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Millionacres House Hack Episode 1

At Millionacres, every employee is a real estate investor. Preston Freeman, a member of our tech team, and his new wife Lara recently moved to Colorado from California. They are excited to share the journey as they renovate their first property, a house hack with a separate rental suite.

In this first episode, they share their journey in finding a house to buy, their thoughts on the housing market, and how they decided as a couple to become real estate investors.

Transcript

Preston Freeman: [MUSIC] I'm Preston Freeman, this is my wife now, Lara Freeman. We moved to Colorado in February to join the Fool. We got married back in March. Our wedding got canceled, but we ended up moving forward with a backyard wedding at that time and moved out here and here we are.

Lara Freeman: I'm a registered vet tech working out in Arvada. I have been doing that for about 12 years now. While working with animals, we have two cats ourselves, Phoenix and Igor, four years old and about 13 years old.

Preston Freeman: We visited Colorado about four years ago and we just really enjoyed the nature. We moved from LA, so less congestion, more nature, little more mellow lifestyle. We're still city folks who still stuck around Denver, but nature just real close and can go white water rafting or go hiking or backpacking and also the affordability, cost of living and all of that just was dramatically different. That helped us out a lot. That was totally out of our range or we would've been like a shack or a condo and we didn't really want any chili or condo, we really wanted a house, we wanted a backyard. That's kind of where we were at. It was like we can either live in LA or near LA in a shack or we could live out in the desert, far from everything and those were our two options for where we were at, at that time in our life. We had to get to a place where we were comfortable buying a house. Our goal was actually about a year we'd be out of debt and have the savings egg to buy the home. We did it a little faster.

Lara Freeman: A lot of faster.

Preston Freeman: [laughs] We did do it faster and then at first we're thinking not necessarily our forever home but a home just for us. Then joining the millionacres talking to some Fools, talking to some other folks, we got into the idea of maybe just starting off as a house hacker or buying quadplex or triplex or something like that. We talked about it, she was not a fan [laughs] and so we chatted and understood that it wouldn't be forever. It would be a nice progression into early retirement or financial independence, investment.

Lara Freeman: He bought a lot of books on property management, investment managing, all these different books and okay you have to read these and I'm like, yeah I'll get around to it, I will read them. You read them first. It was around Halloween time and he gave me a challenge to finish a book in two weeks and I would get a surprise. I did finish reading the book and that book definitely helped along the way. I would ask questions and say we could try this or we could do that and it just opened my mind lot more to the possibilities.

Preston Freeman: We would talk about after she'd read a bit and then collaborate and see what we liked and what we didn't like, and where we would land on a spectrum of rental properties and different things like that.

Lara Freeman: I feel like we compromised a lot and knowing that this wasn't going to be the forever home, we were able to say we can do without a few things that weren't must haves.

Preston Freeman: Living here like garage, must-have. [MUSIC] I think this was our fifth or sixth offer. At first we were emotionally attached and we just sat, and then we were like, this isn't our forever home. It doesn't matter if they lose it. It's an investment property. Yeah we want it but it's not going to make us depressed because we didn't get the home we wanted because we're not going to live in this home for more than a year or two. We put in an offer. Everything was going like 20, 30k over the asking and it was insane. We tried to balance that into something that we would actually like to do and we ended up putting in some offers, getting some decline. We got one accepted and then the inspection came and it was like the person who owned it was very handy, but not very finishy. When we got the inspection back, there was just wires that were sticking out here and plumbing was not done professionally and would probably need to be replaced and it was going to be a very high maintenance investment property. We talked about it and then even our agent was like don't do this one, you don't want this one. We ended up backing out of that one and eating those funds.

Lara Freeman: I feel like the next one was the one that we went in way over, because we thought that it's the right thing to do. Then we were the backup offer?

Preston Freeman: They said we were too high. I was like I don't understand anymore. They went with someone else and then that person fell through. We were essentially a backup offer sometime after that and I think the other one went through, so we didn't end up becoming the backup offer. This one we landed. This one got back on the market, we saw it, we loved it, it was very much finished and just needed some YouTube work that we could do ourselves, that one we appreciated so we can save some money and learn and do things together.

Lara Freeman: I wanted to add before we were lucky enough to purchase this one, we experienced a lot of going to look at the house and only have like 15 minutes to look at this house and then there's four other people waiting to also see this house. It's very pressure and your agent's like, do you want an offer, do you want to put an offer? I'm like I don't know. It was just very fast paced.

Preston Freeman: You'd go in thee market and then within two days you had to make your offer and it was no longer accepting offers.

Lara Freeman: By the end of the day, at 5 o'clock or something like that.

Preston Freeman: A couple of times there's like by 5:00 PM today other offers are going to be reviewed, it was only on the market for that day. It was insane. My agent would ask us and then I'd be like, oh I got to go crunch numbers. I made a spreadsheet [inaudible 00:06:41] my brother and then we talked about it and maintenance and capex and vacancies and put all those variables in and did some high-level math to see if it was worth it. This one ended up being pretty lucrative actually. Especially once we rent out this top unit, once we move out and move onto the next one. We're in Aurora now, we actually didn't really want to come this far east because we like the mountains and being close, but this is just a good investment property because we saw the hospitals there, right below us, so we'll have some nurses around. We have the Airport a little bit closer to the train station right here to go down Denver proper. There's a lot of new buildings, there's some new markets and hangout spots that are coming. It's changing and getting gentrified and so we liked it. We've had lots of conversations, but we're in a position where [inaudible 00:07:39] we don't want kids. We are more mobile and flexible. We ended up saying, we'll do two of these and then go buy a nice home somewhere.

