Getting Started in House Hacking
Bryce Platt discusses house hacking, including his strategy for finding houses and properties that meet his criteria for a good deal, his experience living with his tenants, and how he financed his real estate investments early in his pharmacy career.
About Today’s Guest
Bryce Platt is a healthcare industry pharmacist that uses house hacking to invest in real estate. He now has enough rental income to be considered lean FI.
Summary
Bryce Platt joins Nate and David to discuss his experience with house hacking. Bryce shares the benefits of house hacking, his experience being a landlord in a multi-room condo who lives with his tenants, how he finances his real estate investments now as well as his plans for investing in the future.
Bryce shares that he first learned about house hacking through listening to the YFP Podcast, specifically the episode that features Craig Curelop from Bigger Pockets. After hearing the podcast, Bryce knew that he wanted to learn more about house hacking and start as soon as possible. He purchased an investment property, a condo, and moved in.
House hacking in a condo with multiple rooms and bathrooms means that Bryce is a roommate to his tenants. He finds that it is easier to manage the property because he currently lives and works in the space. Bryce shares that his tenants are working professionals. Because his tenants know that he is the owner, Bryce has never had any issues with tenants. He also shared that he had not yet had any vacancies with his house hacking.
In the future, Bryce hopes to do at least one more house hack, possibly more, funded by the money he has saved and earned to live in his own home.
Mentioned on the Show
- YFP 130: House Hacking Your Way to Financial Freedom
- YFP Real Estate Investing 03: Running the Rental Numbers with Blake and Zac
- Learn More About IBERIABANK/First Horizon’s Pharmacist Home Loan and Start the Pre-Approval Process
- Cozy: Free property management software
- Apartments.com
- Todoist: The to do list to organize work & life
- Getting Things Done: The Art of Stress-Free Productivity by David Allen
- Your Financial Pharmacist
- Bigger Pockets
- Identity-Based Habits: How to Actually Stick to Your Goals This Year by James Clear
- Connect with Bryce Platt on LinkedIn
- Join the YFP Real Estate Investing Facebook Group
- YFP Real Estate Investing
Episode Transcript
Nate Hedrick: Hey, David, how’s it going?
David Bright: Hey, good, thanks, man. How are you doing?
Nate Hedrick: I’m great. I just got back from a nice long week of vacation and excited about diving back in to more podcasts.
David Bright: Yeah, and this was a fun one. This is a house hacking episode, which I know has been something we’ve been talking a lot about. I know that at one point, you said that if you had it to do over again, you would have definitely done this even as a college student or something, right?
Nate Hedrick: If only I had known what house hacking was. I feel like it would have been the perfect fit.
David Bright: Yeah. When I was going through school, I had a buddy who bought a house and rented it out. So like before I knew this was a thing, before I was thinking really anything about real estate investing, thinking back on it, I was a tenant in a house hack where I was renting a room from a buddy. So I — and knowing that he’s still got that house now, it’s still an investment property for him, it’s just really cool to see that kind of on the back side and how not only does that create a great opportunity at the time, but it can even create a long-term rental. There’s just so many doors that open as a house hack environment.
Nate Hedrick: Yeah, it’s such a great way to get started investing because the barrier to entry is so much lower and again, I think that’s exactly what this episode is going to be about here today with Bryce in terms of how he looked at his property and was buying his first house and pretty new pharmacist and said, I can either do this one way or I can go house hacking and really see how that grows my investing career. So again, I think something that I’m glad to bring to our audience because it’s something I wish I had known about ahead of time.
David Bright: Yeah, and I know that it’ll get defined in the episode as well, but really the general concept is buying a house and then renting out either rooms within that house or if you’re buying a multi-unit, renting out other units within that duplex or triplex or fourplex, but in some way then drastically reducing your living expenses because other people are essentially paying your mortgage, again, creating that long-term rental opportunity, just tons of opportunity there. And I think there’s — one of the things that is helpful about what Bryce shares in this is that it’s not all unicorns and rainbows. Like he did also share kind of some of the downsides of things that can go wrong, right?
Nate Hedrick: Definitely. Yeah, that comes out pretty clearly in this episode, which I think is good. It shows that, like you said, you need to prepare for those unexpected expenses. We’ve got a great part in there about having a good insurance policy and getting that done before you close, right? That’s not an afterthought. You need to make sure that it’s taken care of ahead of time. And so again, I think an all-encompassing episode in that regard.
