You DON’T Need 20+ Rentals to Quit (I Did It With 6)

Summary

BiggerPockets Real Estate Podcast Summary: "You DON’T Need 20+ Rentals to Quit (I Did It With 6)"

Release Date: June 2, 2025
Host: Dave Meyer
Guest: Miller McSwain

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Introduction

In the episode titled "You DON’T Need 20+ Rentals to Quit (I Did It With 6)," Dave Meyer interviews Miller McSwain, a former nuclear rocket scientist from Colorado who transitioned to full-time real estate investing after building a profitable portfolio of six rental properties. Miller shares his journey, highlighting his innovative co-living strategy that transformed his investments into 41 separate units, enabling him to achieve financial freedom without the need for a vast number of properties.

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Miller’s Background and Transition to Real Estate

Miller McSwain began his career as a nuclear rocket scientist, a role he humorously describes as "casual nuclear" ([01:56] Miller McSwain). Despite the high-tech nature of his day job, Miller found himself drawn to real estate investing early on. He and his wife purchased their first property just two months before his graduation, embarking on their investment journey with limited funds and a shoestring budget.

Notable Quote:
"You don't need a lot of starting cash or any secret sauce to replicate this exact investing path." ([00:00] Dave Meyer)

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The House Hacking Strategy

Miller and his wife chose Colorado Springs as their investment hub after extensive research and a three-week road trip to explore different cities ([02:55] Miller McSwain). Their initial investment was a single-family ranch with a basement, which allowed them to live in the basement and rent out three rooms upstairs. This approach, known as house hacking, enabled them to cover nearly the entire mortgage through rental income.

Notable Quote:
"House hacking is very low risk. It's like we have to live somewhere. So we're either going to move to Colorado Springs and rent an apartment or buy this place and rent out at least one room." ([06:21] Miller McSwain)

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Balancing Full-Time Employment and Real Estate

While managing their first property, Miller juggled a full-time job, dedicating evenings to furnishing, cleaning, taking listing photos, and filling the rented rooms ([04:44] Miller McSwain). The initial phase was hectic, but as the rooms filled, the workload became more manageable.

Notable Quote:
"It was like a big rush in the beginning... but it kind of chilled out from there." ([05:23] Miller McSwain)

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Scaling the Portfolio Through Co-Living

After successfully managing the first property, Miller and his wife expanded to a second house hack 12 months later. They focused on refining their systems, such as managing shared supplies and implementing resident-led property tours to streamline operations ([07:39] Miller McSwain).

Determined to specialize, Miller adopted a focused strategy inspired by Andrew Carnegie’s philosophy of concentrating efforts to maximize wealth. This approach allowed them to become experts in the co-living model, leading to rapid portfolio growth with six properties and over 40 units within two and a half years ([20:12] Dave Meyer; [21:56] Miller McSwain).

Notable Quote:
"If you want to get really wealthy, you need to put all of your eggs in one basket and just watch that basket like a hawk." ([20:22] Miller McSwain)

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Financial Performance and Returns

Miller boasts impressive financial metrics, achieving a 12-14% cash on cash return on his properties ([21:51] Miller McSwain). This is significantly higher than typical long-term rentals, which often yield around 4-5% in many markets. By investing in appreciation markets and employing a room rental model, Miller ensures both consistent cash flow and property value appreciation.

Notable Quote:
"We're getting around like 12 to 14% cash on cash." ([23:42] Miller McSwain)

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Advantages of the Co-Living Model

Miller highlights several benefits of the co-living model over traditional rental strategies:

1. Diversified Income Streams: With multiple tenants, the risk of income loss due to a single vacancy is minimized.
2. Favorable Regulations: Unlike short-term rentals, co-living often enjoys supportive regulations aimed at increasing affordable housing ([15:27] Miller McSwain).
3. Remote Management Efficiency: Implementing systems and leveraging tenant participation make managing multiple units feasible without being physically present.

Notable Quote:
"Co living provides more affordable housing for locals and has been met with favorable regulations in several states." ([17:00] Miller McSwain)

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Effective Remote Management Strategies

Managing co-living properties remotely is streamlined through:

• Resident Involvement: Encouraging tenants to lead property tours and handle minor maintenance tasks fosters a sense of ownership and reduces the landlord’s workload.
• Systematized Processes: Implementing standardized procedures for supplies management, property tours, and maintenance ensures consistency and efficiency ([28:22] Miller McSwain).
• Regular Property Checks: Routine visits by handymen and cleaners provide additional oversight, keeping the property in good condition and promptly addressing issues ([36:13] Miller McSwain).

Notable Quote:
"We treat all of our properties like we're managing them remotely, and it's actually easier than managing a long-term rental." ([18:26] Miller McSwain)

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Tenant Screening and Retention

Miller employs rigorous tenant screening processes, including credit and background checks, and uniquely incentivizes tenants to provide rental references by adjusting security deposits based on the number of positive references ([32:50] Miller McSwain). Additionally, fostering a community through regular events like pizza nights and bowling outings enhances tenant satisfaction and retention ([34:31] Miller McSwain).

