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The most successful businesses adapt early to game-changing innovations in their industry. By getting into these breakthroughs before everyone else does, you can soak up a large pool of the industry. 

And in today’s episode, we have the most disrupting real estate innovation in the last century, called co-living. Co-living is a way for investors to make more money from their properties with less headaches by giving young adults a cheaper way to live in big cities. 

In this episode, Johnny Wolff, founder of HomeRoom – a co-living company – joins me to discuss how investors can supercharge their business with co-living properties. 

Here Are The Show Highlights:

  • How “slam dunk” business ideas bankrupt you (and the trick to making them wildly profitable) (6:33) 
  • Why the best business idea in the history of mankind can make you fall flat on your face if you’re missing this crucial ingredient (7:56) 
  • The “8 words of less” technique for explaining your business so precisely that investors beg you to let them invest in it (9:12) 
  • The little-known, but rapidly growing “co-living” properties that pumps cashola into real estate investors’ pockets (12:13) 
  • How to “tweak” your single family homes to get more dollars per square foot (without worrying about pets, bad tenants, a ton of maintenance, or high turnover rates) (13:07) 

If you want to learn more about investing with Johnny’s co-living properties, you can email him at johnny@livehomeroom.com or check out his explainer video at https://livehomeroom.com/invest

If you're ready to put the power of wholescaling to work for you, then head over to https://JoeEvangelisti.com/downloads to get your free “Business In A Box” downloads. 

Or if you're a true action taker, ready to blow the lid off your results. You can apply now to work with our team to build the business of your dreams faster than you ever thought possible. Go to http://realestatemoneymindset.com to apply and change your life. 

For my list of top 100 books I’ve used and implemented to grow my business, head over to https://JoeEvangelisti.com/top100

Do you want to become a successful wholesaler and help support the show? Then, share this with two people and go to wherever you listen to podcasts, subscribe to the show, and leave a 5-star rating and review. We will pick one of the top five star comments and give away free swag and goodies.

Read Full Transcript

You're not a rookie real estate investor anymore. In fact, you're probably doing a small handful of deals each month, but you're killing yourself to make it happen and to top it off, if you take time off from your business, you don't make any money. That's because you don't have a real business, yet. We're about to fix all that. If you're a can do action taker, the whole scaling podcast will teach you the tips, tricks, and systems you need to generate massive revenue, build your team and give you the financial freedom you've dreamed of in any market in the US. This is WholeScaling.

00:43: Welcome to the show, man. Thanks for being on, Hey, Joe. Really happy to be here. Real nice to me. Yeah. Yeah, absolutely. Man. So CEO and founder of homeroom co-living, you know, we had a lot of real estate investor and real estate investor wannabes, you know, people that listen to the show, trying to get into something, but co-living is something that literally, I just learned about one of my good buddies does this. And I just learned about it like a year and a half ago. Tell us what it's all about. Tell us like what it's all about, maybe how you got into it. Yeah. So when I started my career was in the Bay area in California, which is insanely expensive. So, you know, we were just out of college or me and my buddies just out of college. We couldn't afford anything else. It was just live with roommates.

01:21: We did in college, we did after, but I enjoy that social lifestyle. So when I moved to Austin, Texas in 2015 to start to do real estate investing full time, I decided to do all my houses as roommate houses. So that was really kind of the beginning of homeroom. The company itself didn't start till I moved to Kansas city and I started buying more houses and then did roommates again. I was like, there has to be kind of a better way to find roommates. And is there a way we can do this as a company and make this all more seamless and enjoyable? And that's a homeroom was born and you know, so far we, I felt like we've done a really nice job making, you know, achieving what I set out to set out, which is just a better roommate experience. So you're essentially, are you like subletting leasing from other people or are you renting by buying a property and then keeping it for yourself or like I, how does the structurally what's it look like?