David Bright: Yeah. And for those that are concerned about that — because I think we’ve all recognized that pharmacists are inherently kind of risk-averse and safety-oriented, which I think is a good thing. I think the insurance question has come up quite a bit, so we’re about four or five episodes out we hope from having a insurance agent on the podcast as well to talk about some of that, about finding an agent, how to work with an agent, an insurance agent, to make sure that you’re also covered there so this can be done as safely as possible.
Nate Hedrick: Yep. That’s great stuff. And I think, again, for those that have not heard Bryce before, this is actually Bryce’s second time on the YFP show. He was on the main show back on Episode 160, a pharmacist down in North Carolina, and again, pharmacist turned real estate investor. And it’s quick to see — it’s interesting to see how quick he was able to make that jump and that distinction. So hope you guys enjoy this one.
Nate Hedrick: Hey, Bryce, welcome to the show.
Bryce Platt: Hey, Nate. Hey, David. It’s a pleasure to be here.
Nate Hedrick: Yeah, it’s great to have you back. We had you back on Episode 160 of the YFP main show. But we knew we wanted to have you back as a discussion about house hacking continued and we really dove into how to evaluate that first home purchase and what you did for that first house purchase. So before we dive into that, though, can you please tell everybody that didn’t hear Episode 160 a little bit about your pharmacy story and maybe some updates that have taken since that time?
Bryce Platt: Alright. Yeah, I did my PharmD at the University of Kansas and then I moved to a post-doc fellowship in North Carolina with Omnicell. And after that year, I decided to stay on with Omnicell and moved from more of a clinical-focused role to a payor program-focused role. We started managing payor programs from our payor partners using our 30,000-pharmacy network. And an update from that: As of about a month ago, I have been notified I’m laid off due to losing one of our major contracts. So if anyone has interest in hiring a pharmacist —
Nate Hedrick: I love the shameless plug, yeah.
Bryce Platt: Yeah, well, that’s what I’m here for. I’m here to network and market myself.
Nate Hedrick: Perfect. We’ll put your CV in the top of the show notes.
Bryce Platt: Right.
David Bright: OK. And Bryce, tell us a little bit about your real estate journey as well. What have you been doing and kind of where are you going?
Bryce Platt: Sure. My strategy that I use is house hacking. And house hacking is when you’re occupying a property, getting all the benefits of the loan and low down payment that come with occupying a property. So this could be anywhere from buying a duplex or a triplex where you have multiple units so you have your own unit to yourself all the way to you buy a house or, in my case, a condo that has multiple rooms and bathrooms that you can rent out individually. And so yes, I have roommate tenants, but it also works a lot better financially because you can rent out a lot more per room than you typically can for a whole property.
David Bright: So this is a great strategy, something I know we’ve been talking about on the podcast here and there. And I’m curious for you, where did you first hear about this and what kind of got you motivated to look into house hacking?
Bryce Platt: Something that I mentioned in our last episode, Episode 160, was I first heard about real estate and house hacking from this podcast. I heard when a Tim had Craig Curelop on from Bigger Pockets, and he was pitching his new book, “House Hacking Strategy.” And I was maybe five or six months out from the end of my lease at the time. And I was like, this sounds like an amazing opportunity. I should get this book, and I did. And that book was enough to fully explain the process to me enough to feel comfortable enough to jump into it and actually do it. From that time in it was mid-February when I heard that podcast with Tim to closing on a property June 4 of 2020. So it only took a few months, but the longest time was really just waiting for the normal closing process, that 30-45 days after you’ve had the purchase accepted and you’re just waiting on the loan to be written up and everything to get through.
Nate Hedrick: Yeah, that’s awesome, Bryce. That’s what I really liked about your story and something that really resonated back in Episode 160 was that, you know, you took the idea of house hacking and immediately jumped into — within a couple of months — actually doing it. And I think your process was pretty unique because you’re talking about a condo. It’s not the traditional duplex, triplex, or quad. You’re actually having a central living space and then renting out individual rooms, which I thought was a fantastic and unique way to look at house hacking. So definitely wanted to make sure we shared that story. And one of the other things that I think is unique is that you actually came to me early on and said, ‘Nate, I want to do this. Help me find a real estate agent.’ And so you worked through the concierge service to get connected with a really great agent. And so can we walk through that really quickly too for our listeners because, you know, it is something we try to promote, something that we’re trying to make sure that our audience is aware of that pharmacists can tap into that? So walk us through that concierge service and how that went for you.
Bryce Platt: Sure. So I had read on the YFP page that there was a concierge service, and I, being completely green, had no idea really how to get started. So I was like a pharmacist that knows real estate that can help me find a good investing agent. So I called and set up a time with you to discuss what I was interested in. It took less than 30 minutes to discuss, you know, my strategy, what I plan to do, house hacking, the investment-focused real estate agent, and you were able to find one in my area for me and get him in contact with me. And I’ve been with him the last little over a year now, and he’s helped me with my next property as well.
