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Real Estate Investing School Podcast
117. House Hack & Hustle with Dan McDonald
00:50:34
Welcome back to the Real Estate Investing School Podcast. Today, we have an educational conversation with Dan McDonald, a house hacking expert based out of the expensive northeast market of Boston, MA. Dan recounts his journey into real estate,...
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- [00:00]
Dan McDonald
I said originally with kind of coming from my dad and everything, it's, you know, it's not what you make, it's what you save. And I think for me now it's, it's shifted to it's not what you make, it's what you invest.
- [00:17]
Joe Jensen
Welcome to the Real Estate Investment School podcast. I'm your host, Joe Jensen. Today we've got Dan McDonald. Now, Dan, he works as a marketing research consultant and is house hacking his son, second duplex just outside of Boston, Massachusetts. Now, even though he lives in an expensive market and houses are 600 plus, he's taken advantage of all the things house hacking has to offer. He took a chance in 2020 when the world was shutting down on a small duplex. It was the best decision he ever made. Alongside his wife Marissa, they've started building a small but mighty portfolio in a market everyone says is too expensive. Dan now enjoys helping others house hacking and spreading the good word across the nation. Welcome to the show, Dan. Spread some word for us.
- [01:01]
Dan McDonald
Yeah, thanks man. Thanks for having me.
- [01:03]
Joe Jensen
Yeah. Excited to have you here. It's, it's fun because it's the one thing I love about real estate is it's so customizable to whatever your life is. You know, a lot of guests will have on here, they're like full time flippers or wholesalers or investors or whatever. But then a lot of time, not like say you, you work in marketing, you're just kind of getting your feet wet in real estate, but you can customize it to whatever best fits you, which is what I love.
- [01:28]
Dan McDonald
Yeah, yeah, yeah.
- [01:30]
Joe Jensen
So what, tell us a little bit down then how did, so you've done a little bit of house hacking or the past couple years, started back in 2020. Like what kind of led you into deciding to go all in with real estate and actually like start making like life shifting decisions based off of house hacking and things like that. Like we'll put it on the radar for you.
- [01:53]
Dan McDonald
Yeah. So I mean, I think for me the idea of real estate has always excited me. I've always, you know, just enjoyed the thought of it, investing in it in general. And you know, it wasn't really until a couple years ago at this point, you know, five realistically I grew up, I mean it kind of relates back to like my overall story. Like I grew up in pretty nice small farm town in Connecticut, pretty standard. I had two loving parents, we're middle class, they both worked very hard and everything. But my dad really always kind of instilled this notion on me that it's not what you make, it's what you save. And I really always believed that until I got a little bit older and I, I could see him, you know, I could see him putting that action, you know, putting that kind of motto to work. And, you know, he was able to retire when he was 50, you know, but that was after working two jobs for 30 years and, you know, not loving either of them and, you know, really being pretty, pretty strict in the terms of the saving aspect. And so it wasn't until he passed away a couple years ago where I really had this wave kind of come over me of just like, I saw how hard he worked for how long, and obviously I was the beneficiary of that. I had a great childhood. Things were taken care of, obviously, no issues there and everything. But from him, I don't think he got to enjoy life as much as he should have. And I know he always wanted to invest in real estate and he just never, never took that leap. So I really swore to myself that when he died, I was not going to just let that kind of lesson in this idea in my head just go to waste, that I was going to figure out a way, one way or another, to start investing in real estate and get my foot in the door, you know, literally and figuratively. But yeah, so, I mean, I, I got, I learned about the house hacking strategy. I, you know, read the book the House Hacking Strategy by Greg Kurloff and I actually went to college with Craig. He was in my fraternity. And you know, he kind of introduced me that idea and it just skyrocketed from there. I was like, this makes like way too much sense, honestly. Like, why is not everyone doing this? So it kind of just became an obsession and the rest is honestly history.
- [04:44]
Joe Jensen
That's so cool. Like, and that's one thing I love about house hacking is it's like everybody can be doing that regardless if they're working a normal full time W2 job or whether a full time investor, whether they're doing like big, you know, like, I always tell my students and even myself, I'm always still looking for my next house hack. You know, even if I'm also buying 10 or 20 or whatever other properties in the same year, it's like, I still want to do it house hack because it makes so much sense. It's like you don't get that gift of, that kind of the kind of financing, the power of that primary residence loan is just like, holy moly. You know, if you look outside the Country. That's when you really realize, like, wait, that's just such a lucky gift we have. And if we take advantage, it's unreal. And now with the new changes on conventional loans that you can do 5% down on duplexes, it doesn't have to be the FHA with the extra fees. It's like, and now you can drop that PMI later, which maybe I should break that down a little bit. Or maybe you can, if you know exactly what I'm talking about here. I'm sure you're excited about that too.
- [05:53]
Dan McDonald
Oh, yeah, yeah. That's a game changer. I mean, so I also have my real estate license and I really, you know, house hackers is kind of the niche that I want to kind of, you know, hone in on and everything. And I'm working with someone right now who's, you know, really excited about the idea and everything. And I'm just trying to explain to him how exciting like this new conventional chain actually is. Because, I mean, it wasn't that long ago, but literally, you know, I pretty much only had the option in my area for an FHA because the self sufficiency rule on the 3 and 4 just wasn't happening. Just didn't make sense. So basically, like, in that sense, I pretty much had to go for a duplex because I wasn't going to qualify, you know, with an FHA and find that three to four family that meets the self sufficiency rule. But with this change, yeah, it's great. So basically now you can, you can put 5% down with a conventional loan, which is awesome, as long as it's an owner occupied and it can be two to four family. So now you have the benefit of you're not dealing with that self sufficiency rule, which is.
