JF1902: House Hack Your Way To Financial Independence #SkillSetSunday with Craig Curelop
Craig is coming back on the show to tell us more about house hacking, which he has done three times now. He’s been able to go from a negative net worth to financial independence through this powerful wealth building strategy. Craig puts things into perspective with actionable tips and strategies for anyone to use in their own lives. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“Buy a single family house, live in one room and rent out the other rooms” – Craig Curelop
Craig Curelop Real Estate Background:
- Author of The House Hacking Strategy and aggressive pursuer of financial independence
- From sleeping on his couch, to renting out his car, Craig has been able to go from a negative $30k net worth to financially independent in 3-years all while paying off $85k in student loan debt
- Now on his 3rd house hack
- Listen to his previous episode:
- Based in Denver, CO
- Say hi to him at:
- Instagram: @thefiguy
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Theo Hicks: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today I’ll be speaking with Craig Curelop. Craig, how are you doing today?
Craig Curelop: I’m doing awesome, man. Better now that I’m on your show.
Theo Hicks: Absolutely. We’re glad you’re here and we’re looking forward to speaking with you again. Best Ever listeners, Craig is a repeat guest. Make sure you check out his previous episode; it is 1260, and it’s entitled “Bigger Pockets analyst tells us his life-hacking story, with Craig Curelop.”
Since this is Sunday, we’re going to be doing a Skillset Sunday. Craig is a house-hacking expert, so we’re gonna talk about how you can house-hack your way to financial freedom/independence.
Before we begin, I wanted to quickly go over Craig’s background as a refresher. He is the author of the house-hacking strategy, as well as an aggressive pursuer of financial independence. From sleeping on his couch to renting out his car, Craig has been able to go from a negative $30,000 net worth to becoming financially independent in three years, all while paying off $85,000 in student loan debt.
He’s currently on his third house-hack. Based in Denver, Colorado. You can say hi to him on Instagram @thefiguy. Craig, before we get into the skill, do you mind telling us a little bit more about your background and what you’ve been up to since we last spoke?
Craig Curelop: Yeah, the last time we spoke I believe I was living in my first house-hack, which was that duplex where I was really hacking it, living behind the curtain, and all that… I won’t go into all the details here, you can go back and listen to the previous episode… But since then, I’ve purchased two more house-hacks. About six months after that last episode, I purchased my second one, or a year after I got my first one; that one was a five-bed/two-bath in Thornton, Colorado, which is just North of Denver.
Then I did a different strategy, where I rented by the room. So it was a five-bed/two-bath, I lived in one room, rented out the others. I had my own bedroom, I was living a semi-normal life at this point… And then I rented out the duplex full-time. So the duplex was making me some money, the single-family I was living in was making me some money, and I was living for free; that allowed me to then save up and purchase the third house-hack, which I’ve just closed on about a month and a half ago, and getting that sold as we speak.
Theo Hicks: Perfect. So you’ve got your book “The House Hacking Strategy”, you’ve done three house-hacks… So let’s just talk a general overview, for those who don’t know – which I’m sure everyone knows what house-hacking is, but just in case… Do you mind just describing what this strategy actually is?
Craig Curelop: Yeah, house-hacking – the whole idea is that you buy a one to four-unit property, with 3% to 5% down; because you’re getting that 3% to 5% down loan, you’re required to live there for one year. So while you’re living there, you rent out the other parts of the property, such that the rent from your tenants is fully covering your mortgage, so you’re allowed to live for free, or maybe even get paid to live, and you’re just able to save tons and tons of money and build lots and lots of wealth that way.
Theo Hicks: Okay, so I actually house-hacked my first property too, so I’m familiar with this strategy… The first question I have is how do you analyze the deals when you’re actually house-hacking them? Because most deals make sense when you house-hack them, just because of the very little down payment, and the fact that you’re really just trying to cover some or all of your living expenses… But then, as you mentioned, the plan is most likely to move out and rent it out full-time. So are you underwriting it based on that time, when you’re gonna move out, and making sure that it’s cash-flowing then, or are you underwriting it so that all of your expenses are covered, you’re making money, some of your expenses are covered… Walk us through the analysis of house-hacking and how it compares to just a regular rental.
Craig Curelop: Yeah, for sure. So when you’re house-hacking, you definitely have to take into account the rent savings… Though I always try to live for free, but that’s just how I am… And I don’t care all that much that I have a super-fancy place. I don’t care all that much that I have my own space. So I really love this buy a single-family home, because it’s definitely cheaper than the multifamilies… And live in one room and rent out the other rooms.