Nate Hedrick: Yeah, Adam has been great to work with from my side as well. So it’s been really fun, and I’m glad he’s been working out for you so that’s awesome.
Bryce Platt: Yeah, he’s definitely one of the top agents. He’s constantly helping people close on properties, which in this market, is an impressive thing to be able to say.
David Bright: Well, and I’d say not only is that impressive just to get deals done in this, in this kind of crazy housing market right now, but you mentioned something, an investing agent or an agent that knows investing. So I wonder if Bryce, both you and Nate could talk just for a minute on what makes an agent different from an investing standpoint and what things does an agent need to know that’s different from what an agent would otherwise typically specialize in.
Bryce Platt: I can speak to it first. I really wanted an agent that not only invests themselves, so they kind of know personally what is good to see in a rental. We aren’t looking for chandeliers hanging from the ceiling, we’re wanting our durable flooring, maybe some granite countertops if they’re particularly durable or really increase the rental price you can get, not the extra luxury stuff, the more durable, put someone in there and it can handle having kids, dogs, people being there for multiple years. So Adam has multiple properties and he is currently investing in this market as well, so he knows what we’re looking for as far as investors.
Nate Hedrick: Yeah, and I would just add that all the things you mentioned are spot-on, what we look for in a good investor-friendly agent. The other thing that’s really important to me too is someone that’s able to move quickly. A lot of times, investors need to move on a deal very fast. They might write multiple offers on several different deals, so you’ve got to have somebody that is ready and willing to work with that, right, and be OK with the idea of OK, we wrote three offers on three different houses and none of them worked out but onto the next one. And if you don’t have an agent that’s ready to move and pivot like that, it’s usually not going to work out. So all things that we look for in a good investor-friendly agent.
Bryce Platt: One point there, something that Adam did mention to me is a lot of agents aren’t really open to throwing out those low ball offers because it’s almost embarrassing. And he’s someone that’s not afraid to do that. So you need an agent that isn’t afraid to, you know, even in this market, if they’re asking for $1 million, you have to be willing to throw out that $700,000 offer.
Nate Hedrick: Yeah, absolutely. That’s great. And that actually leads me to my next question, Bryce. So talk to me a little bit about evaluating that purchase. So you’ve gone through one property, you’re working through number two. But let’s dive into that first property quickly. How did you do the math on that? How did you know that it was going to meet your criteria for a house hack? Can you walk us through that briefly?
Bryce Platt: Sure. The numbers that I look at are really cap rate and cash-on-cash return with cap rate being the more important one. And I don’t necessarily want to share all the math that goes into that, but essentially I look at the potential gross rents, looking around the area to make sure what those should be. I calculate in a 5% vacancy, a 5% maintenance, 5% cap ex, and then 10% property management. So all that adds up to 25%, which currently I’m the property manager, so I get to keep that. But I still calculate those numbers in. And then taking out any fixed expenses like the HOA or if in this case I’m paying the utilities and I just include in the rent and those kind of things. And those all roll up into what you can calculate for your cap rate and your cash-on-cash return. So what I look for typically is at least a 5% cap rate. And the properties I’ve looked at, most of them do not make that number. And that’s the reason that you have a lot. But being able to know your numbers helps a lot with being able to narrow down the properties. You’re not looking at the market that has 300 properties and you’re like, well, where do I even start? You can really narrow down a lot easier. And the cash-on-cash I find is less important, but it’s still good to know what I’m getting on the return for my money. But that’s just really dependent on your financing, and so you don’t want to — you don’t want to over-leverage or have too much focus on the mortgage you’re getting and not enough on the actual property. Is the actual property good in itself? And that’s the cap rate number.
David Bright: Some of these terms I know a lot of the cap ex and repair budget and things like that, and I know those are things we’ve covered in previous episodes. I know if you go back to Episode 03 with Blake and Zac, they go through those, running the numbers. I know we’ve hit some of those in other episodes as well. Cap rate is a term we haven’t talked as much about. Could you help us with cap rate a little bit for those that may not be as familiar?
