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Show Summary
In this conversation, John Harcar interviews Dave Edwards about his journey in real estate, focusing on the emerging trend of co-living. Dave shares his experiences, challenges, and the benefits of co-living as a real estate investment strategy. He discusses the market dynamics, operational strategies, and the importance of understanding regulations. The conversation highlights the potential of co-living to provide cash flow and community while navigating the complexities of property management.
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Investor Fuel Show Transcript:
David Edwards (00:00)
With Co-Living, I’m buying three to five-bedroom homes and converting them to eight to 14-bedroom homes. ⁓ The biggest project we did, we turned a five-bedroom home into a 14-bedroom for our client of ours. Now it’s a 5,000 square foot house, had plenty of spaceJohn Harcar (00:07)
Okay.David Edwards (00:15)
We took a dining room, an office, a sitting room, and we turned them into bedrooms. ⁓ We split two masters that were upstairs in half, because they were very large, to get to that. And we turned, I think it was a game room area into a bedroom.John Harcar (02:12)
All right. Hey guys, welcome back to our show. I’m your host, John Harcar. And I’m here today with Dave Edwards and with Dave, what we’re going to talk about, you know, we’re going to touch on his journey in real estate. What really brought him up to today, but a very interesting topic that I see I’ve been seeing a lot more of. know what some of our meetings have been a lot of talk and that’s co-living what it is, why it’s great. We’ll dig into all that. Dave, welcome to our show.David Edwards (02:39)
Thanks for having me, John.John Harcar (02:41)
Yeah, I’m excited to talk about that. Like I mentioned, there’s been a lot of talk within our group about that about co living and you know why it’s beneficial, maybe some of the regulations coming down the pipe. But before we get in the weeds with all that stuff, introduce yourself man, tell our audience a little bit about you, you know what got you into real estate and what brought you to today.David Edwards (03:00)
Yeah, so, reason why I got real estate was, you know, like everybody else, several years ago, just before COVID, I was feeling iffy on the day job. So I started looking around, started watching Bigger Pockets, those Bigger Pockets were about two, three years before we finally moved to Houston and pulled the trigger on our first rental property after we bought ours. The first one, single-family home, went very bad. I told the story a couple different places.But essentially my house was turned into a strip club slash pit bull breeding center slash meth dispensary. So that was fantastic, right? That was a great story. It’s a story. But by the time I got the property back and I had $40,000 worth of damage been done to the property, the woman had, for an example, spray painted her daughter’s door pink with the AC register right above that door.
John Harcar (03:33)
Wow. ⁓ I bet some great stories there.David Edwards (03:56)
So it’s in and it was on. So it sucked in all of the spray paint and you walked around the house and it was just just lightly tinged with pink everywhere. So it was ridiculous. ⁓ And it didn’t want to come off. So that was fun. From there, I said, hey, all right, I got out of this. I made some money on a flip. I had a little bit of cash from that property. I looked around and I found out about Co-Living.John Harcar (03:56)
Wow.Incredible.
David Edwards (04:22)
And I got into Kohl & Wink because I find it to be less risky than single-family rentals. A lot of people think, oh, Kohl & Wink seems like a more risky thing because they got more people. But I find it to be less risky because you’ve got eight tenants. If one’s not paying, you’ve still got seven tenants paying, for example. You’ve got, you’re not going to have anybody steal the copper from the house when you’re not looking. You don’t have someone running a strip club in the house without you knowing, because there’s other people there they’re going to tell you about.John Harcar (04:27)
Okay.Yeah.
Mm-hmm.
Mm-hmm.
David Edwards (04:52)
Plus you get access to that common area 24-7. You can walk in that front door, go to the kitchen, go to the living room whenever you want, take care of tasks because the space you’re renting out are the individual bedrooms.I find that to be less risky. You’re diversifying your risk with more tenants and with easier access to the property. So we got into that. From there I’ve just grown over the last four or five years. added…
to us. I started a property management company. As people saw what I was doing, they wanted to come in. Today I manage over 430 rooms. 340 rooms, 43 properties. We’ve got another 100 plus rooms coming on board here shortly, over a cross of dozen properties that we’re onboarding for our clients or ourselves in the company. It’s grown pretty big.
