Real Estate Investing School Podcast: Episode 117

Title: House Hack & Hustle with Dan McDonald
Date: December 25, 2023
Host: Joe Jensen
Guest: Dan McDonald (House Hacker, Marketing Research Consultant, Agent, “House Hack and Hustle”)

Episode Overview

In this episode, host Joe Jensen sits down with Dan McDonald, a self-described “small but mighty” house hacker investing just outside Boston, MA—one of the country’s most expensive and competitive real estate markets. Dan shares how he built a portfolio of duplexes through house hacking, what motivated him to leap into real estate (family, legacy, and missed opportunities), and offers practical, current insights for those considering house hacking—especially in high-cost areas. The conversation is rich with advice on financing strategies, lender relationships, handling market challenges, and finding personal success through customization and hustle.

Key Discussion Points and Insights

1. Dan’s Motivation and Personal Story

• Inspirational Roots: Dan’s passion for real estate stems from observing his father—who retired early through relentless saving, yet never invested in real estate. After his father’s passing, Dan committed to building wealth differently, focusing on investing rather than just saving.

  • Quote:

    “It’s not what you make, it’s what you save. And I think for me now, it's shifted to it's not what you make, it's what you invest.”
    —Dan McDonald [00:00, 42:18]

• Turning Point: Reading “The House Hacking Strategy” by former college peer Craig Curelop catalyzed Dan’s start.

2. House Hacking as a Realistic Entry Point

• Accessibility: House hacking works for everyone, from W2 employees to full-time investors, and can be customized for individual situations.

  • Quote:

    "It's so customizable to whatever your life is."
    —Joe Jensen [01:03]

• Financing Evolution: The discussion highlights recent shifts in loan products (especially for duplexes), with conventional loans now allowing for 5% down without the FHA’s self-sufficiency rule—a huge win for house hackers in expensive markets.

  • Quote:

    "Now you can do 5% down on duplexes... and drop that PMI later."
    —Joe Jensen [04:44]

3. Understanding Loans, PMI, and the Self-Sufficiency Rule

• Self-Sufficiency Rule (FHA): For FHA loans on triplexes or quads, 75% of rental income from other units must cover the mortgage/PMI to qualify—a tough hurdle in pricey areas. This often limits buyers to duplexes (where this rule does not apply).

  • Quote:

    "That's pretty challenging to do in an expensive market."
    —Dan McDonald [07:09]

• FHA vs Conventional PMI Nuances:

  • FHA: PMI stays for the life of the loan, requires refinancing to drop.
  • Conventional: PMI can be eliminated after enough equity is gained, via lender request and appraisal.

• Cost Illustration:

  • Dan’s PMI:

    "It was like 400 and something dollars a month. Yeah, you know, it was pushing 500."
    —Dan McDonald [10:27]

  • On his second duplex:

    "I'm still currently dealing with PMI in my second one... literally like over 600. And it's crazy."
    —Dan McDonald [10:54]

• Interest Rate Math: For Dan, sticking with an old FHA loan at 4% with PMI was better than refinancing at a higher rate to drop PMI.

4. Finding the Right Lender & Overcoming Conventional Wisdom

• Key Advice: Work with lenders who understand house hacking nuances. Some lenders rely on default rules (“You can’t do that!”), while resourceful ones find pathways (including exploiting gray areas and writing explanatory letters).

  • Quote:

    “There’s a loophole, essentially... if there’s some sort of conflict, something that requires you to move, then basically I just have to write a letter and they have to approve it... ‘You could say the house is haunted. You could say you want to be closer to work. You could say, whatever.’”
    —Dan McDonald [17:16, 17:41]

  • Notable Anecdote:
    Dan acquired two FHA duplexes within a hundred miles, despite prevailing belief it wasn’t possible, by refinancing into a conventional loan and penning a convincing letter about needing more space for a growing family.

• Lesson for Listeners:
  Don’t take “no” as the end. Policy knowledge and good relationships unlock opportunities.

  “Your number one fiscal responsibility is to build your asset portfolio.”
  —Joe Jensen [34:20]

5. House Hacking in Expensive Markets

• Mindset Shift: Many avoid or fear investing in high-cost areas due to sticker shock. Dan makes the case that high demand equals strong appreciation and quality tenants, and the low-percentage-down hacks make these neighborhoods accessible.

