House Hacking 101: Transform Your Home into a Cash-Flowing Asset

John Harcar (00:01.103)
All right, right on guys. Welcome back to the show. I’m your host here, John Harkar, and we’re here today with Chris Lloyd. And what we’re going to talk about is setting you up for success. We’ll dive into that in a minute. remember, guys, with Investor Fuel, we help real estate investors, service providers, I mean, really all real estate entrepreneurs, 2 to 5X your business. And we do that by providing tools and resources to really help you grow the business you want to grow and in turn live the life you want to live. So Chris, welcome to the show.

Chris Lloyd (00:28.77)
Thanks for having me.

John Harcar (00:29.987)
Yeah, man, I’m super excited about it. We talked before we got on the air about how you like to lift people up, right? You like to help people get there. And that’s where our title setting up for success came in. But before we get into the weeds here, tell us in our audience a little bit about you, you know, your background, where you came from, what got you into real estate and what got you here?

Chris Lloyd (00:48.504)
Sure thing. So I went off to college following, you know, the old wisdom of, you know, go to college, get a good education, good paying job, get a job with benefits, that whole thing. Exactly. So I went through the entire thing just like that. Graduated from the Virginia Military Institute and then took a job at a ship builder down in Newport News, Virginia. And so started getting, you know, into that career. And one of the things that I noticed was I…

John Harcar (00:55.331)
Mm-hmm.

American Dream.

Chris Lloyd (01:17.142)
I’m very forward thinking and so I looked into retirement planning and saw what I was able to put aside.

and then did the math on average returns and was not happy with where that would put me up for retirement. So I started looking at other things, read the book. Sure, many of you all have read it. Rich Dad Poor Dad. And that got me hooked on real estate. So I bought my first house hack deal. Those of you that don’t know house hacking is when you owner occupy a multiple unit property and rent out the other units to reduce your living expenses. I took the money that I saved, started using it for retirement. I was like, Hey, this real estate thing’s kind of cool. And so I decided to get my

John Harcar (01:35.544)
Always. Nice.

Chris Lloyd (01:54.535)
license after doing that deal and launched my real estate agent business and now I’ve been doing that for about four years coming up here in June. I’m a real estate broker in southeastern Virginia and we just launched our real estate team focused on helping investors get started in the investing space and of course we do retail as well.

John Harcar (02:02.832)
nice.

John Harcar (02:12.323)
Yeah, cool. All right, let’s go back a little bit. So you’re not liking your returns or what your retirement age was going to be. What did it put your retirement age at? Just curious.

Chris Lloyd (02:23.502)
Ah, shoot, I think I was looking at retirement age of about 65.

John Harcar (02:29.335)
And what was your target?

Chris Lloyd (02:31.116)
My target, or where it said I was gonna end up was about 1.5 million saved up for retirement. And even nowadays, that’s tight. So I figured, hey, with the way that this economy’s going, that’s really not gonna be good for me by time I’m 65. And so I just, the math wasn’t mathin’ for me, and I needed to figure out something else.

John Harcar (02:39.523)
Mmm.

Yeah.

John Harcar (02:46.351)
Okay, see you.

John Harcar (02:51.395)
And he picked up Rich Dad Poor Dad, just like pretty much everybody who’s listening to us has read that at least once. And how did you go out and find this house? I mean, how did you know how to go out to find it? mean, Rich Dad Poor Dad doesn’t teach you really how to go out and market and get in lead gen and do all that. So how did you learn that step?

Chris Lloyd (02:54.094)
Yep.

Chris Lloyd (03:09.07)
So that was kind of funny. So when I was exiting college

I had been reaching out to people that graduated from my college for advice on what to look for when entering the job market. And then also I was trying to track down the people on LinkedIn that were in the recruiting areas of different companies that I was applying for. And I came across this guy, Tom, and he was a graduate of VMI as well. he was working in real estate. And I talked with him a little bit about real estate and he told me it was primarily commission-based. And me,

with the old wisdom that I had been raised up on, was like, well, that doesn’t sound very stable. And I kind of just wrote it off until I read Rich Dad Poor Dad, talked about real estate. And that was really the only guy I ever talked to about real estate. So I reached back out to him. said, hey, you know this Rich Dad Poor Dad book? And he said, yeah, that’s pretty much what I do for a living. he said, I was like, well, how do I get started? And he said, plain and simple, get a house that you can utilize to reduce your living expenses, because that’s going to be your number one expense in life.

