as well. I changed out some doors and stuff and we lived there for six months. Actually. It was about a year. Um, and we were pregnant again or wanted to get pregnant and it was a little bit tight. So we're like, okay, we should rent this place out. And again, we had a great interest rate because we lived in it. This one we had, we put 10% down because we bought it as a second home or a vacation home. Cause we didn't move in right away. Cause we were doing renovations from Chicago. We kind of lined up some contractors and stuff and were able to rent that for 2,400 a month with a $50 pet fee.
Emil:
So again, just about hitting the 1% rule you did put, you know, the 20 K in to make repairs, but yep. Just about hitting the 1% rule. I might've missed it. But did you walk in, did you guys buy this property thinking it'd be for you guys to live in and then you convert it into rental? Or did you have in mind, we're going to buy this and turn it into a rental later
Chad:
We saw it as a way to get to Ann Arbor. We were looking at like higher priced homes, but since we weren't moving into it right away, we knew we had to buy it as a second home and put 10% down and we didn't want to burn up all of our cash. So we thought it would be a way to us get to Anne Arbor.
Michael:
Did it need so much work that the bank wouldn't finance it as is as your primary?
Chad:
The issue was that you have to move in and like six months, I don't know why we put 10% down. I forget, but we didn't have any financing issues. We have very good relationship with our broker.
Michael:
Great. So we've worked through quite a bit of issues with him in East grade. I mean, we talked to him every couple of months just to kind of stay connected and make sure that whatever we're trying to work on next we can get funding for.
Emil:
Okay. So you guys move out of this one, run it for 2,400 and then, then where'd you guys go what'd you do?
Chad:
We moved up. So about a year later, we moved to another home in Ann Arbor. It's paid 454 again for this one. Our mortgage is right around 3000 in Ann Arbor is a college town, right? There's hospitals here. There's a university. There's a lot of football games. Football is huge here. So we bought a new place and we're like, we can Airbnb this. So we started Airbnb in our house, like 500, 2000 bucks a night at the place we're currently in.
Emil:
500 to a thousand a night.
Chad:
Yup.
Emil:
Dang!
Chad:
For graduation, you can get like a thousand and night football games. You get close to 800, 909. It's all like beds and heads. Right? So we have a four bedroom house for couples and kids to stay here and you know, 800, 2000 bucks really isn't that bad per person. Right?
Emil:
How did you decided to make this one, a short term rental versus saying, you know what let's, let's just do what we've been doing long term rentals.
Chad:
We heard of our neighbors doing short term rentals and generally, how can we make this work? Right. So a lot of people are like, I don't want people sleeping in my bed and stuff like, that's weird. I'm like, Hey, anyone can tweet my bed that they want to as long as they pay me a thousand bucks a night,
Emil:
It is weird. The first time you Airbnb your place and someone you think about someone's sitting on your couch, sleeping in your bed, like using your bathroom. It's it's a weird, thought the first time you Airbnb, if no one.
Chad:
Yeah.
Emil:
If you're listening to this and you've never done it, it's a interesting mind shift.
Michael:
Have you done it Emil?
Emil:
I have, yeah in a couple apartments. Not our house that we own, but apartments we've lived in. Have you?
Michael:
I haven't. But I'm actually just about to do a home exchange for the first time, which basically you go to someone else's home, they come to yours. So at least if I find out they're doing things that I don't like in my home, I can do it in their home too. Alright. Sorry, Chad. So you were saying, so your neighbors had done it and…
Chad:
Yeah. We wanted to see how he could do it as well. Right? Emily, you were talking about this. You're like, you know, it's weird having people asleep in your bed and all that stuff. And it's like a mind shift change, right? Yep. I've had a lot of my friends ask me, how can I get in real estate? Or how can I make money? And I'm like, well, you have a car, right? Like rent your car out on Turo. Come on, man. I don't want someone driving my car. I'm like, well, you kind of get over this. Like you got to have this mindset change. Like if you want to make money and be like free and financially free and like be able to do the things that you want to do travel, like compares this one, sleeps in your bed. Who cares if someone drives your car? Right? Like, so last year my wife and I went to Europe for two weeks with our daughter and we had two different Airbnb guests stay in our place. We covered our flights or hotels or food, everything like, why not? Right.