Bryce Platt: Cap rate is capitalization rate. And that is essentially your operating income, your annual gross rent, your 5% vacancy that I calculate in, and then any of your other weird incomes if you have a pet deposit or a pet income or laundry. And then you divide that by your overhead costs — or you subtract your overhead costs, and that gives you your operating income, your net operating income. And then you can divide that by the property value so you know essentially how much income are you getting for the value of the property. Are you getting enough money on the value for the property? And most people think around a 5% capitalization rate because that is comparable to the market, the stock market. You have your 5% or so on your money. And then I think most people assume a 3% or so appreciation per year on average, which is recently very conservative but is the number that you use. So if you have a 5% capitalization rate from your actual cash you’re getting with a 3% appreciation, you’re essentially getting an 8% return on your investment. And that is comparable to the stock market. And most people will shoot for a little bit higher than that because you’re getting a better appreciation or you’re able to control the overhead costs of your personal investment more than you are a stock, but it also takes more work. So you’re trading those things off. You’re able to get a little more return, but it takes a little more work.
David Bright: OK, perfect. And I know that those cap rates can change based on different markets, based on different asset classes, but you’ve kind of found I think what’s important for people to hear is that you’ve identified the number that makes a property fit for you. You’ve figured that out in your market for your investing goals, and that just really helps, like you said, when there’s a bunch of properties out there, what do I offer on them? How do I narrow the field? You’ve come up with some really objective metrics and some math that’s helped you to define that, which I think is, again, just super helpful.
Bryce Platt: Right. And that, I have an Excel spreadsheet that I just put the numbers into, like what my rent is going to be, what the insurance and taxes are estimated to be, and then it calculates out all of the percentages, like 5% vacancy and the 10% property management and such. And then I can throw in my — what I estimate my mortgage and interest to be. So that calculates out everything for me, and I don’t have to think too hard about it.
David Bright: Yeah, and tools like that can be really helpful when comparing houses that don’t seem very comparable.
Bryce Platt: Right.
David Bright: Just to figure out is this two-story in this part of town better than this ranch in this part of town? Or those kind of considerations there. Just getting it down to very objective and comparable math, which is super helpful. And speaking of that math, how do you work towards saving up the down payment, the rehab costs, emergency funds, all those things, particularly at an earlier stage in your pharmacy career, other kind of competing needs. How is it that you’re able to afford one and now two investment properties this early in your career?
Bryce Platt: Well, the first one was the harder one. But also, the financing was the easier part. So as a first-time home buyer, I had the ability to only put down 3%, and I used the IBERIABANK mortgage that has the pharmacist loan. So I have to put down 3% and I don’t have to pay the private mortgage insurance extra on top of that, which is normally what happens if you pay less than 20% down. That little down is like less than even a pretty old used car, and so you’re — for the price of a used car, you’re able to get a property that not only appreciates but you have people paying down the loan for you. As far as the next down payment and any rehab costs and my emergency fund, etc., the house hacking has made my personal living costs extremely low. I don’t pay — actually, I get paid to live here right now.
Nate Hedrick: That’s awesome.
Bryce Platt: Yeah. And when I move out, I’ll be getting all of that extra — the extra room I’m renting out will be pure profit to my bottom line. So that’s essentially how I did it. The bigger answer is I put all of my money into these extra stock purchase plans that my company had. Part of my salary was stock options, and my company had done very well. At the time when I needed the down payment for this next house, all of that had been sitting in there for two years or so, and I was able to take that out and it was almost like its own savings. And then I realized I wanted to use for a down payment. And I was able to take it all out and get all that appreciation of the stock over the time.
David Bright: That’s fantastic. And I think it’s just a great point to emphasize about that first-time home buyer. A lot of people think that you have to have hundreds of thousands of dollars in cash to go make a big down payment on a big house or anything like that, but there’s so many advantages for people just getting started in this house hack kind of play that I think if that’s something that you’re struggling with, I think this is a fantastic model for getting that low down payment to get started as a real estate investor by living in your investment.
Bryce Platt: Absolutely.
Nate Hedrick: And you mentioned IBERIA as an option for that and there’s also even just FHA loans. So if you’re not a pharmacist, for some reason the IBERIA loan or the other pharmacist loan options don’t work out for you, even an FHA loan is only 3.5% down and of course you have the PMI. But if you’re looking for a low cost entry, that’s it. So you identified that and kind of used your advantages, your unfair advantage in this case, which is great.
Bryce Platt: Yeah, I mean, even the FHA, yeah, you’re paying PMI for the life of the loan, but one, you can refinance later on. And two, even if you don’t want to, as long as you’re making sure the numbers work with the PMI in there, then you’re still getting your education in your first property, which is way more than most people can say.
Nate Hedrick: Great point. Great point. So talk to me a little bit then about the next steps. So you get the financing figured out, you find the property, you get it under contract, and then you take ownership. But now it’s time to find tenants. Can you walk us through that screening process? I mean, you’re a first-time landlord here with this first property. So walk us through how that worked out and any maybe unique challenges you ran into.
