JF1616: Software Developer Gets Into House Hacking & Continues To Grow His Investing Business with Diego Corzo
Diego came to the United States as an immigrant with his parent when he was nine years old. He is a DACA recipient and is successfully working full time while building his real estate business. From his first house hack, to strictly investment properties, and even some AirBnb’s, Diego has a vast range of real estate knowledge to share with us today. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
Diego Corzo Real Estate Background:
- 28 year old DACA recipient
- Bought first house at 23, started house hacking, now owns 18 doors
- Based in Austin, TX
- Say hi to him at http://diegocorzo.com/
- Best Ever Book: Dot Com Secrets
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Diego Corzo. How are you doing, Diego?
Diego Corzo: Very happy to be here. I am doing well.
Joe Fairless: I’m glad to hear that, and looking forward to our conversation. Diego bought his first house at the age of 23, and started house-hacking, and he now owns 18 doors. He’s based in Austin, Texas. With that being said, Diego, will you give the Best Ever listeners a little bit more about your background and your current focus?
Diego Corzo: Yes, for sure. Right now I am a realtor in Austin, Texas. I am 28 years old. As you mentioned, I do own 18 doors, but I started young, I didn’t know what I was doing; I read the book Rich Dad, Poor Dad when I was 21 years old, and that definitely changed my mindset of how I wanted to build wealth here in this country. I am originally from Lima, Peru, and I came to the United States when I was nine. My parents overstayed their visas, so now fast-forward years later, I am a DACA recipient; I am one of those Dreamers that people read on the news right now, and I wasn’t able to work or drive legally until the age of 22, but I was able to still make it happen and be able that by 23 I bought a property, and then 28 I have all those other ones, and I do have passive income that pays for most, if not all my living expenses.
Joe Fairless: Since you have been 23, you bought your first house, so that was five years ago, and you started with house-hacking and now you’ve got 18 doors over a five-year period of time… How did you buy your first house?
Diego Corzo: The first home that I bought in Austin, one of them was a four-bedroom home. This was while I was working as a software developer at GM. I bought a four-bedroom home, I lived in the master bedroom, rented out the other three rooms, and the rent from my roommates paid for my mortgage.
I was able to buy that home by putting down 5% with a conventional loan, and ever since then I haven’t had to have a mortgage payment from my pocket, and that’s what has helped me continuing buying properties more and more. The good thing is that by house-hacking, by living for free, it gave me the opportunity to save money and repeat the process, because I was able to qualify for another owner-occupant loan a year later, and that’s how I’ve been able to grow my portfolio.
Joe Fairless: So what lenders are you working with?
Diego Corzo: At first it was really hard to get a loan, but now I’ve been able to work with some that are local here in Austin, with CMG Financial. Then I’ve got in a couple with Quicken Loans. They are able to do loans for the Dreamers with DACA, so I’ve been able to use them… And because of my situation, I’ve also had to partner up with people, so I was able to buy some homes cash with my dad, or with another friend, and then we either do a cash-out refinance, or we just invest cash.
Joe Fairless: So you’ve got 18 doors – are they all in Austin?
Diego Corzo: No. Right now I own two single-family homes that I’m renting out by the rooms here in Austin. I own a few other properties in Florida, and they are mostly in the C areas; they cost me between 30k to 50k. The ones in Austin, of course, cost me a lot more. My first one was 170k, and another one that I bought was 280k.
Joe Fairless: Wow.
Diego Corzo: And then I’m also doing some Airbnbs in Tennessee. I just started doing the Airbnb thing, and so far we’re remodeling some of the properties, and next year we should be going all out with those units and cabins and condos over there in Tennessee.
Joe Fairless: Wow, so you live in Austin, you’ve got two homes in Austin… How many doors do you have in Florida?
Diego Corzo: In Florida I would say around ten doors.
Joe Fairless: Okay, ten doors. How many properties is that?
Diego Corzo: That is four single-family homes, a duplex, and a quadplex.
Joe Fairless: Okay. What city are those in?
Diego Corzo: The two single-family homes, the duplex and quadplex are in Jacksonville, Florida, and then I own two other ones in the Sarasota area.
Joe Fairless: Okay. And then what about in Tennessee, how many units and where in Tennessee?
Diego Corzo: In Tennessee I own four doors, two are condos. The two condos – those are studio units, and then I just recently bought two cabins, so that adds another two doors. The two cabins – each one was 90k.
Joe Fairless: Okay. Where are the cabins?
Diego Corzo: They are in the Gatlinburg area, in the Smoky Mountains. I was just there for the first time a couple of weeks ago and it was beautiful.
Joe Fairless: It is beautiful, yeah. That’s a great place to go vacation for a family. You were just there a couple weeks ago – was that the first time you were there?
Diego Corzo: That was the first time I was there as an investor, yeah. I went there years ago as a kid, with my family, but this time it was nice.
Joe Fairless: So did you purchase the properties prior to visiting them?
Diego Corzo: I did. What happened was I’m a realtor here in Austin, and I was helping one of my investors; he bought two properties here in Austin, and then he began wanting to buy out of state. He bought a couple of cabins in Tennessee and then he ran out of cash, so that’s when he reached out to me, and we’ve been buying some doors over there.
