Waiter to Financial Freedom with 5 Rentals and $5,000/Month Cash Flow

0:00Hey, rookies. On the show, we always talk about having a bias toward action. Our guest today never gave up on making real estate work for him. He partnered with other real estate investors and used co-living as his real estate investing strategy to be able to quit his W-2 this year.

0:21This is the Real Estate Rookie Podcast, and I'm Ashley Kerr. And I'm Tony J. Robinson, and welcome to the show, Andres. What's up, brother? How are you doing, man? Good. How are you doing, guys? Thank you so much for having me. Yeah, thank you so much for coming on. Andres, can you share a little bit of your background before we actually get into real estate? What were some of the critical steps you took kind of in your current state before you started your real estate journey? Well, let's start from the beginning, like they said. I came to this country when I was 18 years old, worked my way through every possible job that you can work as an immigrant.

0:56I started washing dishes, busboy, kitchen, eventually became a waiter, assistant manager, did ballet parking, cutting yard, some construction work, put myself through college. after college, I got married and my wife is like, hey, we need to buy a house. And at that time I was working full-time as a waiter, so I couldn't qualify for a loan despite making good enough money. We were expecting to qualify for a house, we just couldn't. And it's upsetting because you're making almost six figures and just because you get paid in cash, they don't want to take it. So I made a quick Google search, how to buy houses without any banks, any credit.

1:36And as you guys know, that's like Pace's slogan. So I found Pace. I started watching Pace's videos. I found bigger pockets. And a week later, I was like, I'm going to find myself a deal. So I joined Pace's mentorship. And a couple of weeks later, I found my first house up too. And that was the beginning of my real estate journey for a year. I did wholesaling with that to build cash. and you know one of the last deals that i wholesale was to this guy who i you know i didn't know what he was doing with the house because the house didn't really have an exit strategy and when you wholesale creative deals you got to make sure that your buyer is you know they're not going to default on the lawn so i went with him to the property we walk it his gc is there and he's like i'm going to put a wall here i'm going to put a wall here we need another bathroom here i was like man what are you doing he's like oh i do room rentals i was like that that doesn't exist that's that's false so and i went with a different buyer who was going to do an rb in there and but then you know that piqued my curiosity because he sent me his spreadsheet like hey we're going to make like 3 000 net in this house but i just couldn't believe it because who's going to share a room who's going to share a bathroom and then after that i started researching room rentals because at this point you know this is now uh december 2023 a year after starting wholesaling i'm like i need to buy my first house right i build this capital i want to be an investor so I started researching that.

3:00I was like, okay, this sounds like a good strategy because that year when I started real estate, when I was doing wholesaling, I really dove into short-term rentals and mint rentals because I thought that's what I wanted to do. It is so hard. I'm not a smart person. I don't know how you guys do short-term rentals, mint rentals. I don't understand how to run the numbers. I've joined a lot of coaching programs that I've paid for. I've seen every YouTube video possible. I still don't get it. Hey, we never let anybody on the show say they are not smart because you have been smart in some aspect to be able to made it this far in your real estate investing journey.

3:38Andres, there's a couple of things in your story too, because I want to get into it, how you made the transition over to co-living, but there's a couple of things I want to get into. First, you mentioned Pace. So for our work, he's referencing Pace Morby. And Pace actually wrote a book for BiggerPockets. It's called Wealth Without Cash. If you guys head over to the BiggerPockets bookstore, you can pick up a copy of that and learn about the strategy that Andres was leveraging to help him kind of get started in real estate investing. But it sounds like, Andres, that you said you started wholesaling first, which is a way to generate some cash.