Bryce Platt: You know, it wasn’t as hard as you might think. With the right market, I put on a listing that I made, I built, using purely what I found in that book, “House Hacking Strategy.” Hopefully Craig will pass me some of the money from that, from promoting it. But I just built the listing from there, and the first time, I really just put it on Facebook Marketplace. And you get a ton of people interested and you know, you remind them, “Hey, did you read the listing? Do you meet the screening requirements?” And then you know, like 70% of them don’t answer you. But then the other ones, they do say, “Oh yeah, I do meet those.” And then you can direct them to your actual application, which in my case, I used Cozy software management, property software management. And you can have them essentially make a profile, which is their application. And they can do all of that online, they can submit a credit and background check, an eviction check, and then we both get that. They get to see their credit score, background check, and I get it as well. And I can evaluate that, is their income enough, check their references, and do all those things purely from the software. And that really helps systematize all of that so I don’t have to like separately submit for a credit check and a background check and do all of those things pulling from different areas. I haven’t really had huge challenges. I’ve actually had 0 days of vacancy in this last year, and I’ve had a few tenants rotate through. At the beginning, I had a short-term tenant that just wanted an internship for the summer, which was fine because most students that have come through here, they want to start around the end of July or early August, and this guy wanted to go from when I moved in middle of June to the beginning of August. So I haven’t had any real issues with finding tenants. But that really depends on your market you’re in.
Nate Hedrick: That’s great. And I love Cozy as well. I use that for my, the property that I self-manage because you’re right, everything is integrated in one space. You can do the application process, I have the water bills and the sewer bills actually sent through Cozy, which is really nice. So definitely take a look at that. I know that it’s moving over to Apartments.com here pretty soon. So those that are looking for it, you might find it there. It’s associated with Apartments.com now. But that’s a great tool if you’re looking to self-manage. Definitely recommend that.
David Bright: Yeah, is there anything that’s been different about the management being that you live in the property and have tenants that are sharing a space with you?
Bryce Platt: Personally, I think it’s way easier because it’s just like managing your own house as normal. You know, I have the utility bill and the internet and the water, and those are the only bills that we have here. And since I’m including it in the rent, I can just pay those normally like I would if I was anywhere else. And the next property, I’m going to all end up splitting it up because I don’t plan to have the property continually be rent by the room. So just over there, we’ll split it up. As far as other bills and things, there are no real issues. It’s been a lot easier I think living with them than if I wasn’t. And they all know that I’m the owner, which is your preference if you want to share that or not. I think it makes it a little more professional and respectable. And all my tenants are — at least the ones that continually come out of their rooms, they’re not really students. And so they’re like young professionals. Like one’s a PhD, one’s a Master’s student, and one is a manager at a restaurant. So they’re all more mature people that are easily able to be lived with. And I haven’t had any issues with any of them so far.
Nate Hedrick: That’s great.
David Bright: Along those lines, what about repairs and notification of those kind of things? Have you dealt with any major repairs that have come up? And how has that been different living in the property?
Bryce Platt: Oh, David. Something that I didn’t share last time and I will share this time is so I said I closed on June 4. And I actually moved in on June 7. And you know, everything had been turned off because they were just showing the property for awhile. And so I move all my stuff in. There’s four bedrooms, four bathrooms, so I turn on all the water in each individual toilets. And on the last one, the knob breaks off in my hand and in the wall. So you know, just walking in that day, had no idea where the water tank was or where the main shutoff valve was. And I’m in a complex that is almost all renters. And so they have no idea. And so you know, we’re — I’m running around, trying to figure out how to turn things off. And then I started hearing from the tenants below me, “Hey, what’s going on up there? There’s water coming down from our ceiling.” And so I’m like calling plumbers, asking them where would the water valve be? And the way I ended up finding it was in the walls, the fire alarm went off, and the fire department showed up and they found it. And that was about an hour and a half after the pipe broke.
Nate Hedrick: Oh, man.
David Bright: Oh no.
Bryce Platt: Yeah. That was a good first night.
Nate Hedrick: That’s so brutal.