The numbers on that – basically, I know that a $350,000 to $400,000 property is gonna be about a $2,000 mortgage payment each month. So it’ll be a little higher, a little lower, but within $100, that’s kind of what it is.
So I can go into a property – and I’ve been doing this for long enough where I can go in and look at the rents that I could get for each room, and I just make sure that the rents are well in excess of that mortgage payment. I like to see something between $750 to $1,000 over the mortgage. That will give me plenty of buffer for all of those expenses that you hear about – cap ex, vacancy, all of that stuff.
So rather than trying to have a percentage for each one of those and have all these moving numbers and moving pieces to play with, I just try to keep it really simple, with “Hey, what’s the rent? What’s the mortgage payment? How much do you want for reserves?”, which includes all of those expenses… And I just try to make it work that way, and it’s been pretty successful so far.
Theo Hicks: So you’ve done the renting out one of the units and living in the other unit, and then you’ve done the renting out the rooms… On this third one, is it a duplex or is it a single-family home where you’re renting out rooms again?
Craig Curelop: It’s kind of a hybrid. Technically, it’s a single-family. I’ve purchased it as a single family. But it’s a six-bed/three-bath. The top level is three beds, two baths, and the bottom level is three-bed, one-bath, with its own kitchen, it’s own bathroom, its own laundry room etc. So it’s essentially two units. So what I did was I actually just walled off basically where the upstairs meets the top of the stairs to go downstairs, and made a separate entrance, so that they can walk in and go directly downstairs and have their entire unit. Right now I plan to airbnb that unit out fully, and I expect to make a little bit more than I would with a traditional rental.
Theo Hicks: So would you say that the better strategy is to do the by-room, as opposed to the per-unit?
Craig Curelop: It all depends on who it is. I would say it’s the more lucrative strategy, for sure… But if you don’t feel comfortable living with the people, then maybe you do the duplex or triplex, or you do the “luxurious house-hack”, where you live in the big house and you rent out maybe the mother-in-law suite, or the downstairs, or whatever it is.
Theo Hicks: I’d probably say the most common thing I see — not the most common, but something I see a lot when people are talking about house-hacking is the amount of time you need to live in the house. So is it definitely a year that you have to live there, and if you don’t then something bad happens? Or do you need to live there longer than a year? Does it depend on the type of loan that you get? If you wanna talk about that a little bit, what’s the requirements for doing the house-hack…
Craig Curelop: To get that low down payment, that 3% to 5%, which is what makes house-hacking so powerful, you do have to live there for one year. Now, I don’t think the banks are knocking on your door every month to make sure that you live there, but if you do get caught, it is considered mortgage fraud, which I believe is five years in jail… So probably not worth it. I know people that have taken the risk and they’re not in jail, but again, I would not recommend it.
There are ways you can get out of it… For example if your job moves away, or something happens in your family… They are semi-reasonable with life-changing instances, but that’s really the only way to get out of it.
Theo Hicks: What’s some other important information that we need to know about house-hacking?
Craig Curelop: I would just say it’s a really great way to get started in real estate investing, if not the best way… Because you have to live somewhere anyway, so you might as well live where you’re investing. That way you’re really in the weeds and you can manage the property because you’re always right there. Also, it’s just a tremendous way if you’re doing this to really build yourself a great financial position and hopefully obtain financial independence within the next few years. I’ve never found a more powerful way to do so, with as little risk as house-hacking is.
Now, I’m not saying house-hacking is not risky, but it’s a lot less risky than investing in Bitcoin, or some startup company, or penny stocks, or something like that.
Theo Hicks: How many more house-hacks do you plan on doing?
Craig Curelop: I don’t really know. I guess this aggressively maybe one more… But then I probably intend to take some time off and do my own thing for a little bit… But when I come back and settle down, I still may house-hack, but it’ll probably be a little bit more of a luxurious house-hack, where I just rent out the bottom or rent out an additional [unintelligible [00:09:44].14] in the back, or something like that. But yeah, I don’t see why not do this for as long as I can.
Theo Hicks: Do you plan on doing other investing strategies as well with the house-hack, or will you just keep house-hacking because it’s been so successful?
Craig Curelop: Yeah, now that I’ve got some capital built up, I’m looking to do some more BRRRR type deals, or even just some more buy and holds in the Denver area here. Definitely looking into exploring different types of investing. It’s pretty addicting, it’s hard to just do only one a year.