4:06And then you decided, hey, let's get into kind of actually owning the real estate as an asset. And I just want to point out for a lot of our rookies that are listening, you might find yourself in a similar position where you have the desire to go out there and start building your portfolio. but from a cash perspective, maybe you're not ready. So even if you can't necessarily put down 20 % to go out and buy that first rental, are there other things you can do within the world of real estate investing to generate the cash, which will then eventually allow you to go out and buy something? So Andres, just really quickly before we get into the co-living, how long were you focused on kind of that active income strategy before you had enough cash that decide to go out and actually get your first buy and hold rental?

4:46About 10 months, 10 to 11 months. 10 months? Holy crap, that was a lot faster than what I was thinking, man. I wasn't that successful, honestly. At that point, I was before that working full-time as assistant manager slash waiter. So I was making pretty good money, but I was working seven days a week, 12 hours a day, no days off. If they call me, I have to be there. But with wholesaling, well, how I get into wholesaling, right? While doing the full-time job, I was flipping clothing online, like going to the thrift stores and selling it on eBay, Poshmark. I was flipping furniture. I was flipping appliances.

5:22We love side hustle ideas on the show. And that is a great one. I always side hustle. When I was in the community college, my sister-in-law used to work for BioWorld, which is the company that produces those things for Hot Topic, you know, the kind of like anime toys and backpacks. They would have a clearance every three months and sell everything for a So I would go buy a hundred things, put it in the trunk of my car and go to college, park right outside the arts building and sell it to all the, you know, the otaku guys there that play music and do arts. So I would pay my intuition that way. I've always liked the idea of upside hassling, you know, like if we go back to when I was a kid, you know, reselling candy, deflating other people's bicycles so I can sell them air.

6:05You know, I've always had that mindset. I was four or five. Don't judge me. Were you like, I've seen this Instagram reel where a girl pranks her dad and she goes to her dad and says, yeah, I went to the mechanics and they actually they have premium air there. It was only a hundred dollars and I got premium air in my tires, like just to get a reaction, you know, out of her dad. Is that you? Are you selling the premium air? I've always had these little side hassles in, you know, in college. I ran a poker room under a table until I got kicked out. But that mindset of always doing something on the side, you know, that's, I think that's something my parents, you know, gave me.

6:46Because, you know, when you come from poverty, all you have is hustle, greed, and you cannot give up. Right? The hopes of my ancestors lay on my shoulders. I got to keep going, no matter what. So now we jump into wholesaling, right? I was embarrassed because I was only doing like six deals in one year, which is not a lot. But it gave me enough cash where I wanted to buy a house, right? And, you know, I decided to go with co-living because it sounded doable. I started putting some test ads to people. I was like, hey, yeah, I need a room. I need a room. Studio apartments at that time in Fort Worth are going for$1 ,200,$1 ,300.

7:28So if I can get somebody in a room for$700 to$800, that sounds like a good model. Sorry, before we go on, I just want you to define what co-living is. We've had a couple of guests on the podcast who have kind of gone through this strategy, but for folks who are listening and they've maybe never heard the phrase co-living, what exactly is this and how does it differ from traditional long-term rentals or traditional short-term rentals? Because of various names, you know, co-living, room rentals. A lot of people know it as pad split, like the same way we know short-term rentals as Airbnb, because that's the biggest platform that does it.

7:59But it's pretty much renting a room inside a house. And you're sharing the kitchen. A lot of the times you're sharing the bathrooms. Now, a lot of people right now, you know, a lot of the big coaches, they're fighting into, oh, if there's no community in it, it's not a co-living. It's just like you're renting a room. I would say that's the landlord's taste, depending on your tenants. A lot of people really try to do a lot of extracurricular activities for their tenants, you know, like pizza parties and trying to do this, trying to do that. I don't do anything like that. I just let them be. And I've had only one turnover since I started in 10 months.

8:35So I think I'm doing something right. A lot of people don't believe me. It's like, that's not possible. You have like 42 tenants and only one has left. I was like, yeah, you know, give them a good product. We're going to take a quick ad break. But when we come back, we're going to hear more from Andres on his portfolio and how he cash flows from his co-living strategy. Okay, we're going to shift gears for a minute to cover something important, especially for new landlords. The shows often talk about getting stuck doing everything ourselves and the cost of sweat equity. The key question is simple.