Emil:
It's amazing.
Chad:
Like it just like opens up the whole world to you.
Emil:
Travel for free.
Chad:
Yeah. I hate paying for hotels and I'm paying for mortgage as well. And like, I feel like when I used to go on vacation, I was like very cheap. Like I'd hate to go spend a lot of money for dinner or something because you know, we're paying for a hotel, but now it's like, yeah, I want to go to a nice dinner every night, a month vacation. I don't want to get a nicer bottle of wine. And it kind of makes those things not feel as bad. Right.
Michael:
It's funny. You talk about your friend's head. I also have a friend similar and I've made some very similar suggestions, go get a side hustle or go do something. And he's like, no one really wants you. I'm like, okay, so you want something for nothing. Like there's no such thing as a free lunch. You've got to, like your agent was saying, Kristen, right. You've got to make some kind of sacrifice. You've got to do something extra. You've got to want it. And I think a lot of people want the result without wanting to put in the work.
Chad:
Yeah. I think that's the one thing I can like can pay to like new investors is like, there's gotta be a little bit of a sacrifice for that first one. And once you learn to sacrifice for the first one, then you can sacrifice for the second one, the third one, right? Like it makes it a whole lot easier because you have that mindset change.
Michael:
I would almost make the counterpoint in that it's a mindset shift away from, it's a sacrifice to, it's a mindset shift to it's an investment I'm making. Right. So living in a smaller place is an investment I'm making. And when you turn you gamify or make it fun. Yeah. It's a, it's a much easier sell to yourself or to your spouse or whomever you're living with. Yeah. So if you can have that kind of, um, not scarcity mindset, that's the opposite abundance mindset right. About it. Well, it's a smaller place, but look at all the things I could still do or look at what I'm able to do now. Yeah. I think that really helps frame perspective for folks.
Emil:
Or, you know, you live in a smaller place. It's easier to clean. It's less maintenance. Like there's all these ways you can say, Oh, this place just isn't big enough for us into like, well now we have less things we need to put in space to take up walls, whatever it is, you know what I mean? There's just two ways of looking at everything.
Michael:
Hide and go seek is easier. It's not as challenging.
Chad:
Yeah, definitely. So, you know, Rich Dad, poor dad talks about your house is not an asset. Well like how can we change our house into an asset? How can we make money off of it? So that's kind of always how we're kind of looking at things now.
Michael:
Have you seen people just as a real quick side note, talk about that on Twitter and this everybody gets lit up. No, it is an asset. No, it's not an asset. It's like, all right guys, like what are we doing here?
Chad:
So we, uh, recently we wanted to travel it's COVID now, right? We got some small kids. We're not going to go flying. We're like so where's somewhere in the United States. So we want to go to for an extended period of time. So we went down to Charleston, we took a road trip. We stopped in Asheville, North Carolina. We were there for a week. We, uh, stayed in Charleston for a month. And this entire time we Airbnbed our house. We actually had quite a few people ping us on Airbnb wanting like month-long stays three month long stays because they're in New York and they wanted to get out in a big city. Right. So we had a ton of demand to rent our place out. And we're like, let's take advantage of this. We're working remotely. Like, let's go travel with our kids. So we were in Charleston and I was like, man, if people can work remotely, this is a really, really desirable market.