- [07:04]
Joe Jensen
Why don't you explain what that is? It's for the listeners that the. What you're running into.
- [07:09]
Dan McDonald
Yeah, yeah. So basically what it is, the problem is, is like if I'm a house hacker and say I want a four family, we'll make it easy. I want a four family. And I plan on using an FHA and put three and a half percent down. Cool. All right, well, the self sufficiency basically says that I need 75% of the rental income to cover the mortgage and basically the mortgage, like pretty much the mortgage. And then I believe the PMI also too. So basically you need to live for free, essentially, because if I'm renting three of the four units and I'm the fourth and those three units, cover that mortgage and stuff, then yes, it would meet the self sufficiency test. But that's pretty challenging to do in an expensive market. Yeah, it really is. And now too with the rates, and that's what I do try to tell people too. It's like don't consider it a failure if you don't necessarily live for free. It's still such a huge tool. So basically, yeah, that's the problem with the fha. So that self sufficiency is, was my biggest hurdle. So that's why I ended up getting two duplexes. But that no longer, you know, is, is going to be an issue in your mind if you are using the conventional loan because you are putting a little more down, you know, 5%. But honestly, 5% versus 3 and a half percent isn't huge. It's going to break you better than 25%. Right, exactly. So that's the thing. It's just another low down payment option for you. And yeah, like kind of what you were alluding before, the PMI is always going to be there. Like when you're not putting down 20%, you are going to pay PMI. So that, and that's FHA, that's conventional. Just, you know, if you're not putting down 20%, expect to pay that. And basically the hard part is, and I had to go through it was with an fha, that PMI sits there for the life of the loan. So easy number, like say I have a hundred bucks a month in PMI or whatever, it's going to sit there for as long as I have an fha. Now the thing is you have to refi out of it. So that's what I did, that's, I refi'd out of it to drop my PMI and I refi'd into a conventional loan. And the difference is, with the conventional loan is after you hit a certain threshold, it is much easier. You may not even have to refi. You could, you could call.
- [09:52]
Joe Jensen
It's.
- [09:52]
Dan McDonald
I don't believe it's automatic. I still think you have to talk to the lender.
- [09:57]
Joe Jensen
Yeah, you wanna, they want you to reach out. They don't automatically drop it. If they can keep taking your money, they will.
- [10:03]
Dan McDonald
But you can reach out, we'll do.
- [10:05]
Joe Jensen
Some type of appraisal and then if you're out, they can actually just drop. You don't have to change the terms of your loan, you don't have to pay closing fees. You know, you get a new appraisal and they can drop the PMI which is huge. I mean, that's hundreds of dollars a month. What's your, what's your PMI on your first duplex that you did?
- [10:28]
Dan McDonald
It was, it was like 400 and something dollars a month. Yeah, yeah, you know, it was pushing 500.
- [10:38]
Joe Jensen
It'd be nice to be able to drop that. Right. And you clearly, if you bought it in 2020, you have the equity, you know what I mean, where it's like, oh, that 20% equity comes in pretty tight, even if you didn't put that much down. And I don't know, did you put 20% down on yours?
- [10:54]
Dan McDonald
No, for both of them I have used an FHA and for both of them I put down 3.5%. So I've dealt with PMI and I'm still currently dealing with PMI in my second one. Sure. Which is literally like over 600. And it's crazy, right? Like it's nuts. But for me, you know, it is a little, it's definitely a little bit of a math equation because, you know, I have a 4% on this house, so obviously if I jump from a 4% to an 8%, you know, it's not going to change up much, you know, in terms of payment, it could be worse.
- [11:30]
Joe Jensen
Well, that's where I'm at. I have one with an FHA right now and the PMI is like 300 something, but the interest rate's like three and a half. So yeah, if I go jump into a seven, it's like I'm paying like 800 more on top of it, you.
- [11:43]
Dan McDonald
Know, so it's like, yeah, I might.
- [11:44]
Joe Jensen
As well just leave it with the, the pmi.
- [11:46]
Dan McDonald
You know what I mean? Yeah, for sure.
- [11:49]
Joe Jensen
No, it's definitely how it goes. Yeah, so that, that's what's exciting now. So, so the self sufficiency though, that's different on conventional versus fha for the qualification, you were saying.
- [12:02]
Dan McDonald
Yes, yes. So you don't have, you don't have to deal with that. Of course there's still income limits and stuff for both of them and everything. And obviously this is where working with a lender and what I always recommend is find a lender that understands house hacking because just like agents and stuff, there's a million out there and everything. And I'm not saying like, just because you're an amazing agent when it comes to like finding flip opportunities doesn't mean you're going to be a great agent at, you know, house hacking opportunities or whatever. Same with lenders. You want to find a lender that understands your goals, what you're doing, understands house hacking. And they'll be able to tell you and you know, basically be like, yeah, you know, for example, like the lender, you know, I kind of send clients to and everything usually gives you a breakdown. And basically if you take the same house and you say, okay, if you do it with an fha, expect all this. If you do it with a conventional, expect all this. So that way, you know, kind of the ins and outs of what, you know what you're going to be paying and that's when you get a really, that's when you want to have that great relationship because he's going to be able to work with you and say, well, you know, as you can see here, man, your interest rate is a little bit lower actually with this one, but you're paying more PMI with this one. So you know what? Exactly, you know, let's, let's, let's talk through this. Let's see, like, does it actually make sense? But yeah, so you won't have to deal with that for the three to four, which is huge. That, that'll definitely be a game changer for sure. Especially for people just starting.