Joe Fairless: So you’ve got property in Tennessee, in Florida and in Texas. How did you end up in Florida?
Diego Corzo: In Florida – that’s where I’m originally from. I moved to Florida when I was nine years old. I lived there for about 14 years, went to college there, went to school there, and my brother is a wholesaler in Jacksonville. I helped him get started in real estate over there, so he runs a wholesaling team, and then he sells homes to his investors, and I happen to be one of his investors… So that’s how I was able to get started over there in Jacksonville.
He introduced me to a property management company… Basically, we buy the homes that are 30k to 50k, and then they are renting out for $650-$700.
Joe Fairless: When you think about your business plan, what’s been most profitable for you – renting out the rooms in Austin, or renting out the duplexes, or the quadplex, or perhaps now the vacation rentals that you’ve just purchased in Gatlinburg?
Diego Corzo: Right now, from all the properties that I’ve been able to do, the most profitable has been renting out by the rooms here in Austin… Because for example my mortgage is around $1,500 on one of them, but I’m able to rent out each room for about $600 or $650. One home, as an example, brings in around $2,400, so it gives me a nice cashflow of $700-$800 after some expenses. But I was able to buy that property, for example, with less than 10k, so the cash-on-cash return I feel has been great, and fortunately here in Austin because of the way that there are so many companies that are moving here, a lot of the roommates work for either General Motors, or Samsung, Intel, Applied Materials, so they have great income; I also do background checks, I find them on Craigslist… So I ask them the right questions, and then fortunately I haven’t had many issues with the roommates so far, and I’ve been doing it for years.
Joe Fairless: What has been a challenge that you’ve come across on one of your properties?
Diego Corzo: On the roommates side, there was a lady – she lived in the master, and then there was another guy living in one of the other rooms… And that guy had his girl over, and I guess they were being very loud at night, so one of the other roommates was complaining to me, and then the guy was saying that she got jealous, and all this other stuff.
They were arguing and I had to get involved, but it just happened that one of their leases was ending soon, so then one of them just left, and after that everything went well with the home… But it’s definitely something to consider if I would be having different types of roommates at the house.
Joe Fairless: What’s a deal that has disappointed you the most so far? It doesn’t mean it’s a disappointment, but it just disappointed you the most relative to your portfolio.
Diego Corzo: Yeah, I would say there was one house that we bought with my dad. It was 27k, and at that point we didn’t put insurance on it, and there was a hurricane that happened in Florida, so we had to pay 4k or 5k to take care of some stuff on the roof, remove a tree, and just make a couple of repairs that needed to happen. For example, that was something that wasn’t expected, so it just happened… I wouldn’t say it’s bad timing, but it just happened, because we didn’t put insurance on the property.
Joe Fairless: And when you take a look at your portfolio, what direction do you wanna take it? Because you’ve got vacation rentals you’re renting out, single-family homes, and you’ve also got the traditional duplex or triplex approach…
Diego Corzo: Right now, because of everything that’s going on on the immigration side of things, I’m still working on long-term investments. My goal right now is to get to $10,000/month passively. If I can do that, I will be extremely happy. I plan on probably buying — so if I continue to invest in Austin, I’m only gonna be doing the renting by the rooms, just because it’s a lot more profitable. The market here in Austin has skyrocketed, which means that there’s very little cashflow (if at all) if people are gonna be investing here, on the residential side if you get a home from the MLS or anything like that. So I see myself continuing investing and using the house-hacking strategies, or continuing doing Airbnbs with other partners.
Joe Fairless: About how much does 18 doors bring in a month passive, since 10k is your goal?
Diego Corzo: Right now I would say I have about 5k-6k coming in a month.
Joe Fairless: It’s 18 doors, so that’s about $305/door; I think I did $5,500. So essentially doubling the amount of units then is what you’re looking to do.
Diego Corzo: Yeah, that would be ideal.
Joe Fairless: In terms of renting rooms versus the actual home itself – let’s just use one of your Austin homes for example… What do you make on one of the homes, and then what would you make if you just rented it to a family?
Diego Corzo: In my Austin home – I’ll use the first one that I bought… I bought it for 170k. Right now I’m getting around $2,400/month, so I’m making a spread (subtracting the mortgage) around $1,000, or $900. If I were to just put a family there, put it on the MLS, I’m guessing that it would rent out for $1,650, so it would not be cash-flowing much in that sense, once you allot for either expenses or property management. The ones that I have in Austin, I manage them myself, so I’m able to get something that the normal investor would cash-flow $100/month in that sense, and I’m house-hacking it in a way that I’m able to make around $900.
Now, the idea is to do that multiple times, so that for somebody that has a full-time job and wants to get started in real estate, I would say buying a home, living with roommates, and then continuing doing that, because people are able to buy it putting 3,5% with an FHA loan, or 5% on a conventional loan… So the barrier of entry is pretty low for somebody that wants to reduce their expenses and be able to live with roommates, or that they can either have extra cash to travel, or have money to start their own startup, or get the car that they really want.
