How to Transform House Hacking into Million-Dollar Wealth w/ Ryan Greenberg

0:00All I want to get is a million dollars in assets. And then I got to a million and I'm like, oh, I want 5 million. Then I got to 5 million, I want 10 million. And now I got to that point and the goalpost just keeps on moving. How do you become a millionaire? Ryan takes us to how he got first deal done, second deal done, how he did house hacking. The common denominator that I've found with a lot of the entrepreneurs that I've interviewed is that the money will come, but it's the grind, it's the game, it's whatever you want to call it. That's the addicting part. Ryan's going to share with you how he just wanted to retire easy.

0:32Now he's running multi-million dollar companies. How did he do it? Let's join Ryan Greenberg. So, Ryan, how do you define success? What do you see it as? I would say that that answer, if you'd asked me five to ten years ago, might have been different. But now I find it something where, in the beginning, I guess it was always about the money. And then when you get the money, it's about your time. and right now I'm more in the in the camp of when you can do what you want with your time and your life is financially okay with you doing what you want to do whether that's working building businesses going fishing or going to the movie theater whatever it is if you could pick what to do and financially you are stable.

1:22I think that defines success for me. That's a huge thing. Yeah. It's amazing how our definition of success grows and changes over time. The old learn, earn, return strategy of, you know, first you got to learn money, then you got to earn the money and then you work out ways to give back sort of thing, whether it's giving back time or money is a big part of it. Do you think that you chose success at some point or do you think it was a natural thing with your family or how was that so my family always wanted they always wanted success but they were very conservative so I started my career as a public a public school teacher my parents were very adamant on me going to college getting a regular job getting a pension that whole thing that was success for them I started working a regular job and I could not I was not happy I felt like I had hit it there was a ceiling um that I wasn't happy hitting and that life to me was kind of just a little boring so can we just touch on that a little more because most people in that scenario will never make the leap?

2:36How? Where did you jump out or leap out or what happened? I started my venture in buying real estate while I was working as a teacher. And there got to a point where the one job was making more in one month than the whole other job was making in the entire year. So at that time, I did a simple numbers game and I was like, I could go get another job and replace this other income if all things go to hell in the real estate market. But if I take the time that I'm taking over here at this regular job and push it into this other venture, that could 10x, where my teaching career could never 10x. That was never an option.

3:23It never was going to be scalable because you have a set salary and it goes up one to two percent a year whatever it is um when i was seeing the real estate stuff the money just made more sense it just was like okay the more i work the more i put into this the more i understand the more i earn um and that to me was made it very easy um i called my mom one month and i said i'm not going back to work i'm done and she was very upset. I remember doing that too. My mom looked at me and went, you can't, what a, her, her. And I used words back to my mom, Ryan. I said, you know, mom, you always said, if you can't say something nice, don't say anything at all, please don't.

4:07And she didn't talk to me for two months. Yeah, I mean, my mom was convinced that I was going to ruin my life, that I was taking on debt that I would never be able to pay back, so on and so forth, you name it. she named it and the the month that I quit I'll never forget it it was the month before it was June and then I had to tell the school that I wasn't coming back in July because they were expecting me basically second week in August to start and I looked at our our June numbers and I think we made something like$168 ,000 in profit that month and I looked at my salary as a teacher at that time, I was like$48 ,000 a year.

4:47So I was like, if I could do this in one month now, even if this was an exceptional month versus the other ones, I don't need to go back to this job. That was like, if I take the time that I'm spending at this job and just put even half of it back into the business, I'm going to get a way better return. If I had a job making a quarter million dollars a year as a scientist or something, a doctor, maybe I would look at it differently. But all I had to do was replace$48 ,000 a year in salary. I could do that working at Starbucks almost. You could do that in one real estate deal. You could also do that just driving Uber for goodness sake these days.