John Harcar (03:48.804)
No.

Chris Lloyd (04:12.366)
So that’ll be step one. Owner-occupant financing. You can use a real estate, just about any real estate agent for this strategy, but he told me, I recommend that you go to a platform that we probably all know, or are very familiar with, Bigger Pockets, and find an agent on there. So that’s exactly what I did. I talked to the agent, I said, look, I want a two, three, four unit property. I’ve pre-qualified for a conventional loan at this amount, and I bought it.

Plain and simple. I really didn’t know a whole lot about real estate. I relied heavily on my agent. had a fantastic agent at the time. This was before I had my license. She walked me through the process and I felt very well taken care of and that deal is super fruitful today. Extremely happy with it. And at the end of the day, over the years I’ve learned buying real estate and waiting is extremely important. And so I’ve seen all kinds of benefits because everyone sells cash flow.

John Harcar (04:43.727)
Good.

John Harcar (05:01.45)
Mm-hmm. Why?

Chris Lloyd (05:07.15)
Everyone sells cash flow in this business. However, I did buy in 2021 and what that did for me is in the whole run up, I saw the true power of appreciation. Now I know that the last three years were a little abnormal. However, those three years of that crazy appreciation showed me, hey, cash flow is really how I keep this asset alive. But the true benefit and the true wealth creation, in my opinion, is appreciation.

John Harcar (05:17.593)
Yeah.

Chris Lloyd (05:35.284)
me in the long term, the reason I got into real estate was for saving up for retirement. And the equity I have in just my first property is pretty significant and a lot further along than where my 401k would have been in corporate America.

John Harcar (05:56.633)
So now that you have this house hack and just so people know, like, so when you’re house hacking, I mean, did you rent them all out and they covered all your expenses?

Chris Lloyd (06:06.894)
So when I started, yes, back in 2021, you could do that. The landscape of this strategy has changed over the last couple of years.

And one of the things that, you know, a lot of our investors have to do, they can’t just find a deal. I just found that deal. I rented out one side and was living for free pretty easily. I didn’t have to do a whole lot. Nowadays, when we’re working with our clients on these type of deals, we have to coach them on how to make a deal, not find a deal. You have to find the hidden opportunity in the deal and you have to execute on that plan. So ways that we do that is we actually have a spectrum that we sit down with our

investors when we first bring them on like our entry level house hack investors and we say look there is an inverse relationship between how comfortable you want to be and how profitable you will be and so the three main things that we look at is one rental strategy so are you gonna rent by the room are you gonna do a single family with ADU or you gonna do a straight multifamily so by the room is gonna be the most uncomfortable you’re living with your tenants however it’s typically the most profitable

A single family with an accessory dwelling unit. It’s usually less profitable, but you still have a little bit more privacy. And then a traditional multifamily is not, is the least profitable, but you get the most privacy and the utilities are usually set up to account for multiple families living in the same property. And for those of you that don’t know, two to four unit properties have become so expensive over the last couple of years, simply for this reason. People are looking for a discount on their living expenses and you’re looking at these assets saying, why would I ever

pay that price, that’s negative cash flow, but the owner occupant is saying, hey, I’m only coming out of pocket $600 a month, my next best alternative is studio apartment for $1400 right up the road. So for them, it’s a win financially. And so that’s the first category. The next category is what is your lease length? Are you doing a short-term rental, a mid-term rental, or a long-term rental?

John Harcar (07:56.225)
Right.

Chris Lloyd (08:09.708)
We all know long-term rental is the most comfortable. You don’t have to furnish it and it’s a long lease, but low payoff. Short-term rental is the exact opposite where you have a lot of turnover. It’s like you’re running a business. It’s more uncomfortable, but it’s more profitable and midterm rental is pretty much in the middle. And then the last one is rehab level. If you’re willing to basically take it down to the studs and truly make something beautiful.

John Harcar (08:22.799)
Sure. Right.