Notable Quote:
"When you provide opportunities for tenants to build connections, they're more likely to stay longer." ([35:42] Miller McSwain)

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Getting Started with Co-Living Investments

For aspiring co-living investors, Miller advises:

1. Property Acquisition: Focus on properties that meet specific criteria such as adequate parking, appropriate size, and desirable locations near workplaces or amenities.
2. Understanding Your Demographic: Target tenants who seek affordable, shared living spaces, such as lower-income workers, students, military personnel, and interns.
3. Location Considerations: Proximity to public transportation and a high walk score can significantly impact tenant satisfaction and property desirability ([28:45] Miller McSwain).

Notable Quote:
"You need to think about the sort of tenant that is in need of a room... proximity to where they work or hang out helps narrow down the location." ([29:02] Miller McSwain)

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Conclusion

Miller McSwain's success story underscores that you don't need an extensive portfolio to achieve financial independence through real estate investing. By adopting a focused co-living strategy, implementing efficient management systems, and fostering a strong community among tenants, Miller was able to generate substantial cash flow and secure a 12-14% cash on cash return. His journey from a full-time nuclear rocket scientist to a successful real estate investor serves as an inspiring blueprint for those looking to leverage creativity and strategic planning in their investment endeavors.

Final Thought:
"This co living model is a mega cash flow strategy. It's a lot of work for a lot of cash flow, but if you're willing to put in the effort, it could be a great option for you." ([13:43] Miller McSwain)

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For more insights and detailed strategies on co-living investments, consider exploring Miller McSwain's newly released book, Co-Living Cash Flow: A BiggerPockets Guide, available on Amazon and at BiggerPockets.com.

Transcript

[Dave Meyer]

This investor left his day job after buying six rental properties. And he did it by discovering a single strategy that maximizes cash flow. Then he just repeated it over and over again. You don't need a lot of starting cash or any secret sauce to replicate this exact investing path. All you need is just a little creativity to see opportunities that others might overlook. Let's dive into how this works. Hey everyone, I'm Dave Meyer, head of real estate investing at BiggerPockets. Today we're bringing you an investor story with Miller McSwain. Miller worked as a nuclear rocket scientist in Colorado until a few months ago, when his real estate investing portfolio started generating enough cash flow that he could quit his job and invest full time. Miller didn't have any special advantages that allowed him to make this huge life transition. He lives frugally. He made some sacrifices and he went all in on a co living strategy that allowed him to turn his six investment properties into 41 separate units. Co living has become very popular recently because this room by room approach allows you to generate much more cash flow than you normally can with a traditional long term buy and hold. Miller says he's seeing a 12 to 14% cash on cash return for some of his properties, which is huge. But even if you're not as interested in this co living model, which you may want to be after this conversation, you could still learn a ton from Miller's successful investing career because the lessons that he's going to share with us, you can apply to almost any investing portfolio. So let's bring them on. Here's my conversation with investor Miller McSwain. Miller, welcome to the show. Thanks for being here.

[Miller McSwain]

Hey, Dave, thanks so much for the invite. Super stoked to chat today.

[Dave Meyer]

Yeah, me too. Tell us a little bit about yourself. How did you come to be here on the podcast with us today?

[Miller McSwain]

Yeah, so I was formerly a nuclear rocket scientist. That was my W2 day job, which just casual nuclear.

[Dave Meyer]

What does that even mean? What, like rocket scientists is good enough? Nuclear scientist is good enough. But you had to do both.

[Miller McSwain]

Yeah, well, really, for social media, you know, you got to spice up a little bit.

[Dave Meyer]

Okay. Yeah, gives you a good title.

[Miller McSwain]

So, yeah, nuclear engineering degree and then worked for a rocket company doing some nuclear things there. Nothing classified. It's just probably not worth talking about.

[Dave Meyer]

But I wouldn't understand anything you were saying. But I just have to say it sounds very cool.

[Miller McSwain]

Yeah. I will say though, you don't have to be a rocket scientist to do the strategy that we're going to talk about. Today. Okay, so that is definitely a benefit. But yeah, so kind of started out doing that and you know, that's how we made our money. That allowed us to buy our first few properties. A lot of those were house hacks and yeah, I've since transitioned into quitting that and doing full time real estate.

[Dave Meyer]

Tell us about how it worked for you on sort of a day to day personal level to make that first investment.

[Miller McSwain]

Yeah, so when we bought the first investment we did, we definitely did not have a lot of cash. We bought the first one like two months prior to graduation. Oh wow. So we were on shoestring college budget doing all of that. So you'll like this. But we did a bunch of market research and figured out where we wanted to live and where we could invest at the same time. Right. Because the idea was definitely to house hack so that we could put 5% down and that's how we were going to start our financial journey. So we looked around the country first off and picked which state we would want to live in. Just qualitatively like where has nice views or where has things that we like to do. Um, so we picked Colorado.

[Dave Meyer]

Nice.

