February 23, 2024

Who knew living for free could be as simple as house hacking and renting rooms out to a few college friends? Today’s guest was able to generate enough monthly income from his first real estate deal to cover his mortgage payment each month—and then some!

Welcome back to another episode of the Real Estate Rookie podcast! Ryan Hughes’ real estate investing journey started at the age of fourteen, when his father allowed him to go in on a real estate deal. Naturally, Ryan was ready and eager to start investing in his own rental properties by the time he graduated from college. Within months, he had bought his first investment property, one he conveniently spotted while jogging around his neighborhood. Shortly after closing, Ryan had seven people living in the house and paying rent to fully cover his mortgage payment, utilities, and more.

If you’re interested in living for “free” and attaining financial freedom, you’ll want to hear what Ryan has to share about house hacking, building your real estate network, and how to keep the peace with other tenants. As always, Ashley and Tony have some invaluable insights to share as well—from leveraging debt the right way to finding the best home loan products!

Ashley Kehr:
This is Real Estate Rookie episode 291.

Ryan Hughes:
All throughout college, looking into buying a house, and at that time I was definitely in analysis paralysis. I’m like, “Oh, I’m too young.” Oh, I came up with 100 excuses. And then once it got to that opportunity, I’m like, “I’ve been doing this for five years.” I was already leaning towards just, “All right, it’s time.” And then with my dad, which I wasn’t expecting, “Yeah, let’s go check it out.” I was like, “All right, that’s it. That’s my sign. We’re making this happen, whether we like it or not, we’re making this happen.”

Ashley Kehr:
My name is Ashley Kehr. I’m here with my co-host, Tony Robinson.

Tony Robinson:
And welcome to the Real Estate Rookie podcast where every week, twice a week, we’ll bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And we are back with another amazing guest for today’s episode. Today’s guest is Ryan Hughes, and Ryan’s based out of South Florida. Actually, South Florida?

Ashley Kehr:
West Palm Beach, wherever that is in Florida.

Tony Robinson:
Yes. Somewhere in Florida. But anyway, he’s from Florida.

Ashley Kehr:
West side maybe, West Palm Beach.

Tony Robinson:
Yeah. Yeah, maybe somewhere on the west side. But he’s got a really cool story and we love the Rookie podcast because so many of the stories are so relatable and our guests are doing things that pretty much every single person listening can implement in some way, shape, or form. And I think Ryan’s episode today about house hacking is a great, great example of just super simple steps you can take to get started as a real estate investor.

Ashley Kehr:
Yeah. And just the way he’s been able to network with people and really rely on their expertise. But it’s not like, “Oh, please help me, please help me.” It’s like, “You’re an experienced contractor in this skillset. What do you recommend?” Being genuine, I think, is the really big difference between Ryan and a lot of other people asking for someone’s help with something. And he is super genuine, and he actually takes that person’s advice too instead of just wasting their time. But one of the things I really like Ryan too is at the end of this episode, he breaks down as to how his personal finances have changed since he bought his first deal until now today. And then what his long-term goal is too. It’s pretty cool and inspiring.

Tony Robinson:
I also really loved how he talked about how he got connected to his agent in South Florida and then just how that whole relationship spawned so many other connections that have benefited him as a real estate investor. Our producer dropped it in the chat, and I just looked it up on the map, but West Palm Beach is actually in South Florida, but funny enough, it’s on the eastern side of Florida, not on the west side. So what a, anyway, little nugget for today’s episode.
So just a little bit of housekeeping. Want to give a shoutout to someone that loves to say five-star review on Apple Podcasts. This person goes with a username Welcome home, and Welcome Home says, “I am thrilled,” in all caps, “to write a five-star review for Ashley and Tony. I just closed on my first property and I’m truly looking forward to placing tenants, and I would not be here without all of the guidance, tips, and strategies provided by Ashley and Tony. I am so grateful for you two.” Welcome Home, congratulations. Those are the kind of things we love reading in the forums and in the podcast reviews and Facebook group is people taking action with what they learned on this podcast. So if you have not yet taken a few minutes to write us an honest rating review, please do. The more reviews we get, the more folks we can reach, and the more folks we can reach, the more folks we can help. Just like this person, Welcome Home. So appreciate you all.

Ashley Kehr:
Yes. Thank you, guys, so much. It really does make our day when we get the little email alerts, I think they come every week, every other week showing us what the reviews are and what they say. And we really appreciate it very much and appreciate everyone being genuine. Ryan, do you want to start off with just telling us a little bit about yourself and how you got into real estate?

Ryan Hughes:
Definitely. So I’m 25 years old. I bought my first property just out of college when I was 22, graduated May and bought it August, so I didn’t waste too much time. I’ve been investing in real estate as long as I can remember because when I was growing up, my parents were getting into financial freedom and Dave Ramsey and Financial Peace University. So they would get me involved here and there and ask me questions, “Hey, this is what we went over, this is what we learned from it.” So I got involved that way.
And then when I was about 14-ish, my dad decided to take the leap as a new investor and get into it. And so he bought two properties and when he bought them, they were really cheap so he could afford it by himself, but he wanted us kids because I have a little brother to get into it as well. So when he did that, he was like, “I know you have a little bit of saved, obviously, I see your savings account, if you want, here’s an opportunity to invest and this is what that means.” And he is like, “Basically, every month, I would sit down with you, this is the percentage you would buy in, so this is how much you would earn.” And as long as I can remember the first of every month, we were getting our $25 a month. So it was really cool to see that. And then right around when I was graduating, my dad decided to sell the properties, and when he did, that was enough to pay for my last semester year of college. So it was cool to see that full circle.