- [13:35]
Joe Jensen
And I love what you said about finding a lender that knows what you're doing because that's things. Not all lenders are created equal and it's impossible for anyone in any industry to know everything about every niche of the industry. Right. It's just not realistic. And so it's like, and like we've been talking about, things keep changing, you know what I mean? So somebody might be really, really good at one types of loans, but they know, you know, very little of another one. And so it's like finding someone that knows what they know with that's, that's aligned with what you're doing is super important and not always a given. Because a lot of times, you know, especially people who've never bought houses, their first house hacker second. They'll go to a lender, say hey, can this work? And the lender goes, no, it's probably not going to work. And they go, okay. They just think, I remember I was in that boat when I first started, I said if a lender said it, I just thought this was some in stone rule that that's just how it is. And then I learned to find out, like, oh, there's all these different tricks and tweaks and adjustments and changing rules and this guy just didn't know how to, how to tweak it, you know, and, and so that. That can make a big difference. So definitely find a lender that works good for what you're doing.
- [14:45]
Dan McDonald
Yeah, yeah, I was in the same boat. Yeah, I was in the same boat, actually, with a. The first house hack. I loved the lender I worked with. He was so great on everything about first time home buying, and he understood house hacking. It was such a smooth transition. And then when I wanted to buy the second one, I went to him and said, you know, I don't have. This is when. And FHA was basically my only low down payment option. I was like, I don't even have 10%. I can't. I can't do anything basically, besides an FHA. You know, this was before the conventional change, and you could do 5% down. And he said, you can't there. You can't use an FHA twice within like a hundred miles, I think is the rule or whatever. And so at first I just, like, I was like, okay, I accepted that. And then I talked to another one, and actually they said the same thing too. And I was like, all right, fine. Like, maybe I have to start accepting that. And then I reached out to another lender, and he knew all the tricks and tips to essentially disregard that rule. So it's like, you're not supposed to have. You can't have two FHA loans out on your name at once.
- [15:55]
Joe Jensen
So that's what I was saying. I thought you can't have two at all at the same time.
- [16:00]
Dan McDonald
So you can't have two at all.
- [16:02]
Joe Jensen
You.
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Dan McDonald
Yeah, but you can't. But. But you're. There's also a rule that. So I. I refi'd the first one into a conventional loan. Gotcha.
- [16:10]
Joe Jensen
And then it frees up the FHA again for you.
- [16:13]
Dan McDonald
It frees it up. But then I have to jump the hurdle of you're technically not supposed to use one within a hundred miles of the first one. Okay. Even though.
- [16:24]
Joe Jensen
Even if you refinance out of the first one.
- [16:27]
Dan McDonald
He was like, like, you know, we can't do that or whatever. Well, long story short, I'm now sitting in a duplex that's two streets over from my first duplex.
- [16:37]
Joe Jensen
Yeah, yeah, you can.
- [16:40]
Dan McDonald
You can. And it's just. It's just those relationships and constantly networking and, like, you know, because I don't fall either of them. And he actually reached out to me afterwards and he said, dude, tell me how you did that. Tell me what he did. I want to learn. I want to help other people.
- [16:53]
Joe Jensen
Right.
- [16:53]
Dan McDonald
Get in the same situation. And I Was like, absolutely, man. This is what happened for me. This is why, you know, he got me where I wanted to be and we have an awesome relationship still, you know, so do you know the detail of.
- [17:07]
Joe Jensen
I mean, maybe you don't know, because I know a lot of times lenders do stuff. I'm like, I don't know how they did it, but it worked out. Do you know why, how he was able to get that to work and why the other ones were saying it wouldn't?
- [17:17]
Dan McDonald
Yes. So the 100 mile rule was, like I said, was the reason and how he got it to work. This, this new lender was basically, there's a loophole, essentially. If there's sort of conflict, some sort of something that requires you to move, then basically I just have to write a letter and they have to approve it. And he was like, literally, I don't.
- [17:42]
Joe Jensen
Care what the letter is.
- [17:43]
Dan McDonald
You could say the house is haunted. You could say you want to be closer to work. You could say, whatever. So for me, like, we were living in a two to one, you know, unit. It was, it was pretty tight. We're both working. My wife and I were both working remote. Like, she's at the kitchen table, I'm in the basement. So I literally just wrote, I'm gonna try to start, you know, having a family soon. You know, I need more space. And that was all it took. And, you know, I'm. Now I'm in a bigger spot or whatever. But that was literally it. I mean, we could have, you know, we could use a lot of different reasons. And it wasn't necessarily a lie. Like, we are actually. My wife is actually pregnant right now. But it did take, you know, two years later or something. And it wasn't, you know, I wasn't thinking it was good, you know, like, I wasn't like, oh, we're gonna get this house and then immediately have kids or whatever. I knew, like, yeah, it's still gonna take a while. But I wanted to be in this house longer. I wanted to get a bigger spot and stay there longer than I did in my first one.
