How to Start a Real Estate Investing Business with John Casmon

Investing in real estate is the best way to be successfully unemployed. There is a great way to start if you have little money to invest.

House Hacking is a way to get into a house and rental property at the same time.

Then you can continue to grow your business. Learn from John Casmon the steps to do it too.

Article Contents show

How John Makes Money Without Having a Job

It took John a while to figure out how to quit his just over broke J.O.B. He recommends first figuring out how to take some of the income you are currently making and invest it in a way to get passive income, where you aren’t exchanging your hours for dollars.

The key for John is that he was waiting for his passive real estate income to meet or exceed his full-time salary. However, that was going to take a really long time. He started to look at ways to build other streams of income.

Watch the Real Estate Investing Lesson Here:

John thought about what he liked to do — real estate — and he looked within that. There are different ways to make money within real estate, such as consulting, wholesale, rentals, partnering with other people, etc. It opened his mind to other ways of replacing his salary and build long-term wealth in the process, without relying on that J.O.B.

What John Was Doing Before He Was Successfully Unemployed

The big moment when this started was early in his career. John worked for General Motors (GM) and he was there from 2007 to 2011, which was during the economic downturn.

John saw people who had spent their entire careers working for GM and they were really concerned and didn’t have any options. This is when John realized that he could lose his job.

Fortunately, John was able to continue working for GM and he thrived during that time. Even with GM coming out of bankruptcy and coming out of those hardships, he looked around to find out who looked happy, and nobody looked happy.

It became something that made John uncomfortable. He didn’t like to have his life in the hands of a company, no matter how good of an employee he was.

He saw superstars get shot down out of nowhere and sent to work somewhere overseas where they couldn’t speak the language. John was paranoid and scared this would happen to him.

John made two decisions. The first was to transition to a place where, if he stayed in corporate America, he could control his options a little better. The second was to start investing, and he found real estate to be relatively easy to do.

More people have made millions investing in real estate than anything else.

John isn’t a tech guy or artist that could make millions of dollars. Real estate was something a lot of people can do. This intrigued him and that is where he started.

John and his wife started out with a two-unit building, where they house hacked — they lived in one unit and they rented the other unit. This was the way to get going. He wasn’t really concerned about having all of the numbers worked out right. John was able to cut his teeth managing property and ease his way into real estate.

John traded six figures of equity in that first deal and this is where the lightbulb went off. He decided to invest more of his time and money into real estate until they got to the point where they had a $1.5 million portfolio and decided it was time to expand and partner with others.

Overcoming Fear Comes Down to How Well You Know Yourself

One of the biggest things you need to do is come to grips with yourself and have some honest conversations with yourself. John has been working since he was 13 years old.

There was only one year, when he was 15, where he wasn’t working.

John had always had a W-2 job and has never been fired from a job. He is very employable and is savvy at navigating political waters.

The reality for John is that corporate America was a comforting thing.

However, being in a comfort zone, he knew he would never achieve the goals he set for himself. The biggest moment for John is when he laid out his priorities. He realized he had to go from doing multiple things to really dedicate to transition out of corporate America.

John’s son turned three years old and he wasn’t there. John was in Atlanta filming a commercial and he couldn’t make them change the date and he was the only person who could go to the shoot.

John FaceTimed his son, while he was on set and his family was all there. John was already putting in 12-14 hour days, between his job and his real estate business.

In that moment he realized he needed to take full control over his entire schedule, and if there was something he wanted to do, he would be able to do it.

Listen to the Entire House Hacking Episode Here:

You need to go through these hardships to find your why, and you need to have a strong enough why that makes it worthwhile to move forward. This could be for health reasons or family reasons. Having a strong why is a great way to get over that fear, but also have a strong plan.

Take the time to actually go through those fears: What if the business fails? What if you lose your money? What if you don’t have the money?. You need to go through these fears and come up with a game plan.

Once you have a counter attack for any of these obstacles you may or may not encounter, you will feel more empowered and more comfortable moving forward.

You will be ready to pursue the life of your dreams instead of just living in the moment that you have in front of you.