Ashley Kehr:
Ryan, did you ever calculate what your cash-on-cash return was? Was your dad actually giving you a good deal or…

Ryan Hughes:
No, I did not. I definitely didn’t. I didn’t know anything about that. Honestly, I don’t know if he did at the time. We were just like, I would go with him to the property and do the work as well. So we didn’t hire anything. He self-managed. It was as simple as could be.

Tony Robinson:
Ryan, you mentioned that it was your parents going through the Dave Ramsey, I don’t know, like the Financial Peace University and drinking that Kool-Aid. Now obviously Dave Ramsey is opposed to debt. So how did you square the idea of Dave Ramsey with becoming a real estate investor, because Dave Ramsey’s whole methodology is you can’t be a real estate investor, but you got to pay for everything in cash? Is that the route that y’all went down to get started where you’re paying cash for your deals, least the ones you did with your dad?

Ryan Hughes:
To your point, that was a very hard struggle for my dad, for myself, and it still kind of is a little bit for me and he financed them, but he did go as much down as he could. He did use, I think, a 15-year fixed. So he did follow that Dave Ramsey route because that’s all we knew at the time. And then now that we’ve got into it more, it still conflicts a little bit, but we use that as a loose guide, Dave Ramsey. And then outside of that, we focus on just investing.

Ashley Kehr:
I love Dave Ramsey for the paying off debt part, but then once you’ve done that, as far as his investing advice, I feel like that’s where a lot of real estate investors like, “Yeah, sorry, Dave, I don’t need you anymore.” But, I mean, that was my personal situation and so I like his advice for paying off debt, using the snowball method, all of those things, and putting yourself in a great position, but as far as investing, I think it’s very hard for people to really grow wealth without using any kind of debt or leverage to rapidly grow wealth. And I think too with Dave Ramsey is he has a ton of other different income streams rather than just real estate investments or investments like his all media company and everything like that. So I feel like it’s a little difficult to compare apples to oranges.

Tony Robinson:
And I feel like with every person, you have to look at it like, “Did Dave Ramsey build wealth in the same with he’s teaching everyone else to build wealth?” And like you said, Ash, no, he didn’t snowball his way to being this ultra super rich guy. It’s because he built this extreme amount of active income through his media company and now, he’s able to stash his cash into real estate. But even still, it’s like when you think about the really big players, whether it’s real estate or any industry really, they all leverage debt in some capacity.
I just saw an article about Donald Trump. Regardless what’d you think of Trump’s political beliefs, he’s done some smart things on the business side, and he had this office building that he owned and some downtown city, I can’t remember what city it was. And he refinanced it for a $100 million. They were able to pull out $100 million on this one deal, and that’s all debt, but it’s tax-free and he’s got his tenants paying it down. So I think once you get to a certain point, being able to leverage debt smartly is what really allows you to grow and scale at a quick rate.

Ashley Kehr:
So Ryan, you talked a little bit about how you struggled with that. So was that something just you had a hard time sleeping at night, just knowing that you could potentially get into deep debt? What was your mindset there? Why did you decide to still continue on with using leverage?

Ryan Hughes:
So I 100% agree with everything you said so far, and that’s the hardest part was I definitely struggled with the mindset of, “I want to do this myself. I want to get out of debt, I want to make sure, if something were to go wrong, I can handle these by myself, no big deal.” But just like you said, you can’t scale that way. And that’s what started getting into my mind slowly, the more I listened to this podcast and other resources I read like how much income and how much extra would I have to do to be able to cover every single property myself was so much more work, so much more time-consuming versus leveraging that debt, leveraging those opportunities.

Tony Robinson:
And we’ve talked about this in the past too, Ashley, where it’s like if debt is something that you’re struggling with, there is a way to minimize that. Maybe even if the bank is offering you a 10% down loan or 3.5% down loan, if you’re going owner occupied, put up 25, put up 30, put up 40 and say, “Hey, I’m never going to have less than 60% equity in any of my deals. That’s my benchmark.” And if you buffer that or you give yourself that breathing room, then you have more flexibility if there’s ebbs and flow in the valuation or with whatever happens with your property. So there’s some ways I think to offset that fear around the debt as well.

Ashley Kehr:
That’s such a great point, Tony. And when I first started out was any BRRRR strategy property that we did, it was always 70% you would pull out and it definitely made BRRRRs harder, only pulling out 70%. But that was a really good way for me to transition from Dave Ramsey to getting into debt again for real estate investing. Actually, I did it simultaneously. So Ryan, with your background, so your dad sold the investment properties he had, you went to college. What happened from there as far as did you take on debt? Did you only get debt for real estate? What happened after college?

Ryan Hughes:
Yeah, definitely. So quick side note to the BRRRR, you were just telling that story. I did my first BRRRR ever about six months ago, and I was conflicted with that idea again, how much debt do I cover? And I had the option to do 80% versus 75% loan to value. And because I was nervous, I did 75% and left some money in the deal, if I would’ve did 80%, I would’ve been able pull everything out and then some. So I still struggle with that, like I mentioned. But after college or throughout college, I was very fortunate to be able to graduate with no debt in schooling. However, I was ready to buy the house, I was ready to go for it. I was excited, I was looking for it. So one day, I like to run and I was running through this small neighborhood near my house just north of Atlanta, and I was just running, I saw it for sale sign.
I was like, “Oh, okay, that’s interesting. I’m going to track down that address.” And then I got home. I was like, “Let me run the numbers.” So I was using the BiggerPockets’ calculator, running the numbers, and I’m like, “This actually works.” I’m like, “But I’m only 22 years old. I don’t have a ton in savings, just barely graduated, just got my job.” So I called my dad and I’m like, “Dad, is this crazy?” And he was like, “Let’s go check it out. Let’s see.” And sure enough we did, and it happened so fast. I think I was running on a Saturday, and we put the offer in by Sunday. My dad came up that afternoon, we saw it. It was just so fast. I didn’t even know. I was like, “This is actually happening. Oh my gosh.”

