A New Way to Do Rentals with Much Higher Cash Flow with Ryan Chaw

My guest today is Ryan Chaw. Ryan has created a personal real estate portfolio cash-flowing almost $11,000 per month through single-family home investing in California while working a busy pharmaceutical job. Real estate investing is going to allow Ryan to retire at age 31 with a 6 figure income. He was also recently featured on the BiggerPockets Rookie Podcast.

Ryan first shares his background story and how he got into real estate. He relates that he was inspired to get into real estate by his grandfather who bought a couple of properties in the San Francisco Bay area. He was able to cover all of his living expenses with the rental income and retire early. So, pretty soon Ryan realized that real estate is one of the best ways to create generational wealth, if not the best way and he wanted to get in as soon as possible. He got his degree in pharmacy in 2015 and worked two jobs, seven days a week to save enough capital to buy as much real estate as possible as early as possible. He bought his first property in 2016 and decided to copy a model that one of his friends was doing and rent individual rooms in local college towns. This allowed him to double his cash flow and double his rental income, by charging $600-$700 per bedroom. Most of his properties make between $2,500 and $3,200 per single family home. Since then, he bought one property each year by reinvesting the income. Now, he has four properties and is about to buy his fifth that will make his monthly rental income $13,910.

We then move on to discussing how Ryan manages his tenants who are all college students. He explains that at the moment he has 18 tenants and that he does all the management by himself. Ryan looks for high quality tenants: professional students, third or fourth year students, more mature students who will most likely take on some responsibility around the house. At this point, he spends less than an hour a week self-managing his properties thanks to his PRIME method. P stands for placement of ads, you have to post your ads in a way that puts you only in front of the people that you want to rent to. R stands for receiving their social media, this helps make sure that they are serious about their studies. Next, I stands for identifying the type of tenant; are they difficult to communicate with, do they seem to get angry very easily, are they asking for cheaper rent, are they asking for things before they even sign. M stands for measuring responsiveness, the more responsive they are in terms of getting their paperwork back to you quickly and answering all your questions, the more responsible they're going to be. And finally, E stands for ensuring proof of income which is usually parent’s bank statements since they are the ones paying the rent most of the time.

Ryan then explains his rule of thumb when it comes to evaluating the property. He shares that the number one thing he looks at is the price, even though that is not the only factor. He also makes sure that he is following the 1% rule, meaning that his rental income is 1% of the total cost of the property. After purchasing his property, to increase his rental income, he usually adds as many bedrooms as possible while making sure that there is no more than 3 people per one bathroom. He also makes sure to make all the rooms move-in ready.

We then talk about the type of properties that Ryan purchases. He explains that he mainly focuses on properties that are in good condition, turnkey properties. He always takes into consideration opportunity costs, because his properties are making such a large increase in rental income per month. With turnkey properties, it usually takes him two to three weeks to repurpose some of the rooms into an extra bedroom or two and then by the next month, he usually has two tenants in, because he starts advertising his properties as soon as his offer is accepted.

Eventually, we dive into discussing male and female ratio in Ryan’s properties. He tries to match up his tenants whenever possible, but if there is a house where females prefer to live with other females, a lot of times due to their culture, he'll have a female house and then a male house. But, he also has co-ed houses, when female tenants are comfortable staying with male tenants. But, he explains that he has to be very careful here, because he can’t have an ad that says that a house is an all-female house because that's discriminating against sex, but if the tenant that already signed a lease prefers to only stay with other females, then he is simply respecting that request.

Lastly, Ryan shares some advice for anyone getting started in the student housing market. His first advice is to follow your local city laws and to check with your city planning division to make sure that this is legal in your area. His second piece of advice is to get to know your neighbors and to expand your network as much as possible.

Don’t miss this incredibly educational episode of the Just Start Real Estate Podcast with Ryan Chaw, and learn all about this new way to do rentals with crazy high revenue!

Notable Quotes:

“I realized that real estate is one of the best ways to create generational wealth, if not the best way. So, I wanted to get in as soon as possible.”

Ryan Chaw

“Right now I actually have 18 tenants. I'm able to self-manage this while working a full-time job so that's already a testament to how well this system could work.”

Ryan Chaw

“Putting ads where your target tenants aren't hanging out is like fishing in an empty pool.”

Ryan Chaw

“What's really great about this market is the student tenant has so many ways to pay for the rent and it's also a lot cheaper than on-campus housing, so it saves them a lot of money.”

Ryan Chaw

“I start advertising my properties right when my offer is accepted. So, not even when I have the house. I basically sell the product before I even have it.”

Ryan Chaw

“This gives them more privacy, they're just as close to their classes, or sometimes even closer, and they're paying half the price of the dormitories.”

Ryan Chaw

“Every person who contacts you could have three or four other people interested.”

Ryan Chaw

“I always wanted to have that choice to either work as a pharmacist full-time or maybe just work part-time and use the rest of the time making a larger impact on the world.”

Ryan Chaw

“There's so many ways that you can make it happen if you really want it to happen. People blame time and money, and really those two things are not the problem.”