How to Become a Multi-Family Real Estate Investor

There are three easy strategies to get into multi-family real estate. The first is house hacking, which is usually smaller, two-unit properties. Live in a unit and rent the other unit. From there, lean on your experience and move into larger properties.

The second strategy is looking into joint venture (JV). If you don’t have the skills or time right now, especially if you have a job, a great alternative is to partner with someone who does have the skills and time. This way, you can learn from them, gain the trust, and gain the experience.

The third strategy, which is what John is focusing on right now, is through syndication. It is where you take that same JV approach, but instead of partnering with one person, partner with many to buy large scale apartment complexes.

This allows you to earn passive income and, because you are a partner, you get all of the tax benefits that come with being an owner as well.

Once you pick a strategy, you still need to learn about multi-family. To educate yourself a little bit about what you are looking at and how it differs from rentals, you have to look at a couple different things.

The first is that you have multiple doors. It is not just one family, you have multiple doors and multiple units. The good thing is that when one family moves out, you still have others that will pay the mortgage.

The downside is that you have more logistics and more things that can go wrong. You have more leases and tenants to keep track of.

If you have a day job, there is scale somewhere in there. When John was at GM, they built millions of vehicles and he had a small role in building them.

He oversaw a $100 million advertising budget at one point and that was huge. The reality is that he had a role he played and others had their roles.

You have to think about real estate the same way. It doesn’t have to be a massive undertaking, you just need to understand your role and what other roles are available. From there hire, plan, or partner to fulfill those other roles.

How to Get Into Your First Multi-Family Property

First and foremost, you need to understand location. The number one rule of real estate still applies — location, location, location. In this case, focus on where you want to live.

John talks to people who want to get into house hacking, but they are looking in areas they wouldn’t otherwise want to live. This is a mistake, because you are sacrificing a lot, you can’t wait to move, and you may be putting yourself in an environment that isn’t going to be comfortable for you. Your personal health, wellbeing, and mindset is key.

You want your first investment to be something that makes you feel good.

Start by looking at the neighborhoods where you want to live. What are the characteristics you want. This is going to come down to your life stage — do you want nightlife, do you want to be close to restaurants and parks, do you want to be in a certain school district, etc.

Figure out where you want to live anyway and make a list of places where you can find two- to four-unit places in those communities.

From there, sit down with a real estate agent. John prefers an agent that has experience dealing with investors and can help you run the numbers and understand the investment side of it like how to rent a unit, how to get a lease, contracts, etc. Make sure you work with someone who has that experience.

In some markets, you will not be able to find a real estate agent who has worked with investors, but at least find resources that will help you navigate that process. Bigger Pockets is a great resource if you have questions about house hacking.

They have numerous articles and podcasts on it and you can learn a lot about it on their website. You can also learn a lot by just Googling the term “house hacking”.

Once you get an agent and find a property, you want to run the numbers. What you are looking for is to run the numbers as if you did not live at the property.

If you are not going to live at the property, does it still cash flow, is it still a good property, is it in an area where you can expect to see appreciation. At a minimum, is it desirable? If you desire to live there, you can assume that others will want to as well.

These are the key steps.

Once you get through all of this, you can find a property that makes sense for you and your situation and the lifestyle you want to live.

How to Find an Agent that Works with Investors

John was fortunate enough to do most of his investing while living in Chicago, where there are a ton of two- to four- unit investments.

Finding an investor-friendly agent wasn’t difficult, but for others, it is more challenging. John’s sister-in-law is one of the top real estate agents in Cincinnati, but he would not hire her to find a two- to four-unit property, because that isn’t what she does.

The easiest thing to do is ask for recommendations. If you can attend meetups, if you can go to different events in your city, or if you can connect with people on Bigger Pockets, simply ask them who they use and what the process was like.

The other thing you can do is a reverse-engineered approach. Look up two- to four-unity properties in the area you want and find the listing agent. Go through the listings and make a list of the agents.

If the agent pops up a few times, there is a good chance they know a thing or two about two- to four-units. The mere fact they are selling multiple two- to four-unit properties may be a sign.

When House Hacking, You Need to Tow the Line

You don’t want to misrepresent facts, but try to avoid the ownership conversation. Instead, say you are a manager and you manage the property. You don’t have to say yes or no if someone asks you if you own it.

