She Bought the Property No One Wanted. It Had a Hidden Income Stream ($3K+/Month).

0:00Most people will tell you that buying a home in Los Angeles takes family money, a six-figure windfall, or a 20 % down payment that you will never save in time. Today's guest bought a$675 ,000 house at$25 ,000 with having none of that.

0:16Tony Robinson:Hannah and Easton Jones, a husband and wife duo, saved their way on a regular paycheck and used loans most rookies overlook and found a house with a built-in way to help them cover the mortgage every single month. So they're both about to walk you through exactly how they pulled this up.

0:35This is the Real Estate Rookie Podcast. I'm Ashley Kerr.

0:39Tony Robinson:And I'm Tony J. Robinson. And let's give a big warm welcome to Hannah and Eason. Guys, thank you for joining us on the Rookie Podcast today. Hello. Thanks for having us. Stoked to be here. Well, we're happy to have you guys and we can't wait to get into your story. Take us back to before you even thought about real estate investing. You guys were both regular W-2 earners and you were living in one of the most expensive places in the country. So what made buying a home at 25 feel like a must instead of something that you'd get to do one day? I've always really wanted a house. I was a big dreamer.

1:15Always wanted the wife, the kids, the dogs, the house. I'm born and raised here in the South Bay and it was just always something that I knew I was going to do. And so I had been a saver from a young age, probably when I was 12 or so. My favorite candy was Junior Mints growing up. But for me to purchase them at 7-Eleven, it was a big purchase. I was always just saving my money. So yeah, from a young age, it started early. And then, yeah, we just had some big dreams together. And Hannah, was that your dream from the beginning too? I always wanted, I definitely wanted a house. But when we started dating, that was like a very big topic and like subject on his mind was like, okay, hey, this is like what we're going to do.

2:04This is my, this is my dream. He actually took the Dave Ramsey course when he was like 15 or something. And so it was like, okay, this is what we're going to do. This is how we're going to set up our life. And I was like all for it. My in college, my like number one social media was Pinterest and all the home stuff. So I had this far out dream. I thought it was far out of owning a home and getting to like do little things to it. But when you're growing up, it seems like such a far off dream. And just because so many people aren't necessarily doing it at the age that we did. So when we started dating and that was his goal, I was like, OK, let's do it.

2:44Let's like buckle down. Let's do it together.

2:46Tony Robinson:I mean, you guys are living in the greater Los Angeles area. What were you guys doing after college? What careers did you guys go into? So I didn't go to school for software engineering. I actually started off being a personal assistant to somebody in LA, but then was like, I need to figure out what type of career I want to do. So I actually went back to school and did a software engineering bootcamp. That's not something that a lot of people really know about, but becoming a software engineer is a great profession and has a good a good pay so I went back to school did a three-month boot camp and then got a job with a health care app right after that program so yeah that was my first job and then yeah and then first jobs for me so I started a company when I was 19 a clothing brand and then I started working at another clothing brand was helping out with them and then my so during college I was working at Islands Restaurant.

3:51I was doing my company and then I was working at a clothing company and also doing some interning at like as PA work for commercials, etc. And then I got a job at Nitro Circus. That was my first full-time paying job. I was getting paid, I think,$48 ,000 a year. And then I was also commuting 120 miles each day there. It was 60 miles there, 60 miles back. So that was a long drive. And then in 2018, I went on my own to, to continue doing my graphic design business that I was doing on the side. So in 2018, took that on full time. And 2018, I think is the year you moved here, right from Oregon, 2017.

4:35And then in 2019, we got married. And 2018, I actually quit that job at Nitro Circus and went full time on my own.

4:43Tony Robinson:I mean, so you guys, well, first, both of you guys sound like hustlers, right? So I love that part. And I think a lot of our rookies would do well to take a note from a page in that book. But I mean, you guys obviously have done well for yourselves, but you guys weren't like attorneys living in, you know, physicians living in Southern California to have these like massive, massive incomes coming in. And so I think maybe walk us through how the two of you actually say, because most people hear Los Angeles and they hear 25 years old and assume that buying any type of real estate is impossible. So what did your day-to-day money habits really look like during those years where you're building up your savings?