5:25I mean, it's a totally different thing. So I want to go back though, Ryan, the idea of becoming a millionaire, becoming wealthy to most people, it seems foreign to them yet when you like your podcast you look at everyday millionaires right there's a lot of fallacies in my mind about becoming a millionaire is just so different so far off so far away today it's almost own your own home you're a millionaire type thing and it's it's crazy uh where we're going to but what did you learn in all that time interviewing all those millionaires around what is the traditional what's the typical millionaire look like today yeah so like you said i mean it doesn't take all that much to become a on paper millionaire whatever you want to you know however you want to define that a million dollars in assets minus you know liabilities um if if you have a home in like the mid range of let's just say a half million to 800 ,000, which is kind of like not that crazy anymore.

6:35And you have a regular job, even if you don't own a company, you don't make that much money, you know, you make low six figures, which is most jobs. Now, you could become a millionaire in 15 years without doing anything exceptional. You just pay down your mortgage, right? Just pay off your mortgage and put the some of it into the S &P 500 and then boom, you're a millionaire by 35, 40 years old, whatever it is.

7:04The one thing that I look at when I'm interviewing people on my podcast is what drove them to get where they are. Most of the people are entrepreneurial and it's not at that point for the most of them, the common denominator, it's not about the money. It's a game that we're trying to play and level up. And when you think that, when I think back to when I started, I was like, all I want to get is a million dollars in assets. I didn't even care about the millionaire status. I just wanted to collect a million dollars in rental properties. That was my goal. And then I got to a million and I'm like, oh, I want 5 million.

7:43And then I got to 5 million, I want 10 million. And now I got to that point and the goalpost just keeps on moving. And it's not even about the number. It's not about the money. It's like, I look at it almost as like points in a game, in a video game. And that's the common denominator that I've found with a lot of the entrepreneurs that I've interviewed is that the money will come, but it's in the beginning, it's the grind, it's the game, it's whatever you want to call it. That's the addicting part. That's what I feel like most of the entrepreneurs that I've interviewed all have in common. I think that you're right.

8:16It's that attitude, that desire to level up. You said something in your story, which I find very regular in millionaires. I realized that I could never multiply my income over here. The only way I could is to go and do something different. And that's where, if you look at it, there's one similarity in the vast majority of millionaires. They own their own business and they pay off their own home. I mean, that, or sorry, two similarities. I mean, when I read The Millionaire Next Door, Stanley and Danko's research, 4 ,000 millionaires they interviewed, there was nothing special about any of them.

8:57They were just tenacious. They built their own business. They paid off their own home. In fact, interestingly enough, Ryan, the number one profession of the spouse of the business owner, millionaire was school teacher. Funny that then it was nurse, then it was nurse second, school teacher first, nurse second. It was the two things. So let's look at real estate then. And what made you decide real estate was your game or your investment strategy? Because the old axiom of you don't have to, you know, you don't have to be rich to invest, but you have to invest to be rich is true. You started small, worked your way up, but why real estate?

9:39What were the things that said, I've got to be in this game? So when I started investing back around 2015, 2016, real estate, like podcasts, BiggerPockets, a couple of like people, books that I've read, Rich Dad, Poor Dad, just all pointed to real estate as being a passive investment. where I thought when I first started that I would be teaching for 30 years and retire and have five to 10 houses that would be part of my retirement plan. That was the goal. There was no running $10 million construction companies and property management companies and all the other stuff that I'm doing now. None of that was even in my foresight at all.

10:26This was just buy the house. I had an opportunity with a private lender at that time. Buy the house. You rent it out. You collect money. Over the 30 years that I'm going to be sitting in the school teaching, the mortgage will get paid off. And at the end of 30 years of my career, I'll have this many houses that are paid off and I'll be good. I'll be set. And then the goalposts kept on moving, like I said. And, you know, you do a flip and you realize, oh, there's some money in the construction piece of it. You start a construction company. You have to manage the properties. You start a property management company.

11:04All those things came later on. But the first thing was passive investment, something that most people know is a tried and true game to be in. That's it. It wasn't anything special. Like I heard a couple of podcasts, man, and I was hooked. That was it. yeah i think and i've said this to people all the time and one of my uh team members the other day said to me she's making her offer on her first uh real estate uh investment but she said i just did what you told me i went and looked at 50 homes and and by the time i'd looked at 50 homes i knew what to ask what not to ask what to look for what prices what rental incomes i knew all of the things and it's like yeah read the books do the podcasts but just go look at homes now you started with a strategy though that I love and I've been I just think it's one of the most brilliant strategies for a young person you rented out rooms in your own place to offset your costs how did you stumble into that or did you did you learn it and then do it or what was the what got your brain thinking buy a big house and rent out the room sort of thing So, um, when, after I got my first job as a teacher, this was back in like 2013, I lived with somebody else that was doing that.