- [18:41]
Joe Jensen
I love that. It's funny that, yeah, the letter of explanation, that's the key thing people don't always realize, like, because if you think about, like, the way these loans work is these lenders have to do what they would do, diligence. Just like when you're looking at a deal as an investor, you're like, is this gonna cash flow? Is it a good deal? Like, are tenants go, can I find tenants in this area? That are going to be good tenants. You have to do your due diligence to make sure it's going to be a safe deal for you to buy. The lenders have to do their due diligence to make sure you're safe to lend to. And so if there's any question marks, they're going to want a letter of explanation to show that they did their due diligence. Now one key thing though is with these conventional and FHA and government backed, a lot of times it's not just about doing their due diligence, make sure you're safe, but it's them being able to tell their superior, whoever they sell the loan to, back to Penny, Fanny, Freddy and all this stuff. Can they say they checked off the boxes? And that's when sometimes 90% of it is like you said, they don't even care what the answer is. They just need to be able to say that we checked off the box. And as long as the boxes are checked, everybody's happy. And so I've had a lot of these random letters of explanation for all sorts of things like why was this credit check, why was this, you know, any. So many random anything that they're like a little like confused upon. If they can get a letter of explanation and check it off, then they're happier and you're more likely to be able to move forward. And it's funny because as like a professional house hacker, you know when you're getting really into house hacking, it's funny because a listener might be like, dude, all you guys are doing is talking about like lenders and loan procedures and stuff. It's like, yeah, that, that's kind of how it feels. When I was doing it, I was hacking. It was like, I just felt like that was half my job was learning how lending works and what will work and what won't work, because that's kind of the key, right, Is you're trying to take advantage of good cheap financing. And there's a lot of rules associated with this. If you figure out those rules, then it's a lot easier to move forward.
- [20:42]
Dan McDonald
Yeah, for sure.
- [20:44]
Joe Jensen
So you're doing this and, and you're not in, you know, the Midwest and cash flow heaven, you know what I mean? These aren't cheap houses. You know, when the medium home is, you know, 600,000, you know, Boston's not a cheap area. But so how did that not deter you? How do you that make that work? And I. And kind of. What are your thoughts on that?
- [21:09]
Dan McDonald
Yeah, it's Funny, because I talk to so many people who are in, you know, really cheap areas, and they're, you know, they're like, oh, you know, I got a house hack. I got a house hack and stuff, like, this is going to be great. I'm going to make that cash flow and everything. And everyone I talk to in those expensive areas is so turned off to the idea. But for me, it was always like, oh, yeah, I definitely want to, like, house hack in this area. Like, why would I not, like, why would I want to Pay, you know, 25 or $3,000 a month in rent, you know, for, like, when I can get a better place and make it my own and everything and build the equity? So I've always been kind of surprised how unwilling people are, you know, to house hack in those expensive areas because 150%, you know, you need, you need money. You obviously need the three and a half percent down. But you, when you look at it, you know, like three and a half percent down on, you know, a $500,000 property or 700,000 or $800,000 isn't actually that bad, you know. And so it was like, for my first one, you know, it was like the down payment was $17,000 or something. It was a $500,000 property. $17,000 was the down payment. And I was like, okay, that's, that's, that's not $120,000 or $200,000 or anything. That's, that's, that's doable money. That's, you know, just, you know, you find a way. And so for me, it's always been like, I try to think people, people really get turned off around the expensive markets, but I try to think, why are they expensive? You know, and in my area, people want to live here, people want to buy. People continue to just be going crazy to, you know, buy houses here. And it shows in the appreciation. I mean, the first one I have, you know, we bought our $500,000, and it's worth, you know, probably 680, 690 right now. And you don't, you don't get that in the Midwest when you buy like an $80,000 house, it's not going to be worth $500,000 anytime soon or whatever. So that's crazy. Yeah, it's crazy. It's definitely an appreciation.
- [23:21]
Joe Jensen
And get like a hundred thousand in equity, like, yeah, that's worth it.
- [23:26]
Dan McDonald
That's the thing, man. It's like, yeah, it's definitely. You got to think to yourself, why is this place so expensive. Is it just because, like, you know, the world hates me and I live here and it's like bad legislation or whatever? It's like, no. I mean, sometimes that's true. But no, like, it's literally the fact that like, Boston is a very, very popular place. And even outside of it, like, even like an hour, you know, you go out an hour. Because right Now I'm like 30 minutes north of the city. You go an hour outside of Boston and that you draw that pretty much circle or whatever. All those places are appreciating like crazy.
- [24:05]
Joe Jensen
Yeah, I love that. Like, and I do the same thing with people ask about hoa, so I'll get that question a lot like, hey, like, should I buy something with an HOA or not? And it's kind of what you're saying. It's like, well, if the HOA is expensive, why is it expensive? And is it, is it justifying its expense? And that's the real thing. You're saying these are expensive. Does the higher cost justify itself? And if it's bringing in enough value, then yeah, like, I have one property with an hoa and it's got this like lagoon walk in beach and like two swimming pools and like activities every week. And I mean, the place is phenomenal. I mean, it's. And it was a, you know, a place I lived in myself for a while, and then I moved and rented out. And it's. And it's. It's incredible, right? It's like, yeah, the HOA lights. And I think it's like 400 bucks a month. It's not like a cheap HOA, but, man, does it bring in high quality tenants that'll pay whatever they can to live in that neighborhood because they want that neighborhood so bad. Then I have another place with an HOA of like 250 that literally has nothing. I mean, there's nothing to show for the hoa, and it doesn't justify. That was the first place I ever bought. And you know, and it doesn't justify itself. You know what I mean? So if the HOA is expensive, but it brings in higher quality tenant and higher rent, then cool. And so it's the same thing with the overall price. Like you're saying you're like, okay, these are expensive, but you're gonna get a better appreciation, better tenants. It's always going to be desirable because people want to live there. That's why it's expensive, you know, and so if it evens out, then, then great, you know, And I, I think that's I think that's awesome that you didn't let it deter you, and you got actually more bang out of it.