Joe Fairless: What type of management process or update should be considered when determining if we should rent out rooms, versus rent it out to one family?
Diego Corzo: I would say that renting out by the rooms there is definitely more involvement, I would say… Because I’m the one that buys the furniture for the common areas, for example… So I buy the sofas, the furniture, and stuff like that, and then the roommates will bring their own furniture for their rooms.
As far as having the roommates, each of them have their own lease, and they end at different times. From my experience, there are some roommates that wanna stay for like a year, others are okay with three months or six months, so there’s definitely more involvement. So if you’re able to [unintelligible [00:15:42].20] There’s a property management company here that does it for 11% or 12% of the gross rent, and there’s other companies that would do just the house, put a family in there for 6% or 10%. So it will cost you a little bit more if you were to hire a property management company to do it, but I would say if you wanna manage it yourself, there’s just a little bit more involvement.
There are different ways to make it – for example, I put the ads on Craigslist, I get a lead that wants to live in the property, I schedule a call, I ask him a couple of questions, and then I send them a YouTube video of the house of me doing a walkthrough, so that if it’s really the house that they wanna live in, then I schedule a time for me to show it to them… Because I don’t wanna waste my time, drive to the house, and then they walk in and they’re like “Actually, I don’t wanna live here.”
Then another thing that I do is if I have three or four people that want to see a room, for example, I schedule them all within an hour, so that as they’re coming in, I’m only there one hour, I talk to four, and then I create urgency. Then I send them a link to apply, and it becomes first come, first served, at that point.
Joe Fairless: Based on your experience as a real estate investor, what’s your best real estate investing advice ever?
Diego Corzo: My best real estate investing advice is invest for cashflow, don’t hope on appreciation… And try to just get to first base, rather than hitting a home run on your first deal. Because a lot of people trying to hit a home run in their first deal get them afraid of not even getting started; then they just wait, and wait, and wait… And while I’ve had friends or clients that wait, I already bought multiple properties.
Joe Fairless: Yeah, and your first comment about cashflow, not appreciation is so true… Because if and when a market correction takes place, that’s gonna be an important part of a real estate portfolio – a cash-flowing property, versus just hoping that appreciation is continuing.
Diego Corzo: Yeah, that’s for sure.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Diego Corzo: Let’s do it!
Joe Fairless: Alright. First, a quick word from our Best Ever partners.
Joe Fairless: Best ever book you’ve recently read?
Diego Corzo: Best ever book I’ve recently read… I would say DotCom Secrets, by Russell Brunson. I’ve just read that one.
Joe Fairless: What’s the best ever deal you’ve done that we haven’t talked about in detail already?
Diego Corzo: I would say the quadplex. The quadplex cost me around 100k, and I bought it cash with a friend of mine, and it grosses around $2,100. We did a cash-out refinance recently and we got around $70,000 back. For me, I have very little money in the deal, and it’s cash-flowing great.
Joe Fairless: How do you structure that with your friend, on that 100k cash purchase?
Diego Corzo: This is an interesting situation, because at that point I had 70k and he had 30k, but I knew that in the future I allowed him to buy another property with his own money, and just add it to our portfolio. For example, I put in a lot of the money on the quadplex, and then we bought a duplex for 30k, we put in 20k, and right now we’re gonna be putting it on the market, but he put in all that 50k. So now we’re sort of 50/50, and I was able to add another two properties in my portfolio, while I’m the owner of 70%. I make 70% of the money, but now that we are gonna be adding more properties in our portfolio, that’s when we structure the earnings to be 50/50.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Diego Corzo: A mistake I have made… I would say recently it was me not asking — because I invested out of state, there was this one property that had a detached garage, and I forgot to ask the inspector if he actually was able to get into that. I forgot to ask him, and when we got the crew to go out there to give us a bid, it added another (I believe) 3k. They had some stuff to do in the garage, so… I just had to cut the losses there.
Joe Fairless: Best ever way you like to give back?
Diego Corzo: Best ever way I like to give back… I would say by sharing my story, because I came from not being able to work or drive until I was 22, to not the properties that I have, to give them a sort of inspiration, and to teach millennials that it’s definitely possible to house-hack, to get started in real estate at an early age, so that they don’t have to just be focused on their retirement account once they’re 65, they can actually achieve financial freedom in their 20s or 30s.
Joe Fairless: And how can the Best Ever listeners learn more about what you’re doing?
Diego Corzo: They can actually go to my website, HouseHackingClub.com. That’s where they can check out a little bit more videos of all of my projects, and just get more detail on how to get started with house-hacking.
Joe Fairless: Diego, thank you so much for sharing your story and the types of investing that you’re doing, from renting out the rooms in single-family homes in Austin, to purchasing vacation cabins in Gatlinburg, Tennessee, and doing the more traditional thing in Florida, in Jacksonville and in Sarasota, as well as talking about your thought process for why you approach certain things the way you do, and how you structure deals creatively with business partners too, and getting into the specifics there.
Thanks again for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Diego Corzo: Thank you very much, Joe. Have a good day.