12:32So I lived in the, I rented out the basement suite of his house. Sweet. I love it. It's the basement suite, dude. It's yeah. You know, it's got a little bathroom, a little thing, you know, it's just the basement. I'm in the, I'm the guy in the basement. But, um, Um, that's what got me thinking like, oh, this guy's collecting, you know, 850 bucks, whatever it was I was spending a month on me. And his mortgage is only 1600. And he's got another person renting another room upstairs. There's three people. If he rents it to him at 850, uh, he's not paying anything to live. That to me was simple math.

13:11So I, my first piece of real estate that I bought, that's what I call it. house hacking now. It's like I was going to buy the house. I rented out two of the bedrooms and I wasn't paying anything to live. So typically your rent, your mortgage for somebody in this country is their biggest expense every month. If you get rid of that and just invest it into anything, S &P 500 or treasury bills, for God's sakes, over 30 years, it's going to be worth a lot more than you think. That was it. There was no other brainpower besides me seeing somebody else do it that I was part of on the other side of the coin and said, this is a no-brainer.

13:53I'll go buy my house. I think my first mortgage, I still have that house. I believe the mortgage is like$1 ,100 and my mortgage interest is like$2.75 or something crazy low. And right now, it's currently rented at like$1 ,800. But when I was living in it, I lived in one room and rented out to two other people. And I was basically net positive like$150 a month. I think it's interesting. I don't think the average person realizes that about a third of Americans rent, about a third own with a mortgage, and about a third own their own home outright. You know, they don't have a mortgage, they've paid it off, and they have no expense on that side of it.

14:35I realize there are that many people that have paid off homes and that sort of thing. So when you start thinking about, and you've said it several times, the goalposts kept moving. How was it that, you know, you, I mean, you learn something. I always say when you hit one street corner, only then can you see what the next potential is. What was some of those sort of like goalpost moving events. Like I did this and then I went, holy heck, I've got to do that. And then I did this. Give us some of those stories because I think that stuff's valuable for people to understand that you can not just get into real estate, but you can level up yourself in real estate.

15:18Yeah. So the beautiful part about real estate, it has so many different facets to it, right? When you're doing what I'm doing, you have to acquire the property. You have to renovate the property. You have to manage the property. So I had a couple of people where I'm from in New York saw me doing what I was doing just on social media. And all I was doing was posting happy I just got to buy my first rental property and then pictures of me renovating my first rental property. And people were like, how are you doing this? Especially the people in New York. I'm like, oh, well, down here in Maryland, where I live now, the numbers are a lot cheaper than what you're used to.

15:58Like we're buying houses in the 150 to$250 ,000 range, and we're renting them out for 1500 to$2 ,000 a month. Where in other places in the country, that's not a possibility. You're half million for a little shanty shack in New York. So that's kind of when people started contacting me and realizing, hey, maybe I should get involved in what he's doing out of state. I had the first aha moment was when somebody said, hey, I've been trying to invest. I'm in New York. I have this much money. I couldn't find any deals in New York. Can you help me find deals in Maryland? She came down that first weekend.

16:38She bought three houses with me. At the time, I was not a real estate agent. I was not a construction guy and I was not a property management company, but I was managing my own properties and I was managing my own construction on my properties. So she said, hey, do you know any contractors? Because I don't have anybody down there to help fix these places. And I was like, huh, well, I just used this guy, this other guy for my house. I could just probably manage him to do your house. And she's like, okay, then for property management, like, are you, how are you managing your own properties? And I was like, oh, well, I'm using this software called Buildium.

17:20I have an assistant now that's, you know, the lady in the office kind of thing doing the admin work. And I was like, yeah, I could do that for you too. And I'll just collect a fee on it. So, so that, those, that couple of first transactions, I was like, huh. And then I was renovating another property of my own. And somebody came up to me and was like, hey, I see you just did the roof on your house. My roof's leaking. Can you help me fix it? So I just contacted my roofer and I said, hey, can you go over there and fix this person's roof? He said, sure. He charged me$1 ,200. I charged them$1 ,800.