Chris Lloyd (08:32.95)
you’ll be able to make more money. made the opportunity, you built the equity, but if you want something that is a, you know, fully rehabbed, brand new LVP, granite countertops, stuff like that, someone else built the value. You’re buying the product, so you have to acknowledge the fact that you’re not gonna be as profitable. So if someone comes to me saying, I need a fully rehabbed, top to bottom, multi-family property that I wanna do long-term rentals on, we have a serious heart-to-heart conversation and say, well,

John Harcar (08:45.188)
Yeah.

Chris Lloyd (09:00.822)
Because this is a very easy route, you cannot be expecting a whole lot of profit. Here are some other ways in these three different tiers that we can say, hey, are you willing to get more uncomfortable in one of these three tiers? And it puts them onto a scale and we typically see profit coming in around the five or six on a one to nine scale.

John Harcar (09:05.806)
Right.

John Harcar (09:19.311)
Well, I think that too, that’s where a lot of people get over their head when they’re getting into stuff is that they don’t have that knowledge of what is their threshold. Like do they want to have that easy, but the understanding that might not make as much of the, want to put your blood, sweat and tears into something that you can be more profitable for. So what does, what prompted you to just start up a brokerage?

Chris Lloyd (09:26.956)
Yes.

Chris Lloyd (09:35.767)
Absolutely.

Chris Lloyd (09:40.259)
So I did not start up a brokerage. am an associate broker with my current brokerage. Yes. But I do have a real estate team. What really prompted me to start it up, honestly, I had such a good real estate agent on my first deal. I wanted to become one. And at the end of the day, I think that just seeing what she was doing, I wanted to basically implement

John Harcar (09:43.871)
Okay, all right. Got it. Okay.

John Harcar (09:58.167)
Mmm.

Chris Lloyd (10:07.95)
throw my own spin on it and help more people like me and really dive deep into that. And I was also pretty unhappy with the job that I had. I was working with great people at the shipyard, but I was not passionate about the work and I was passionate about real estate. I had got the bug doing the deal. Exactly. So at the end of the day, I got into real estate sales because I just wanted to do it more.

John Harcar (10:19.385)
Yeah.

John Harcar (10:26.093)
You got about to say you got bit by the bug, man.

Chris Lloyd (10:36.398)
than I wanted to do my other job. one of the trade-offs of that is now you’re a 1099 independent contractor and financing is more difficult to obtain. And so I did take that on, but at the end of the day, I was so unhappy with the job that I had. I didn’t really care about the fact that it would be easier to invest. I wanted a better quality of life overall.

John Harcar (10:59.223)
Right. Now that makes sense. Tell me about some of the maybe the challenges, struggles or mistakes you made when you first started in real estate.

Chris Lloyd (11:07.778)
yeah, well there’s plenty of them. So I think one of the biggest things was a lot of real estate agents when they come in, their broker and their initial training is gonna talk to them about the real estate roller coaster. And the whole concept of the real estate roller coaster is a lot of real estate agents will prospect, prospect, prospect, prospect, and then they’ll get the client, they’re super excited about the client, they get them under contract, they’re focused on the contract all the way to the closing table.

they get paid and they turn around and they’re like, shoot, I don’t have any more business. And then they start prospecting, prospecting, prospecting again. And so it keeps going up and down. And so one of the things that I learned early on, my first hire very early on, I had only done about three transactions before I hired a transaction coordinator, because I realized I was spending so much time doing non-dollar producing activities. These activities are necessary, but it’s not bringing new business into the.

John Harcar (11:40.975)
Stop the marketing.

John Harcar (11:54.639)
Hmm.

Chris Lloyd (12:06.764)
So I hired a transaction coordinator to handle anything that did not require a license to get that contract to the closing table. What that did was open up my time so that I could focus more on being known, being liked, and getting people under contract because those are the highest dollar producing activities in my business is bringing new business in the door and putting them under contract. I don’t need to be in the coordination side of my business.

John Harcar (12:29.145)
Mm-hmm.

John Harcar (12:36.409)
Right.

Chris Lloyd (12:36.438)
If I go over to the coordination side of my business, I’m losing time on being known, being liked, and putting people under contract. That’s my job. And that’s what most real estate agents struggle with is realizing what their job Does that make sense?