- [25:50]
Dan McDonald
Yeah.
- [25:51]
Joe Jensen
Yeah. That's cool. So you. So let's kind of dive into your deals a little bit. So your first deal, you. You're like, hey, you saw kind of what happened with your dad living that kind of the normal expected, you know, work hard, save money, retire, and, you know, and he provided a good life for you and your family, your. You, his kids, whoever. Like, it was decent, you know, it was, but it wasn't all that you saw was possible. So you wanted to get into real estate. You jump into the house hack thing from your buddy's book, and you buy your first duplex. What does that deal look like? You do an fha, you do three and a half percent down, and then you live in one side and rent out the other side. And how long did you guys live there for?
- [26:35]
Dan McDonald
Yeah, so we got that in March of all. We closed in in May of 2020, you know, right. During COVID which was fun. And we lived, you know, moved in, you know, within that month or whatever. And we lived there for. Until September of 2020. 2022.
- [27:03]
Joe Jensen
There a couple years.
- [27:05]
Dan McDonald
Yeah. Yeah. So, yeah, so we were there, you know, I was all, like, gung ho. Like, I kind of get lost in, like, the bigger pocket stuff and everything in this idea that, like, you know, you need a house every year, and it's like, you know, you just got to do it. And, you know, that's the one thing I'll say. Like, that's where the expensive market's tough. You know, I just couldn't do it. I couldn't get that second one as quick as I wanted to. So after the first year, I ended up refi. Ing instead of. And I, you know, did that. And luckily, the rates were still awesome, so I actually managed to lower my rate to a 2.9. And that's a. Yeah, it's a 2.9 conventional right now. And refinancing that baby. No, that thing is. That thing is my ride or die. But, yeah, no, it's not.
- [27:57]
Joe Jensen
I paid off a 2.9 mortgage. Like, paid. It was my first one. Right. It was my first home. And my whole dream was to have my house paid off. I didn't understand leverage. I didn't understand real estate investing. I didn't understand any of it. And I paid the entire home off. And I look back at that, I'm like, oh, my gosh.
- [28:15]
Dan McDonald
Anyway, yeah, man, I know. I definitely. Yeah, you know, it's like, that one's gonna sit, that one's gonna 100. Always be there, you know, better than I did now.
- [28:26]
Joe Jensen
So. That one.
- [28:28]
Dan McDonald
Yeah. Yeah. So, yeah, I lived there, you know, for, you know, pushing two years or whatever. And. Yeah, and. And it was great. So again, with my area, it's hard to live for free. And it's hard to live for free, too, with, you know, a spouse. And, you know, she didn't want to live in the basement, you know, or behind a curtain or anything. You know, it was like, it was a two bedroom. You know, I wasn't about to convince her to rent out the second bedroom or whatever, you know, so there was definitely that, you know, that. That middle ground there, it was like, all right, let's make this place a place we love. But, you know, because of that, like, let's. Let's be willing to get a duplex, and let's be willing to essentially, you know, have a tenant above us or whatever. And so we did. And, you know, after we refied, we had to cover $800 a month. So we were splitting. Splitting the mortgage at that time or whatever. So we're each going $400 a month. And literally we were before that, you know, spending $2,000 on a horribly old rundown place. And it went up to 2,400 when we left. So it was a huge difference. And yeah, we could actually feel it. Like, we could actually feel us, like, because, you know, we weren't making, you know, we weren't raking in the millions or anything. So, like, for us to only have to spend $800 a month on. On our mortgage was like, whoa. Like, And. And. And where we are too, like, yeah.
- [30:09]
Joe Jensen
You got an extra, like, $1,200 a month all of a sudden just sitting there and it's like, okay, and now you own it, you know, because you're. You're spending 12 less a month, and you own. You're getting all that appreciation that you already mentioned. They ended up skyrocketing because you bought right during COVID you know, so you're just making 1200, paying 1200 less, getting awesome appreciation, getting all this tax benefits, writing the interest payments off, like, all these benefits of ownership on top of, you know, just a way 1200 more on your budget cash flow, which is awesome. Yeah.
- [30:47]
Dan McDonald
Yeah.
- [30:48]
Joe Jensen
But then you guys decided to move out of that one.