Bryce Platt: Yeah. I’ll say it can’t get much worse than that. And I still think this was a great decision. Now, I will say that was the first day I moved in. About a month ago, I needed to change out the water tank because it was about 15 years old and pretty rusty. And so I hired a professional to do that, one of the big people that are in the area, because I didn’t want to have to deal with any water stuff at the time. Maybe from my past experience. He changed out the water tank, and that worked out well. And he was connecting it back up to the main line, he broke off the main valve above the main valve, so he couldn’t turn it off with the main valve line. And also above the pressurizer, so it was coming full force into his face. And so he was having a good time. And he broke it off and I’m standing there next to him, and he’s like, “I broke the pipe.” And yeah, I see that, but just turn off the main valve. He’s like, “I broke it above the main valve.” And so I had to grab some pliers and run down to the street and turn it off at the meter. But that was still like five minutes or so of full force water. And their water restoration people said, “Yeah, we’re going to have to tear out your floors, your living room floors.” And I was like, oh no. Free floors in my living room? Yeah, so they ended up, they covered the cost of replacing the floors. I did have to pay for the water tank installment still, which was fine because I got free flooring that they estimated $7,000-8,000 worth of free flooring. So that’s pretty good payoff I think. You know, I did have to live without floors for like two or three weeks, but I think it was worth it.
Nate Hedrick: That’s incredible. I love how you just roll with the punches on that because that sounds overwhelming, but you’re just like, ‘Yeah, I get free floors out of it, so I can deal.’ That’s awesome.
Bryce Platt: The second time, it’s much easier to handle. You know, the second time when it started happening, I was like, ‘Alright, let me get the wrench and walk down to the main floor and turn off that out there.’ And I thought I had done it fast enough that there wouldn’t be any real damage, but the water restoration people said, ‘Yeah, you’re going to need new floors.’
Nate Hedrick: Wow. What about the first time? Was it an insurance claim? I can’t imagine that call to the insurance agent like a day after you moved in.
Bryce Platt: Right. I did. It was completely covered by insurance. And you know, it looks a little weird that — it was actually three days after I closed, but this is why you always pay your insurance premium at closing.
Nate Hedrick: No doubt. Wow. Yeah, that’s great advice to make sure you get really good quality insurance and make sure it’s done on time. I’m actually closing here on a house in a couple of days, I’m going to go double check my insurance premium is already paid.
Bryce Platt: Right.
David Bright: And I love what you said there about the second time that comes up, it’s so much easier because I can totally relate to that with the first eviction is so much harder than the second eviction, the first time you have termites is so much worse than the second time. I mean, that first time is just like you freak out. The second time, it gets so much easier. And I wonder, you’ve mentioned a couple times now that you’re doing this despite these like major water issues and floods and all this stuff, despite all that, you’re doing this again. So tell me about that second deal. Is it easier? What’s easier? How are you evaluating it differently? Kind of what have you learned? And how have you grown into that second deal?
Bryce Platt: Sure. So the second property, it’s just a coincidence. It wasn’t what I was looking for. Actually, when I made that application for the loan a few months ago, it was a renovation loan. And the renovation loan is so I could buy a property and then have the rehab costs rolled into the loan. And so that was because I was planning to look at properties that were barely livable but still livable enough that it would qualify for my loan. And I did look at a bunch of properties like that. The one that ended up accepting my offer actually, they did a pre-inspection on their own property and fixed everything themselves before our closing. They’d done all the work beforehand. And so it’s been a lot easier this time. You know, I’m not moved in yet, so I can’t say something’s not going to explode when I get there. But all I need to do is change out the flooring because they had tenants in there for like six or seven years with dogs and carpet in the whole place. And so the whole place smells like dogs. But that’s an easy fix if you just remove all the floors. And I’m replacing it with hardwood floors. So as far as numbers, the numbers are the same as what I mentioned earlier, but when I got this first condo before, I wasn’t that specific on it. The numbers actually for this condo were better. But that was by coincidence, not because I had stronger numbers I was looking at before.
David Bright: No, that’s good. And I like the tip in there about the smelly houses. Sometimes you can find great numbers in a house that doesn’t smell all that great because a lot of times, like you’re saying, those are easier things to fix than what a lot of people assume when they walk through and sniff.
Bryce Platt: Right. And actually, this property ended up — from what I heard from my agent — it ended up having multiple, you know, like several offers, which is common. But this was within 24 hours when they stopped taking offers. And they told us that there was a all-cash offer that was higher than the one I submitted. And they liked my offer better because of the due diligence money, the earnest money, and saying I would match any difference in the appraisal to the offer price. So if the appraisal came back $10,000 below, then I would cover that difference. And they liked all of that enough to turn down the all-cash offer and accept my offer.