17:55They were happy. He was happy. And I made some arbitrage on it. And I was like, okay, this is the next step now. Now I can do this for other people. And now I would say my biggest profits come from the construction company from building. We're building custom homes. We're building apartment buildings. Those profits are really, really good. So I stumbled into that. That was not something that I had planned. I had never swung a hammer in my life. That was just something that came about. And that's when the goalpost moved because I was like, hey, I just made$800 or whatever it was,$600 doing nothing.

18:35I just made a phone call. I just collected$600 and I've been getting yelled that by kids all week in the school. Hey, I want to go back to something because I think this is an important lesson for people. New York, it's got high capital appreciation, like the value of the property goes up a lot faster because it's that central city whole thing. Maryland, value doesn't go up anywhere near as fast as it does in New York. New York's rent to value is lower because high capital appreciation will have lower rental income. It balances out. Maryland, lower capital appreciation, higher rental income, it balances out.

19:21I think it's really important, and obviously you saw this pretty quick as being invested in Maryland rather than in New York, that there is a balancing factor of you will get more rent, but you won't get as high a capital appreciation. But in the beginning, more rent is most important. You need cash flow. Unless you have like, you know, you go into New York, some of these other markets, New York, California, whatever, and you buy a property and you have a million dollars to put into it, then you might be playing an appreciation game. You have a million dollars already. I was a schoolteacher making barely any money.

19:59So that$500 of arbitrage every month that I was making on the rent times it by five properties, I just doubled my salary. That's a big deal, right? So I couldn't care less about appreciation at that point because appreciation didn't pay my bills. If I had something go wrong, the appreciation couldn't bail me out unless I sold the property. And we've all played Monopoly, right? You don't want to have to sell the property. you want to keep it. You've thrown out the word arbitrage a few times. Explain that to people because I think there'll be some people that don't understand what you mean. So arbitrage I look at is just like the delta on what you've spent and what you made.

20:39So being a middleman of sorts, right? If I had a roofer go out and he charged me$1 ,000 and I said to you to fix your roof, it would be$1 ,500. That$500 delta there is your arbitrage, right? That's what I look at. Yeah. And that's pretty simple. But I think that once you, until you get into the game, you don't realize just how much. Now you've talked about the construction business right now, and that's obviously a whole other level. I look at level one of real estate investing as just buy and hold. Okay. Just, you just buy and hold and your first buy and hold should be your own house. And as you've said, you can turn that profitable, especially if you're young.

21:20I think that even couples should try and buy a duplex or something so that they've got one for them, one they can rent out or something like that. Second level where you got into really early was the buy and renovate that property sort of thing. When you renovate today, do you have any like financial rules like I should be only investing 10 % of the value of the property, I want to be increasing the value by 30 % or anything like that that can give people a little bit of guidance based on your experience? Yeah. So right now with the rates being so high, we've had to shift our goals a little bit.

22:01But if you'd asked me the same question in 2018, I was like, I want to get a big fat check at the refi table tax-free because it comes in the refi. And I want to make sure that I'm making$500 a month on that asset. I was pretty much buying in the same asset class, ARVs after renovation value, for the listeners that don't know what that stands for. I was looking in the two to 350 ,000 range. So my thing was at the end of the day, I wanted none of my own capital to be tied up in the house because I didn't have any capital at that time to get tied up. We've got to get into that in a little detail too.

22:38If you can just go into some detail as to how you would not have your capital tied up after renovation? Sure. So the banks back then would lend you 80 % of your loan to value would be 80 % of the total value, right? So if you appraised a house at$100 ,000, just to make the house, just to make the math easy, if the house appraised at$100 ,000 and that you were going to get a loan from them, the bank would give you$80 ,000 in a loan, right? Now, the goal back then, and now, like I said, it shifted a little bit now with the rates, was that at the end of the day, I would have that 20 % built equity by doing the construction.