- [30:51]
Dan McDonald
Yeah. So, you know, the next game plan was basically like, you know, my wife is not as crazy into real estate as I am. You know, she's not obsessive with it. Like me. She's not listening to podcasts all the time. And like, you know, for her it's like, cool, whatever, like, just tell me what we're doing. Like, but, you know, so she was like, all right, I'm down with one more duplex. You know, like one more duplex, and then I want to go the single family route like most other people. And I was like, all right, I can work with that. So, you know, obviously it was my goal to get that duplex pretty much as soon as I could. And, you know, we started looking and everything. And I knew that I wanted to make this next one a longer stay. I was like, all right, we both work from home. You know, we're not in great, like, comfortable situations for that. We still love the area, but, you know, if we buy a single family right now or whatever, it's just going to be ridiculous and we're going to feel so house poor. And so we were like, all right, let's go for size here. You know, let's. Let's go for space. And I know this is like, you know, some people would be like, oh, God, like, this is not the best idea or whatever, but the first one I was going for, like, is the best deal I could find. The second one I was going for the most comfortable I could get. So this is a four bed, two bath, two levels, and, you know, we have all that space to ourself, and then there's a two bed, one bath on the first floor. So the house is definitely much bigger, much more space. You know, we both have our own bedroom for an office. You know, we have two bathrooms. It's like, it's, it's a lot different, you know, it's. It's night and day or whatever. And, you know, my goal was, all right, like the next one, I'm thinking like at least a five year stint. You know, the first one I was like, I want to get out of it as soon as humanly possible so I can start collecting the cash flow. The second one I was like, I want, I want a place that I'm going to be really happy and excited to live in for 5 years but not destroy me in terms of, you know, paying five or six thousand dollars a month in mortgage, whatever. So, yeah, so it was definitely more of a let's go for comfort on the second one for sure. But it's still, I mean, it's still, you know, it's still a great neighborhood. It's still a solid house. It'll still sell, you know, pretty easily or whatever. And you know, it's like. And I still have a 4%, so I'll probably try to hold on to this one for as long as I can too. So.
- [33:23]
Joe Jensen
Yeah. And you, you, did you do a FHA or conventional on that one?
- [33:28]
Dan McDonald
Did an FHA on that one. Yeah. Nice.
- [33:30]
Joe Jensen
Yeah. That's awesome. And that's when you're in right now. And so yeah, in the past three years you went from zero doors to four doors by doing two duplex house hacks. Yep. And it's just like, it's so simple. But it's like it's such a big deal. I mean you like going from no doors, you know, three years ago. Now you own four doors. That's more than a door every year, you know what I mean? Because you did the dude, four doors in three years. And it's like, that's really, really cool. And just show goes to show, like this is so dual. And you did it while working full time, you know what I mean? While having your normal life. This wasn't some crazy thing that you, you know, retired and went all in and spent years studying and buying all this stuff. It's like you just did it while you were living your life.
- [34:21]
Dan McDonald
Yep.
- [34:22]
Joe Jensen
You know, so it's just like it goes to show that so many people can do it and like saying you didn't have to be living for free and you're not living for free now, I take it, you know, but it's subsidized. And the bigger thing is you're building your wealth. And anybody listens to me, they probably heard me say this a thousand times. Like, your number one fiscal responsibility is to build your asset portfolio, you know, and it doesn't have to be real estate. You can go start businesses and buy whatever, you know, but we talk real estate, you know, but you're building your asset portfolio, you know, which is the number one fiscal responsibility that you can be fulfilling, you know, and it's just so cool to see that happening on such a normal day to day lifestyle way that that isn't somebody's quitting their job and going all in and, and you know, flipping 100 houses. You know what I mean? It's like it doesn't have to be that.
- [35:12]
Dan McDonald
Yeah, totally.
- [35:14]
Joe Jensen
That's cool. So what, what's next for you then, Dan? What's the, what's the next move?
- [35:18]
Dan McDonald
Yeah, so like I said, you know, my, my wife definitely doesn't want to do a house hack. Another duplex doesn't mean I will stop buying duplexes. I love my area. I. I love my area. I believe so much in my area. I believe in the appreciation of my area. I don't believe you're going to get cash flow rich here, but you'll get equity rich, you know, and it's. It's, you know, I've. I've obvious. I've struggled with the idea of, like, you know, because everyone's obviously. Cash flow, cash flow, cash flow. You know, like, you want to quit your job and you want to, like, have, you know, 10k a month or whatever. And, like, I totally get that. And obviously I want to continue to build passive income and everything, but I. I do like my job. You know, I. I don't know necessarily when I'll stop liking it, but I do like my job. I do love this area. I do want to continue to focus in this area, and I just want to continue to invest and build. Build those assets. And, you know, I have looked, you know, I. I'll admit I totally get down every now and then about, like, the expense, you know, and I'm like, oh, man, like, should I be looking in, you know, some. Some different area or whatever? And this summer, like, I was looking in Augusta, Georgia, which is, like, super popular for, you know, single family rentals and stuff, and the birth strategy and everything, you know, like, I was looking and I was putting in offers for, like, $80,000 houses. And I was just, like, getting too obsessed with this idea of, like, cash flow, cash flow, cash flow. But then, you know, like, I'm running the numbers and stuff, and, like, things just aren't working that well. And I'm like, all right, I'm. I'm driving myself nuts here for, like, 100, $150 a month.
- [37:04]
Joe Jensen
Yeah.
- [37:06]
Dan McDonald
So I was like, all right, this isn't necessarily worth it for me. So what if I continue to really just focus in on here and still build assets and everything, but more focus here. So, like I said, you know, I'm an agent. I. I really want to just help everyone expand and grow here and, you know, house hack and figure that out. But I'm also looking into syndications, too. Working with one right now that sounds like it's going to go through, and that's on a campground, so that would be really cool and a really, really exciting first kind of step into syndication. I've always loved the idea of syndications, but I've never been super excited about a particular one. And then this campground one came up to Me, and I've. That's been kind of like in the back of my mind, like one of those dream deals. Like, I go camping every summer or whatever, and I'm. I always am sitting here thinking, like, man, this person's got to make bank off this. Like, this is just rented ground essentially. Like, literally you're not dealing with tenants and stuff. Like, you're, you're literally getting people in and out on the weekends. Yeah, you got RV people and stuff. But they, like, love it. They live by it. Like, they take care of it. They spruce up their campsite and all that stuff. So I'm really excited about that and sounds like that's going to go through, so that'll be kind of the next move there. But I don't think I'll ever say no to stop, you know, buying around me. Like, if something comes up and I can make it happen, I'm going to make it happen. But, you know, so.