Tenants just need to know if you are their day-to-day contact. At some point, they will probably figure out that you own it, but initially, when you are starting to screen tenants, it is okay to let people know you manage the property.

Depending how you structure it, you may not own the property. It may be set up as an LLC or a trust. This is why you can be honest when you say you manage the property.

Make sure to set clear ground rules for communication. Talk about how you want to communicate, what is feasible, what is not feasible, and also say the you are their neighbors. Just because the tenants are upstairs or next door doesn’t mean they should bang on your door at 2:00am. They wouldn’t do this with a regular neighbor.

If there is an emergency, like a fire or a massive leak, then they should call you. Anything else should be handled during business hours by email or text message.

If it is a text and it is at 8:00pm, John might reply if it is quick, but he tries to keep it tied to the hours a normal business would operate. Maintain standards as if you were a property management company.

Hiring a Property Manager Depends on Your Goals

John is open to hiring a property manager, but it is best for someone who truly wants to be hands off. For John, being hands-on was a prerequisite. How are you able to work with other people, if you’ve never managed a property on your own.

For others, it makes sense if they don’t want to go that deep or if they truly want to be a passive investor. These people want to put their money in, collect their returns, and they don’t want to get phone calls about what is happening or be involved in the managing side.

If you live in one of the units, and you are paying someone to come over to fix things or show it, it seems inefficient. If you don’t want those hard conversations or have to explain why you are raising rent 10%, John understands, but if that is the case, you should think about your expectations long term.

Are you house hacking for now or are you trying to build a portfolio? If you are trying to build a portfolio, house hacking is a great way to start, but there are other alternatives if you don’t want to be hands on.

How to Use the FHA Loan to Grow Your Portfolio

With an FHA loan, you can put 3.5% down on a $200,000 house, which is $7,000. One thing that is necessary to use this loan again is to live in that property for at least one year. After that, you need to be able to refinance out of that FHA loan, because you can only have one FHA loan at a time.

In theory, you could buy the $200,000 house for $7,000. If it is in a really hot neighborhood or maybe you’ve fix it up, you need to be able to have 20% equity in the house and refinance after a year.

The best thing is to do this again. Take another $7,000 for another $200,000 two- to four-unit property, rinse and repeat. You could do this every 365 days if you wanted to repeat the process.

Most people are not going to move that frequently, and it is difficult to create that much equity on a property in a year. From there, the next thing you could do is get an investment property, which usually requires 20 to 25% down. If you have the capital, that is the best thing to do to grow and scale.

If you don’t have that much capital, it may be a good opportunity for you to go into a JV and partner with someone else.

You can offer to manage the property and look at a capital partner to get the down payment. Look at the obstacles and see what is possible.

As an entrepreneur, you need to solve problems. Don’t give up when there are obstacles, because there will always be obstacles. Figure out ways to solve them.

Money Always Becomes an Issue

When you really start to peel back the onion, you will realize there is a lot of capital available. The bulk of the money is coming from the bank, which gives investors in real estate such a huge advantage.

Imagine going into the stock market and buying $100,000 of stocks for $25,000. If it goes up you will give them their $75,000 back and keep the rest. You can’t get that kind of leverage on any other asset class.

The first thing is you have the bank coming in with the bulk of the money. Then you have to look at it and figure out how to come up with the rest. One way is to save up money like John did, which is why it took so long. John bought a three-unit building and an eight-unit building. With the eight-unit building, he put down $120,000.

It took him a year to save and invest that money and he thought there had to be a better and quicker way to buy a property. This is where he opened himself up to asking how can they save up enough money, without taking a year to do it. Even if you are starting out, partnering with other people may be something you should start to think about.

There is creative financing out there. There are hard money lenders and private money lenders. A hard money lender is someone who is going to charge you a lot to borrow their money and they will probably foreclose on you if you don’t execute.

They make all of their money off of the interest. A private money lender is someone you may know personally or someone who strictly invests in real estate.

They are going to be more flexible with the terms. Maybe they have an old IRA or other account where they don’t need the money right away and they are going to invest in a vehicle that is going to get them better returns than bonds or stocks.