Tony Robinson:
So we’ve heard of driving for dollars, but I think this is the first time we’ve had a guest that was jogging for dollars. But what a cool way to get to know a neighborhood even more intimately than you would if you were driving. Ryan, I guess, just one… I think that for so many rookies that are listening, they’ve listened to the podcast, they’ve read the books, they’ve watched the YouTube videos, but even if a good deal presented itself, they would have too much fear to actually move forward because that first deal for so many people is the scariest. What was it about you or why do you think you didn’t have any hesitation moving forward?

Ryan Hughes:
I think because at that point I had been, all throughout college, looking into buying a house, and at that time I was definitely in analysis paralysis. I’m like, “Oh, I’m too young.” Oh, I came up with 100 excuses. And then once it got to that opportunity, I’m like, “I’ve been doing this for five years.” I was already leaning towards just, “All right, it’s time.” And then with my dad, which I wasn’t expecting, “Yeah, let’s go check it out.” I was like, “All right, that’s it. That’s my sign. We’re making this happen, whether we like it or not, we’re making this happen.”

Ashley Kehr:
So walk us through that period of time when you’ve seen the house and then you’re making the offer. What were the action steps that you took during that time to actually get this offer in?

Ryan Hughes:
Well, definitely. So from when I made my offer, I was calling a family friend I had or my friend of my parents that was an agent, talking to him, “Hey, do you know the area? Hey, what do you think about this? Do you know investors in this area? This is my end goal. This is going to be an investment property. What do you think? Okay. Do you know any good handyman? Do you know any good…” Getting connections from him, and they had great recommendations, great advice, great opinions. “Is there any way I can figure out the last time this roof was done? Is there any way…” “Oh, you can go to this website.” As an engineer by day, I was deep in the analysis. So I was running numbers every hour, I was calling people left and right, and I was making as much information in front of me as possible to make this decision.
However, once we got our offer accepted. Actually, I’ll step back here. Right before we put in exactly at asking, because I knew it was a good area and I knew that this market was definitely going to appreciate just because I saw so many big businesses coming into the area. And then they came back to us, the seller, and said, “Hey, we had three offers around the same. We want you and the two others to offer an another offer, your best and highest.” So we actually went over asking in that case, not by a lot, about 5,000, but went over asking because I was so into this area that I knew. From running the neighborhoods, from walk into city hall and all these places, I knew this was the right area. And then from there, I got as much information as possible, got my inspection back and I was like, “Well, this deal’s off the table. Too many things, too many pages.” And I was back at, “Okay, what do I do?”

Tony Robinson:
So, Ryan, did you actually end up moving forward with that? Because I guess the thing I wanted to bring up is that you said you went in over asking. And I think there is a common misconception that anytime you go in over asking, you’re automatically getting a bad deal. So what made you feel comfortable or how did you support your decision to go in over asking?

Ryan Hughes:
Definitely. So I did end up taking that and closing on that house, which was awesome. Worked out great. So that house in itself has a hundred different stories. So we did end up closing on that house, which when I went in at asking in the first place, I was like, “Oh my goodness, this is already a little bit obviously high.” I thought the exact same thing as you just said, “I’m getting scammed.” I’m giving them exactly what they want. And I’ve heard David Green talk about a hundred times if you offer and they accept right away, you’re too high. So I was like, “This isn’t a good idea.”
And then when they came back and wanted more, I was like, “Oh my gosh, are you serious?” I’m like, “You said I’m losing out.” But I just saw the market, I didn’t care about the house, I didn’t care about the lot. I saw the area and I knew that area was going to do very well, very well. So I was like, “You know what? I think 5,000 today will be worth much, much more five, 10 years down the road.” And it ended up being way less time than I thought because that property’s worth about double what I bought it two years ago.

Ashley Kehr:
Wow, that’s amazing. But my first question that I have is the financing piece of it. Because you said that you didn’t have a ton of money saved up. So in that short time period of when you looked at the house with your dad and then you put in your offer, what did you do to figure out how you’re actually going to pay for the deal?

Ryan Hughes:
I would say, this whole deal was as relatable as possible. It was on market, it was through an agent. I went to the biggest lender, Rocket Mortgage, just as plain, as simple as it could be. My dad, his properties were through them. So when he called and gave a recommendation, I was able to skip a little bit. They were like, “Oh, okay, we don’t have to go through as much paperwork.” I think because of the recommendation, they gave me $500 back at closing, which is an awesome benefit, especially, like I said, when I only had so much saved up, that helped a ton. And I got approved for a good bit over because at the time I just graduated, I didn’t have a lot of responsibility and I was just starting as an engineer, so I was getting paid a decent salary. So I got approved for more than that and I was going to just wrap closing and everything into the loan. So I didn’t have a lot to come down. I think I put 3% down conventional. So again, as relatable, as easy as possible.