- [38:38]
Joe Jensen
And this is a syndication. Like, you're not doing the syndication, you're just putting money into it.
- [38:43]
Dan McDonald
Yeah. So on this, I am an LP limited partner and stuff, and I know the GP and his team and everything. And so been building that relationship and stuff. And I do think I would love to explore that avenue at some point as the gp and, you know, that, that bigger responsibility but, you know, bigger cut of the pie too and everything. But, like, I think, you know, for now I want to see how the LP world goes and kind of get in, get in there and get a little understanding of that. So, you know, I wouldn't be surprised if someday, like, I, I, you know, I possibly go that avenue.
- [39:27]
Joe Jensen
I love it, man. And, and then just kind of to go back a little bit on the one that's a great option, like says, because I want to talk about living in an expensive market or investing in expensive market, like one that's a great option because they can do a lot of things, you know, and there's the, that's real passive income. Right. On the, the syndications, you know, if you have the money to put into it the, you know, obviously for me. And the downside on some syndications, and not all of them, but a lot of them, at the end of the day, you don't end up with any ownership on the asset. They refinance, pay you back, you don't own anything, which as long as you know that's what you're doing and if it aligns with your goals, that's fine. But going back to just being in an expensive market is that I think is the perfect market to do the house hack in. Because if I'm going to have to put 5% down, you know, putting 5% down on like an $80,000 home, that's really not very much. But like I said, you're not going to get much out of it. The overall like benefit of getting to you know, a 500, 700, a million dollar home for you know, your 20, 30, 40 grand or whatever and that thing goes up in value, it's like, it's so much better. And that's what I tell all my students. I'm like, hey, for the house hack, don't worry about cash flow, worry about depreciation because that's where you're going to get the most expensive asset for the least amount. Now when you got to go drop 25%, you're probably putting a lot more money into it and now you want to return on that money. Right, but so I actually think the way you're doing it plays in perfectly with my strategy is use the house hacks for, for the big appreciation moves, the getting the most expensive asset that's going to be self sufficient that you can and you know, save the 25, 20% downs for the, the cheaper ones so it's, it's more approachable and those will be ones you get cash flow on anyway, you know.
- [41:22]
Dan McDonald
Yeah, so I love.
- [41:26]
Joe Jensen
Dude. Well, it's super cool, it's doable. What, what if people want to follow you or reach out to you to learn more from you or if they're looking for an agent that understands house hacking in the Boston area. What's way to get in touch with you, Dan?
- [41:40]
Dan McDonald
Yeah, so I'm pretty active on social media. House Hack and Hustle is my tag on Instagram. Also the website househackinghustle.com but yeah, shoot me a DM, you know, whatever. Like I'm, I'm pretty good at getting back to everyone and yeah, I love connecting with people and definitely love connecting with people in the area too. And yeah, hopefully get some more house hackers out there.
- [42:08]
Joe Jensen
I love it, man. Do you have any kind of guiding principles or habits or any thoughts that you want to share before we go into our final four questions?
- [42:19]
Dan McDonald
Yeah, I think, I mean it kind of goes back to what I, you know, said originally with, with kind of coming from my dad and everything. It's, you know, it's not what you, not what you make, it's what you save. And I think for me now it's, it's shifted to it's not what you make, it's what you invest. And, you know, I think that's crucial for people. You know, like, I. I'm. I'm still not in a position where I'm, you know, I don't make a million dollars a year or anything, but I'm still investing regularly. I'm still letting. Letting that compound do its thing. I'm still, you know, trying to buy more duplexes and things like that. So, you know, I think that's really how, you know, you got to think about this stuff. If it's like, yeah, you know, like, let's. Let's get it together and, like, let's invest. And I mean, a lot of it will. You know, the nice thing about investing is a lot of it, like, does it for you when it just starts to build on top of each other.
- [43:14]
Joe Jensen
So I love that. It's not how much you make, it's how much you invest. You know, it's way, way better than how much to save. I love that.
- [43:22]
Dan McDonald
Exactly.
- [43:23]
Joe Jensen
All right, man, well, we're going to dive into our final four questions. All right, so question number one. Dan McDonald, what is your dream deal or what deal do you hope to tackle eventually?
- [43:34]
Dan McDonald
Yeah, I think it goes back to that campground, man. I think I want to really dip my toes in this. And if. If this aspect works a bit of the LP side, I think I would love to explore the GP side. And I love the idea of rv, RV parks, you know, and campgrounds, stuff like that. I love the idea of, you know, potentially owning a business. Like, for me, if I was in a position where, you know, maybe I reached financial independence, but I didn't want to necessarily just sit on a beach and do nothing all day. And I wanted to still, you know, challenge myself or something. Buying, like, one of those smaller businesses does sound really appealing to me and kind of, you know, building that structure and. And doing that stuff. So I'm gonna. I'm gonna go with campground on that one.
- [44:21]
Joe Jensen
I love it, man. Question number two. What's been one of the most pivotal books you've ever read?
