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was my real estate startup a scam that's a question that people have and today we have the answer the first two times that we fundraised we had no operations we just had an idea well as of today we've been operating for 175 days we generated approximately over $4 million in Gross profits that's about $22.8 th000 per day and just $24 million of real estate that's because we haven't even fully deployed the capital that we have invested in the company yet now the question is should we stop with the real estate that we have Acquired and the value we have created or do we keep going in this video you're going to see the vision we're going to show you how not only are we opening up the opportunity to be a part of this real estate investment again but we're showing you the path forward the path for how we can turn this into multiple Cycles rather than just a oneoff keep in mind even if we were to stop today and we completed Just One Mini fun cycle with our company we'd be net profitable and we've only been operating for 175 days in this video you're going to learn a lot more this morning somebody came to me and said Kevin what's house hack that was on our Market open live stream and I'm like wow I think I need to remind everybody that I have a real estate startup and officially starting today we are fundraising from accredited investors and now we'll explain what all of that means but first I think it's worth you knowing what the heck house hack does and quite frankly even if you're not interested in being an investor you're going to learn a lot in this video about how the real estate investing World works so that way you can be a little bit more aware when you're looking at real estate Investments how you want to diversify your money so we'll talk about a lot let's get right into it so what is house Haack briefly house Haack is a company that makes money from buying fixed uppers distressed properties foreclosures or otherwise mismanaged houses or apartment buildings we then renovate them add value add accessory dwelling units we improve the management and we fully rent out the properties we do all the property management inh house and the renovations obviously we work with our own contractors in-house or Outsource then once the products the properties are rented out we call that being stabilized we bundle the properties up and we sell slices to institutions or on Exchange or people who want to defer taxes and maybe invest in our mini funds little pies of real estate so to speak through a 1031 exchange which we'll talk about those details in the future but the point is our company makes more money the better deals we get basically the cheaper we can get the ingredients means we can make more money because we're going to sell those properties as pies for fair market value that'll be independently verified we're not trying to make money by selling properties for more than they're worth we just buy them for a lot less than they're worth stabilize them and basically roll them now the difference between this and flipping is we retain management and we're making sure that these pies are stable for the long term it's not like we're trying to just get rid of these properties we're still involved for the long term and what I found is that as a licensed real estate broker former licensed contractor mortgage loan originator currently licensed finra CR7 24 27 14 63 and 65 I get finance and one of the biggest things that I've learned over the last 14 years of doing this is real estate agents dislike Wall Street Finance folks and Wall Street Finance folks dislike real estate folks this is possibly because of the way people are compensated real estate agents make money through commissions and Selling Houses fund managers make money by allocating money to funds and so fund managers don't make money if somebody takes that money invest it into real estate directly real estate agents make money real estate agents don't make money if somebody takes their money throws it into a fun right so you've got a little bit of this tension between these industries in my opinion that tension has created massively huge missed profitability opportunities both for investors and quite frankly companies like house and house we want to take that money and basically make a lot of money for our investors and of course our company our employees our team the people working with the company that's the point that's the point of capitalism to find in inefficiency and then solve the inefficiency providing value to customers and making money so how do we do that well first we got to stop doing what everybody else has done and struggled with so let's think about that for a moment in real estate there are few ways you can make money you can buy real estate yourself this is great and I actually encourage people buy real estate I think this is great it just comes with headaches and it's not right for everyone acquiring real estate it doesn't give you diversification unless you can really manage properties in multiple different areas you have to work with agents and lenders renovate the real estate work with contractors deal with City permits deal with the challenges that come with renting real estate dealing with property managers or doing that yourself and learning Property Management dealing with tenants and repairs and quite frankly tenants and toilets and delinquencies or hopefully not delinquencies but the point is that's a lot to do or you could buy a property and then just quickly flip it for a profit but you also have a lot of selling costs that can eat away your profits often 7 to 10% sure you could represent yourself as an agent and try to save some money but let's be real most people end up spending 4 to 6% on commissions 1% on escro title fees another 3 to 4% on repairs during escrow that's typical of almost every transaction that I've done with clients it's just very normal now again you don't have to flip you could