John Harcar (12:50.927)
Got it. No, 100%. What other challenges or maybe mistakes or pitfalls people should look out for when they’re getting into the business? Any part of investing or real estate.

Chris Lloyd (13:01.742)
paid lead generation. There is a lot of junk out there. You will be sold, and I had been sold very early on saying, hey, we’re gonna give you this many leads, and new me, new real estate agent, know, know, bright eyed bushy tail was looking at these like, oh my gosh, I’m gonna have 25 leads a month. I can definitely convert three of them.

John Harcar (13:27.863)
Yeah, right.

Chris Lloyd (13:28.632)
We signed the contract, I’m paying them $1,000 a month. These leads come in and they’re like, I never filled out a form or how’d you get my number or bad email, bad phone number. As soon as I call them go boop, boop, boop. And then I reach out to the lead source and they’re like, well, I mean, we got you the information. We’re upholding our end. We set 25 leads. We didn’t talk about the quality. And I was like, I didn’t read that. And that was on me. And I have to take ownership of that.

John Harcar (13:37.867)
Mmm.

John Harcar (13:52.191)
Wow.

John Harcar (13:56.771)
Yep.

Chris Lloyd (13:58.543)
is I did not properly vet my paid lead sources. I still do paid leads and I do very well with paid leads right now. That’s what I’ve built a good portion of my business on. But the reason why I am good with paid leads now is because I made some expensive mistakes early on paying for these lead sources that nearly put me under and I almost had to go back to my old job.

John Harcar (14:04.856)
Mm-hmm.

John Harcar (14:18.062)
So

So how does someone vet the lead provider? What are some of the best questions to ask?

Chris Lloyd (14:27.474)
One of the main things that I always ask is, can you give me an example of what these leads fill out before coming to me? Because if they’re just filling, I personally don’t like paid lead sources that are like, hey, fill out this list and we’re gonna put you on a custom search of properties. And then you get the phone call from a couple of agents, hey, I saw you’re looking at properties. I wanna put together a custom list. I personally don’t like those.

John Harcar (14:37.711)
Okay

Chris Lloyd (14:56.822)
my paid lead sources, what we do is, you I am in investing, you know, that’s my primary niche. I work with well-known education platforms in the real estate investment space as a trusted service partner of theirs so that I am niched within my advertising. So when these people are filling out their, their, their lead forms or whatever, it’s not off Facebook. It’s not off Google. I’m.

John Harcar (15:13.027)
Mm-hmm.

Chris Lloyd (15:24.972)
Those are more numbers games. There’s money to be made in those type of lead sources, but I’m getting my lead sources from say less publicly known sources, but more trusted. Like those leads trust by affiliation because I specialize in an area that helps them get the product that they’re being taught how to obtain. So that’s how we have really gone into it as.

John Harcar (15:28.217)
Well, sure.

John Harcar (15:35.823)
more try, okay.

Chris Lloyd (15:51.289)
What are the lead forms that they’re filling out and what’s the relationship that’s kind of built? When they fill this out, am I a cold resource for them or am I a trusted resource through the platform that they filled out this form?

John Harcar (16:00.035)
Hmm.

John Harcar (16:04.61)
Yeah, I was told or what to do is like when you have those forms, yeah, if they get into like, they’re multiple, they’re longer forms, those people are gonna be more genuinely interested or wanna, because they’re filling out, if it’s just name, address, email address, I mean, doesn’t show really intent by that person to fill out more questions, you know what I mean?

Chris Lloyd (16:15.779)
Yes.

Chris Lloyd (16:29.752)
Correct, that’s exactly the problem we were running into with our early lead sources. Our early lead sources, that was exactly what they did. And yeah, we got numbers, but it was an extremely low conversion rate. And when I first started, I was still at the shipyard. So I was like, hey, what’s a way for me to get a higher return on my investment? And I was looking at it from both a time and monetary standpoint because I was looking to move it full time.

John Harcar (16:39.661)
Right.

John Harcar (16:53.515)
Sure. And you want to make most of the best effective use of your time, not calling a bunch of dead leads, you know? So that makes 100%. I get that. I get that 100%. So who is your target avatar? Like, who’s your target client?