Ashley Kehr:
Oh, we’ve been hearing more and more, Tony, about conventional loans and doing 3%. We just had another guest on the podcast that was talking about this too, where we were so used to hearing the FHA loan 3.5% down as being the lowest, but now we’ve been hearing about this 3% conventional. So Ryan, how did you hear about this loan product or know that it existed? Did you hear it somewhere and tell the lender, “This is what I want to do,” or did they tell you, “This is what the product we have for you”?

Ryan Hughes:
Yeah, by talking to everybody about everything, in all honesty. I asked my agent, at the time, our family friend, “Hey, so how are a lot of your clients closing on deals? Are they coming in cash? How are they strengthening their offers? What do they do? Are they putting in these contingencies?” Same with the lender. “How are you guys giving most of your loans? For someone, myself, my situation, just out of college, I obviously have enough to put the down payment of 3.5% FHA.” And he was like, “Oh no, don’t do 3.5%, you could do 3%.” I’m like, “Since when? How is that?” And he is like, “Oh, we’re offering 3% conventional. So you also don’t have all the rules tied to FHA like you normally would. It’s just a simple loan.” I was like, I’m going to honestly… I was kind of saying, “I’d lean on you. You’re the professional in this space and I’m just coming to you for all my questions.” And he was like, “No. Trust me, this will work out very well.”

Ashley Kehr:
And so did it?

Ryan Hughes:
It did because I moved out about a year later and this is when I moved to Florida.

Tony Robinson:
Well, just really quick on the mortgage side, the lending side, I think it’s so important, and we’ve talked about this so many times before, Ash, but it’s worth repeating is that when you’re working with the lender, just always let them know what your goal is and not necessarily what kind of loan product it is that you want. Because had you gone to that lender and said, “Hey, I want a 3.5$ FHA loan.” Then it said, “Okay, cool. Here’s 3.5% FHA.” But if you said, “Hey, I want the lowest down payment, but I also want the type of debt that is most attractive to the seller.” And for a lot of sellers, FHA is not as attractive because there are so many hoops you have to jump through. And when you go to them with your goal, that’s how you get the best loan product for your unique situation.
Because it’s like you said, it’s the lender’s job to know all of the different levers that can be pooled, and it’s your job to give them the end goal they should be working towards. I think you did a great job of that. And Ash, you shared the story, but I feel like you probably haven’t shared it in a while, but it’s worth repeating about the property you closed on with the line of credit. Do you know which one I’m talking about?

Ashley Kehr:
No.

Tony Robinson:
They gave you like a 90-day unsecured line of credit or something like that.

Ashley Kehr:
Yes. So it was a 90-day unsecured loan to actually purchase the property. We, Joe and I, my other one business partner, we were both getting lines of credits on our investment properties and we’re at the closing table closing on our line of credits together. And we had already needed these funds for something else. They were already being used, our line of credit money. So we were telling the loan officer about this deal, and I actually had the BiggerPockets’ calculator report. I’m like, “Tell them about everything.” And he’s like, “How are you going to pay for it?” And we’re like, “Oh, we don’t know yet.” And so he’s like, “Well, if you don’t find a private lender, I could offer you this.” And what it was was a 90-day unsecured loan. It would be for exactly what I needed at the closing table to close on the property in cash, and then we would go ahead and refinance with long-term financing with that same bank.
So that’s what we did. We had our appraisal done, I think, three days after closing. The only thing we did was add a fridge in there, got the appraisal done, and we were actually able to do more than perfect BRRRR. We pulled out more money than we actually needed to actually pay off that 90-day unsecured loan. So yeah, it worked out great, but that was all just not telling him what we wanted to do, just like, “Here’s what we have.” And then him telling us, it was hitting our options are. So I never would’ve thought that would’ve been a scenario at all that would happen.

Ryan Hughes:
Yeah, Tony, that’s a great point. And until you just specifically said that example, it didn’t click with me, but that’s how I do everything. I approach everything. When I have a contractor, I’m like, “Hey, I’m kind of thinking this is the best approach for this, but you’re the professional, so give me your opinion. What are your thoughts?” And they’re like, “Oh, I like your idea. I didn’t think about it, but this is where we’re going to struggle.” I’m like, “Okay, awesome. That makes sense. What if we did this then?” And the same with the lender, the same with the agent. “Hey, I’m looking, this is what I found from my research, one of the better neighborhoods to better areas to be in. But you live in this area, you’re from this area, what do you think?” And they’re like, “Oh, this is a good neighborhood, but this one’s up and coming. It’s lower, but this is where they’re putting all this money.”
And I’ve found so many resources, so many connections, so many different aspects that I never ever would’ve thought of, new ideas that just never would’ve crossed my mind. When I first did my BRRRR or this live-in BRRRR that I did, I was like, “Okay, it’s a three-one. Okay, we’ll keep it a three-one, yada yada.” And after talking to people, they’re like, “Why would you keep that at three-one? That layout doesn’t make any sense. Make it a two-two.” And I was like, “You could do that? That’s available?” Okay. And so that’s what we did.

Ashley Kehr:
Ryan, I think we can end the podcast right here because what you just said has tremendous value for anyone listening. And I feel like Tony and I have always restricted it to lending, but you are 100% correct. It goes with all elements of asking other people for their expertise. And I think if somebody actually doesn’t know what they’re doing, you can find that out too.
If you know this is the way to do the plumbing issue and you ask them, “Well, what do you think is the best way?” And they tell you something that you know is 100% incorrect, then you know not to go with them. So I think there’s two sides of that. But yeah, that’s great advice you just shared in all elements of all people you’re connecting with and networking with, relying on as professionals is asking for their expertise and what they actually have to offer. Because it’s almost impossible to know what everybody can give for you. As much as we want to think that we’re real estate investors, we know exactly the lending we need, we know exactly what we want from the real estate agent, things like that, there’s so many things people are capable of or the knowledge they have that we don’t know.