[Miller McSwain]

Uh, we actually drove across the country then I was, we were in Tennessee and drove over here again. College, shoestring, budget and car. Camped around the state for like three weeks going to different cities and you know, figuring out what, what places had the vibes that we liked. Um, and narrowed it down to a couple and then started diving into the numbers at that point to see which one had the best rental market and would have jobs for us and, and all of that. So that's what we did and landed on. Colorado Springs is where we ended up moving and nice. And that's where pretty much our entire portfolio is. So, so the day to day at that time was yeah, find the property, purchase that house hack a couple months prior to graduation, then move in. And at that point it was like, well, what strategy are we going to do? You know? Right. Like I'd read Craig's house hacking book and it's like you can either short term a piece of your property, you can midterm a piece of your property or you can rent rooms. And like it wasn't even called co living at the time, but that's kind of what it is now. And so we looked at all the strategies and chose the room rental model.

[Dave Meyer]

So you, you found the house hack in, in Colorado Springs and then I assume you started working full time. What was it like for you? Sort of like balancing the two different avenues, being in real estate, also having this W2 job at the same time.

[Miller McSwain]

Yeah, it was a. It was definitely a lot to start out. Right. Because this room rental strategy that we were doing there, there wasn't really a book on it yet. You know, there's. There's short term, and there was midterm. You know, there were books for those. But we were just kind of figuring this thing out as we went. So it was very much, yeah, work, work. The 40 hours at the job and especially. Especially right when we first bought it. You know, come home and, like, furnish certain things and clean certain things and take listing photos and do all of that. So it was like a big rush in the beginning. Then it was a big rush to get the rooms filled. But then it kind of chilled out from there. You know, it's like, okay, they're filled. We have some breathing room. It's only three rooms that we were renting out. So, like, it wasn't a ton, so there was some breathing room afterwards.

[Dave Meyer]

Was it a single family house with them?

[Miller McSwain]

Yeah. Yeah. So this is a single family house that what we ended up purchasing was essentially like a ranch with a basement. So the top and bottom level were the same exact square footage. So fortunately, my. My wife is super cool, and she let us live in the basement so that we could get the maximum rent upstairs.

[Dave Meyer]

Nice.

[Miller McSwain]

And so, you know, so that was a nice situation there. But, yeah, so we lived in the basement. Honestly, super comfortable. You know, people talk about, well, how do you get your wife on board? You know, all those sorts of things. Honestly, this was an improvement over college. It's like we were in a small apartment, you know, before. So us living in this basement where we had our own living room, had two bedrooms down there, had a kitchenette, had a bathroom. It was. It was definitely an upgrade, even though we could sometimes hear people walking above. I guess that's the downside, Right? But, yeah, there were three rooms upstairs that we rented. There was a living room, there was a kitchen. So pretty close to a duplex by the time we kind of added a door to separate the two levels. But it was. It was a single family and was.

[Dave Meyer]

Renting out those three rooms. Was that covering your entire mortgage?

[Miller McSwain]

Yeah, not quite. It was pretty close to it, though. It was still definitely a big benefit. So, you know, it could be definitely scary buying the first deal. Right. Especially when we were halfway across the country and purchasing sight unseen and doing all of this. But the way that I thought of it was house hacking is very low risk. It's like we have to live somewhere. So we're either going to move to Colorado Springs and we're going to be renting an apartment and paying, you know, I don't know, 1600 bucks a month or whatever it is, or we could buy this place and yeah, the mortgage is, you know, 25, but surely we can rent out at least one room. And now like it's net even. But on the, on the best case we can rent out three and all of a sudden we're paying, you know, 300 bucks of the mortgage, 400 bucks of the mortgage, and, you know, some repairs and whatever. But overall, definitely a net positive. We paid a little bit, but not much.

[Dave Meyer]

So tell me a little bit how you scaled from here because I think a lot of people, especially when you talk about house hacking or, you know, just being out of college, the first deal, it's intimidating sort of on a mental level, but you know, getting together 5% and getting the benefits of owner occupied that you can sort of wrap your head around, but scaling up from there becomes a little bit more of a challenge. So how did you go from this first house hack to whatever you did next?

[Miller McSwain]

Yeah, we definitely had to get more serious about it. We were thinking about the second property while we were in the first property. So I think that was a big benefit. Right, because like I said, there was no, there was no book, there was no, there wasn't even YouTube really about like how to do this co living thing, which didn't even have a name yet. Once we moved to the second property, you have to be a little bit more intentional about things. So things like the shared supplies, so toilet paper, trash bags, paper towels, we now provide those things because we found out that when somebody uses it and. But the other guy bought it.

[Dave Meyer]

Tension.