If you don’t have the money right now, make a list of people you think have the money and you think believe in you and may have an interest in partnering with you.

A lot of people are interested in real estate and they may just need an opportunity to react and ask questions to learn more about what you are doing.

If you are going to approach someone, make sure you do your homework. Be clear on what you are looking for. If you are interested in a two- to four-unit property in a certain neighborhood, make sure to say that.

The clearer you are on the criteria, the more credible you are going to be.

If you said, “I’m looking at investing in real estate. I’m not sure what, but something that makes us some money”, it is less credible than if you said, “I am looking to invest in a two- to four-unit property, in these three zip codes, where we can deliver $250 per unit cash flow after taxes and our debt service”.

You may even have a couple of properties to show them. The more specific you are with your vision, the clearer you will be able to communicate and find someone to move forward with your plan.

There are two things investors are worried about. The first thing is NOT losing their money. Being clear is a huge step forward. The second concern is how much of a return they will get.

If you can be clear and alleviate those fears or concerns and answer those questions, people will be more comfortable lending you money.

How to Continue to Scale the Business

If you want to scale a real estate business, you need more properties and more money. It doesn’t have to be your money. You have to get comfortable with that. This was the realization John came across.

After he and his wife bought the eight-unit property, he ran the numbers and realized it would take him another eight years to make enough money where he could leave his job. His oldest son at the time was two or three years old and he didn’t want to wait that long.

John had to get over his fears. There is an easy path if you can get other people to partner with you.

At that moment, he felt like he built up enough credibility and enough of a track record, in addition to his business background of how to manage and grow.

Step one is getting more deals and step two is getting more capital. Start having those conversations with people. You need to be honest and vulnerable and it isn’t easy. Reach out to those people, let them know what you do, and that you are looking for investors. If you want to grow and move forward, this is what you have to do.

John also had to stop looking at investing as a side project or a hobby. He really thought about it as a business. If you have a business, you are being neglectful if you don’t go out and promote products and services to prospective clients. Imagine having a business and never telling people what you do.

The reason people don’t do this is because they only see this for themselves and how they benefit from it. Stop and think about what the other person gets.

They get to diversify outside of the stock market, they get to learn more about real estate, they get a chance to get tax benefits. There are different benefits they get as well.

When you realize how you can help other people, you won’t want to keep it to yourself. You will want to share, because you are providing a real value to other people. This shift is critical if you want to scale and grow.

How John is Making the World a Better Place

Target Market Insights is John’s podcast and he does this for other people who want to get started in real estate. He launched this to learn from other investors and to share the information with others.

John has a friend who left her W-2 job to start a non-profit, going into underserved communities across the globe and teaching them how to create sustainable water solutions in their communities. He is on the advisory board for that non-profit.

Find other causes that you are passionate about and volunteer your time. Using the expertise you built up and transitioning and leveraging those skills into your passion is a great way to stay motivated and help others.

The First Step to Get Started in Real Estate

Surround yourself with the right people, the people who are already doing this. It isn’t scary or a myth, it is real.

Surround yourself with people who are seeing real success, so you can emulate them.

You are the five people you spend the most time with. It doesn’t have to be all physical, in person. Immerse yourself into podcasts and books too.

One Piece of Advice John Would Give to His 18-Year-Old Self

There is this thing called the internet. You only use it now to play games, but you need to use it to find solutions to your questions and problems.

John wanted to get into real estate when he was 19 or 20 years old. He bought a newspaper and started looking for house for sale, but he didn’t know how to get the money or even how to qualify for a loan, but it was the perfect time to use the internet.

He would have used the internet more wisely and figured out who he needed to get on his team.

The One Tool John Recommends

Day One is a journal John uses. It is an app and he uses to document his day right when he wakes up. He can write in it and talk into it too.

Another app John uses is Pipedrive. There are different CRM systems and tools, but this allows him to track his relationships and communications.

If you have hundreds of conversations a month, you may forget about the guy you talked to at that conference last year who was interested in partnering with you.

It is good to have a database you can go back to. Find a system that keeps track of your relationships, especially if you are trying to raise capital.