Ryan Hughes:
100%.

Ashley Kehr:
Let’s get back into the deal part of it. So your offer is accepted when you’ve upped the price and now you’re getting into the inspection. So what did that look like?

Ryan Hughes:
So it was for a person buying their first house, I get, I don’t know, a 50-page report, and I’m like, “I might as well throw it in the trash because that is so many pages. That means everything’s wrong with the house. The house is going to fall down tomorrow.” That was my thought because I didn’t know what I was doing. And there’s so many pages that are coming with this report, and I’m like, “There’s got to be a lot wrong.” And then the more I look at it, broken light switch, plate on the wall is hanging. I’m like, “Oh, dude, I can go out there with a screwdriver and fix all this in an hour.” I’m like, “Okay, okay, this isn’t as bad, paint chipping.” I’m like, “That’s nothing.” And then you have deck not properly braced to the wall. I’m like, a little bit serious. I can’t do myself.
So then I went through line by line with my dad, with our agent, with all of these different people and just asked like, “Is this a big deal?” And they’re like, “No, not necessarily.” And so I was like, “Okay, the things I can’t fix, let me just go ahead and ask for those back from the seller.” So I slowly talked myself off the ledge and then other people talked me down as well. And then I went to my agent, I was like, “Here’s the things I can’t do. Let me submit those and see if we can get any of those repaired.” And he was like, “Why’d you do that? Submit everything.” I’m like, “Everything? They’re not going to repair everything.”
He’s like, “Yeah, but if you shoot for 100 and get 75, you were only going to ask for 50 and they were going to give you 30.” He’s like, “So you’re way better off by doing that than throwing out a few.” And sure enough, we got way more done than I expected by throwing everything and them going, “You know what? I can’t really bring it down that low and fix it, a majority of the things.”

Tony Robinson:
I think that’s the power of the inspection and that’s why I love the inspection process. And it’s so funny, Ryan, like you said, when you get a thick inspection report that it scared you. But for me, it’s almost the opposite where it’s like, “Man, now I have all this ammo that I can use as the buyer to negotiate,” and like you said, get a credit or some of these things repaired by the seller.

Ashley Kehr:
Tony, do you have an example of that happening to you recently where you’ve gone in, gotten an inspection and you had to use it to renegotiate the deal?

Tony Robinson:
Pretty much every property that I buy, except for our new construction stuff, pretty much every property that I buy, whatever comes up in the inspection report, even if we’re going to gut the house anyway, we still ask for credits. We closed in a house, a flip that we just recently finished. And I don’t know, I think we end up getting an extra $10,000 off the purchase price from the information that was inside of the inspection report.
And one of the things that we used to do, we don’t do it as well anymore, but when we were buying a lot of stuff off the MLS, we would have our handyman be at the property the day that the inspection was happening. And as the property inspector was going through the property notating everything that was broken, our handyman would be right behind him creating a bid of whatever costs to get those things repaired. So now as soon as we get the inspection report back, we already have a bid from our handyman and we’ll just give that bid to the seller and say, “Hey, here’s a projected cost. Either you can credit us this amount or you can fix it all yourself.” And that was a tactic we used quite a few times as we were going through the negotiating phase.

Ryan Hughes:
That’s genius.

Ashley Kehr:
Yeah. A good technique of having an actual estimate too when you’re going and asking, instead of just saying, “Here’s all the things that have to be fixed, can we get $5,000?” But if you actually have an invoice from a contractor or a vendor that shows how much it’s going to cost because really locking up a deal is they have to… Were you pending at this point, Tony?

Tony Robinson:
Mm-hmm. Yeah.

Ashley Kehr:
Yeah. So when you’re pending, it leaves a ding on the property. If a property goes pending, then all of a sudden, it’s backup on the market too. So I think that you do have some negotiation. They’re just for that reason alone too.

Ryan Hughes:
And to your point, now that I’ve gotten the first deal under my belt, now that I’ve gotten the second deal under my belt, two completely different strategies, I think the exact same thing. And I’ll call the inspector ahead of time after I’ve already scheduled him, and I’m like, “Hey, I need you to find everything.” I’m like, “Everything.” And he is like, “All right, man, I got you.” I’m like, “No, no, everything. If it is less than 50 pages, we’re going to have to go back.” And so I think the same thing now.

Ashley Kehr:
So Ryan, this first property was a house hack. How long did you live in there before you ended up getting your second property?

Ryan Hughes:
Yeah, definitely. So that first property is a house hack on steroids, so it was a three and a half bedroom house. I rented to all my college buddies. My brother just started going to college. I rented to him. And at one point, I think we had seven people living there and everybody paying rent other than my girlfriend at the time, my wife now and myself, everybody was paying rent. So we’re living in a very nice area, lots to do near Atlanta and we’re getting paid every month. And she herself couldn’t realize it or she realized it, but she didn’t fathom how this is happening. And I’m like, “Look, we have so many bedrooms, we’re renting them all out.” And then even we had a very large utility room that we had a buddy that come over the weekends and he would just stay there and rent the weekends. So it was just-

Ashley Kehr:
Stay in the utility room?

Ryan Hughes:
Yeah, it was huge. It was like a-

Ashley Kehr:
This is the college house for sure.

