Real Estate Rookie: Making $8K/Month and Quitting His W2 with 2025’s Ultimate Cash Flow Strategy

Hosted by BiggerPockets featuring guest Miller McSwain

Introduction

In the April 23, 2025, episode of Real Estate Rookie, hosts Ashley Kerr and Tony Jarrett Robinson welcome back Miller McSwain, a seasoned real estate investor who successfully transitioned from a traditional W-2 job to managing a lucrative co-living portfolio. This episode delves deep into Miller’s cash flow strategies, market selection, property management, and the nuances of scaling a co-living investment approach.

Guest Background and Portfolio Evolution

Ashley Kerr kickstarts the conversation by highlighting Miller's proven strategies in maximizing cash flow through co-living and house hacking. Miller shares his journey since his last appearance, emphasizing a strategic pause in acquisitions to optimize existing properties.

Miller McSwain [01:24]:
"We haven't bought anything in the last three or four months. Instead, we've been focusing on optimizing what we have to ensure everything is up to speed."

Miller explains that while they remain under contract for new purchases, the primary focus has been on enhancing income from current properties by converting unused spaces into additional bedrooms, thereby increasing overall profitability.

Authorship and Contributions to BiggerPockets

Miller announces the completion of his co-living book, set to release through BiggerPockets. This publication aims to provide comprehensive insights into high cash flow strategies within the co-living sector.

Miller McSwain [02:29]:
"I've written the Co Living book now and it is coming out with Bigger Pockets. Visit colivingbook.com for a 25% off deal."

The Rise of Co Living: Trends and Regulatory Landscape

Tony Robinson poses a critical question about co-living being a burgeoning trend in 2025. Miller concurs, positioning co-living as the latest in a series of cash flow strategies that gain popularity over time.

Miller McSwain [03:12]:
"Co living is definitely the hot one right now, right after short-term and mid-term rentals."

Miller discusses the regulatory environment, contrasting co-living with short-term rentals. While short-term rentals face increasing restrictions in urban areas due to their impact on housing affordability, co-living benefits from more favorable regulations as it offers cheaper housing options for locals.

Market Selection for Co Living

Miller outlines critical factors in selecting profitable markets for co-living investments:

1. Regulations: Assessing local laws to ensure co-living is permitted and understanding any limitations on the number of unrelated tenants.

   Miller McSwain [06:06]:
   "Cities like Washington, Oregon, and Colorado have passed statewide legislation preventing cities from setting restrictive regulations on co-living."

2. Supply and Demand: Evaluating the rental affordability by comparing room rents to local incomes. High rental unaffordability indicates a strong demand for cheaper housing solutions like co-living.

   Miller McSwain [09:28]:
   "Look at rental unaffordability and the room rent to price ratio to gauge demand and profitability."

3. Population Growth: Using population growth as a predictor for future property value and rent increases, ensuring long-term investment viability.

   Miller McSwain [10:32]:
   "Population growth infers what property values and rents could do in the future, making it a vital indicator for market selection."

Property Acquisition and Renovations

Miller emphasizes the importance of partnering with real estate agents knowledgeable in co-living. He advises leveraging BiggerPockets’ community resources to find specialized agents.

Miller McSwain [15:18]:
"A good real estate agent who knows about co living can significantly aid in finding and optimizing properties."

Key Property Features for Co Living:

1. Ample Parking: Essential to prevent neighborhood friction and comply with HOA or city regulations. Larger lots or properties with multiple driveways are preferred.

   Miller McSwain [19:15]:
   "You definitely do want to look for ample parking to avoid neighbor disputes and maintain a good relationship with the community."

2. Square Footage: Larger properties offer more flexibility in adding bedrooms without being constrained by existing layouts.

   Miller McSwain [19:55]:
   "The bigger the property, the more opportunity there is to add bedrooms and increase efficiency."