5:20Yeah. So, you know, I think when you have a huge goal together, it doesn't feel like such a sacrifice when you're not going out to eat and doing these things. because our day-to-day was eat at home, buy groceries for a minimum. We weren't buying organic. We weren't buying expensive things because we had this huge goal in mind. Our church has a food bank, and so we would go to the church food bank. You would be so surprised at how much food actually goes to waste in the Los Angeles area because every single grocery store has to get rid of all the expired food. So there's so many resources. And then, yeah, we just we were like we made sure to eat before going out to eat with friends.

6:12We were really diligent. I mean, his spreadsheets were crazy. I mean, like we were writing down every single purchase and would put it in brackets and be like, OK, this month we were fifty dollars over. How can we cut back just a little bit? So we were really thoughtful about every purchase we made and making sure it was like within budget. What was the monthly dollar amount that you were actually trying to save every month during this time? As much as possible. Yeah, as much as possible. I mean, we were always doing like investing. We were always trying to max out our Roth IRAs at the same time.

6:52like I said when I was working at the company Nitro Circus I was making about$48 ,000 which is nothing I was probably spending more in gas on the commute so yeah dollar amount I'm not really sure what we were trying to save but we're just trying to put everything that we could towards our house saving and of course get by in life we were renting in a small apartment in Manhattan beach. We actually had a really decent rent,$2 ,300 at the time. And yeah, we were just going for it. Just trying to shovel away little by little.

7:24Tony Robinson:And Ethan, just so you know, like for, for all of our audience who is not in Southern California, when you said decent rent at 2 ,300, a lot of people are like, their, their minds are blown right now. Yeah. My mind is blown too. Cause we'll never see a price like that again. But yeah, I mean, um, Manhattan beach is a really nice city. Of course it's, it's about, it's uh it's touching the beach so but yeah 2300 for a two-bedroom apartment with a little patio outdoor area garage is an extremely good price and honestly i don't know anything differently because i was born and raised here um we we never lived in manhattan beach specifically but the surrounding cities um and yeah so guys i you know ash and i talk a lot about dave ramsey not a lot about Dave Ramsey.

8:09Tony Robinson:We've talked about Dave Ramsey many times in this podcast. And, um, you know, I, we love a lot of his advice in certain areas. We disagree with a lot of it in other areas, but, um, I think one of the reasons that Dave Ramsey gets, gets knocked a little bit is because it can feel like deprivation when you're, you're kind of following the, you know, the, the, the, the baby steps. Did you guys feel that level of, of deprivation as you were working through that savings journey? And, and if not, how did you still maybe find joy in that process when you were saying no to so many things that people typically want to say yes to?

8:42Yeah, well, following the course was definitely tough. And I had taken the course before I was homeschooled. And I took that growing up, like when I was 15. And then when Hannah and I were engaged, we actually took the course together as well. And yeah, it's tough. I mean, we didn't do everything that he says. For instance, I got a credit card because I like the idea of points. And so I only used a credit card though as a debit card. And so basically we're living within our means, whatever we're normally spending, we're putting it on. And then I'd be paying that credit card off every, you know, twice a month.

9:22And yeah, the great thing about that is it gives you points. And I think to Dave Ramsey's point, he's huge on no credit cards, which I understand it's because he's so black and white and he's doing this certain program. So if he's kind of being lenient in some areas and not in others, then it really just doesn't make sense. So I think the great thing about following steps of someone like Dave Ramsey is you could take what you like and what you don't like. And then also just through our community, different people in our lives and just taking the advice of them. Now, you really went the extreme of, you know, spending less, but a lot of times people go the other way and to afford their first property, they actually try to earn more.

10:07So during this time, did you try and pull that lever too, as far as doing any side hustles or trying to increase your income? And if not, why did you not do that and decided just to focus on the frugality? Yeah. So side hustles is definitely the thing that we've both really done. Hannah can talk about that, but I did a lot of modeling growing up, fit modeling, which is like putting on clothing for the companies. And then also had my clothing company that I was running. Also had a graphic design business. Like I said, I was working at Islands Restaurant and I was working at a couple of different jobs as well.