Ryan Hughes:
It was a bedroom in itself. It was a big room. But yeah, he definitely did. And it was a great time. We stayed there for about a year and a few months. And then my wife got a job down in Florida, so I was like, “This is a perfect opportunity to push me out of this house and get the next one.” And I did the same thing I do, and we found an agent that we didn’t know anybody down here for the most part or in the area we were moving. I called an agent, asked, “Hey, what are the areas? What do we do? What do you like?” And I was trying to set up that house in Georgia to finish painting, new flooring, and my wife already moved down. I was calling the agent, texting her addresses, she’s touring all the houses and FaceTiming me throughout all the houses, and she’s telling me like, “I’m not going in that one.”
I’m like, “Please, this one’s the best one.” And then the agent would call me. He is like, “The area’s not good. We’re not going to do that one.” I’m like, “Oh, okay. That’s good advice.” And then it came to the point where I was asking him so many questions. He’s like, “You know what? I know a couple people you might like to talk to.” Ended up being a couple big time investors down here, and I hit it off right away and one of them actually ended up being my mentor. So that was an awesome little steppingstone.

Ashley Kehr:
That’s so cool. One question I do have is when you bought this first house hack, were you dating your wife then, or was that part of the appeal? Was that you started dating because you own this house?

Ryan Hughes:
So that’s a fun little story. I told you that first house had a million, million stories since it was runable. I was dating that girl at the time, my wife now, my girlfriend at the time, and I told her, “Let’s go.” We had dogs. “Let’s take her for a walk. Let’s enjoy the outside.” So we walked to the property, I’m like, “Isn’t this a cool house?” And she’s like, “Yes. Yeah, okay.” And then I’m like, “Let’s go check out the backyard.”

Tony Robinson:
But did she think anything?

Ryan Hughes:
She had no idea. We already went under contract, but we haven’t closed, and she had no idea because it happened so fast. She worked nights. So I didn’t really get time to talk to her about it. And we went in the backyard and she’s like, “Oh, this is really cool.” I’m like, “Yeah, it is cool, especially now that it’s ours now.” And she just looked at me like, “Ours?” I was like, “Yeah, we just went under contract on this house,” and she didn’t know what to think. So it was really cool to surprise her with the whole house.

Tony Robinson:
Yeah. That’s a great thing to surprise your wife with is your first investment property. The first time I bought something big without my wife, my girlfriend at the time, knowing I bought a BMW, and she was not super happy about that. So surprising her with a house would be way better. Just a couple of follow up questions, Ryan. You said that you house hacked that first property, but just for our rookies that are listening that may not be familiar with what that phrase is or what that strategy is, break down the strategy of house hacking and how you said you were able to essentially live for free.

Ryan Hughes:
Yeah, definitely. So house hacking is getting more and more creative, I would say, but the original thinking was to own a duplex, triplex, quadplex and rent out the units that you weren’t living in. That was a great benefit because you could have your housing paid for, but you can also afford to get a financing deal on a typical finance on that property because you can show income for those properties to counteract what it would cost. Then it turned into renting out your rooms. Like myself, I had a three bedroom, and it was perfect because each bedroom had its own bathroom. Then there was also a half bath for all guests, so no guest used anyone’s room. Everybody had private bathrooms so I could rent it for more.
So I rented out every single bedroom and the laundry room, other spaces, and I was able to actually pay, enough to pay for my mortgage, my utilities, and then some. And I made money every month. And then now I’ve thought myself to renting out an RV in my backyard for people to rent that and not actually rent my unit. So there’s been a couple of creative things I’ve seen out there that I’ve really liked with house hacking.

Tony Robinson:
Yeah, I think house hacking is a great strategy, especially in today’s higher interest rate environment to get started as a real estate investor, if you have that additional space. And sometimes there’s the knock around sharing space with people and all this, that, and the other, but it’s like if you set it up the right way, it can really be a good strategy. And then one other follow up question. You said that when you and your wife moved down to Florida that your agent became the person that connected you to your mentor and everyone else that you needed. How did you find that agent and why were they so willing to just plug you into their network? What did that dialogue look like for you to get tapped in like that?

Ryan Hughes:
Yeah. So like I’d been doing the whole time, I basically took advantage of the opportunities that were out there in terms of… I went to Zillow. Everybody at Zillow and some of the listings will say schedule a tour this afternoon. I clicked schedule and he called me. And from there I just had a conversation and said, “Hey, this is what I’m looking to do. Where are you from? What areas do you like? Do you like where you originally grew up? Do you see opportunity? What do you think if I did this with this property?” And then once I started to ask him questions that were less about the market is when he was like, “Okay, look, you’re a knowledgeable guy. Let me start sending you to people I know really close to me that I trust with answering your questions.” I’m like, “Okay, that’d be great.” Started talking to them and they would connect me with someone else or they would be able to answer my questions and started forming connections with people.
I knew a ton of people before I even stepped foot in the state because I just been calling and calling and talking and asking questions and, “Hey, when I get down there, I’d love to take you out for dinner for just an appreciation for all your time and just answering my phone call. That’s as easy it was, just answering my phone call is more than enough I could have asked for. I know you’re busy.” And then they would keep answering my phone call. So I just found out that more and more people enjoy talking about what they already love to do.
And it’s same thing when it came to asking professionals, plumbers or handyman, “What is your recommendation?” They’re like, “No one really asked me what I want or what I care about. They just want me to come over and do the job, and then they pay me, and then I’m too expensive.” I’m like, “No, I appreciate your time.” And they would end up giving me a friend’s business card, giving me their business card and wanting to keep calling me or talking to me. And I closed in this house down here, and then me and my agent just went golfing last weekend, so we’re still really close now. It was really cool relationship to build.