Like Charleston has great food. It's by the ocean taxes are not as bad as like New York or California. And it's like, it's very desirable. It's not too hot. It's not like Florida where it's like a hundred degrees every day. Right. So we're like, there's, there's a lot of opportunity here. I actually made some money trading options, uh, early in the year. And I wanted to buy an investment because I wanted to kind of save that money. I made some money and then I lost portion of that. It's very hard to consistently trade options. So I wanted to put in real estate to kind of protect it. Right. So we were looking at places to buy in Ann Arbor. But with university here, no football coming back, the market is a little bit unknown. Right? So we feel like there's a little bit of risk in buying another place near Anne Arbor. We're going to buy somewhere else, like Charleston. Like we can go there for a year. It's going to be warm. We're not going to have the winter and be stuck in doors. Right. So we started looking at places. We found a realtor all while we're on vacation. Right. And we're like, let's see if we can rent our house out for a year back in Ann Arbor. So we posted on Zillow for four grand a month.
Emil:
This is while you're on vacation. Yeah. Ambitious. I like it. Okay. Keep going.
Chad:
And we had air B and D photos, right? So we're like, let's just take these Airbnb photos. We'll throw them on Zillow. Let's throw a crazy number out like four grand a month and see what happens. So we had someone tell us, this is perfect. They want a furnished home. So we're leaving like majority of our furniture in here. And we rented it out. We actually agreed upon 3,800. And then we threw in a $50 pet fee. Uh, so 3850 a month. And that covers our mortgage and then some quite a bit. Right. Cause we got a low interest rate because we lived in it. So now we're going to Charleston. Uh, we're buying a duplex uh, that we found off market while we were down there. Can we just got locked in it? 2.9% interest rate and the place we're buying is 700 kid. And the plan is we'll live in the top unit and will Airbnb the bottom unit.
Michael:
What do you expect to be able to make per night on the bottom Unit?
Chad:
We think we could do like 230 to 300 a night. So it's downtown Charleston. It's about a seven minute walk to King street and 10 minute drive to the beach. So it's pretty great location. Awesome. So this is essentially my wife is she cut her hours back at work. We aren't sending our kids daycare. There's some savings there, but our big house is covered through rent. Plus we're making some cashflow on it and we're going to be down there and living pretty much free because our Airbnb will cover our expenses. So we don't really have any other debts. So it's kind of like, we hit financial freedom by doing this for the year, at least.
Right. So we kind of put ourselves in a position where we're financially free, but I'm still able to work remotely. And my wife is still working a few hours. So we just kind of saw this as like a fun opportunity. Get our kids involved. We got some young kids and you gonna learn much cause they're too young, but they'll see us like working smart, not hard. I always say like work smart, not hard. Right. And I feel like if you're working really hard, there's a difference between working smart and hard. If you're working on the right things for me, that's real estate. I feel like you're able to get a lot more traction. I feel like before real estate I would work so hard, but I felt in my wheels were always spinning. Right. So I want to teach my kids work smart and they're going to be a part of this. Right. They're going to kind of grow up, being involved in a rental property that we're going to do some improvements to an Airbnb out.
Michael:
That’s so rad. I think so many people would have, or who might be eligible for having a similar type story to you say, Oh, but I have kids. I can't do it. Yeah. What's what's that been like adding the kids to the equation?
Chad:
Oh my gosh. It's been the whole COVID with kids and working and trying to move. And like, I mean, it's been awesome because like my wife and I, we talked about this, we feel like we didn't really know our kids or our daughter or my son was born, uh, April fool's day, this year. So in the heart of COVID, right? Like in like,
Michael:
Wow.
Chad:
The most intense COVID period. But like, we need to spend all day every day with our kids now. Right. Working remotely from home. So it's great because we can spend so much time with them. But also like I were talking about this before, like working remotely, it's not a lot of the whole, like, you know, talking at the water cooler, it's you focus on your work and you get it done. And then you have some free times. So when we have free time, we're able to like, hang out with our kids. We're able to pack real to like get our place ready. So we kind of just see it as like a fun adventure. We're going to go on for a year. And then we either continue to Airbnb it out or we just rent it out and we'll help place the tenants. So know we'll feel good about it. And we won't have title property manager.
Michael:
Right on. So you really see it as an additive more is much more so than a attractor or hurdle to overcome.