10:43So hustling at different levels of jobs was always our thing. And we were getting money from different areas. Granted, it wasn't anything crazy, but at the same time, it was a solid start to our young careers. After the break, Hannah and Easton are going to take us inside the actual purchase, the loan most rookies never hear of, the house everyone else passed on, and the little back unit that quietly helps pay the mortgage. We'll be right back after this break.

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13:55Okay, so now that we learned how they saved the money, let's get into how they actually got the keys. Because in a market like LA, a down payment alone does not hand you a house. So, Eason, let's start with the part that surprises most people. You did not put 20 % down. Walk us through the loan you actually used and what you brought to the closing table for this deal. So we found this house together and we looked at one house before this. We really liked it. And it just wasn't in the best single family residence area. My dad kind of talked us out of it. Then we found this one and Hannah kind of had to talk me into this one because it was a little smaller.

14:34It had a lot of work to do. And then as far as the loan, we put down 9 % and we got an FHA loan. And again, the house was 675 at the time. It was mid-COVID. We closed in July. And so it was a scary time. And on top of that, with COVID, my job was in events and graphic design. I was producing merch for companies. And so literally my job just fully tanked come March. And so I was really just going off of savings. I had barely any income. And then Hannah thankfully had the W-2 job at the time. So we had a great savings. And then she had her W-2 at the same time. So we were just really taking it step by step.

15:22We knew it was a great time to get a house because the interest levels were below 3%, which was unheard of. And it would be nice if we ever see that again. But yeah, so on the FHA loan, we put down 9%, which was close to, I think it was$70 ,000 plus closing costs. And I think the total we put down on the house was around$80 ,000.

15:46Tony Robinson:Eason, let me ask, because when we talk FHA, one of the benefits that folks cite as the reason for going FHA is that the down payment can get to 3.5%. And typically when someone wants an FHA loan, they're putting down 3.5%. But now 9 % is obviously way less than 20%. But maybe walk me through like, why did you guys put down 9 % versus what most folks put down on an FHA, which is three and a half? Well, of course, the more you put down on the down payment, the less your mortgage is gonna be. And that was something that we of course had to afford. And honestly, I didn't wanna put down something like three and a half percent because the mortgage would have just spiked up.

16:26And then we had the savings. What else are we gonna do with it? We want to have a comfortable mortgage. And so that's why we chose to do the 9%. I think we were trying to do 10%. Of course, we would have loved to do 20%. And anything below the 20%, you have that PMI insurance, which is also a couple hundred bucks a month at that rate. So that was something that we were just trying to hold on temporarily.

16:53Tony Robinson:I love that. So it was really just a personal where it's like, hey, we have the cash. We want to reduce our ongoing monthly expenses. Let's just put the cash to work that way. I mean, I love that. It's a great, great answer. Now with this deal, when you went and walked it and you put in your offer, was there any competition and kind of take us through that offer process on the deal? You know, this was, you had said during COVID, was this a time when, you know, there's 20 offers on the table or were you the only one? Yeah. So for other houses, there may have been 20 offers, but this house, to tell you the truth, it was pretty ugly, pretty outdated.

17:29There were bars on the windows. It wasn't an appealing house. And that's another reason why I said Hannah had to convince me to get this house because I was not expecting all the work that it was going to take, but she has a good eye. She has the Pinterest vision. All of those years on Pinterest paid off. Yeah, so she was able to see like the potential that it had. And that's where we went.

17:55Tony Robinson:What was some of that potential that you guys saw on this property? We love that it had a huge backyard. And then it was close to the freeway close to where we love to hang out. And then it was also like as close to the beach as possible that we could afford. I also grew up very close by. So that was a nice touch to it, too. But I'd say the most appealing part about it was that it had a little guest house in the back. And one of the biggest reasons on our list when buying the house was that we wanted some sort of way to also make income, whether it would be a detached garage, a two-car garage, a little back house, or something like that that we could rent out.