Ashley Kehr:
I think that’s a really awesome advice too was to how you can provide value and also not take too much, but then you’re building out a relationship with that person because you find those similarities and the things they really do involve. And for your example with the contractor of saying, “Nobody really asked me what my recommendation is or what I should do.” I think that’s so funny because I see that oftentimes when I send contractors to tenants. The tenants know what is the best way to fix something, even though the plumber’s been doing it for 30 years. So I can see that frustration.
But I want to ask about the overall picture. So now that you’ve done your two investment properties, your first one in Atlanta, your second one in Florida, how has your financial picture changed? But just doing those two deals, before you bought that first property to right now, what has changed as far as your personal finances?

Ryan Hughes:
So that’s a great question. When I was coming into college and then graduating college, I would say my idea of what was expensive slowly started to change, was one concept that it took me a while to grasp. And then moving to Florida, everything’s expensive and very hyper-inflated. So it was like, I realize now a very small property is going to cost $500,000 while in Georgia it’s going to cost half that. And you’re like, okay, so you started getting it. It’s more the location. Okay, location’s the important part, not necessarily the house itself. And then you start to evolve more and more where myself, at least my mindset that, “Okay, if that’s obtainable because of my location and everybody wants to be there, I just have to buy in the right location. Okay. Let me look for different locations that everybody maybe will start to move to.”
And then that’s what I started to juggle with more because those are more obtainable for myself. But as I’ve realized that things get more expensive, get more valuable, I want to start in somewhere that’s obtainable, that if something were to go wrong, I could handle it and then slowly progress and maybe go to small multi-family and progress into that and that stretches that or uses debt a little bit more leveraged and then maybe get into a more desirable area and do, I don’t know, a fresh build or something along those lines. And I want to be able to tap in all areas of real estate just as a whole because I love learning about it, and it’s complicated, so it makes me think, but at the same time it’s so much more fun because I enjoy it and because it makes me think. I’m never wasting time, I’m always growing as a person, and I got to meet so many great people. So it’s that right there is what I’m always looking to progress, but because I can meet new people and get into new markets and do new things.

Tony Robinson:
I love the last thing you said, Ryan, about meeting new people. I think that’s been one of the most fulfilling things for me personally about becoming a real estate investor is just the network of people, the relationships that I’ve built, the conversations I’ve been able to be a part of all because we share this passion for financial freedom and entrepreneurship and building a legacy. And it’s like when you get connected with people who are on the same wavelength as you, it’s like you unlock this part of life that some people never find, man. So I love that.
I want to take us through our rookie exam, Ryan, but before I do, just one follow up question because I know this is something that might be swirling around in the minds of some of our rookies that are listening. When you house hack, it means that you’re living in… At least the way that you did. It means that you’re living in one bedroom and then your other two, three, however many bedrooms you have are occupied by tenants. What have you found as maybe some of the… If you had to give someone tips or advice on how to manage tenants, when you literally are sharing the same kitchen and living room and everything else, what are some things you can get to folks who want to go down that path to make it smooth?

Ryan Hughes:
Oh, that’s a fantastic question. I was super fortunate that most of them were my friends. So just college friends that moved in that also want to be in the area. But I’m not going to lie, it’s stressful because not everybody’s clean. Not everybody cares about your kitchen. For example, my own brother would leave the stove on all the time and melt our utensils. I’m like, “Dude, what are you doing?” I’m like, “Can be too mad at you. You’re my brother, but come on, man.” So things like that happen all the time, and you just keep going and you keep pushing through or keep doing your thing. And part of it that always helps is, this might sound a little bad, but in the end you got to be like, “Well, he did burn my utensils, but he did pay me every month for burning my utensils.” So that still makes it a little bit easier.

Ashley Kehr:
I think back to my college days and how different it would’ve been for me if I owned the house that people were living in, especially if that was my first investment property. Oh my God, I would’ve been so anal like, “Oh, I would’ve been crying. You put a ding in the trim. Oh my god.”
So there was one summer I lived in a frat house because I was taking summer classes and I was like, “Mom, either you can spend this much money for me to stay in the dorms for six weeks, or I can stay in my boyfriend’s frat house with him and five other guys for this amount of money.” And she’s like, “Fine, you can stay in the frat house, but don’t ever tell your father I let you do this.” So I lived with these guys in this frat house for six weeks over the summer, and it was like… Other than that, I’d always lived on campus. And so it was definitely an experience of sharing the kitchen area and just like whose stuff is whose.
But I always found it interesting how they actually picked the rooms as to who got what room, and they had a competition. So each of them picked something they were good at. So one was video games, one was one-on-one basketball, whatever it was, and then they had a contest and whoever ranked the best out of all of those got first pick and then second, and it was like a score [inaudible 00:44:19].

Tony Robinson:
That is a genius.

Ashley Kehr:
I know. I always thought that was such a great way. If you are house hacking with friends to pick who gets what room or whatever.

Tony Robinson:
That is genius. I love that. I don’t know if we’ve ever had this situation, but like an eviction when you’re renting by the room. When you’re house hacking and you’re renting by the room, I don’t think we’ve ever had a guest that had to evict someone from a house hack like that. So yeah, I don’t think we’ve ever had anyone. So maybe there’s just something about sharing a space where you get a better group of people, but it would be awkward to evict someone from the room next door.

Ryan Hughes:
Yeah, exactly. “Hey, I will help you move out, but I go past the front door. That’s my limit. That’s all I saw.” You’re not friends anymore.

