House Hacking Advice That Sounds Smart (But Is Really Dumb)
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Question. What kind of dress does a house wear? An address. Let's try this one. Why was the realtor in counseling? They couldn't get closure. Why did the mortgage broker always eat lunch by himself? Because he was a loner.

Well, if that didn't get you laughing, I've got some real estate jokes that will definitely get your goat. And by jokes, I mean these TikTok real estate hacks that are out there. You see, the talk is loaded up with real estate influencers trying to convince you that they've discovered the secret to get rich quick from some magical loophole in the system that you're missing out on. So let's dig into what these jokesters have to say about banking off some house hacks and whether they're full of baloney. But before we do, I've got one more joke for you. What's a YouTuber's favorite kind of moss? The old like and subscribe.

Get it? Lichen is a type of moss. It's kind of a fungi-algae combo. Okay. Bad joke. Bad joke. So be a pal, give us that like and subscribe, and share it with someone who loves YouTube, who loves moss, so we can keep churning out the goods on this channel. All right, first up, a video with 2.7 million views. Let's go.

If you can buy 10 rental houses before you're 30 and you own those 10 rental houses at the age of 30 and you don't buy another piece of real estate for the next 25 years, when you're 55, more than likely, all of those properties are going to be paid for. And let's just say you still have a balance on all 10 because you put them on 30-year notes, you can sell off more than likely two or three and pay the rest off.

So now you're sitting there with seven homes paid for that you have tenants in and you have cashflow coming in every month. So think about that. If you literally had seven rental properties making you $2,000 a month, that's $14,000 a month. That's called financial freedom.

What are you doing, guys? You're dumb. Just go buy 10 houses before you're 30. It's a simple wealth hack. But what Jeff Bridges is not taking into account here is risk. I knew it, dude. I knew something was going on. So you're asking a whole bunch of broke people out there to put nothing down on these homes, take out exorbitant mortgages to hope they can find a tenant, hope they can keep up with the maintenance, the property taxes, the homeowner's insurance on 10 different homes.

all as some kind of wealth building hack. It's just not that simple. Hard pass on that advice. Seller carry is where you basically ask the seller to be the bank. Say you're buying a house for $300,000. You say, I'm going to put $150,000 down, but I want $150,000 carry it.

So you get $150,000 cash. Maybe you don't need all the money today. Can I pay you the rest later? And I'll give you interest in that $150,000. Maybe you negotiate a 6% or 7% or 8% rate, something comparable or a little less than you can get in the free market, but you're getting all of your purchase price done and you can make interest payments to that seller. And once you fix up the house or eventually sell it or refinance it, you pay them off. They're happy. They're made whole plus their interest.

Here's the deal with seller financing. Like you mentioned in the video, they can jack up these interest rates because they're not a bank and they can pretty much do whatever the flip they want. And on top of that, these seller financing loans are often a much, much shorter term. You're not going to get a 30-year loan from Joe down the street. He wants his money fast.

And that means you can end up with a huge balloon payment at the end of this short loan where you don't have the money. And that can put you in a really, really dangerous situation. So avoid seller financing, go with a traditional lender, and you can save big on your interest rate.

This is the number one real estate investing strategy that I use to become a millionaire. It's called the BRRRR method. B, buy a property for a good price or below market value that preferably needs some TLC. R, renovate or repair the property so that you can make it attractive to future tenants who will pay the rent.

R, rent out the property to a tenant with good credit. R, refine. Once you have revenue coming into your property and you build some equity, you go back to the bank and get a cash refine. R, repeat this process again with the money the bank gave

and buy another revenue property. - Oh, wow. Oh, where to begin? What she's talking about here is the BRRRR method, which she explained in the video, right? Here's where the BRRRR strategy goes wrong. It doesn't take into account risk.

See, these short-term loans can be super expensive with high interest rates. You can quickly go way over budget with unexpected expenses and repairs, which leads to longer rehab time and even negative cash flow. And think about this. You're not the only person trying to find a deal to rehab a house. So you're now competing with other people who also watch HGTV and Tatlon Dono on TikTok, and they also want that deal. Oh, and by the way, good luck finding contractors who are available and affordable.

And good luck keeping up with all the work that needs to be done on this rehab. That's a part-time job right there. Does this feel like passive income to you? Are you kidding me? This is a full-time job on top of your already full-time job. And it's extremely time-consuming, and it's not as easy as it may appear to some people. Avoid this.

So we bought our first house and we lived in it for two and a half years. After that, we pulled out what's called a HELOC, home equity line of credit. And we use that to put a down payment on our next house in that we turned our first house into a rental property. So we became landlords. We moved into our new house. Our first house now has tenants living in it. They cover the mortgage plus some. And so all we had to do was put down 3%. Okay.

Investment properties, you have to put down 20%. Yeah. And so that's the hacking piece that people don't really understand because a lot of them are like, well, how am I ever going to get 20% to put down an investment property? You don't have to.

My brain hurts after watching that. Okay, so the description on her post says that house hacking is a real estate strategy where someone purchases a property, they live in one part of it, they rent out the remaining portion, and that generates rental income. She goes on to say house hacking can be an effective way for first-time homebuyers or real estate investors to get into the market and start building wealth. Here's why house hacking is a bad idea. Number one, it's not a hack.