John Harcar (06:29)
That’s awesome.Yeah, that seems like you have and you got some big plans and a question I like to ask folks and I really believe that there’s always in somebody’s life, like if they’re getting into real estate, 90 % of the time at least there’s something that was plus seed that was planted back when they grew up. Was there anybody in your family, neighbor, friend, uncle, aunt, whatever, anybody that was in real estate that planted that little seed because
for some you didn’t just decide to go to bigger pockets. mean something had to tip you there but was there anything in the in the the grow up phase?
David Edwards (07:05)
Um, so grow up, it’s just, think it was less real estate, but more just my dad was always an entrepreneur. Like when he, when he never had, he never worked for somebody else. He owned a heat treating company. It’s like you ever see the movies of the making swords. They’ll take a piece of metal, heat it up real hot and the cool it down. That’s what he did on an industrial scale. And I worked there for him as a kid, taking things apart, moving things around.John Harcar (07:24)
⁓ wow.David Edwards (07:32)
And then just after that, he owned a cleaning company, a couple other things. Eventually he ended up buying a warehouse. But just through all of that, just, you know, I took a part of initially getting a day job or somebody else, but always, Hey, you know, my dad can do this. I can do this. What can I do? What can I access? And I looked around, heard about bigger pockets, figured out real estate was the way to go and move forward. Yes.John Harcar (07:37)
Okay.Well, you know, you did have a little bit of that seed. You said he bought a building, right? He got into
real estate. He bought real estate. So. Right. A little bit less. OK, so then so then, you know, you’re getting tired of day job. went to bigger pockets. You decided, hey, I’m going to buy a rental. What made you choose Houston?
David Edwards (08:03)
He did. He was when I was in college. So was less, it was less day to day. ⁓Um, so I was living in New York City. Um, when I decided when we chose Houston, the reason why I was there was I got the degree in marketing and where you go, you’d say the Chicago or New York lived there for 15 years, got married, bought a house with my in-laws. They provide the down payment. I provide the credit history marriage in heaven. After about a year and a half and two babies, you start getting antsy and we’re like, all right, we’re going to move. If we’re going to move, let’s move big.
Right. And at the time, even today, Houston is one of the top markets recommended for people getting into real estate. Good acquisition costs, decent rent to value ratio, so forth. we looked around, we checked out Arizona, Florida, a couple places in Texas, ended up with Houston, because a coworker of mine was like, hey, you should try Kingwood. It’s off a little area of Houston. I grew up there and I turned out OK.
John Harcar (08:57)
Mm-hmm.David Edwards (09:13)
So we took his thought and came down here. looked at it and ended up liking the place, moved down here a couple of weeks later. it’s a bunch of different data points coming together leading to that decision.John Harcar (09:28)
What were some of the initialchallenges when you started to get into it? Right? You know, like for me, when I started, one of the challenges was like the data and the, the, marketing and all that piece, you know, what was a challenge for you?
David Edwards (09:40)
Yep. So I was a marketing data analyst in my prior life. ⁓ One thing I learned is that you can get absorbed in data. You can spend all day spinning your wheels in data. Some people think I got to have every little point. I got to have everything perfect. You can get the pair paralysis. I learned real quickly in my day job. No one cares about the teeny tiny details. The teeny tiny details don’t affect the story down the line.John Harcar (09:49)
yeah.David Edwards (10:39)
So for me, I never hit analysis paralysis because I understood enough data was needed to make a decision and going any deeper than that didn’t provide much value. So I came down and I initially, I learned from everybody, everyone said three bed, two bath, standard, try to hit the…the ratios where you get two to one rent per revenue or per cost. So we did it. We came down, we found a property where we could make more money than it was gonna cost us every month, and we bought it. And that was our first property. After that, getting into co-living, very similar, I looked at several different homes. I ended up buying a home that was a bit more expensive than some of the others because the floor plan was perfect.