[Miller McSwain]

Yeah, yeah, exactly. Yeah, yeah. And maybe it doesn't cause an issue right then, but enough of that builds, right? So while we were living in that first house hack, we built a lot of those systems where we were really thinking about how to systematize this thing. And then so yeah, we moved to the next house hack 12 months later and everyone that I knew who was house hacking and renting out rooms, like whenever I would go to a meet up and talk to someone, they would move to their next house act and they would turn the previous one into a midterm. Like that's just what everyone did, right? Like it, it definitely sounds simpler. It's like, oh, I'll just have one tenant now instead of having the, the five, the five guys and gals. But I knew there was definitely some way to, to keep renting rooms and I knew that there were reasons to do it. So whenever we were deciding what strategy to do, we were considering the short term, the midterm and, and the renting rooms. Now short term is like very regulated here, like it is in a lot of cities. So you can do it when you live there, but whenever you leave it's. There are some exceptions but for the most part you can't. So I didn't want to do that and then have to leave and switch strategies. So really it was like do we want a midterm or do we want to rent out rooms? And what really attracted me to co living was the diversified income streams. You know, like you have five different people paying rent, probably each working in different industries. And so if one person loses their job you're probably still cash flowing. If two people lose their job or vacate or whatever, you're probably still break even now, you know, after that maybe you're dipping into reserves. But those are like some of the benefits that we saw. And so that's why when we left for the second house hack, we've tried to figure out how to keep renting rooms at the first one and it was successful just because we did focus so much on those systems like, like the, like the supplies, like the cleaning, things like that.

[Dave Meyer]

So yeah, I hear this all the time that people move out and either turn into a long term rental or like a midterm like you were saying. But I imagine that there are some sort of math or return benefits in terms of how cash flow you were generating in this rent by the room model. And I want to learn about this premium that you can charge essentially when you're doing the rent by the room or co living model. But we do have to take a quick break. We'll be right back. Stick with us. Do you know that feeling when you're about to leave the house and you pause to double check the locks? I used to get that feeling all the time until I got Simplisafe. Here's why I trust it. Most security systems only act after somebody's already inside. Simplisafe takes action before anything happens. Their AI powered cameras and agents keep an eye on things 24 7. Someone's hanging around your property. The agents can talk to them, activate spotlights and even call the police. All in real time. I've had peace of mind since day one. Setting it up is a breeze and I'm honestly not very handy. And it could be done in just under an hour. Plus there are no contracts. There are no surprise fees and plans start at just $1 a day. And if it's not for you, that's fine. They offer a 60 day money back guarantee. It's no wonder SimpliSafe's been named the best home security system in the US by US News World Report five years in a row. Right now is a great time to get SimpliSafe because you can get 50% off a new SimpliSafe system with professional monitoring and your first month free. Go to simplisafe.com pockets that's simply safe.com pockets there's no safe like SimpliSafe. Running out of gas? That's a problem that's avoidable Owning a rental property without proper landlord insurance? That's a problem that's equally avoidable. Steadily Landlord insurance can help. Steadily offers fast quotes on property and liability coverages that are tailor made for the real estate investor community. And they can even compare pricing from multiple carriers. For landlords looking to weigh their different options, you can rest easy knowing your investments are secure with Steadily. They're available online 247 and they can start coverage as fast as the next day. Visit biggerpockets.com landlord insurance to secure your investments with Steadily Insurance Steadily Insurance Founded by Landlords for landlords frustrated with savings.

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[Dave Meyer]

Welcome back to the Bigger Pockets podcast. We are here with investor Miller McSwain talking about how he started his investing career doing the rent by the room model and deliberately chose to keep doing that after his first house hack. So, Miller, before the break, I was curious to hear about your decision to sort of keep scaling this model. And we've talked a little bit about some of the challenges or at least just like the unique elements of co living and some of the things you have to deal with. But tell us about the upside, like why are you excited about this and why should people consider it?

[Miller McSwain]

It's definitely a mega cash flow strategy. It's, it's a lot of work for a lot of cash flow. Right? I know I keep bringing these up, but like, if you compare short term rentals, midterm rentals, long terms and co living on the income front, I would say that long terms are of course going to be like the lowest, you know, just like your traditional single family, you know, long term type property, it's going to produce the lowest income. Then I would say midterms are going to be higher than that. And then depending on the market, co living or short term could be tied or co living could beat it a little bit. At the same time, management is going to be different for each of these strategies as well. So the more, the more income that you get, most likely the more work you're going to have to do to get it right. Like that's kind of just how life works. So your long term rental, little effort, midterm rentals, a little more co living and short terms, a lot of effort. So that is why you would potentially choose a strategy. If you're willing to put in a lot of effort to get a lot of cash flow, it could be a great option for you.

[Dave Meyer]

Yeah, absolutely. And I think that's so important for everyone to remember. We talk about this a lot, but basically there's like a risk reward spectrum for real estate investing. And honestly any asset class, right, like you could buy bonds that you're going to get a modest return, but it's basically no work on the other end of the spectrum, right, you could be a real estate developer, you can make tons and tons of money, but it's a lot of effort and a lot of risk and you just sort of have to decide for yourself where you want to fall on that spectrum. And Miller, I think you Did a really good job sort of summarizing it that I think actually this co living model probably has a benefit because it's, it's more work for the cash flow. But I wouldn't say it's riskier. Right. Like I guess I don't see the risk in co living in the same way I see risk in short term rentals. Like you said, you know, I invest in short term rentals so I'm not knocking it. But there's more risk. There's at least in my opinion than in the co living model.