Chad:
Yeah.
Michael:
Awesome. Love that.
Emil:
So your strategy has been the living right by a place live in it and then potentially turn it into short term long term. And you're kind of collecting places as you go. I'm curious. Why has that been your strategy versus buying a property just to purely be a rental?
Chad:
Yeah. We didn't really have the cash to buy something as a pure investment. Right. Because as a single family, you have to put 20% down as a multifamily, have to put 25% down and plus there's like two basis point increase your interest rate if you're buying it as investment property versus a primary residence. Right. So your monthly payment is sniff currently lower. So we'll keep doing this until we can't or we're sick of moving. I'm in the thick of it. I mean, we just sent a pod down to Charleston this morning, so we've been cleaning and packing and it's a lot with two kids and jobs and stuff. We say that we're not going to do it again, but I know in a year we're going to want another one and we're going to want another adventure.
Emil:
Well, as long as you guys are flexible and cool moving around, you know, like it works for you.
Chad:
Yeah. Yeah. And you know, when we move a lot, it gets easier each time. Cause we get rid of a lot of the junk that we don't need.
Emil:
It's like you're forced spring cleaning, basically
Michael:
Pulling a Marie Kondo.
Chad:
Um, you know, it's a lot, but for us, like now we got the cash flow. We'll have cash flow from four places. Um, our like our mortgages are being paid down every month. Something we should talk about is PMI, right? So if you don't put down 20% for a single family or multifamily, I believe you have to pay PMI. And we've been able to, because of the improvements we've made and stuff, we've been able to get written, call the bank up and we say, Hey, we want our property praise. Cause we want to remove the PMI. So they dropped the PMI from property, right? So we've been able to remove a PMI. So we have equity in our places. Now by the time our kids go to college, if they want to go to college, like we'll do a cash out, refinance, we'll take money out.
We won't have any taxes on that because that's tax free and they can go to school where they want. Right. Like we don't have to set up like the college fund for them. But I think right now the best opportunity to invest in real estate is a hedge against inflation. Right? So with COVID the fed is pumping trillions of dollars into the economy. Right. And when you do that, you devalue the dollar and a great hedge against inflation is debt. Right? A lot of people don't understand that or they use the wrong kind of debt. So credit card that is the wrong time. But if you have that backed by an asset that is paying cash flow and we see inflation, I mean, this is like having gold, right. Because dollar goes down, but your debt stays the same.
Emil:
And then your equity goes up because yeah. Everything costs more.
Chad:
Yep. Yeah. So it's like 30 years ago you could buy a pack of bubble gum for 5 cents and now it's two bucks, right? That's inflation. So I'm buying properties like when the bubble gum is 5 cents. I hope in 30 years, they're two bucks. Right?
Michael:
That's such a good analogy.
Emil:
I think this is a, a good spot for us to end this one. Chad, thank you so much for coming on and talking about your story. I know a lot of people are going to take away some good information. This is actually the first time we've had someone on, who's talked about like consecutive house hacking. So this was a really unique story. Thanks again, man, really enjoyed it.
Michael:
Chad, if people want to find out more about you reach out about questions, about your story. Is there a good way for folks to get in contact with you?
Chad:
Yeah. I'm on Twitter. @_Chad_the_dad, uh, can also email me. Uh, Chad.m.wales@gmail.com. I'd love to talk and you know, happy to analyze deals or if there any opportunities, uh, feel free to send them my way.
Michael:
Awesome. Thanks so much. I really appreciate you coming on and taking the time.
Chad:
Thank you.
Emil:
All right. Thanks again, everyone for joining us for this episode you haven't already, I know you're probably tired of hearing me say it, but make sure you go and subscribe. So you get an update whenever release new episodes and let us know what you think of the show. Leave us a review. We love them. We will beg for them. Just kidding. We don't want to beg for them, but please leave us a review. We like them. We like hearing from you guys and we'll catch you on the next episode. Happy investing.
Michael:
Happy investing.
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