hold on to the properties and manage them yourself and then the goal is to refinance but rates have to be appropriate you're still dealing with lenders and qualifying so they still work involved this doesn't even mention finding a good deal and actually negotiating a good deal and valuing the real estate correctly it's a pain in the butt I know I do it every day I just happen to like it now option number three is you can invest in some kind of fund the problem though with funds is they're often bloated with expensive acquisition fees platform fees disposition fees renovation fees Asset Management fees Annual fees to basically manage the manager add to that waterfalls like 20 is sometimes 35% of your appreciation going away bu a $100,000 property it's worth 200,000 in the future let's say there's a 100,000 of gains well you might have to give away up to 35% of that to the promoter of the fund in a syndication or a partnership and then you have to deal with the K1 on your tax return which is a pain in the butt it's not that straightforward it all creates work and effort and quite frankly lots of fees the other option is maybe you invest in a re or a DST but you have to be careful about bloated book values and fees here too look at Invitation Homes or American homes for rent you're paying $2 to $230 sometimes even more per $1 of real estate they have on their books that's because REITs often sell for two times Book value on top of that with American homes and specifically you're spending another about 11.8% of your rent on operating expenses plus another property expenses line which presumably includes things like taxes Insurance uh utilities reserves whatever but you know who knows what other kind of Opex is in there it's not broken out at least I couldn't quickly find it and obviously verify this yourself this video is not to bag on other opportunities it's just to say like it's complicated the the choices aren't that easy and we think that creates an opportunity for us now I'll explain that but first you might be then thinking to yourself what about like Vanguard like a Vanguard real estate fund sure but what does Vanguard do well Vanguard charges you a fee to allocate you to different home builders and reats so you get the same problem with just the Vanguard fee on top okay what about like fundrise or roof stock or arrived homes okay well let's think about those so roofstock they tell you their advisory fee is 15 basis points so 0.15 but then they sneak in another 85% for management and then they suggest additional renovation and distribution fees you got to read their documents yourself obviously but these are things to consider then there's arrived homes let's just look at some of the arrived homes documents to look at at their latest filing this was on like a $7.8 million offering they did so we pay our manager 2% of the gross proceeds okay got it so if you raise let's just make the math easy if you raise $8 million 2% is $160,000 going to the manager okay maybe that's not that bad but then they charge another 2% if you sell your shares within the first six to 12 months so that doubles that to potentially $320,000 you know presuming everybody were to sell within 6 to 12 months but maybe you don't do that and wave the Redemption fee over time fine but take a look at some of these other ones what fees and expenses do you pay your manager or any of its Affiliates reimbursements of offering acquisition origination fees Asset Management fees broker fees financing fees other operating expenses Property Management fees special servicing expenses auditing valuation fees asset disposition fees that's a lot but wait wait are some of these actually broken down oh yes yes indeed they are so here's the 2% of gross offering proceeds for outof pocket expenses for the manager receiving that okay but then wait a minute what's this with respect to our Equity Investments we will pay up to 3.5% of the total purchase price for any property in which we make an equity investment in other words the the fund is going to as a sponsor fee all of these sourcing fees will be paid to our sponsor will pay somewhere between 2 and 1/2 to 32% on top of the manager fee as a sponsor fee to the fund manager okay wait so it feels like we're paying the manager twice here but okay this is there for maybe I'm just misunderstanding it but then they're also going to charge a quarterly asset management fee annualized to the rate of 1% and it doesn't even end there because then they're going to pay a disposition fee of 6% of the gross proceeds the manager will be entitled to retain the difference between fees paid to the broker and the 6% charged to the company so in other words if they're their own broker they're just purposely trying to keep their their own 6% as a dis as a liquidation fee or what they're more likely to do is pay a lower commission to their agents so let's say they pay a total of a 3% commission one and a half and one and a half because you know they're selling a portfolio and they're negotiating a deal there they're basically pay charging a 3% liquidation fee ouch I just want to be very clear about this is that's what's out there and so at house hack we're looking at this going this is ridiculous I'm not here to bag on any one company because they're all doing it they're all doing this with the fees and it's nuts so what is house hack do how does house hack make money and how is house hack different it's very simple house hack makes money by buying great deals and doing a great job managing them hopefully we'll manage these properties forever we we we're not trying to like turn real estate and constantly sell it in our in our mini funds over it's not what we're trying to do because we don't make money on acquisition or disposition we make money by getting a good deal house hack buys a good deal and then we roll it to our mini funds and we manage it ideally forever that way we have stable assets and we make money on the difference we manage our stuff