Lara Freeman: [MUSIC] It's got one more [inaudible 00:07:51] .

Preston Freeman: She's letting me do one more. [laughs].

Lara Freeman: Yes.

Preston Freeman: The goal would be to stack the funds that we save from our mortgage. Once we get the unit downstairs rented out, that will cover the majority of our mortgage. We'll be saving that fund for the next house. Then once we get enough for the next house, we'll do this again, and then do that again until we save for probably our longer-term home, I'll say.

Lara Freeman: I feel we're open. Just when we were looking at the quadplexes and the triplexes, they were just really expensive, and a lot of work for what we would have gotten. But I think we like this set up. But again, it was also really hard to find already prepped and the basement already remodeled.

Preston Freeman: I think actually it could even up our game and make it a little more work, because now we're going to be understanding what needs to go on. The quadplex that we looked at were just in neighborhoods we didn't care for. We really wanted to find a neighborhood that we wanted to live in. I grew up with my dad repairing furniture, and helping him build things. I've seen it in action, I've never executed it myself. I'm confident that I can follow directions. We'll see that.

Lara Freeman: I will follow his direction.

Preston Freeman: [laughs] We'll break things and learn together. No investors in family. She doesn't either. Definitely real estate was an option. I didn't realize how much of an option until I started reading, and then working at the Millionacres, and then when she was reading those books series. Renting always, to us, was like, you're going to buy a house and you're just going to rent it out. But there are so many more options. Once we learned about the duplexes, threeplex, fourplex, we were pretty excited. That's really what drove us into research a bit more. Then our agent was trying to push us not necessarily to the fourplexes. He heard us go back and forth like we don't want to live in this neighborhood, or we don't like that area or whatever the case was. Then he got the vibe that-

Lara Freeman: We needed a house.

Preston Freeman: Yeah. Or just learned from us and our feedback to him.

Lara Freeman: Just starting.

Preston Freeman: We're moved in. We've been what now? Almost two weeks.

Lara Freeman: Yeah. Two weeks.

Preston Freeman: Our goal is to just get us comfortable living and then start the projects. We've been ordering things. We have window well covers needed there for safety reasons. We got those ordered. We're in the planning-ish, ordering stage, if you will. We have the sink, we have the faucets, we have the egress covers, the ladders that need to be there for compliance reasons. We were just ordering a railing for the stairs downstairs, because it's not getting covered. Getting quotes for different projects because some of them we can't do. Uncovering the new little things we weren't expecting like the heat, our furnace. Upstairs is cold. It's set at 70. It's showing it's 65 in the house. Clearly thermostat's out of whack. Then if you go downstairs, I bought a little monitor because it was just outrageous. You go downstairs and it's 85.

Lara Freeman: So nice and warm downstairs. [laughs].

Preston Freeman: She likes that. Eighty five is nice and warm for her. We have to figure it out because there's one thermostat for both units. It was flipped in 2018. Gentleman that owned it prior had his aunt living downstairs in the mother-in-law suite. The house has a kitchen, bathroom, laundry, two bedroom. That's why we liked it, because it was just ready to go. I don't think anything outrageous. Just get your license, let them know you're renting it.

Lara Freeman: Your leasing contracts.

Preston Freeman: Yeah. It's just a lot to get the co-leasing contracts and different things like that. But nothing weird from the city, I would say, yet anyway. We'll find out when we start [inaudible 00:12:00] all the things and doing the stuff.

Lara Freeman: I would say patience. [laughs] Working with each other, being that we're going to be partner investors. I think he's very just project manager by the books, by the plan, go, go go. I'm more of the, we have time, we don't have to do it right now. I'm learning to just be patient with him and go with the flow, and some things he's read on that we do need to get done more quickly. I would say I've learned a lot of patience.

Preston Freeman: I've learned to talk more about it. I'm a, let's get it done, knock it out. I'm always like, go, go, go, let's be done and move on to the next thing. From a learning perspective from the house side of things.

Lara Freeman: Oh, I lost the shed key. [laughs]

Preston Freeman: We got handed like literally 15 different keys for this house that weren't labeled. I changed all of the locks already. Then the shed key, she went out there.

Lara Freeman: It's still missing.

Preston Freeman: Missed that back. That was funny. We had to go find a new shed key. Learning, I think it's just expensive. For something like contractor building, that thing is expensive. I can do it probably or I can either buy part. For the awning thing, I found $700 awning. We would need three of these pieces, so it would be 2,100 bucks. I could probably install it in a weekend. The quotes we were getting were like 20 grand, or 15 grand, 10 grand, and you're like, I don't understand. We bought a 12-foot railing for the stairs for 220 bucks. The quotes I was getting was $2,500. I just really don't get that part of it. I am glad we're capable-ish, we'll say, to do these things because I feel like a lot people get ripped off like that for those little things. I think quotes, get too many quotes is what I've learned. Just shop around because there's such a variety in the market of things. Then also just portraying what you want to accomplish. People are like, "Oh, you want this fancy awning, with wood and a fan? " You're like, "No, I just want to keep snow out of that wall right there. It's simple, just trying to articulate the projects. I've learned it's very important to get the right quote. Just get too many quotes because the spectrum is so wide for quotes. [MUSIC]