[Miller McSwain]

Right, yeah. No, I totally agree on a few fronts. So regulation wise maybe we can dive into first. So yeah, as far as regulations go, right. We've seen across the country more and more regulations again in the urban markets, like totally go do it in the vacation markets for sure but, but more regulations in the urban markets, the cities for the short term rentals. The reasoning there is if you have a short term rental, you're essentially taking a unit off the market that would be available to a, to a traditional family that's working in the market and all of that and you're converting it into another use. So you're driving up the cost of housing for locals whenever you do that. Whereas co living on the other hand, regulation has actually been very favorable because it does the opposite. It provides more affordable housing for, for locals. So we've seen states like Washington State, Oregon, Colorado, all three of those have passed statewide regulation that says hey, you can have unlimited number of people, you know, live together as long as it's safe, you know, like, and things like that. But the regulation that you can find for co living is, you'll see in some cities you're allowed to have five unrelated people or less in a property or three or seven or eight. But like that's the one that you would want to look for. But like I said, some states have totally blanket wide, said it's cool. Arkansas has a bill right now that's looking like it's going to pass. Doing the same thing I saw this week. Texas has one that's proposed. I don't really know the status on that one yet. But then there's certain cities that don't have rules or are favorable as well. But we're seeing this like kind of sweeping movement towards co living because of that affordability piece.

[Dave Meyer]

That just is good strategy in my mind because you want to sort of go with the trends and short term rentals have been great for a lot of people for a long time. But look at the Trend, especially in large metro areas, the trend is towards restriction. Right. We see this all over the country. Red states, blue states, big cities, small cities. If you're in a city, there's a lot more risk of regulation right now. I agree with you. Vacation area is still a great place for short term rentals. Whereas on the other hand, cities and municipalities, they are looking for ways to create housing. And this is a no cost way essentially to create more housing. You don't need any more construction. There's no time in permitting. All they have to do is say that it's allowed and that's happening. It's similar in my mind to the idea that we've talked about a bunch on the show in the last couple of weeks of upzoning or basically cities allowing more ADUs or taking away parking requirements to add additional units. They're just trying to look for ways to create more housing. And so you're sort of going with this co living model, I assume you're sort of going with the flow. You're, you're just latching on to popular ideas right now instead of sort of fighting against it with some other strategies.

[Miller McSwain]

Yep, exactly.

[Dave Meyer]

So you did the second one, Miller. How was it for you now that you weren't living in the property? Did it get harder on the management front?

[Miller McSwain]

So since, since we did kind of buckle down and really think about our systems and processes and implementing those, those certain things to reduce tension and all of that. Honestly, it was not bad. I think that of the strategies that we've talked about today, this is the easiest one to do remotely. Which sounds kind of crazy. Uh, like, right, it sounds like, oh, you have five people, six, seven people in this house. Like managing it when you don't live there, like that's gotta be super hard. Um, but there's actually a lot of things that you can lean on the current residents for that that make it a lot easier. So for example, I treat all of my properties like, like, like I'm managing them remotely. And like if you read the book, like that's, that's exactly how it's set up. Things like property tours. So now that I'm at the second house act when somebody wants to move into the first one, well, am I going to drive over there and give them a tour? Well, I did it first and then it got really annoying. So what we started implementing afterwards was resident led tours. So now if someone's interested, I just email the whole house. Like I said, you can lean on them for a lot of things. Really. I Just email the whole house, hey, this guy or gal wants to tour. If they sign a lease and move in, we'll give you 50 bucks off next month's rent. Right. So it kind of aligns your incentive here so that now they're kind of a salesperson, they're not being mopey and walking around and whatever. It's like, no, no, this place is awesome. You. Oh, it has all these great things. We do these community events, they take care of the supplies, yada, yada, so we can lean on them for that and they just give the chore for us. So that was pretty easy. I mean, even just small stuff like you know, the door lock hub that's in the house, like if it comes unplugged, I just email them and see who wants to plug it back in. Like someone's available because there's so many people. Right. So it's actually not too bad to do remotely.

[Dave Meyer]

So what happened next for you? You're two units into this, right? You're still working full time, I assume?

[Miller McSwain]

Correct.

[Dave Meyer]

Okay, then how did, how did you scale up from there? You've done two. Were you all in on co living then or did you ever start thinking about other tactics and strategies?

[Miller McSwain]

Yeah, definitely didn't start diving into any other strategies. One of my favorite quotes is from, is from Andrew Carnegie and he's like the steel tycoon from the industrial revolution, late 1800s kind of thing. And he's talking about basically anti, like he's against diversification. He was like, you know, I think if you want to get really wealthy, and this isn't an exact quote, but it's something like this. He's like, you need to put all of your eggs in one basket and just watch that basket like a hawk. So that was kind of our approach was, hey, you know, we have two of these and we're doing pretty good. Let's, let's really dive in on this and just become, you know, the expert at this strategy. And like that's, that's how we could get wealthy. Rather than doing a little bit of this and a little bit of short term and a little bit of, yeah, you know, bonds and a little bit of whatever. Like we're just going really deep. So that was kind of the strategy. So from there we had experience at this point, right. We had the knowledge and we had applied that knowledge and had success with it. So at that point we did start bringing in partners that we, that would, you know, help fund things. And we both have some decision making power and all of that, but I'm doing more of the day to day type work and that's how we have scaled from there. So once we, once we started doing that and started producing significant cash flow, that's when I was able to quit and, you know, lose half of our household income. But we were already pretty frugal anyway and we were saving half of our income to purchase the next house hack all the time. So we lost that. But now we had partners that were able to help fund our future acquisitions. So that's kind of what helped push, push me out of the W2.

