Podcast Summary: Real Estate Investing School Podcast

Episode 139: "Rent By The Room: Not Only for Students"

Guest: Justin Morgan
Host: Joe Jensen
Date: March 11, 2024

Overview

In this insightful episode, Joe Jensen interviews Justin Morgan—a seasoned real estate investor, father, triathlete, and advocate for intentional living—about his 20+ year journey in real estate. The discussion spans Justin's “origin stories,” reflections on past mistakes (notably during the 2008 downturn), the evolution of his investment strategy, and why “rent by the room” or co-living is a powerful model in today's market. Justin's focus on family, resilience, and actionable financial education offers a wealth of lessons for both novice and experienced investors.

Key Discussion Points & Insights

Justin’s Path into Real Estate

• First Real Estate Experience (00:37)

  • As a 19-year-old LDS missionary in California, Justin connected a local family with an investor, earning an unexpected $4,000 commission for simply “being a connector.”
  • Quote: “Take the assets you have. And all I had at 19 years old was I was a connector... and I made a little bit of money.” (Justin, 02:47)

• Transition from Aviation to Real Estate (03:31–06:53)

  • While in aviation school, Justin spotted real estate opportunities, notably making $21,000 by selling his position in line for a condo—a “lightbulb” moment that demonstrated the power of creative deal-making.
  • Quote: “My fellow students, my classmates, were graduating ... at 21, 22,000 a year. And I could make this in one real estate deal.” (Justin, 05:39)

Early Strategies, Mistakes, and Lessons

• Creative Finance Beginnings (08:48–10:43)

  • Early portfolio built quickly using lease options, seller finance, and subject-to deals, growing to 12 homes by 2009—but “over-leveraged, out of money,” and ultimately lost those properties during the downturn.
  • Quote: “Between those years of 05 and 09, before the market crashed, we collected 12 houses ... which subsequently we lost between 2009 and 2011 because we didn’t know a lot of things that we know today.” (Justin, 08:48)

• Key Lessons from the 2008 Crash (11:32–12:52)

  • Focus on buying at a discount and for cash flow—not speculation or appreciation.
  • Quote: “Buy at a discount and buy with cash flow, right? If you buy at a discount, you can weather a market correction.” (Justin, 11:32)
  • Quote: “A lot of investors, even today, I see them gambling ... and I think that very, very foolish.” (Justin, 12:52)
  • Immediate negative equity risks due to commissions and costs—“You're 40 grand upside down, day one, if you had to get out of it.” (12:52)

Creating Deals in Today’s Market

• Deals Aren’t Found—They’re Created (15:28–18:16)

  • The most successful investors are those who know how to create deals through education, due diligence, and recognizing value, not just waiting for bargains to appear.
  • Quote: “Deals are not found. Deals are created.” (Justin, 15:28)
  • Emphasizes real-world analogies: “If you walk into any store, they have a sale ... you recognize that that’s a deal. How was that created? Because you know what its retail value is.” (Justin, 17:54)

• Taking Action & Risk Management (18:32–22:26)

  • Encourages new investors to get properties under contract (with due diligence periods) and let the marketplace and experts (e.g., lenders, buyers) help “vet” their deals.
  • Quote: “People get deer in the headlights and they don't take the action to actually put stuff under contract when there's nothing at risk to do that.” (Justin, 18:32)

• Rules of Thumb for Different Strategies (23:16–25:30)

  • Flips: Aim to make at least 10% of after-repair value (ARV) due to higher risk than being an agent.
  • Wholesales: Okay to make half of what you would on a flip; time and risk much lower.
  • Holding: Only on properties that make sense for cash flow—especially in the current market.

Asset Classes and Market Adaptation

• Lessons from Short-Term Rentals (26:32–29:51)

  • Sold off entire nightly/short-term rental portfolio after COVID exposed volatility and regulation risk.
  • Quote: “By the end of 2022, I had sold about $5 million worth of nightly rental portfolio... and it’s a good thing overall.” (Justin, 27:45)

• Why Rent-By-the-Room Makes Sense Now (29:51–33:15)

  • Pivoted to “co-living” properties (“rent by the room”) due to strong cash flow potential in an affordability crisis, higher cap rates, and market mismatch.
  • Quote: “It's an asset that does cash flow. It’s an asset that does make sense right now with our affordability crisis.” (Justin, 29:57)
  • Not just for students: Mature professionals and others seeking affordable, flexible living. Modern “shared economy” makes this model mainstream (Uber, Airbnb, etc.).