Chris Lloyd (16:58.667)
Exactly.

Chris Lloyd (17:02.485)
Exactly.

Chris Lloyd (17:10.102)
My target client personally, because I got started in the house act strategy, I love working with new investors looking to implement the house act strategy. And we’ve actually had multiple house act investors do successful investing, you know, and then graduate to other types of investments. So I like the house act strategy because it’s very difficult to fail doing it.

John Harcar (17:29.762)
Okay.

John Harcar (17:37.027)
Mm-hmm.

Chris Lloyd (17:37.985)
You know, it’s a low cost of entry. It teaches you how to be a landlord. And in the absolute worst case scenario, you have a roof over your head on a mortgage that you qualify for and you were able to make the payments on. Like there’s very few real estate investments that have that as the bottom, you know, bottom of the barrel result is you have a roof over your head. You know what I mean? And you have to live somewhere.

John Harcar (17:59.617)
The worst downside. Right. Right.

Chris Lloyd (18:04.75)
So it’s a very low risk investment, but I think it’s very high reward because most people’s largest living expense is their housing. Why not utilize your own personal situation to reduce your living expenses? Because, know, many of the platforms, know, the investing platforms say after all expenses are paid, good cash flow on a base hit deal is a hundred to $200 a month, right?

Well, what if I could teach you to house hack and reduce your largest living expense by a thousand dollars a month? Would you rather make an additional hundred or 200 per month or save an additional thousand dollars a month? You tell me what helps you get ahead financially faster. And that’s why I love this strategy. Yeah.

John Harcar (18:43.81)
Right.

It’s a no brainer. I mean, that makes sense. So are you targeting people that are actively looking to learn how to house hack or are you just kind of talking to, investors out there, this is another tool in the toolbox or something like that.

Chris Lloyd (18:55.564)
Yes.

Chris Lloyd (19:01.574)
I am primarily targeting people looking to get into real estate investing. Most real estate investors that have already kind of gotten the ball rolling and are successful aren’t necessarily interested in getting into the house hacking strategy for whatever reason. But new investors that are willing to make the sacrifices needed.

John Harcar (19:16.601)
Mm-hmm.

Chris Lloyd (19:21.42)
to get forward. We work with actually a lot of recent college graduates, know, financially savvy, recent college graduates that were in the very same position that I was after I got out and they just did the math and they were like, Hey, this thing’s not working. read Rich Dad Poor Dad. They go to, you know, these education, education, real estate investing education platforms, sorry, and learn about the house hacking method. And so when, when we’re running our ads, we

John Harcar (19:26.99)
Hmm.

Chris Lloyd (19:51.437)
are putting house hack specialists. We are so niched down that people see that keyword and if they’re interested in it they don’t see agents advertising hey I specialize in house hacking like everywhere. So our lead conversion is very strong because we identify ourselves as a specialist in a very niche field. Now on the flip side of that we’re not talking to near as many people and so we’re not

John Harcar (20:04.94)
Yeah.

John Harcar (20:12.655)
rate.

Chris Lloyd (20:21.08)
We’re just another fish in the barrel, if you would, for just your regular retail buyer. We still work with them. We go to networking events and everything like that, but our advertising dollars, our advertising time, we’re focused on getting in front of investors and new investors. So one of the biggest things we do is we network. We go to the real estate investor associations in our area, and even on my team, I require our team members to go to at least two a month.

John Harcar (20:39.673)
Yeah.

John Harcar (20:47.983)
I like that.

Chris Lloyd (20:48.428)
That is a team requirement for any Chris Lloyd real estate team agent is that they have to go to two networking events at minimum per month. And of course we encourage more because new investors are told to go to those meetings and that is a great place. Yeah, exactly. So we spend our time there and then online, we spend our money becoming trusted referral partners for trusted investor education networks. Yep.

John Harcar (21:01.903)
Yep, exactly. That’s where your target is.

John Harcar (21:14.253)
I love it. Real quick, let’s talk about what the title of this was, Setting You Up for Success. And I know it’s something you’re passionate about. So kind of tell folks, talk about your passion, man. Let’s go.