- [44:28]
Dan McDonald
Yeah, I gotta go back, give a shout out to Craig Kerlop and the House hacking strategy. I'll say. There's so many good books out there. And the thing about all real estate books is, I find is that, like, it really just depends on when you read it, you know, because, yeah, at the end of the day, there's a lot of repetitive information. You know, there's only so many ways someone can say, buy Real estate or there's only so many ways someone can tell you to reach financial freedom. You know, it's. It becomes very repetitive. But when you find that book that's like, that you need at that point in life, it's. It's a game changer. And for me, that was house hacking strategy. Like, you know, called to me and said, all right, you live in an expensive market, so what do this, you know, and it just was a perfect kind of transition into thinking like that. So definitely, definitely got to give credit to that one.
- [45:17]
Joe Jensen
I love it. And what was the name of the book again?
- [45:20]
Dan McDonald
The House Hacking Strategy.
- [45:21]
Joe Jensen
The House Hacking Strategy. All right, question number three. What is the most expensive or interesting mistake you've made in real estate investing?
- [45:33]
Dan McDonald
Yeah. So, you know, I have been fairly fortunate, knock on wood, for the most part. But one of the things with the first one was we were, you know, getting blown out on offers we were making. We were struggling for, you know, months and stuff, and it seemed like it wasn't going to happen. And then we finally got this property, and we knew going into it there was a little water damage and. Or, yeah, water damage, a little mold in the basement, but also, you know, some leaks. So the inspector basically was like, you probably want to get, you know, a mold guy out here and figure out what that. That. That actually is. The problem actually is he's like, you know, from my professional standpoint, it can be one of two things. A very cheap fix, which is you just need to extend the. The gutters out there and get the water, you know, running away from the house. Or it could be a very expensive fix and you need to put in a drainage system. Because I was so eager and because I was literally not, like, not going to let this house go, I ignored his comments, I hope best on the, you know, well, we're buying it either.
- [46:40]
Joe Jensen
Way, so it doesn't matter. Let's go.
- [46:43]
Dan McDonald
Exactly. So, you know, the first day we get that house, like, I'm crawling under the deck, extending the, you know, those gutters out to run the water away. And that didn't do anything. And of course, it ended up being about $13,000 for mold removal put into sub pumps and a drainage system. And that was obviously a huge blow that really wasn't fun to pay. We didn't have the money to pay it off. You know, had to definitely grind and hustle for that. And honestly, that's not even where, like, the worst part of it is. The worst part of it is, is, you know, I. I thought I did my due diligence. I thought I interviewed enough companies and I would be in good shape. And I ended up actually going with the most expensive one because I kind of just assumed in this case I would get what I paid for and that I would really want. I really want a great system I'd never want to deal with. Yeah, that's not the case at all. I've been battling with them since August. Like, the molds coming back, like, they will not return my calls, they will not talk to me. It has been the worst customer experience I have ever had. And so, you know, I learned two things there. One, listen to the inspector and just spend the $800 or whatever it would have cost me to get, you know, a mold and water guy out there to really narrow it down. And then don't assume necessarily that, you know, more expensive always means better. Like, I definitely believe for the most part you get what you pay for. But that's not. Unfortunately, that's not always the case. And that one, I just felt kind of dumb being like, oh, man, I just spent so much money on this. And it's not perfect. Are you kidding me?
- [48:24]
Joe Jensen
Like, yeah, I found that it's like you get what you pay for if you go cheap, but it's just, it's. It's hit or miss if you go expensive. Like, you know, it's like always if you go cheap, you're like, you're gonna get. But you go expensive. A lot of times I've had the exact same experience. I bought a duplex with. It literally has like a spring well or something underneath the house. Like, they first thought it was like leaky pipes. No, it's literally like a self rising well that just has internal water. And we put sub pumps and run it off and we were still battling with it. So it's. That stuff's fun.
- [48:59]
Dan McDonald
Water's tough. Water stuff.
- [49:00]
Joe Jensen
Yeah. Stinks, and then it freezes and you got tenants slipping and it's. It's fun. Well, sweet Dan. Okay, last question. Then we'll let you go. What? What's the purpose of life, Dan McDonald.
- [49:14]
Dan McDonald
Yeah, for me, I mean, obviously that's probably one of the tougher questions you'll ever get asked in your life, but.
- [49:20]
Joe Jensen
You know, leave it easy on you, you know?
- [49:22]
Dan McDonald
Yeah, definitely not. You know, for me, it's legacy. And, you know, I don't mean in the sense I got to be the next LeBron James or anything and, and be out there in the public eye and, you know, winning championships or whatever. Legacy to me is. Is. Is the friends and family I leave behind and the, you know, the memories I leave with them and the thoughts that they have about me and stuff. And especially, you know, now that I have, you know, my first. First child on the way, I have a daughter on the way, like, it. It means all that much more to me to, you know, to make sure that, you know, that is. I give her the best life possible, that I am there for her. That, you know, it's. It's that. That is literally my protege. So, you know, it's just like, that's. That type of stuff to me is. Is just like, yeah, I wanna, you know, when I do leave this world, like, I want to definitely be missed and I want, you know, to have those great relationships.
- [50:18]
Joe Jensen
So. I love it, man. I love it. Without any further ado, we'll let you go, man. This is Joe Jensen signing off for the Real Estate Investing School podcast. From reminding you to keep hustling and keep house hacking.