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11:43What do you think is like the big reason that co-living is becoming more popular right now? You know, people talked about rent by the room, you know, throughout time, I guess. But like, it seems like this year, going into 2025, co-living is the hot new thing. Several years ago, it was Airbnb, and then after that, it was midterm rentals. What do you think is the major shift that has made this a hot commodity right now for investors, but also for people who want to live in co-living? It's real estate cyclical, right? 2008, 2009, the burr was the biggest thing because you could get all your money out, you could get paid, you can get cash flow.

12:2616, 17, Airbnb is a boom. two years ago, everybody was like, oh, the interest rate is so low. Let's get it at that low and resell it on a wrap. Also at the same time, hey, let's do traveling nurses, right? Let's do midterm rentals. And now everybody's failing on that. Now it's like, oh, co-living because it's secure cash flow. The thing is that co-living is actually really good because, you know, just as a general economical principle, we're targeting the people who make the least amount of money, right? And we are taking care of the most principal need, which is shelter. So that's always going to be there.

13:03Because what happens, studio apartments, which is the efficiency apartments, the cheapest thing that you can buy, those prices have gone so high that people can't qualify for them. For example, this studio apartment in this area that is$1 ,200, you need to make about$43 ,000, $44 ,000 a year to live in. What happens with the people who are making$36 ,000,$35 ,000? What happens to the people that are making minimum wage where are they living right so uh even uh middle school teachers high school teachers they don't make that much money right i have one teacher and then one of my properties and when she came she was crying and i was explaining her like look this is not a group home right there's an engineer here he was from home there's a nurse the other guys work locally uh because she couldn't believe it like she went to college she has a master's degree and she has to share a bathroom with a couple of guys.

13:53So it is what it is. Andres, let me ask, because you mentioned something that you did a little bit of a test before you actually dove into this strategy. And I'm just curious, what was that test? How did you try and validate this idea before you actually committed to it? Advertising. Because my biggest fear, it was like, how long is it going to take to get full? because at that time I was using, you know, other companies' numbers. They're telling you like, hey, it takes like this long. They stay for that long. And then talking with investors actually in the platforms like, dude, we're barely breaking even, right?

14:29As soon as you launch, they get you full. But then after that, they start taking tenants because, you know, so many people are diving in. And at that time, there was no control, which is about a year ago. You know, landlords can do whatever they want. So I was like, let me just run my own ads, do my own marketing, see if I can get my own tenants. So I started researching how to do that. I found Sam Wiegert, who is probably the biggest investor in this market. He's out of North Carolina or South Carolina, somewhere in there. And he does a five-day free course where you can learn how to do this yourself for free.

15:02So I copied that, and I started marketing on Zillow, Apartments.com, Facebook Marketplace, Craigslist, all the room rental websites, Roomies, Roomster, Sumper. I only got leads from Facebook Marketplace, but I started getting like 13, 14 messages a day. Was it like, is this still available? All of them were still available. And a lot of investors told me, don't do it because people just click on it and they will respond. And I was like, okay, do you respond to this? Is this still available? No, never. Well, let me do it. So I started replying and guess what? People do respond, right they don't they don't type room for rental just because they're crazy so i started having conversations with them and you know the property was barely under contract i had just gotten out of contract with the seller and um and i was already people like i'm ready to move in so i was like okay this works let's uh and then something else happened where uh the person who was gonna onboard me into the outer company uh they said a few things that my lawyer didn't agree with.

16:05And that's something a lot of co-living gurus and investors don't talk about, which is the legalities of it. And that's something we have to be aware of it. Otherwise, your investment is going to go belly up. Yeah. Super cool way to test a strategy before going into it fully. And I guess two follow-up questions for me. Number one, what did you actually put into the post that you think garnered such strong attention? And then second, how did you actually land on the pricing for the room rental? Like you said, like, hey, for you, it's difficult how to, you know, underwrite and analyze properties as a short term.