3. Room Conversion: Converting unused spaces like basements or garages into bedrooms enhances income potential.

   Miller McSwain [25:18]:
   "Converting garages to bedrooms without sacrificing parking can significantly boost cash flow."

Renovation Best Practices:

• Permits and Codes: Ensuring all modifications adhere to local building codes, including adding necessary egress points and ensuring electrical and lighting standards.

  Miller McSwain [23:05]:
  "Make sure you have two forms of egress and meet all safety and code requirements when adding bedrooms."

• Community Spaces: Retaining communal areas like living rooms to foster a sense of community among tenants.

  Miller McSwain [28:41]:
  "We always keep a living room and add features like porches to encourage community interaction."

Managing Tenants and Building Community

Building a harmonious living environment is pivotal in co-living setups. Miller identifies two "holy grails" for success:

1. Screening Tenants: Rigorous screening processes, including rental references and community interactions, ensure compatibility among tenants.

   Miller McSwain [41:52]:
   "Screen well by checking rental references and conducting vibe checks during tours to maintain household quality."

2. Fostering Community: Organizing events and providing communal spaces helps tenants build relationships, reducing conflicts and enhancing tenant retention.

   Miller McSwain [28:41]:
   "Community events like bowling nights significantly reduce tenant conflicts and improve management efficiency."

Financials and Cash Flow Management

Miller discusses the financial aspects of co-living, highlighting the importance of detailed financial analysis and leveraging tools like BiggerPockets’ calculator.

Miller McSwain [31:33]:
"Use the Bigger Pockets calculator to ensure you don’t overlook any financial inputs when evaluating a property."

Key Financial Strategies:

• Rent Calculation: Utilizing platforms like colivingpro.io to determine competitive room rents based on local data.

  Miller McSwain [31:33]:
  "Use colivingpro.io rent calculator or check listings on Zillow and Facebook Marketplace to determine appropriate room rents."

• Managing Expenses: Accounting for utilities, cleaning services, and shared supplies, which are typically covered by the landlord in co-living arrangements.

  Miller McSwain [31:33]:
  "You will be paying for utilities and possibly a cleaner, but the increased income from room rents justifies these expenses."

Cash Flow Example:

Miller shares an example from Colorado Springs, illustrating substantial cash flow post-renovation:

Miller McSwain [33:26]:
"We invested around $12K-$15K in renovations and now produce approximately $2,000 a month in cash flow from an eight-bedroom house."

He emphasizes the high cash-on-cash returns achievable through strategic investments and renovations, even in higher interest rate environments.

Tenant Retention and Lease Management

Miller highlights strategies to enhance tenant retention, such as offering lease options that incentivize longer stays.

Miller McSwain [39:38]:
"Most tenants opt for 12-month leases with small discounts, ensuring steady occupancy and reducing vacancy periods."

By providing flexible lease terms and incentives for longer commitments, Miller minimizes turnover and maintains consistent cash flow.

Conclusion and Key Takeaways

Miller McSwain’s insights offer a comprehensive blueprint for aspiring real estate investors looking to delve into co-living. Key takeaways include:

• Market Selection: Prioritize markets with favorable regulations, high rental unaffordability, and strong population growth.
• Property Optimization: Focus on properties with ample space and parking, and strategically convert unused areas into income-generating bedrooms.
• Tenant Management: Implement rigorous screening processes and foster a strong sense of community to enhance tenant satisfaction and retention.
• Financial Vigilance: Use specialized tools to accurately assess financial viability and manage expenses to maximize cash flow.

Miller’s approach underscores the potential of co-living as a robust cash flow strategy, equally balancing profitability with community building.

Connect with Miller McSwain

For more insights and to access Miller’s upcoming co-living book, visit colivingbook.com for a 25% discount. You can also reach out to Miller directly on Instagram @MillerMcSwain for personalized advice and further information.

Thank you for joining this detailed exploration of co-living strategies with Miller McSwain on the Real Estate Rookie podcast. Tune in next time for more actionable real estate investing tips and success stories.