Ashley Kehr:
You put locks on the kitchen, cabinets, the fridge, you’re renting that. They released us, that room. You can’t get into the bathroom. Everything’s not-

Tony Robinson:
No bathroom, no kitchen. All right. Awesome, Ryan. Well, let’s go to our rookie exam. We’ve got three questions that we ask every single guest. So our first question, Ryan, is what’s one actionable thing rookie should do after listening to your episode?

Ryan Hughes:
Call an agent, go to real estate meetups, reach out on BiggerPockets, just meet people. Make connections and meet people. If you’re not looking to buy right now, that doesn’t matter. Just like you said, one of the best parts about real estate is meeting people. So you can do that for free right now.

Ashley Kehr:
Ryan, what is one tool, software app or system in your business that you use?

Ryan Hughes:
As an engineer, I’m big in the numbers, like I mentioned, so I’m a huge Excel guy. Everything’s Excel. I’m like, “Wait, let me think about that.” And I go knock out a little calculator, I go do a spreadsheet, something down to… When I was financing my car, I had a million different things on one spreadsheet.

Ashley Kehr:
Pretty soon Ryan’s going to be selling these spreadsheets as a side hustle. Everyone’s going to reach to know I want those spreadsheets. Yeah.

Ryan Hughes:
That’s not a bad idea.

Tony Robinson:
All right. Last question for you. Where do you plan on being in five years, Ryan?

Ryan Hughes:
I’ve always told myself since my teenage years that I’m going to retire from 9:00 to 5:00 by the age of 30. Always told myself before I had a plan before I bought my property, I’m going to retire by 30. So I hope I’m full-time in real estate by the time I’m 30 and I hit 10 plus units by that time.

Ashley Kehr:
Well, that’s awesome. Yeah. And we can’t wait to listen to you on the OG Real Estate podcast as you get closer to that goal. Well, Ryan, we’re going to take it to the rookie request line. Today’s question is from Jonathan Eloisa. If you guys have a question you would like us to answer, you can go to biggerpockets.com/reply or you can leave us a voicemail at 18885-rookie or leave the question for us in the Real Estate Rookie Facebook group.
Jonathan’s question is, “What’s a better option to purchase a flip or long-term hold such as a rental HELOC or hard money? I currently own my primary free and clear, but I’m scared to put it up as collateral or take out a mortgage on it. Can you all give me any advice on using either a HELOC or hard money for purchasing? Thank you very much.” So Ryan, what would be your advice?

Ryan Hughes:
Especially right now with rates as crazy as they are, HELOC, they are a variable rate, so they’re increasing. I would lean a little bit more away from that. And as primary residents, when I had my first unit, my first goal was to house hack it so I didn’t have a major overhead cost and then get out of it as fast as possible. So that could be a rental. I got in extremely low, and especially in this case, you would have little to no cost, owning it free and clear, that means the cash flow would be one of the best performing units you have. So I would lean towards moving to a new unit or owning a different primary residence because you could get in very low and making that your new best performing asset.

Ashley Kehr:
Yeah. I think my take on it would be is if you are going to do a flip, is to get a HELOC on your property because that’s definitely going to be cheaper money than hard money is getting that HELOC. And that’s what you use to fund the deal, rehab it. And then when you sell it, pay that HELOC back.
As far as a long-term buy and hold, you either are going to get debt on the rental or you’re going to get debt on your primary. So your debt is going to be cheaper on your primary. So you’ll look at it as when you run your numbers, can your tenants in your investment property pay that mortgage for you that’s on your primary residence and look at it that way? And then also, what’s the risk? Worst case scenario, can your W-2 cover that mortgage payment? Can you save up six months reserves in case it is vacant? So look at those worst case scenarios as to how bad does it really have to be for the bank to seize my primary residence. And then maybe even you’re not taking out the full amount of the value of your primary residents too as you’re doing a smaller amount, so you still have a lot of equity left in the property too.

Tony Robinson:
I think the only thing I’d add to that is, and everyone’s going to have their own risk tolerance, but if I were taking out a HELOC on my primary residence, I would only want to use it for a short-term project. So I would probably lean a little bit more towards using that money to fund a flip where I can be in and out in a few months versus a long term buy and hold where like Ash said, you got to rely on the cash flow from your rental to pay that off. And I feel like most folks I talk to, they’re using the HELOC in those kind of short term situations where they can quickly pay it back and be done with it. But ultimately, Jonathan’s whatever feels best for your unique situation.

Ashley Kehr:
And I think you’re in a great situation, Jonathan, too and congratulations having your primary residence free and clear. That’s a goal of a lot of people, so congrats to you. Well, Ryan, thank you so much for joining us on this week’s episode. Can you let everyone know where they can reach out to you and find out some more information about you?

Ryan Hughes:
Yeah, definitely. So a college buddy of mine and I started a YouTube a while back at 2 Bros and a Budget and pretty much on everything from TikTok to Twitter to YouTube with that title.

Ashley Kehr:
Hey, awesome. Thank you so much for joining us. I want to give out a quick shoutout to this week’s Instagram social media account you guys should be following, and this week it is @annakcpa. If you guys want to know real estate advice for taxes, for bookkeeping, please give Anna a follow. That is @annakcpa for all real estate investors, especially rookie investors that are just starting out. She does a lot of reels and information for people. Just starting out as to what you need to know about taxes, bookkeeping, accounting in general.
Thank you guys so much for listening. I’m Ashley, @wealthfromrentals, and he’s Tony, @tonyjrobinson, and we will be back on Saturday with a rookie reply, so make sure you get in your requests at biggerpockets.com/reply.

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