[Dave Meyer]

Okay, how long did that take? Like, how many years were you doing this before you quit your job?

[Miller McSwain]

Honestly, it wasn't long. I. I surprised myself. It was like two and a half years, I think.

[C]

Oh, wow.

[Dave Meyer]

Okay. That's really quick. Yeah. Just out of curiosity, you have this very impressive degree. Like, did you ever have pause about giving that up?

[Miller McSwain]

So let me say that's definitely what my parents thought. My parents were like, yeah, dude, you went to school for five years and then two years later, you know, three years later, you're going to throw it away. I wouldn't be where I am right now if I hadn't gone through all that experience and done the work to get that degree and learn, really learn how to solve problems and learn how to think creatively and all of that. So it was totally useful in getting me to this point. But unless we went like bankrupt and like lost everything and like, I had to go have some active W2 income again, that's the only reason I would go back. I mean, I did leave the door open. So I guess I will say that, right? Like, yeah, I gave my work a four month heads up because it's, it's like a very specialized skill set. Like, it is difficult to find someone to refill that. So give them a huge heads up and they're like, please come back, please. You know, please come back if this doesn't work. You know, fingers crossed. And I'm like, you know, thanks, but no, it wasn't really. It's not on the table.

[Dave Meyer]

All right, great. Yeah, I mean, I think it's important because a lot of people get into real estate with this aspiration to quit their job to do this full time, which is great. But I also think there's something hard about that. Like, a lot of people put a lot of effort and years into a career. They get training, they have friends in that career. You know, it's not always as simple as people think it is. But I'm glad for you that it was kind of just like a clean break and you had this like clarity of purpose in mind that hopefully made it easier for you to quit. So Billy, you brought in partners, you scaled up. Let me just get a snapshot here. Like how many properties are you managing now and would you be able to tell us like what your average cash on cash return is for a property?

[Miller McSwain]

Yeah, so six properties, which is like 40, a little bit over 40 rooms. And then as far as cash flow and cash on cash and all that. So. Right, it depends on if you house hack or not. Right. So whenever you house hack, you put such little down, your cash on cash is like stupid. It's like 50%, it's like 60. It's ridiculous. Yeah. But if you're buying non owner occupied like we're doing now with 20, 25 down, we're getting around like 12, 12 to 14 cash on cash.

[Dave Meyer]

Fantastic. That's excellent.

[Miller McSwain]

Yeah, I mean, depends on the market, but that's around 2,000amonth in cash flow is kind of what that equates to for us.

[Dave Meyer]

Wow, amazing. Yeah, I think comparatively, you know, it's different for everyone. But if you just go out and buy a property on the MLS right now in most cities you're hopefully breaking even. There's places in the Midwest and Southeast, maybe you're getting 4 or 5% cash on cash return on a long term rental, short term rentals, the upside is, is a little bit higher. But I mean 12% is better than most long term rentals that you can get in most places. So that is very compelling.

[Miller McSwain]

Well, and I'll say too, we're in more of an appreciation city as well, like an appreciation market. I mean there are ones that are even, you know, further than us, but, but I mean there are markets where you could cash flow even more. But of course there's trade offs with that. So kind of my thinking was if we can buy in an appreciation market. Right. Because that's the long term wealth generator. Right. If we can buy in an appreciation market and then find a way to force cash flow, then that's, then that's the sweet spot. Right. Like that's the double edged sword that gives us both things. So that was kind of the goal.

[Dave Meyer]

Got it. Yeah. I mean that sounds like he nailed that goal for sure. Being in a good market and able to generate that really solid cash flow. I want to learn how to do this and I'm sure there are a lot of people listening who hear about this 12% return and also want to learn how to employ this co living model. I'm going to ask you more about that, but we do have to take a quick break. We'll be right back. If Miller's co living strategy sounds appealing to you, you may want to check out his new book. It's called Co living cashflow a BiggerPockets guide, and it's available everywhere books are sold, including Amazon or biggerpockets.com coliving if you buy the book on Amazon, don't forget to leave a review. Running out of gas? That's a problem that's Avoidable Owning a rental property without proper landlord insurance? That's a problem that's equally avoidable. Steadily Landlord Insurance can help. Steadily offers fast quotes on property and liability coverages that are tailor made for the real estate investor community, and they can even compare pricing from multiple carriers. For landlords looking to weigh their different options, you can rest easy knowing your investments are secure with Steadily. They're available online 247 and they can start coverage as fast as the next day. Visit biggerpockets.comlandlordinsurance to secure your investments with Steadily Insurance. Steadily Insurance, founded by landlords for Landlords.