Nate Hedrick: Yeah, and that appraisal gap has been something that I’ve used on some properties here in Oakley. And it works really well. And it’s not always needed, but a lot of times, the appraisers, you can get that value out of it, but it’s really nice from the seller’s perspective to look at that and say, ‘OK, even if this doesn’t appraise, they’re still going to come to the table with a lot of extra cash in hand to make sure that this deal works.’ Because under a traditional market, right, let’s say you had a house at $200,000 and it gets bid up and bid up and now it’s at $250,000, for example. Well, if the property re-appraises from the appraisal from the bank at $230,000, well that $20,000 gap, it’s got to be paid by somebody. Either the seller is going to drop the cost, the buyer has to come with the additional cash, or the deal is not going to work out. And so you’re basically coming in and up front saying that, ‘Hey, if there’s a difference here, I’m going to help cover some of that.’ And that can make your offer look really strong.
Bryce Platt: Right. Yeah, and I actually have gotten the appraisal since then, and it appraised for exactly what I put in as my offer, even though my offer was $15,000 over their listing.
Nate Hedrick: Nice.
Bryce Platt: So I’m at least getting — you know, I didn’t have to cover any difference there.
Nate Hedrick: Yeah, that’s great. And like you said, that’s the hope every time you put those in. But it’s always good to know that you’ve got that backup plan. And then so one of the things you mentioned at the very top of our conversation though is that during all of this, you had a pretty unfortunate job situation, right, while you’re trying to buy this second property. Can you talk us through that? What’s been going on?
Bryce Platt: Sure. So I submitted this application for this loan and then three days later, I was notified I was going to be laid off in a few weeks. So they gave me some notice. And so I was like, I probably don’t qualify for my loan anymore, even though I have a few weeks, I’m not going to close by then. They’re going to re-check. So I called the loan officer and I was like, “So what can we do?” instead of, “Hey, I can’t get a house,” I was like, “What can I — how can I get this house still?”
Nate Hedrick: I love that.
Bryce Platt: We went through a few options. One of them was asset depletion for qualified income. And I’d never heard that really mentioned on podcasts before. But essentially, you submit all of your retirement stuff, your savings, any kind of assets you have. And they can turn that into some qualified income that they can use as your monthly income to offset your mortgage for your 50% debt-to-loan. It’s kind of hard because he told me that he had an old client that had like $2 million in assets and had only really qualified him for $3,000 per month in qualified income. And I was like, “Yeah, I don’t have $2 million in assets, so that’s probably not going to get me all the way there.” So I was able to end up using a co-signer. And with our debt added together and her income added in, it was enough for us to just barely squeak by using the asset depletion also. So it was a close time, and there were so many times this — actually, they pushed out our closing date 11 days because one, my loan officer, he got COVID right when we submitted everything. So he was out for a week or so and didn’t pass it on to anyone, so it was just kind of sitting there for a week. And so that was stressful like we’re not going to make closing on the same day and I’m trying to coordinate with the contractor to do the flooring and the tenant that wants to take my room because he wanted to move in immediately as soon as possible. And I’m like, “Well I need to move out first, so I need to have this other house fixed up enough for me to move out.” And so you know, I’m trying to coordinate with all those people while also not knowing when my closing date is going to be. And so just having all that debt and underwriting from the loan was stressful throughout this. But it has worked out, and I am still planning to close later this week and everything seems to be on track.
Nate Hedrick: And one thing I think I want to make sure that our audience catches here is that one, it’s obvious your attitude about this is amazing. Right? You just say, again, like ‘Alright, cool, how are we going to do this?’ Like very Robert Kiyosaki of you. Not, ‘Oh my gosh, I can’t do this,’ but, ‘How am I going to do this?’ But I think a lot of that comes from your approach to your finances overall. You know, YFP, Your Financial Pharmacist being the main driver of this, like you’ve set up your finances in a way that allows you to make those decisions. There are some people out there that are living paycheck-to-paycheck trying to make this decision work. A job loss would have been utterly crippling for them, no chance to buy a house, let alone all the other stuff that goes with it. You looked at it like, yeah, I’ll go find another job and I’ve got a little extra time on my hands now. This is pretty great.
Bryce Platt: The loss of job was really more the problem with getting the loan. I have plenty enough to put the down payment down, like I said, from just living frugally the last two years. And I have on top of that plenty of emergency fund to last me probably several years, especially while house hacking, to not have to worry about being desperate on like, OK, I just need any kind of position that gets me some income.
Nate Hedrick: Yeah, that just really shows the importance of getting your own financial house in order before looking at real estate investing and really making sure that you’ve got that emergency fund built up, you’ve got cash reserves. And then again, it speaks to the advantages of house hacking. You’ve been living so — not only for free, but you were getting paid to live somewhere that that really makes the difference.
Bryce Platt: It’s huge.