18:42Now, when you looked at this property, did you estimate the rehab at all? Or is this something you're just wanting to get into and you're going to DIY it? What was the actual plan to do the renovations and to make it work for you? And how did you budget for it? We honestly didn't have an idea of what we could spend on the rehab. And honestly, we spent pretty much every penny that we had on the house. And when we did buy the house, we did a month of renovation so we basically knew that we had enough money for the house and then a certain amount of money for the remodel which i think was like thirty thousand dollars yeah yeah we we had to get really crafty with our remodel because it was mid-covid and also because we were trying to do it as cheap as possible and so we used a lot of facebook marketplace finds like tile from facebook marketplace or like um used secondhand like appliances the stove you can find actually really amazing deals there's so much here in la there's so many different resources that you can find secondhand that are like barely used or just has a debt or it's an open box so it's cool um yeah we just we had to make sure it was as cheap as possible because we didn't have very much money Exactly.

20:07Tony Robinson:As you guys went through this process, did you, did you guys have experience doing renovations yourself? Like, did you DIY a lot of this or did you hire out what you could? For our rookies that are listening, they maybe want to follow in your footsteps, but don't necessarily have the experience of renovating a home. It can feel somewhat intimidating. So did you guys DIY? And if so, how did you educate yourself on the correct way to do that? Yeah, we really had no idea what we were going to do or how we were going to do it. Thankfully, we had an amazing friend named Joe. And he was a little slow during that time.

20:41He owns a construction business. And he literally allowed us to pay his guys by the hour, no up charges. He was just a blessing from God. We love Joe. And basically, we would go to Home Depot, swipe the card, which we would, of course, pay off. We didn't get into any debt during this besides the home loan itself. And yeah, we're just paying for all of the materials ourselves. And then we were paying for the hourly of the guys, which was incredible. Yeah, there's definitely like resources again, to get crafty, like you don't necessarily have to go straight through a construction company. There's a lot of side workers or people on apps and little things that you can get workers, construction workers that have that experience.

21:28Because yeah, for us, we didn't do very much DIY. We had the vision and we had the idea and then we went and purchased the materials, but we didn't actually, well, yeah, we didn't do it ourselves. However, my dad is a finished carpenter. So my dad came and also helped out. This was his first contribution. He helped with the ceiling here. That was awesome. Now, what about the numbers on the guest house and how that would actually rent. So did you factor in what you'd be able to make in rental income? And what strategy were you actually planning short term, long term, midterm? So we really didn't have a strategy.

22:06We just knew that we wanted something that would also bring in some income. And we were talking to my cousin before we purchased the house. And we were like, hey, you know, if we had a little back house, would you rent from us? And we were really just trying to offset the mortgage. And the mortgage at the time, I believe was$3 ,300 a month. And then we were charging my cousin just below$1 ,000. So that turned our mortgage into 2000, which was awesome.

22:35Tony Robinson:Which is less than what you guys were paying in Manhattan Beach, right? Literally, it was just a shift, except we had no more money in our bank account. Yeah. And then after long-term renting to his cousin for a year, we went and traveled through Europe and every place that we were staying was tiny and didn't have full kitchens. And I always had this thought that the back house couldn't be, it's just so small, right? So it's like to have even our cousin back there was like, OK, it's really tiny. But once we were traveling Europe, we were like, well, maybe we could actually turn it into a short term rental, put it on Airbnb because you don't necessarily need a full kitchen.

23:19It's kind of like a hotel room. So we were like, let's just try to make it fix it up a little bit, put some put some makeup on it, make it look pretty and put on Airbnb and see how it does. And I talk about this on my Instagram, but it started bringing in three to sometimes even upwards to five grand a month. So it was started paying for our full mortgage. We had no expectation of that. We were kind of just like, let's just see how it goes. But everyone who came through loved it. We would give them sparkling water and just really trying to make their experience as a host personal. And I think that's what made it really special for people who come and stay here.

24:06We always try to introduce ourselves. And yeah, we really weren't expecting much. And it it turned out to be the best decision for our family.