16:40I know how to do that really well, because we've done it a lot. But like the idea of the single room rental, I feel like there's a little bit less clarity around how to do that. So first, you know, what did you put into the post to generate so much attention? And then second, how did you decide how much to actually charge for your rooms? Yeah. So the way you underwrite a room rental, you go from the comps in the area, right you can go you can use comms uh from silo silo is great uh realtor.com because it tells you what the apartments in the area are going for so once you find that price in your area let's say it's between a thousand twelve hundred you want to be within 65 to 70 percent of it because it has to be a deal right you're telling people you're going to share a bathroom you're going to share a kitchen so it has to be a deal so i started testing ads at 60 percent 65 percent 70 percent 75 % and 80 % of the price of the studio apartment, which is at that time the cheapest available option.

17:35And I started getting responses in all of them, right? And I was like, okay, so it's not about the price, right? Because now we're talking about 750, 775, 800, 825, 850. My cheapest advertising at that point was 600. And I started getting people who would not have qualified anyways, right? They just got out of jail. They have multiple felonies, DUIs. And one thing I really like about Facebook Marketplace is that you can click on their profile and see their pictures. As a general rule of thumb, if their profile picture is themselves holding a few guns with a lot of weed and a couple pitbulls, they're probably not going to qualify.

18:14Right? And so you don't even have to waste time betting this possible tenant. I've done that before too, is where when I haven't done in a while, but I used to post long-term rentals on Facebook and I would go and I'd also look at like their interactions with comments or like if they had pictures of them, like in their own house, like trying to look like, is it kept clean? Is it nice? You definitely can find a lot about a person by going to their Facebook page for sure. I think yes, because they are deliberately choosing that to be their avatar. You know, they want the world to know them as that.

18:50So if you want the world to know you as that, well, I might as well treat you like that, right? And, you know, there's so much volume right now from my ads, so I can choose the better tenants, right? So right now I have a criteria where I'm really just looking for introverts, you know, and when they respond, it's like, hey, tell me a little bit about yourself. I'm a night owl. I keep to myself. That's perfect. Because what happens before, I was looking for building the community type of thing, and that usually means you're going to get people who want to talk to others. They might be friends for a month or six weeks.

19:24Eventually, they're going to crash. Because you don't know that person. You don't know their background. So while building my list, I was like, what is the middle ground? Because eventually, they're going to come to you if there's a problem, and you have to be the referee. You broke the list, you're out. So what happens? The people that have a good background check that we're living with people who don't have a good background check, they start texting me. So I was like, what do you don't like about this? And I was like, man, they're forcing us to do this. They're forcing us to do that. Like, they want us to buy the toilet paper together.

19:53They want us to share this and that. I was like, what would you like? I was like, I just want to buy my own business. Done. You're allowed. Right? And I kind of let each house self-regulate. Right now I have five. Closing one more in two weeks, hopefully. We're almost there. And Andres, on those five, can you just kind of walk us through in a little bit more detail? So you have five properties currently. How many rooms is that? And how many specific tenants is that across all those rooms? It's 36. 36 rooms. So about seven per house. One has eight. Oh my God, those are big houses. Yes. Did you buy these big houses or did you add rooms to them?

20:31Like take a dining room and add? We definitely add rooms because, you know, it's really rare to find a seven room house. right? Actually, I don't know if my Instagram is going to be someone in here, but I have videos of there because now I'm the GC on the property. So I do walkthroughs of the properties, how to do the layout, how to do the construction quickly. A lot of people, when they're acquiring these properties, you know, they have a three month holding period plus another month of renting. The fastest one we did was we closed on August 13th. By September 1st, it was fully renovated, fully list up.