in housee so we can scale our own team control quality and minimize costs so let me give you an example on how this works if let's say we buy a house which we did uh and we're all in on it for $500,000 here's an example of one we're all in for $500,000 the fair market value is $600,000 so we sell it as part of a bundle for $600,000 so we're not selling it for more than market value we just got a good deal on it now obviously if we got a bad deal we'd still be selling it for 600k we' just take a loss that's a risk right but our goal is is to buy properties for less than they're worth here's a building we bought for $15.7 million it was mismanaged we believe the debt was coming due so there was a lot of pressure and we negotiated what we think is a win-win deal the sellers got a cash deal they're great people they did a great job on their development but the market is what the market is and so we think we got a deal for $15.7 million that once stabilized and managed the way we manage buildings could probably sell for $18 million okay well that's $2.3 million in what we call the wedge that's how house hack makes money the more we can do the wedges the better let me phrase that a little bit differently think about mini funds so we buy homes we stabilize them we rent them out think about mini funds as like little pies we buy all the ingredients that's getting everything ready and then we roll that pie or sell it to a mini fund which we manage and somebody can buy little slices of the pie so you get a Delicious Pie that offers you no fees diversification predictable cash flow appreciation because the people who own the pies get appreciation diversification cash flow the benefits of no fees Asset Management fees disposition fees a you know whatever renovation fees all that nonsense we're not charging all that crap that's that's what we're doing we're creating what we think is a really good product we're creating the pie house is the pie maker we make the pie and then our job is to sell the pie we make the pie we sell the pie it's simple if we can get the pie ingredients really cheaply we make more money that's how house makes money and again that's because we're negotiating really good deals that's hard for people to do but we think we can do it at scale obviously there's risk in all of this none of this could work out at scale you know the first time we fund raised all of this was an idea we weren't operating today we're operating we've got 12 excellent employees we're doing a phenomenal job in my opinion but now I'm biased so you have to conduct your own due diligence read our perspectives understand the risks but consider this so we get Pi ingredients at a really really good negotiated rate we're not flipping on the market so we're not paying crazy selling costs we're actually retaining management of these buildings so we're vested in the long-term quality of what we're buying because we got to manage it so we think we're putting together a really delicious pie and people can buy slices of this pie now who would buy P slices the pie well simple potentially anybody who just wants to swipe up on Robin Hood and diversify into real estate through a publicly listed entity or somebody who wants to 1031 imagine you own three rental properties and you're like I'm done I just want to diversify I want to defer taxes I'm going to sell my portfolio and I've got $2 million but if I touch that money I have to pay say 40% in taxes so all of a sudden you're down down to $1.2 million well that sucks well what if you could take that $2 million and put it into one of our mini funds which you can email us at IR house act.com now what happens well you have the full $2 million in there and you're deferring taxes now obviously talk to your CPA but see we're creating a really delicious pie for people with a need people with a need who want to diversify on the public market people who want to 1031 into this Delicious Pie uh family offices Banks Goldman Sachs Morgan Stanley JP Morgan we have a relationship with JP Morgan wealth managers hedge funds Pension funds you name it so many funds they're not just going to be one entity we have many different flavors of these pies for people to invest in and since we don't charge a fee on our pie maybe wealth managers add their own fee to it and sell it to their clients I I don't know that's an option uh but again we're not charging fees on those pies because we just want Delicious Pies that people love like in and out right it's it's a The Price is Right and it's great quality it's simple and so where do we make the money again buying the ingredients cheaply and then we sell for fair market value based on valuations of what other things are selling for in the neighborhood that's simple and so again we buy wedge deals we buy the ingredients inexpensively and we sell Delicious Pie that's our company the more pie we can sell and the more earnings per share we could generate the greater the valuation for house hack house hack is the company that does the management the acquisition the negotiation the renovations house hack deals with all the headache so house hack is a service business that makes money and will probably be valued based on how well it handles all of these pain points in real estate we are also buying assets where we think there's little competition you know we play a bigger game than mom and pops but we're not as big as a Blackstone that's going for you know a 500 or1 billion do skyscraper 500 million to1 billion skyscraper right so we think the opportunity are really endless for us and timing frankly couldn't be better multif family loan defaults just skyrocketed per the Wall Street Journal we went from 4% defaults in multif family in January 2023 to 9% that means almost one out of every 10 multif family buildings is in default that is an over 22% increase one in three multifam loans approximately are late on their loan yeah see the opportunity delicious so okay so again that's what house hack is and