02:12: Yeah. So co-living is a pretty, it's a young industry. So they're across the board, everyone's doing it differently. Like I think some people, everyone that does it, that is thinks they're doing it the best way. The way that we work is we partner with real estate investors to buy the property. So our team identifies it. We know exactly what type of home we want, that works best for Columbian. So that's really cool. We get to select like great homes versus being forced into using whatever on the market. Then we'll set it up. We have kind of a special way, you know, you know, there's not special way, but we have a unique way of doing that. That makes it ideal for roommates. And then from there we manage it. We're a hundred percent remote management. You know, our head of operations is in Canada. I'm in Kansas city, our leasing teams and Chicago and California. So that's really, and then we just take it from there and we're built into a machine that we can do this over and over. And investors really have. They don't have to do much other than get pre-approved and sign the documents. That's pretty

03:04: Wild. So you're doing the machine side. You have properties that are all owned by investors that you brought on board. So they're getting a great return. You're running a business on top of their return. So you're stabilizing the returns for them, but you're also stabilizing the expense for yourself, right

03:22: Breath. Exactly. And I think one of the bigger challenges that some of the early Coleen players, they just signed master leases kind of like we worked at and what that ends up doing is you end up partnering with owners of properties that aren't the best partners, frankly. They're just trying to rent it out. You come up to them, you're like, can we rent your property? And those owners that are trying to self-manage may not be the best partners. Cause they're like a little cheaper. They don't want to pay for property management. You know, they don't like paying for repairs, but with investors that enter the game, seeing what they have to do with us, it's, it's a perfect partnership. The lot of the friction that we had early as gone with our new model. So

03:56: We have a lot of investors that have multiple units, right. They keep rebuying with you guys and staying in Sunday Ecosystem. Yeah. One of the bigger challenges with that is that we're just trying to grow fast enough to meet the demand of our investors that are buying multiple. We have a number of investors with two or three. I think a lot of them are targeting six to 10, but we're just, we're launching the Austin market right now. And we have Dallas and Kansas city. Well, you know, we can only add three houses a month per market. So that's actually the main bottleneck is just meeting the demand that we have from investors. So

04:26: Biggest challenge right now with your growth, like, would you say three, a market or three a month per market? What's that limited? Yeah. So the house profile we're looking for, as you know, it's very specific, it's very specific in terms of price point, but it's very specific, more specific in terms of the layout. We need to add a quick parking. We need enough shared bathroom spaces. We need the house to look nice and have kind of like a Polish to it. Right. Cause young professionals. So to find something that's super low price point, that's near the city in a good location that has those restrictions. There's just not that many houses that match that. So we usually say three to five and then we try to get all five or maybe we'll get three that's sort of what sells us down there. Gotcha. Okay.

05:07: So Johnny, tell me about like, you know, you're, you're obviously an entrepreneur, you're a CEO you've been through the ringer man. Like I always talk about like visionaries and entrepreneurs. Like we're used to getting punched in the face, like on a daily basis, you know, can you share a time with our listeners were like maybe you got hit hard and you didn't think that homeroom was going to continue or, you know, maybe you had to pivot hard or something changed big time for you. I know you haven't been around a long time, but you've been around long enough to take some time.

05:33: Right. Of course the couple stand out to me specifically. One is when I initially started the company and we at Coleen and really, you know, it's sort of starting to emerge as an industry. I just thought it was the best idea ever. I didn't, you know, I was, I'm a first time founder business owner. And so I empty my retirement account. I sold one of my favorite rental properties and I'm just like, we're just going to go all and we're going to go super fast. And there's just a ton of nuances that I wasn't ready for frankly. And you know, we weren't able to lease as fast as I thought we didn't have the right processes in place. We sucked at maintenance. So, you know, we started with like this kind of big crew of part-time excited people and frankly it came and went down.

06:13: It was just me and one other guy at one point. And it was what we were just on life support. You know, the first three months were exciting. They're like this isn't really working. And we had to pivot really hard to be a very more, if we had more efficient company that was operating fully remotely and then that started to work, but it still wasn't great. So we did pivot one more time into working with real estate investors. So it was just like, you think like, okay, this is a slam dunk. And then, then you get to the reality of evidence, like not a slam dunk at all and you better do it. You better be incredible at some things to do to, you know, survive, but also to thrive.