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[Miller McSwain]

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[Dave Meyer]

Welcome back to the Bigger Pockets podcast. I'm here with Miller McSwain. We're talking about how he has created a 12% cash on cash return in an appreciating market. I want to learn how to do this. Miller, tell us. If I've never done this so genuinely, if I wanted to go out and start doing the co living model, where should I begin?

[Miller McSwain]

Yeah, right. So starting with, we can start with like property acquisition. It does take a very particular property that really does cut down on our deal flow. So only 10% of the properties that we look at kind of pass the, the feature test, like seeing if it, if it has the, the right location and then other things like the right parking, the right size, all of that. So it's very limiting. So that, that is a downside of the strategy, I would say.

[Dave Meyer]

Okay, I see. I'm already, I already was sort of like you could buy any single family work. I, I was kind of assuming the opposite. Like, oh, you could just, it's have four or five bedrooms, probably work. So you mentioned parking. What are some. And location, like what are you looking for in location?

[Miller McSwain]

Yeah, so I will say you could pick up any old property and it'll do better than a long term, but it won't. Any old property won't be worth the effort. It's like, yeah, like it'll be better than a long term, but like you have to get pretty significant returns for it to be worth the effort. So what we're looking for in location. Right. I think you need to think about the sort of tenant that is in need of a room. So whenever you think about midterms, you guys have heard about traveling nurses. That's like the classic classic tenant demographic. Right? So in the co living world, the classic tenant demographic is just like the lower income worker, anyone making anywhere from minimum wage to, you know, less than the median in the market. So probably anywhere from like 25,000 a year to like 55 or 60,000. Like that's kind of your, your prime demographic. And that's because if you're making that much, if you're somewhere in that range and you're renting a studio apartment, you're probably spending more than 30% of your income on rent. Which is financial experts, you know, personal finance guys say that you should spend 30% of your income or less on rent. So for example, the minimum wage type worker that I was talking about, if they're renting a studio, like nationwide average, they're spending 70% of their income on, on their rent, which is totally not sustainable. And that's why there's demand for this strategy in the first place. Because they, there's no room for them to invest, save, even like, you know, buy groceries at that level, you know, hardly. So you need to think about who you're going to rent to. But that's a big group. You could throw some other, you know, types on top, like military. We went to rent to a lot of military guys, you know, just enlisted younger guys and gals coming out of boot camp and all that. Students. Right. I mean that's a classic example of co living. That's like one of the original ones. At least over the last 30, 40, 50 years. Students, you know, interns, those kinds of folks are the ones who are probably going to want to rent a room. So when you're looking for location, you want to be close to where they work or where they hang out. That can kind of help you narrow down a little bit. And then once you do that, you do need to really look at parking. A way that you can determine how many parking spots you need. You can look at the walk score for a property. So like if you look on, you can go to walk score.com or you can look on like a Zillow listing, they'll have it listed there. And it just kind of tells you like a score for how great the public transport is. And anyway, in the book we have like a table for. Oh, if the score is this, you need 50% of the people to have parking, you know, 100% or whatever.

[Dave Meyer]

Nice.

[Miller McSwain]

That's super helpful. Yeah, so it's kind of a good way to estimate it because really you don't want to make the neighborhood angry. Like there's no sense. There's enough properties, you can find one with good parking. Okay.

[Dave Meyer]

And then tell me a little bit more about the management. You know, you talked to me a little bit about screening tenants, but like, is it basically the same as a long term rental for identifying tenants, listing it? Like, I mean, at least in my naive perspective, it doesn't seem like it would be all that different.

[Miller McSwain]

Yeah, I mean all of that's similar with some Variations. So on the listing front, I would say there are unique services that you'll be listing on. So you'll still be listing on Zillow. Like they officially have like a room for rent section now. So like again, just trending towards like, like this is becoming a real thing. Right. So you'll list there and like Facebook Marketplace. And then there's certain room specific sites, like there's roomies and, and certain places like that. I guess a special thing that we do on the listing front, a couple of things. One, we always have a YouTube tour for the property and the room listed there. Just because it's a very high volume strategy, right? It's you have to find five, six, seven, you know, residents. So if you can cut down the number of tours, that's fantastic. So a lot of people will watch the YouTube tour and just be comfortable to move in based on that. Otherwise, as far as the screening itself goes, it is similar to a long term rental. We still do credit checks and background checks. You know, that's all pretty standard. But you know, you do want to make sure that you have quality people moving into the property, especially since they're sharing space. So the biggest thing that we do is we actually contact the rental references, which by the way, no one ever does. Yeah, we've had 80 tenants and no one's ever, literally zero landlords have ever called me.

[Dave Meyer]

Really? Zero.

[Miller McSwain]

Ever. Zero.

[Dave Meyer]

I'm surprised. I don't get a lot, but yeah, so zero is very surprising.