how can you invest well you have to be an accredited investor the minimum investment amount is $40,000 and if you invest $100,000 you get warrants the warrants will be available uh it's for call so that's when they're due as early as 2026 which is nice because it basically gives you at minimum 18 months uh where you could decide in 18 months if you want to invest more but if you invest 100K you get 50% of your investment in warrants so if you invest 100K you'd get $50,000 in value in warrants at the current share price to buy more shares 18 months down the road or more and you don't have to it's sort of a free option but the minimum investment is $40,000 and if you invest $100,000 you get warrants it's very simple the share price is $2 per share also very simple now it's important to remember what an a credited investor is and that this is a regular D offering which means it's only available to accredited investors we had a non- accredited round last year if you didn't invest in the non- accredited round maybe there'll be another one in the future but I can't guarantee that at this point when I talk regulation D it's very important that you remember this means there's a PPM private placement memorandum this is called a perspectus basically it's important to read the risk factors remember I've just gone through problems in real estate I've gone through how we think we can solve them but you have to remember even though I have a back CR in real estate we haven't done many funds before we are in talks with wealth managers who are like this is a great idea please bring us these products we're in talk with the NASDAQ New York Stock Exchange what these these are all great things but none of those guarantee that the company will be a success in fact if you invest in the company you could lose all your money that's the nature of a startup investment this is a startup so I want to be very clear and I you know anything we're talking about here can change and evolve when we started this company we made it very clear that goal is to acquire real estate and then strategically and opportunistically sell that real estate but we hadn't fully formulated yet exactly how we're going to do that now we think not only do we have the vision but we've got the operation already in the works on Acquisitions rentals Property Management Renovations this is going great and we're in a position where we think we're getting pretty close to launching our first mini fund which could be a publicly listed entity but then again that might be subject to investment bankers or maybe a private fund is like Kevin don't forget doing that give us that product we want that product so we can put our fee on it who knows I I don't know there are so many things that are unknown I just want to be very clear please please please read the PPM understand the risks involved in investing in this company so that way when you hear me say hey these Shares are selling for $2 and I think you know my goal and and I'm hanging my reputation on the success of this company is to grow these shares to120 per share or more I can't promise or guarantee that it's I don't even calling it a projection that's my hope it's my vision I think so far we've been executing phenomenally well but always remember investing in startups is risky so read that PPM very carefully it's not something where I could give you a summary of it either because legally you're supposed to read all of it so just keep that in mind uh I can't even highlight it for you everybody always liked when I used to go through bills and I highlight things and the SEC is like you can't highlight any of it I'm like really make it easier for people gota read the doc so anyway keep keep that in mind the deadline of this offer is expected to be June 30th 2024 so while we could close the offering early it's probably going to be June 30th 2024 you could always email us with questions at IR house.com make sure to click the link down below to go to hous hack.
invest ready.com to get your invest ready letter remember you have to be an accredited investor to invest I'll explain that in a moment uh today we we have about 30 stabilized units we're about $29 million uh in and that does include a chunk that are in construction so obviously our average cost per door is going to be way lower we're trying to get to about a hundred doors here before we do our first pie so to speak uh there are plenty of other updates on this channel that you could watch I think it's very important to stay tuned to this Channel or uh our Twitter Channel where we post these videos and updates also worth noting that we're in two states right now about five a little more than five different cities by the way more of this information and spreadsheets will be found at house hack.com just click the investor tab or the link below but remember to be an accredited investor the easiest thing to do is go to house.in ready.com and get a letter from them you'll have to show them your W2s your tax returns or something to prove that you're an accredit investor about 18% of people are accredit investors today and it looks like the SEC is probably going to start changing the accredited investor rules so pay attention to that I think they're doing that in April I'm not sure but it's possible that they'll reduce the amount of accredited investors from like 18% of households to like 5 or 10% which means the income criteria will go up it'll be harder to be a credit investor currently you have to as an individual make $200,000 or $300,000 as a couple the other option is having a series 765 or 82 license being a family client of a family office or having a net worth of over $1 million outside of your primary residence now again go to house hack.
invest ready.com to get your letter and then sign up and follow the steps at house.com after reading the PPM there you go our fundraise is live thank you so much for watching and see you in the next one
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