Chris Lloyd (21:26.862)
Yeah, absolutely. So setting people up for success is something that we really, you know, take near and dear. We, when you come to us and we’re trying to set you up for success, we’re going to look at your entire picture, what your skill sets are, what you’re willing to do, what you’re not willing to do. And if you just come to any run of the mill real estate agent, they’re going to ask for your pre-qualification, how much cash you have in the bank to see if they need to get you concessions or not. You come to us.

What we do is we take a look at, here’s your pre-qualification, here’s how much you have in the bank, what does that mean, right? So the first thing that we’re gonna ask is, okay, we’ll just run through an example. I’ll throw some numbers out just for easy example. You have $20,000 in the bank and you’re looking to house hack.

I immediately am thinking, okay, for the average home price, $10,000 is gonna be your down payment and the other 4 % for your 20,000 to be wiped out by closing cost. So I’m gonna recommend to the client, hey, I know you can afford and close on this home with how much money you have in the bank. I don’t want you to though. What I want you to do is consider the fact houses break, like stuff breaks. That’s that’s home ownership. We need to make sure we get seller credits so that you have money in the bank.

to weather the storms as they move forward. Because just because the water heater inspects just fine on inspection day, that doesn’t mean it can’t burst two months down the line. You need to have reserves. So one of the things that we always talk with our new investors about is don’t just focus on the property and its performance, focus on your financial situation and make sure you can float it if things go sideways. Because things do.

My first deal that I did, my first house that I did, the main sewer line collapsed two months into the purchase. And I was lucky that I had an agent that asked me those questions and set me up the same way that we like to. I modeled my business very similarly to hers in terms of, hey, she was like, hey, stuff breaks. Home ownership is difficult. I wasn’t expecting a whole main sewer line to go, 80 feet sewer line too.

John Harcar (23:19.983)
Cheers.

John Harcar (23:39.289)
Yeah, that’s pretty big, man. That’s pretty big.

Chris Lloyd (23:41.251)
It was an 80 foot sewer line. So there was a lot of digging. was an expensive job. And it opened my eyes and was like, thank goodness that she prepared me well because in 2021 we had a hot market in Hampton Roads. She very well could have advised me, Hey, well there were three other offers on the table too. She said, Hey, like she could have been like, Hey, we need to give them a list price offer. We can’t ask for concessions. There’s other competition on the table. She advised me, said, Hey, look,

John Harcar (23:45.335)
huh.

Chris Lloyd (24:08.578)
Here’s how we can make your offer strong. I called them, we can satisfy them by closing on this date. In exchange, I recommend we ask for seller concessions to set you up because we need to make sure you have money in the bank after you close just in case. And the just in case absolutely happened. And so I really embodied that. And so when we take on new investors, it’s not about how much money you have in the bank and what’s your prequel. We ask, how much do you need in the bank after you close?

John Harcar (24:20.621)
Right, right. And that just in case happened.

Chris Lloyd (24:37.708)
because stuff happens and we need to set you up for success. Like I don’t want to sell a home and six months later someone called me up needing to short sale because they can’t afford to upkeep their home. In my opinion, that would be a failure on my end. You know what I mean? It’s, yeah.

John Harcar (24:46.223)
Mm-hmm, yeah.

John Harcar (24:50.573)
No, 100%. 100%. Well, cool, man. If folks want to get in touch with you and talk about that, talk about the House Act, talk about and learn to do it. mean, whatever, maybe just shoot the, you know, what about real estate with you? How do they get in touch?

Chris Lloyd (25:05.46)
Absolutely. So I’m on Instagram, Chris Lloyd, that’s L-L-O-Y-D, underscore real estate. Shoot me a DM, would love to chat. My contact information is also in my bio. You can reach out to me over text or phone call. It would probably be best to shoot me a text and see what time I’m free. We can get you on the calendar and chat about different options.

John Harcar (25:26.479)
Sweet man. Hey guys, I hope you guys took a lot away from today. I mean, I love the house act strategy. I wish I would have done that back in the day. It’s really hard to do with an eight year old now, but I hope you guys took some good notes and Chris again, thank you so much for being on here and sharing your experience and your knowledge guys. I hope you enjoyed the episode and we’ll see you on the next one. Cheers.

Chris Lloyd (25:36.662)
Right.