• Numbers Perspective:

  • First purchase: $500,000 duplex, $17,000 down.
  • Present value: Approx. $680,000–$690,000.
  • Result: Wealth and equity build much faster than on cheaper $80,000 houses in low-cost markets.
  • Quote:

    “People really get turned off around the expensive markets, but I try to think, why are they expensive?... People want to live here, people want to buy.”
    —Dan McDonald [21:08]

6. Deal Walkthroughs—Dan’s First & Second House Hacks

First Duplex:

• Purchased: May 2020, at pandemic onset.
• Strategy: Lived in one unit, rented the other.
• Financing: FHA, 3.5% down.
• Duration: 2 years.
• Refinance: Into 2.9% conventional loan after ~1 year.
• Financial Impact: Lived for ~$400/month each (split with spouse); previously paid $2,000–$2,400 in rent.
• Gain: ~$100,000+ equity in appreciation.
  • Quote:

    “For us to only have to spend $800 a month on our mortgage was like, whoa.”
    —Dan McDonald [28:28]

Second Duplex:

• Acquired: After moving out of first; bigger home for starting family, four bed/two bath owner’s unit.
• Financing: FHA, 3.5% down.
• Aim: Comfort and longer-term stay (at least 5 years), retaining affordability via rent subsidy.
• Current Status: Dan and wife occupy large unit, rent the other.

7. Portfolio Philosophy & Future Plans

• Balance Between Equity and Cash Flow:
  Dan prefers appreciation and long-term wealth (“equity rich”) over maximum monthly cash flow, especially given his career satisfaction and family plans.

  • Quote:

    “I don’t believe you’re gonna get cash-flow rich here, but you’ll get equity rich.”
    —Dan McDonald [35:18]

• Expanding Investment:

  • Favors his local area for long-term holds.
  • Explored syndication (in campgrounds/RV parks) as a Limited Partner.
  • Considers future opportunities as a GP (“General Partner”) in syndications and dreams of owning a campground business.

8. Notable Quotes and Memorable Moments

• On Legacy and Motivation:

  “Legacy to me is... the friends and family I leave behind and the memories I leave with them... Now that I have my first child on the way, it means all that much more.”
  —Dan McDonald [49:13]

• On House Hacking Mindset:

  “Don’t consider it a failure if you don’t necessarily live for free. It’s still such a huge tool.”
  —Dan McDonald [07:09]

• Advice on Navigating Lender Rules:

  "I talked to another lender, and he knew all the tricks and tips to essentially disregard that rule [on FHA loans]."
  —Dan McDonald [15:55]

Timestamps for Important Segments

• Dan’s Motivation/Family Story: [00:00–04:44; 42:18]
• Intro to House Hacking & Lending Changes: [04:44–09:52]
• Explaining FHA & PMI: [09:52–11:30]
• Finding the Right Lender & Rule-Bending: [13:35–17:41]
• Buying in Expensive Markets: [21:08–24:05]
• First Duplex Deal Walkthrough: [26:35–28:28]
• Second Duplex & Living Choices: [30:50–33:23]
• Portfolio Growth & Future Plans: [35:18–39:26]
• Legacy and Philosophy: [49:13]

Guidance and Lessons

Guiding Principle

“It’s not what you make, it’s what you invest.” [00:00, 42:18]

Books Mentioned

• “The House Hacking Strategy” — Craig Curelop

Advice for Listeners

• Customization, persistence, and creative financing make wealth-building possible even in “expensive” markets.
• Build strong lender (and agent) relationships—pick those who understand your specific investment strategy.
• Real estate investing, especially house hacking, can be done alongside a traditional W2 job.
• Focus on growing your asset base, not just cash flow.

How to Connect with Dan

• Instagram: @househackandhustle
• Website: househackinghustle.com

Final Reflections

Dan McDonald’s journey epitomizes accessible, grounded real estate investing: you don’t have to quit your day job, live in a cheap market, or do dozens of deals to build meaningful wealth. Through hustle, resourcefulness, and a willingness to learn (especially about lending and policy tweaks), he has turned house hacking into a platform for both financial and personal legacy. The philosophy: Invest intentionally—because what you invest, not just what you make or save, defines your long-term security and freedom.