Personal Story: Real Estate as a Tool for Life and Family

• Life-Changing Family Experience (33:17–36:53)

  • In 2022, Justin’s son was diagnosed with childhood leukemia. Real estate gave him the freedom to be present—he was “the only dad” on the cancer ward for weeks.
  • Quote: “Real estate provided cash and cash flow that allowed me to take almost a year off and be with my family.” (Justin, 34:15)
  • This experience catalyzed his “Investor Dads” movement—using real estate as a means to prioritize family and service, not just material success.

• Big Picture Outlook

  • Only industry where you can have “now money, massive money, and passive money”—income that serves your current needs, future dreams, and offers freedom to choose your seasons.
  • Quote: “It’s the only business that allows you to make money in all those areas ... and then you’re making passive money which allows you to get out of the rat race…” (Justin, 35:37)

Final Reflections: Financial Education & Taking Action

• Education and Action (39:30–43:03)

  • Real estate’s secret weapon: tax advantages especially for W2 earners—“merely understanding financial education” is life-changing.
  • Quote: “Just merely understanding financial education. If you're a W2 employee ... there's ways and there's tax code ... that's one of the biggest stealers of wealth for most people.” (Justin, 39:50)
  • Don’t “major in minor things”—replace trivial obsessions (sports, Hollywood) with financial learning.
  • Quote/Mantra: “Start majoring in major things, get out of majoring in minor things. It doesn’t serve your life and it doesn’t move the needle forward for you.” (Justin, 43:21)

• Partner Up to Learn and Grow (43:43–44:38)

  • For those starting out: lock up a deal and reach out to more experienced partners—learn by doing and through collaboration.
  • Quote: “Real estate is such a cool way to be able to partner with people ... that’s a great way to learn, to learn safely, to learn smart.” (Joe, 43:43)

Notable Quotes & Memorable Moments

• “Deals are not found. Deals are created.” – Justin Morgan (15:28)
• “A lot of investors, even today, I see them gambling... I think that [is] very, very foolish.” – Justin Morgan (12:52)
• “My passion is fatherhood first and foremost and what real estate can do to serve fathers and to serve me.” – Justin Morgan (35:11)
• “You're not promised tomorrow. Whether it's... an accident or cancer or a COVID or whatever, it's like, go make the best of it right now.” – Joe Jensen (54:37)
• “You don’t need to be able to speak money more than football. Make sure that’s the minor and this is the major...” – Joe Jensen (43:09)

Timestamps for Key Segments

• 00:37 – Justin’s “origin story”: Early real estate deal as a missionary
• 03:31 – Aviation to real estate; first big flip “lightbulb” moment
• 08:48 – Creative finance; building & losing a portfolio pre-2008
• 11:32 – How to avoid 2008 mistakes: buy at a discount, buy for cash flow
• 15:28 – Creating deals vs. finding them
• 23:16 – Justin’s flip/wholesale/hold rules of thumb
• 26:32 – Selling short-term rentals, switching market strategies
• 29:51 – The new co-living/rent-by-the-room model
• 33:17 – Family, cancer, and the real purpose of wealth/freedom
• 39:30 – Real estate as the greatest wealth-building and tax tool
• 43:09 – The importance of financial literacy (“major in major things”)
• 43:43 – Collaboration and learning by partnering

Takeaways for Listeners

• Focus on Fundamentals: Don’t gamble on appreciation; always seek cash flow and buy at a discount.
• Deals Are Made, Not Found: Your education, network, and willingness to act are your biggest tools.
• Adapt with the Market: Short-term rentals can be volatile; rent-by-the-room/co-living is a proven cash flow strategy for today’s affordability crisis.
• Prioritize What Matters: Use real estate as a vehicle to prioritize family, time, and service.
• Financial Education Is Key: Learning the language of money and the tax code is more important than many “minor” things we spend time on.
• Take Action with Low Risk: Make offers, use the due diligence window, and don’t fear learning through doing.
• Partnership Multiplies Success: Don’t hesitate to partner up, especially in your early deals.

Connect with Justin Morgan

• [Facebook & Instagram links will be in show notes]
• Focus: Rent-by-the-room/co-living model, mentoring, and networking

Host’s Closing Reminder:
“Learn the language of money.” – Joe Jensen (55:14)

This summary captures the depth, practical wisdom, and personal authenticity of Justin Morgan’s journey—making it a compelling listen for anyone seeking to build not just wealth, but a life of intentional impact through real estate.