David Bright: So tell me what’s next for you in real estate? What — are you planning on doing another one of these? Are you thinking about diversifying strategies? Kind of what’s on the horizon?
Bryce Platt: I will definitely do this again at least once more, doing a house hacking style in a year because I have to wait a year after getting this loan. But I also have friends that have asked me if I can partner with them into getting properties. So they bring the down payment and all the finances and I bring the expertise, if you want to call it that, and the deal. So I find the deal here in Raleigh, and I do all the management and all the actual if you want to call it the effort, the time effort, and they just bring the money. So and then we can decide how we want to split that as far as a partnership. So that’s something that’s new recently. I have friends that actually have enough money they can do this. That’s new to me. But as far as my personal strategy, I plan to continue doing house hacking. And up until I lost my job, I did have enough money to do at least — for sure one, a comfortable one, and then possibly two properties. And I had been looking at other properties as well. But when you lose a job, you don’t necessarily want to push the limits of your savings. So I’ll stick to the one for right now and see how that goes.
Nate Hedrick: I love it. I think that’s awesome. And again, I just think your story is incredible, Bryce, and I appreciate you sharing it. I want to jump now to our final infusion questions. These are three questions that we ask each guest on our show. The first one is what is one tangible strategy that you can use to make sure that your investing works hand-in-hand with your career as a pharmacist?
Bryce Platt: Personally, I haven’t had many issues because I live here and I was working from home. But the real answer is systems. Basic systems like the ones when you have a new opening in your property, you have this process, you have a maintenance request, you have this process or whatever else. I have some Google docs and some systems that are inherent in the property manager software. But I also use ToDoist if you guys have heard of that mainly for remembering those less common things or small tasks that come up. Those small tasks and those less common tasks, they’re open loops in your mind, and this is from “Getting Things Done,” David Atlin, his old book. Those things really cause a lot of weardown on your mental health, building a lot more anxiety. And so you don’t want to be the person that’s winding down and getting ready for bed and then you jolt awake because you forgot to file your taxes or whatever. And by the time this comes out, taxes are filed. So hopefully you already did that.
Nate Hedrick: Surprise! No, that’s great advice. I think that makes a lot of sense. I resonate with that a lot because again, I have those random tasks that come up and trying to make sure that you’re putting them into a system and keeping track of them, so that’s great.
David Bright: So second question is what’s one resource that’s been most helpful to you in your real estate journey, whether that’s a book, podcast, person, author, website, whatever that would be?
Bryce Platt: YFP kicked it off for me, like I mentioned earlier. But it was due to bringing someone from Bigger Pockets on. And Bigger Pockets has been great to me as well. The thing that they all say you’ll learn a ton from is actually getting a property more than hearing about it. So I would say my best resource has been getting this first property and living here for a year, which those two water issues were really the only repairs I’ve had. But living through it here, that’s the real experience, that’s the real resource. You’re getting your education while getting paid to get your education.
Nate Hedrick: Great advice. Love that. Alright, so what’s one piece of advice that you’d give to a pharmacist that is contemplating a start in real estate investing then?
Bryce Platt: I really like house hacking because it’s like training wheels for real estate investing. But that idea alone won’t be good enough for people to start and others, it’s just not an option for them because of their personal situation. To change your behavior for good, you have to start believing in some new things about yourself. And it’s something that James Clear calls “identity-based habits.” First, you decide the kind of person you want to be, like a real estate investor. And then you say, ‘Prove it,’ and you have some small wins over time that proves it to yourself. And this could be a real estate investor, they get an agent or they at least call Nate to find them an investor-friendly agent. And then a real estate investor knows how to run the numbers and make sense of an investment and talk to lenders and make offers. And all those individual things, they take 5-30 minutes to do. And those short actions, for someone that identifies as a real estate investor, that’s making you a real estate investor.
Nate Hedrick: That’s amazing. I really like that, Bryce, and I think, again, your story, it’s going to resonate with a lot of our audience and so we really appreciate you sharing it. Where can people find you if they want to track you down or try to hire you, in this case?
Bryce Platt: Right. Yeah. Definitely check me out on LinkedIn. My name is Bryce Platt. I have the full LinkedIn profile all updated and with my experience. Definitely reach out to me if you want someone who’s interested in really changing the healthcare system structurally. I really want to get into more payor or government positions. So if you guys want to talk to me about real estate investing or about career stuff, check me out on LinkedIn.
Nate Hedrick: I love it. Well Bryce, we appreciate you being on the show today. And I’m sure we’ll be hearing more from you in the future. I look forward to that very much.
Bryce Platt: Yeah, thanks for having me, guys.
David Bright: Thanks so much.
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