23:23So if I was all in the property for 80K, meaning I bought it for 60, I renovated it for 20, it was worth 100. Then I refinance it, The bank's giving me my 80 back. That's what I had in it. Now I'm net zero. I got no money in the deal. So any money that I get is just an exponential return because there's none of your own money tied up in that asset. Now I'm more in the camp of like, if I have less than 10 % invested at the total value, because as an investor, you're not getting those anymore. Right now it's like 70%. They want 70 % LTVs, 65 % in some cases. Now, for people like me, if I've got a lot in one area, I'm down at 60 % in some markets where they're like, you got too many houses in that market.

24:11You got to, you're at 60 points. You had too much risk there. Go buy somewhere else if you want 70 or 80%. Yeah. So that's a game that you kind of have to play with the banks and the brokers and the lenders and stuff. But for me, if I have less than 10 % in the deal and then that 10 % is making me a 10 % cash on cash return annually, I'm happy because that's a safe place to be. If I'm making a net 10 % cash on cash return and the house is appreciating and my debt's getting paid down, you're really looking at a much higher return on investment than 10%. Well, hey there, and thanks for listening.

24:51I've noticed that 78 % of you are brand new, which means you haven't hit the subscribe button yet. By subscribing, you help us bring on even better guests, better quality content, and serve you better with even more podcasts. So please hit that subscribe button. It only takes a second. It makes a huge difference. If you support us, we're going to support your success and help you achieve big success together. Yeah. For those that don't understand, cash on cash might be if I'm into the property with$50 ,000 in cash and I'm making$30 ,000 a year or after rent, after all of those things, if I'm getting 20 % a year, I'm getting$10 ,000 in extra money.

25:33It's$10 ,000 on$50 ,000. So it's cash on cash. Sometimes that's referred to as internal rate of return. But that also then you take into account depreciation taxes, all of those sorts of things on top of it, plus appreciation. And every state has different software. Every country has different software. You just have to type in. You mentioned one you were using for management, Ryan. Are you using an off-the-shelf version currently for evaluation of cash on cash or internal rate or are you using something you've developed? So for analyzing deals now, I've kind of developed my own spreadsheets of ways that I like to look at deals.

26:15But there's all these different things to look at, right? Like this year, this past year, I bought a duplex that I bought for$550 ,000. It's in a very high-end A-plus community right outside of D.C. Typically, you're getting high-end government employees living there. And I bought it for 550. I put 75 into it and renovated both sides. And it reappraised at 1.15 million when I did. So, yeah, so I ended up pulling out a 700, I think it was like$720 ,000 refinance. So I got back a big fat check, a hundred plus thousand dollar check at the refi table. And then I had a big tax issue, but I had to find some ways to get rid of some income of last year.

27:09So we did what's called a cost segregation study on that property. And what that does is takes future depreciation. So you're allowed to depreciate rental properties for 27 and a half years. But if you do what's called a cost segregation, you can actually fast forward that, right? and say, I'm going to take my depreciation this year. And that comes off of your taxable income. Now, if you were to sit the government, Uncle Sam was coming after you for, you know, 250 ,000, but you just depreciated that asset and you plan on keeping it, right? You plan on keeping it. Well, you have to, if you do that one.

27:47Yeah. Right. So you can't do it if you're going to flip it, but if you plan on keeping it, then you take all that. And then next year, when you have the same tax problem, hopefully, you can find another property and do the same thing. So that property I looked at in a different way. It doesn't really cash flow. I maybe make$100 to$200 on each unit per month, if you take it to consider vacancy and capital expenditures and all that stuff. But I got$150 ,000 in my pocket as profit that's non-taxable. It's a non-taxable event because it's in the form of a loan. And then I took a quarter million dollar paper loss on taxes.

28:27That deal makes a lot of sense for me. But for some other people that in the beginning of my career, I couldn't afford to do that because the cash flow, you know, you need the cash flow. So the deals all get analyzed in different ways, depending on your needs. If you're somebody that has$2 million in your bank account, well, your goals and your things that you can look at and you make a high W-2 job, let's just say. I know a guy locally that's a defense contractor that makes like$1.2 million a year at his W-2 job. He's in a different position. He wants to buy things for tax losses and push the can down the road for Uncle Sam.