Theo Hicks: Is there anything else that we haven’t talked about as it relates to house-hacking that you want to mention?
Craig Curelop: One thing I would just mention is that if you do decide to go down this route of house-hacking, is that you’ll always feel different. The first house-hack you will look like a poor man/woman, because if you do what I did, you’ll be living on a couch behind a curtain, or you’ll be sharing a house with 4-5 different people, and you’ll be unlike everyone else, because they’ll probably have their own place and whatnot. But then you’ll be saving and saving more and more money, and after year one you’ll be able to buy a second property; then you become unrelatable, because now you’ve just bought two properties in basically less than two years…
So then you’re able to save more and more and more, and then by the time you get your third one, you now have tens of thousands or hundreds of thousands of dollars to either investing — you can start investing in larger properties, or you can start going out and doing your own thing, and before you know it you’ll be financially independent, which even if you’re in your 30’s and you’ve got 5 years, you’ll be 35 to 40 years old, and most people are not financially independent at 40 years old.
So you have to be used to kind of being a little bit different. At first it’s kind of not so good, and then in most of your life it’ll be very good, it’ll pay off for you.
Theo Hicks: When you’re actually looking for these deals, do you just look for them how you would look for any single-family home? Are you just finding these on the MLS, or are you finding these things off market?
Craig Curelop: I find them on the MLS, yeah. I guess the main reason why that is is because the house does need to be livable. A lot of the ones off market are kind of rundown and beat up… So in order to live there for a year, the bank needs to deem it as livable, and basically it needs to have running water and electricity, and four walls and a roof… So yeah, there has to be that… And then also I’m looking for one deal a year when you house-hack, and in my market there’s lots of house-hacking deals… So you just have to figure out how to make a mark.
Theo Hicks: Alright, Craig. Well, thanks for coming on the show and essentially giving us a breakdown of exactly how to house-hack. Just to quickly go over what we talked about – so you’ve done three house-hacks so far. The first one we’ve talked about on the first show; again, that’s 1260, if you wanna check that out. The second one was the five-bed/two-bed just North of Denver, where you decided to rent it out by the room, while renting out the previous one full-time. You mentioned that by the room is more lucrative than by the unit.
And then you just closed on your third one a month and a half ago. That’s a hybrid one, where technically it’s a single-family home, but you were able to wall it off and turn it into a hybrid duplex, and you actually plan on airbnb-ing one of those units for even more money.
We talked about how you actually analyze these deals, and it really depends on what your goals are, but for you it’s you wanna live for free. You don’t really care if it’s a really nice place, or if you’ve actually got a room; as you mentioned, you lived behind a curtain on a couch for a while… So to do so you wanna calculate what the mortgage payment is going to be. You can do that pretty quickly, [unintelligible [00:12:45].27] experience. And then take a look at the rents for each of the rooms or each of the units, how you plan on doing it, and you want the rents to be at least (in your area) $750 to $1,000 above the mortgage, so that you can cover all the ongoing expenses and live for free.
You also have to live there for a year. If you don’t, it’s considered mortgage fraud and you can go to jail. There are some exceptions, but… If you’re gonna house-hack, live there for a year.
A few other things we talked about – it’s a great way to get started in real estate investing, because you need a place to live anyways, and you might as well have that be your own investment property. The strategy is a low-risk strategy, compared to other investment strategies out there.
And then lastly, you mentioned that when you’re buying real estate in general, but especially if you’re doing the house-hack, you’re always gonna feel a little different compared to others around you who maybe have their own apartment/home, and you’re living, as you said, on a couch behind a curtain, but obviously the benefits long-term outweigh that, because in a few years you’ll have a bunch of money, multiple properties under your belt… And the more money you get, the more deals you can do, and you can be financially independent by just following the strategy and buying one property per year.
And then lastly, you mentioned that you’re just finding these deals on the MLS, because they need to be livable in order to qualify for the loan. And you only do one deal a year, so you’re able to find that in your market, because there are a lot of single-family homes available.
For more about house-hacking, make sure you pick up Craig’s book, “The House Hacking Strategy.” There’ll be a link to that in the show notes. And again, check out his first episode, 1260, “Bigger Pockets analyst tells us his life-hacking story.” And say hi to him at @thefiguy on Instagram.
Craig, thanks again for joining us. Best Ever listeners, have a best ever day, and we’ll talk to you tomorrow.
Craig Curelop: Thanks for having me, man.