John Harcar (11:26)
youDavid Edwards (11:26)
And whenI started looking at it, there’s costs. There’s your acquisition, then there’s your rehab, and then there’s your furnishings, and then you gotta take into consideration your location. Sure, I could get a house cheaper, but there’s more rehab, so there’s longer holding costs, longer periods there, more… Exactly. You can fall into, oh, I didn’t realize there’s an electrical issue here. They said they updated the wiring, but not in this half of the house.
John Harcar (11:42)
more potential for problems that are unseen.Right. ⁓
David Edwards (11:55)
So I ended up going with a slightly more expensive home that I could have the rehab done in a month. All we had to do was turn a half bath into a full bath and broke some walls because it had just been rehabbed. And a lot of investors would be like, no, I want to get that absolute pile of dog crap so I can put my mark on it and get the maximum revenue. I just figured the first one I’m going to get into co-living, let’s keep it simple. Let’s get it up and running fast so I don’t get held back. And that’s what we did with that first one.John Harcar (12:03)
Mm-hmm.Yeah. Yeah.
So how did you learn all this? mean, YouTube you, did you have a mentor? Did you have a buddy that was doing it? I mean, how did you really, you know, encompass the whole learning process for all this stuff?
David Edwards (12:34)
So I’d call it, know, Bigger Pockets U. We ended up joining a couple masterminds. were doing, ⁓ Branditor came out with a book. ⁓John Harcar (12:48)
Yeah, I know what you mean.David Edwards (12:49)
driving like your goals or whatever, right? And that came with a mastermind. So I was paired with several other investors and we still talk to this day. We came together, we started having our discussions, we learned from each other, we pitched ideas back and forth and that was great. That really helped give me some of confidence, couple that with that first one that even though it ended up going crazy, I figured I still made it even withJohn Harcar (12:51)
Yeah, right. Okay.Mm-hmm.
David Edwards (13:16)
these three or four things that went super wrong. How do you have a house turned into a strip club? Right? But I still made it through. We did a, we made that through. We found our way through. My wife and I worked that way through. So it was a lot of, you know, some support systems, but also just, listen, I told my wife we’re moving to Houston for investing and for a better life. I better figure a way out. So kind of had my wife scare me through, through all the industry.John Harcar (13:21)
YeahYeah.
Mm-hmm.
Yeah,
I kind of did the same thing. I moved from Phoenix to Nevada. I’m going like, Hey honey, pack up or we’re moving two weeks later. We were there. ⁓ So ⁓ why co-living? Let’s start talking about that a little bit, right? Because, know, that’s something once again, you know, in our mastermind meetings, we’ve had more people talk about it. I’ve interviewed on another podcast, a lot of people talking about it. Why co-living? Why is that becoming such a thing?
David Edwards (14:13)
Yep, so if you look at the market, what is the issue with the market today? Right, high expenses, low cash flow, right? Appreciation’s going stale, people aren’t sure if we’re gonna see a price drop or not at this point. We’ve been warned about a crash now for, seems like five years, six years, 10 years, ⁓ coming through. So co-living provides you with that cash flow that’s lacking with a single family home. It allows you to take a single family home,John Harcar (14:31)
youDavid Edwards (14:41)
the expenses of a single family home for acquisition, but hit multifamily returns. Generally better than multifamily returns. What I’ve heard from some people is you should expect $100, $250 a door for a multifamily home. So what are you looking at? $1,000 in cashflow for a quadplex, maybe.But you also have four kitchens, four hot water tanks, a larger roof, a bigger foundation for something like that.
John Harcar (15:45)
Yeah.David Edwards (15:50)
With Co-Living, I’m buying three to five-bedroom homes and converting them to eight to 14-bedroom homes. ⁓ The biggest project we did, we turned a five-bedroom home into a 14-bedroom for our client of ours. Now it’s a 5,000 square foot house, had plenty of space.John Harcar (15:57)
Okay.I was gonna how do you turn a five
bedroom into a 14 bedroom home? mean, are you splitting every bedroom and the living room and all that stuff?