It's a job. This is not passive income. You are running a small business. You've got vacancies to fill. You've got to deal with maintenance requests. You've got to keep track of rent and security deposits. You've also got more complicated tax returns with a Schedule E form where you've got to keep track of all your expenses. Second, it's awkward. Think about this. You lose any semblance of privacy because your tenant also lives in the same house as you. So you can't throw a birthday party or a bar mitzvah or a quinceanera or a chupacabra without asking your roommate first.

That's awkward. Third, it's risky. Having someone else live in your property who doesn't own it means they don't treat it like you do. So you gotta expect wear and tear on the property, which means higher expenses you're probably not prepared for. And if the tenant doesn't pay, you still have to. So if you really are gung-ho on doing this house hacking thing, here's the only way I would do it.

If you get a 15-year fixed rate mortgage where their payment is no more than a quarter of your take-home pay, and you've got a good down payment of 5%, 10%, 15%, 20% down is ideal to avoid PMI, then this could make sense for you. But if you can't do that on your own, and those numbers are out of control, don't do this. It's a recipe for disaster.

This is a HELOC. It looks like a credit card. It works like a credit card, but it's actually just a way easier way for you to access the equity in your home. With an Avon card, you can get all the benefits of a traditional HELOC like low APR and high spending limits. But with

but with the ease and use and flexibility of a credit card. No wasting hours at the bank or paying a ton in origination fees to access the equity you already have in your home. Oh, and the best part, it costs $0 to get. You can get approved online in as fast as 15 minutes. So what are you waiting for? Head on over to avon.com to discover what you prequalify for today.

What you just said is one of the most insanely idiotic things I have ever heard. Wow. You love that fine print at the end. That's always a good sign. This is like me saying, hey, getting punched in the face, it costs you nothing. And you can do it in less than 15 minutes. I'll show you how. Also, I just want to point out that as of the making of this video, the AvonCard Instagram account is following just one other account. Any guesses on who it is? You would never guess because it's Krispy Kreme Donuts. Really? Is that...

Wow, that's so weird. I don't know why. Did Krispy Kreme help start this business? Are they the angel investor? I don't understand what's going on here. So let's cover what a HELOC is real quick in case you don't know. A HELOC is a home equity line of credit, meaning your house is used as collateral to secure property.

Here's why a HELOC is a terrible idea to begin with. Number one, you're putting your home at risk. If you default, if you misstep in any way, the bank can take your home. So even as a credit card tied to your home equity, which allows you to rob yourself of your home equity at the low, low price,

of 8% to 15% interest. But guess what? It's not fee-free. There's a 2.5% fee on cash outs and balance transfers. There's a $29 late fee if you don't make the minimum payment. Here's the solution to this. Save up and pay cash for whatever it is. And listen, if you're really in a financial bind, it may make sense to sell your home while you get financial foundation under you. But do not rob your home equity, please. Kim Kardashian just took out a $48 million mortgage to buy a new home in Malibu.

Why would someone who's worth over a billion dollars take out a loan when they can afford to buy the house in cash? Well, I'm Vivian, your rich BFF and your favorite Wall Street girl. He's going to let you in on this massive rich person secret and explain why you should understand it.

All these years you've been lied to. Debt is not bad. Debt is a tool, but you got to know how to use it. And in Kimmy's case, debt allows her to use her money for more lucrative things. Because even when you're a billionaire, locking up $48 million that you can't touch isn't a great financial move. That's money she could have been funneling into her high growth brands like Skims, KKW Beauty, and SKKN. So instead of putting her own money into her house, she's putting the bank's money into her house and using her own money to make more money.

The key takeaway here is if the cost of borrowing money is less than what you can make with it, you've created an infinite money printer. And when poor people borrow money, we call it debt. And when rich people borrow money, we call it leverage and we put them on the cover of magazines. Which one do you want to be? Vivian, I was on board until you threw my man Dave Ramsey under the bus. Okay, not cool. Unappreciated. Rude.

We got to talk about this whole leveraging debt thing. You said when poor people take out debt, we call it stupid, right? Debt is okay as long as you're rich. Why would she use that cash when she can make more in the market? And you might be thinking the same thing. Why would I not take out the loan or why would I pay off this debt when I can use that money to make more money in the stock market?

Well, you're forgetting about a thing called risk. You see, last year, the stock market was down 18%, which means if you put $100,000 in, you lost $18,000. How's that for your little money-making scheme? So it doesn't make sense that you can just say debt is something to be leveraged. We should all do it. Kim K does it. Why shouldn't we? Listen, there's a lot of decisions Kim K made that I don't think anyone should make, okay? What do you mean by that?

But that's besides the point and for another episode. Not all wealthy people leverage debt. Okay, I know a guy by the name of Dave Ramsey who's worth hundreds of millions of dollars and he pays cash for all of his real estate. So don't believe this myth that this is what wealthy people do just because one TikToker said one celebrity did it.

So can home ownership help you build wealth? Absolutely. Real estate was a huge part of my own wealth building journey. And I've got a video called How I Went from Broke to Millionaire in 10 years where I walk you through that. If you like what you heard today, there is plenty more where that came from. If you want to learn about how to be successful in real estate, how to do it the right way with less risk and more peace, check out the place I look for all of my home and mortgage questions, the realestatehub at ramsaysolutions.com. I'll link it below.

As always, be sure to like and subscribe to get more content like this and share this with the self-professed real estate gurus in your life. I want to know what they think. Or maybe a friend who's likely to fall for some of these real estate hacks. Thanks for watching. I'll see you next time.