[Miller McSwain]

Well, because I think a lot of them, you know, might move into another room rental in another city or whatever. In this city, this strategy is so, so mom and pop. So not sophisticated. You know, it's, it's maturing right now. So yeah, I don't think people are very advanced with it yet, but so we definitely do talk to the rental references, right. To get a gauge on their personality and how they interacted, you know, with, with the landlords or if there were other tenants there. And this is kind of special. One thing that we do to incentivize people to provide those rental references is we adjust the security deposit based on the number of positive reviews we're able to get.

[Dave Meyer]

Whoa, that's a cool idea.

[Miller McSwain]

So yeah, it's. Honestly, you could do this with any strategy. I think it should become the new norm. But it's, but it's super useful for this one for sure. So as an example, if somebody provides three rental references and we get in contact and they're like, oh, she was great. Yeah, she lived with Some other roommates and she left the place. Great. Awesome. Okay, well, we're only going to charge her a half month rent of security deposit. So 300 bucks, 400 bucks, you know, something in that range. Whereas if someone provides zero rental references, it's probably because they were poor tenants, right? Like they, they, they behaved poorly. So all of a sudden now we get to the end of the screening process and we're like, hey, we told you up front, but you had zero references. So now it's two times the monthly rent.

[Dave Meyer]

Interesting.

[Miller McSwain]

Again, they just kind of naturally screen themselves out. They're like, oh, I'm going to go find somewhere else then.

[Dave Meyer]

Right.

[Miller McSwain]

So that's a good kind of screening tool.

[Dave Meyer]

Nice. Very cool. And one potential downside or just consideration to the strategies, I imagine the turnover is pretty high. Is that true?

[Miller McSwain]

I think it depends on how you run it for sure. The big thing that we do and that I'm trying to emphasize with this co living model is the community piece of it. Right? Like community living, like I said. So I think that that is a huge lever that helps you increase your retention. So as an example, some things that we do that are pretty easy and cheap and it sounds like it would be a management headache, but it's really not. We'll host certain events for the house, so we'll do like a, like a pizza night, for example. Pay $50 to get pizza delivered. It's done totally remotely. Like I don't have to show up. And what that does is it just provides that spark for people in the house to be able to meet. Because naturally what happens is somebody moves into the house, they go to the kitchen every day and heat up their food and then they go back to their room and like that's, that's it, right? Like they're not interacting with anyone at all. But all of a sudden you provide this little spark or this opportunity for them to meet each other. If one person makes a friend at this event that we do, they're probably going to stay six months longer, you know, ten months longer, whatever. Just because they now have one friend and all we did was pay 50 bucks and now we've reduced our totally turnover and increase the retention. So yeah, totally worth it. Things like that are like, the new one that we're trying is like a bowling night. So we'll pay for them to go bowling again, like 50 bucks. So totally worth it.

[Dave Meyer]

Yeah, I'm a weirdly good bowler. Next time me, we're going. All right, well that's, that's, that's great. I think that that makes a lot of sense and it just shows that that sort of level of intention and care about your tenants and wanting to provide a positive experience creates that mutual benefit. Right. It works for you, it works for them. That's a great situation. Anything else that you think the audience should know about how to get started or to manage sort of the co living model? I'm sure you put it all in the book, but any, any last key things that I haven't asked about yet?

[Miller McSwain]

Yeah, I mean, I guess the only, the last thing that I'll say is along the lines of being able to manage it remotely. With this strategy. You do have extra eyes that are on the property that are useful. So for example, the existing residence, if people are partying or having their girlfriends over or boyfriends over or whatever, you're probably going to hear about it.

[Dave Meyer]

Yeah.

[Miller McSwain]

When your cleaner goes over there, if there's issues, you're probably going to hear about it. We have a handyman go through on a quarterly basis to do routine things as well as record an entire video of the property, including inside the rooms. So we're gonna get eyes on it then too. So again, it's honestly easier to manage remotely, I think, than a long term like. Like how often do you get eyes on a long term rental? Like on the inside, you see it three years later, right? We have eyes. Yeah. Every, every month with the cleaner. So. So that's a big benefit.

[Dave Meyer]

All right, well, Miller, thank you so much for sharing this with us. It sounds, you know, I'm getting a little bit of FOMO. I think this sounds like a great strategy. 12% cash on cash returns. And although it is more work, which you're very candid and honest about, that's a decision that all of you listening can make. Like you can find Cash Flow. This is a perfect example if you're willing to take on a little bit of extra work. So, Miller, thanks again for, for sharing all this with us today.

[Miller McSwain]

Cool, thanks for having me.

[Dave Meyer]

Thanks again to Miller for joining us today. If you want to order his new book, which is called Co Living Cash Flow, it's available everywhere where books are sold, including on Amazon [e-mail]. if you buy the book on Amazon, please make sure to leave a review. I'm sure it will help Miller out tremendously. Thank you all so much for listening. We'll see you next time. Thank you all for listening to the Biggerpockets real estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K, copywriting is by Calico, content and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com. the content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk, so use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose, and remember, past performance is not indicative of future results. BiggerPockets, LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.