David Edwards (16:14)
So with that one, we took a dining room, an office, a sitting room, and we turned them into bedrooms. ⁓ We split two masters that were upstairs in half, because they were very large, to get to that. And we turned, I think it was a game room area into a bedroom.And in doing so, we just took, you know, with co-living, there’s different, there’s different business.
cases. Okay. Some people go for the idea of developing community and having more common space, right? We’re gonna put a place here so people can come and hang out. What we found generally is as less needed. People like the photos of having a nice little sitting room, but what generates you revenue is the number of bedrooms you have. And people don’t like the sitting room enough to justify you losing a thousand dollars.
John Harcar (16:46)
Mm-hmm.David Edwards (17:05)
in revenue or a vacation every quarter depending how you want to look at it right they don’t use it typically your your your tenants and there’s four or five different types of tenants they’ll come home they’ll make their meal they’ll take it to the room they’ll eat they’ll watch TV they’ll take a shower they’ll go back to the room go to bed they’ll wake up they’ll go to work and they’ll do it all again they’re not really hanging out with each other okayIt’s not your frat house. Now, some operators are working to try to build community, to try and do game nights and pizza nights and everything. Which, more power to you. We can certainly see varying avenues for different models in this space. And that’s how you define your business. How do you differ from the core, right? ⁓ Some people do furnished bedrooms. Some people do unfurnished bedrooms.
Some people are doing different levels of furnishings, right? We provide desks and chairs, ethernet and TVs in every room with the beds and everything so that we can get ideally the work from home tenant or the Uber driver, more stable individuals that we tend to find in the tenant base.
John Harcar (18:15)
Mm.Are you, and I know
it wasn’t called co-living, but it was a rent by the room. I don’t know what the other thing was, but I heard a lot of legislation or maybe rules because of how many people are parked there and all that extra trash and all this other stuff. mean, are there any other rules slash regulations that you have to kind of abide by or might make it a turn off for somebody to invest in?
David Edwards (18:49)
Yep, so you hit on a couple of things. Just like with an Airbnb, right? You gotta take care of the exterior of the property. Make sure your lawns are cut, make sure the trash is taken care of, make sure your tenants are treating the property nice, you know, come by some spray paint or something on the door or whatever. ⁓take care of the exterior of the property. ⁓ Parking is always a big consideration when you’re doing site design. So whenever you’re gonna select a property to do co-living, we in Houston, because we have public transportation, I’m looking at bus routes, we try to be within a 10 minute walk of the bus. That’s gonna put less pressure ⁓ on the homeowner to have parking figured out. But then you have different, you know, other park chargers, because you wanna have at least 60 % of that home’s bedroom count figured out as far as where people are gonna park.
Okay. so we, you know, we’ve tried, we have different strategies. apply, I’ve turned backyards into parking. So if we have a detached garage, the driveway goes past the back of the house. We’ll gravel over the backyard. Recently, a client of mine bought a home that actually had two separate driveways. One to go into the back and one went into the front of the, where the garage was because it sat on two lots. Guy bought two lots before built the home, had both driveways there. So we will turn the whole backyard into.
John Harcar (19:59)
Okay.David Edwards (20:05)
Ithink it holds like 12 cars in the back of this house. It’s insane in that house. I’m looking at buying old churches because they’re going to have a perfect form factor, a nice rectangle. Already you’re going have a kitchen, some bathrooms there, and I can turn the seminary, the refinery into the pew area. I don’t know the name of it. it called?
John Harcar (20:09)
Wow.the sanctuary.
David Edwards (20:29)
Yeah, I said something close. The station where I into bedrooms. It’s already an open space, right? And I can imagine having like, stained glass windows in each room, having the different signs of the cross, be the bedroom name, that’d be crazy. But, know, that’s already gonna have parking figured out. You’re already have a parking lot figured out because they already have people coming through. looking at that, corner lots, you know, the bottom of…John Harcar (20:35)
Yeah. Yeah.That would be really cool.