21:00So we don't have any holding costs. We added four rooms. You know, we find all the people. My longest time has been three weeks, except for the first one. The first one, I went with a contractor and she stole my money. That's how I ended up doing the construction myself. Well, you got to tell us a little bit about that story, Andres. I mean, I feel like every real estate investor has got at least one bad contractor story. So tell us about yours. So she can recommend it to me by another couple of investors in the area. I went to check her work that was close to my property. She was doing two full flips, full gut, changing plumbing.

21:30I was like, okay, that's a big job. This is not a small time contractor. And then they started doing my job, and the guys are not showing up every two, three days, which sometimes is normal when they have multiple projects, right? And then spring break hits, and I asked for LVP flooring. That was in the contract. And I get to the home, and I see the guys cutting the flooring with the meter saw and putting dust. So I was like, dust is wood. LVP doesn't have any wood. This is laminate. Then I see the brand. It is the cheapest thing that you can find at Home Depot, right? And I was like, hey, we didn't agree on this.

22:04And she's like, well, where would I put it? If you want to leave, you don't have to pay more. And that was it, right? So, okay, yeah, sorry, but I already knew that it was going to happen. In fact, she immediately, three days later, you know, she doesn't deliver the rest of the flooring. She took it. It was about$5 ,000 worth of flooring. She didn't pay the guys for two weeks, that I didn't know. And then they come to the house. It's like, hey, she said you didn't pay her. We're going to destroy our work. Oh, my God. Jeez. I'd be crying at this point. Just, you know. I have to stay at the property, right?

22:33The subs who did the tile work for the bathroom tried to break in a Saturday at 2 a.m. So luckily I'm there. So I have to get on a fight with them, have to call the police. So after that, I stay at the property every night and I had to finish the work myself, right? I'm kind of handy and YouTube is your best friend. You can learn everything in YouTube right now, right? So I was going to Home Depot at 6 a.m., buying material, going to work from 9 a.m. to 11 p.m., going back to the job site, 11.30 to 2 a.m., sleeping next day, next day for like two weeks. So there was no delay in my first property, right?

23:07We were like, we're going to go live April 1st. We're going to go live April 1st, no matter what. Because I bought that house with other people's money. So I cannot fail them, right? But even though I have the money to pay for another crew, at this point, I'm... Because I don't know how to hire them. I don't know if what they're doing is right. The only way that I knew that it's right is if I can do it myself and I can see that they're doing it like I'm supposed to do it, then they're doing it right. Right? So that was a big experience. I almost have a heart attack during those two weeks. I had to go to the emergency room.

23:41My heart would just not stop because it's a lot of stress. at the same time I had some bad news with my wife you know we needed to do an IVF treatment so I had to put another 25 ,000 into there so my reserves are like so anyways we went live the property wasn't even finished and I already had five people moving in right so I made the rooms upstairs ready the bathroom was ready I was like look the kitchen is not ready downstairs is not ready cool they didn't even see their room so that's I think it was a blessing because now everybody wants to come see the rooms. But for the first one, it was all online.

24:18I didn't even have pictures because the house wasn't ready. And these guys moved in. They paid a deposit. They liked the area so much, they just moved in. I have to say, I'm so impressed with your hustle. Like, I mean, just all the side hustles that you've done throughout your life so far. But in this circumstance, not many people are willing to roll up the sleeves and to spend every night after working a full-time job, working on their property just to like meet their deadline, to be able to pay back the people that invested with them. And that really does like take some character. And I commend you on that hustle.

24:56We had a similar experience happen and I'm very thankful. I had a partner on the deal who was the one that went in and did all of the work on it when we had to fire our contractors and had no one else to lean on. So just from watching him kind of go through that grind, like I share a little bit of your experience, but I just want to commend you on that hustle. And I hope everyone listening knows that like sometimes things like this will happen in real estate where you are going to have these really stressful periods, but sometimes just working hard and putting in that labor, putting in that sweat equity.