David Edwards (20:58)
the U in an area. If you have a community where houses are facing left and right and your house is at the bottom of the U, you got that whole end of the cul-de-sac to park in. So you take a look at the property, you try to figure out how you’re gonna park. And if the house can’t get parking, that’s a major issue, we tend to move on.John Harcar (21:09)
Yeah, very true. Okay.Yeah.
David Edwards (21:21)
But other issues, you the biggest ones would be occupancy limits. If there’s rules in your area, a lot of times the HAAs will have them around that. You just gotta figure that into your decision.John Harcar (21:33)
I was gonna ask with the HOA situation, you ideally trying to find properties without an HOA?David Edwards (21:40)
So a lot of people are afraid of HOAs. And ideally, yeah, if you’re new, it’s the simplest thing to do. Don’t buy it within an HOA. The very first one that I bought, that home I turned into an eight bedroom, three bath, I bought that. Form factor was awesome. Five bedrooms, all bedrooms up, detached garage. If you have five bedrooms, all bedrooms up, a detached garage, what is downstairs?a heck of a lot of space because you got all the bedrooms up so you got a lot of space downstairs. I got three more bedrooms converted a half past a full but this property with a perfect form factor was in an HOA. So we looked at it. The HOA didn’t care. It’s a predominantly Hispanic neighborhood so there are already cars parked everywhere. Ours does not stand out. There are already plenty of people living together because of the cultural fit. It’s been awesome. It’s been fantastic. We’ve never had a problem.
John Harcar (22:07)
Yeah.Yeah.
David Edwards (22:32)
the HOA there. A couple other areas we have we have properties we manage and other HOAs not a problem but we have seen that go very badly. ⁓where some people were part of a sub two program and the sub two buyer bought in HOAs, didn’t really understand what he was doing, gutted properties, took a home that was worth 400,000, gutted it to be worth about 200,000, and then tried putting in 14 bedrooms. HOA caught wind of it, shut it down, and now this guy has a subject two property that he’s taken from a value of 400 down to 200.
and is thinking about walking away from the deal altogether, leaving the person that still has the mortgage in their name holding the bag. So you can see that go very wrong if you don’t know what you’re doing. Yeah.
John Harcar (23:20)
That’s terrible,Right.
So it really, yeah, it really comes down to education and due diligence. It sounds like a lot for, you know, for co-living properties. Before we get out of time here, man, we could talk about this for hours. I told you we said it before, right? We’re to get to that point to where we’re going to have to shut it down. What are if someone wants to talk to you more about co-living, they want to reach out and maybe do some deals together or, just just, you know, gain some more knowledge. How do they connect with you?
David Edwards (23:53)
So I launched a Facebook group, Co-Living Operations. If you just look up Co-Living Operations, it’s fantastic. I went from nobody to over 600 members in the last month. So just by talking and putting out value there across a couple of different groups, feel free to join me there. You can always email me, Dave at co-living operations.com. Spelled just how it sounds, Co-Living Operations.there and I’m working to launch a nationwide offering where all my SOPs I’ve developed over the last four years are being trained to VA’s that we’re bringing on board. So if you’re looking to get into co-living, you can just tap into those resources, the whole who not how method, right? You know, why do you need to learn everything if I’ve already learned it and I’m educating people who can apply that knowledge for you, right? So they do it with you service.
John Harcar (24:44)
Yeah, heck yeah.David Edwards (24:47)
tied there. So feel free to reach out. ⁓ easiest way is the email or better yet the Facebook group. There’ll be a school and some other things launching soon. We support that.John Harcar (24:57)
it,man. I love your journey. I love what you’re doing. It sounds like you’re very successful at it. Guys, if you learned and enjoyed this, reach out to him, man. mean, learn more about co-living. It’s been a hot topic, and I think a lot of people are going to really get into it more. And this is a fantastic resource. Dave, thank you again. out there, I hope you enjoyed it. We’ll see you on the next one. Cheers.
David Edwards (25:18)
Thank you for having me.Thank