06:48: Awesome. Awesome brother. I love that. It's a good takeaway. So tell me something that just like exceeded your expectations. Just worked, just took off just like Holy crap. That was so cool. I can't imagine it being that easy.

07:00: Yeah. You know, when we pivoted to working with real estate investors, you know, the first nine months I was just like, this is the best deal for real estate investors. It's exactly what I'd want to do. I've done a lot of investing. I've looked at a lot of deals. This is perfect, but we just couldn't, we could not break through. But then, you know, I think what was it August? We kind of came up with a video that explained it better. And then a few other things we made a better webpage. I fine tune my messaging and suddenly it just started to click. Right. And so now we have a way in less. So from going to, like, we had like two investors in the first six months trying to now we have 20 on a wait list, you know, six months later, you know, and I was just sitting there, like, I'll never figure this out. Right. So just working through that and then seeing like, it's not really the product's fault, it's your messaging and how big of a deal that made is you know, pretty amazing

07:51: Is such a powerful important takeaway for our listeners, for people who are really trying to start things up is understanding the power of communicating what it is you're trying to communicate, right? Like so many people are trying to find, I think these like shortcuts or these widgets are these like shiny objects that are going to like automatically make their business to happen overnight. And the reality of it is communicating what it is that you do is so important. We spend so much time on that. I mean, I don't know about you, but I mean, we spend so much time. I was just on the phone today with one of my copy guys for an hour, you know, talking about like, what's the message, what are we trying to say? What are we trying to articulate so that people will not only want to buy into it, but they know what the heck they're buying into. Right? Like they don't just want to buy bind, Joe, what does Joe do? Right. So I think that's so interesting that you you articulated it that way because I think it's really, really important. So many people have so many great things to sell his ideas and, but they just can't put the message across properly. So I appreciate that

08:53: And it takes time and I mean, people are uniquely crazy talented, and they can just drop a, you know, a brilliant one-liner about what something is and everyone can get it. But I feel like that the reality is most people struggle with it for months and months. We went through I don't know if you're familiar. So it's a startup accelerator called Y Combinator. We went through their interview process. And one of the things that we were told, like over and over again, by other people that had gone through it was that you need to come up with like an eight word presentation of what it is that you do. And they said, you'll work on it for hours and hours and hours. And then you'll keep working on it forever because that's simplicity of a words is just such a necessity for any business, especially one that's innovating.

09:41: It's almost like your elevator pitch, right? Like if you don't have, you can't say what you do in 20 seconds or less, you know, you got to figure that out. I love that eight words or less. It's even more succinct. Right. It's very hard. What would you come up with? You can't leave us hanging.

09:56: Oh man. If I remember, I think we said we went through so many iterations. So I think we said where the, you know, we were the first double-sided, you know, investor marketplace focused on co-living or something like that. I don't think that's exactly right. But in our case we have two customers coloring investors, tenants we buy and manage. So there's all the itches it's like getting that on eight words is still one of the thing we're working on today.

10:23: I do love it though. It's almost like you're like a mini monopoly in the way you're controlling that piece. Cause like you said, you have, you know, the investors part of your customer base. Right. But you're also offering an opportunity for them and then you need the tenancy in order to have a business. Right. You need the tenants, but again, your offer an opportunity for them because tell us about your tenants. I mean, because some people I think are like, well, why would I do this versus just rent an apartment. Right? Like, so tell people about your ten-year tenants. Because when this was explained to me the first time I thought to myself, Oh, well, that kind of does make sense. Right?

10:56: I mean, that's one of the two responses co-living operators get, I think a lot is like, and I think you're probably in the minority to be like, that makes sense. And I think it also depends on if you've done it before. I think some folks had never had that chance. Maybe they went to a local school and then they moved into an apartment. They don't, they're like, that's crazy. How do you guys live with so many people you don't know? And frankly, people that have done it though, I think generally really have enjoyed it. And so they're looking for it to get, and I think what we've seen is 26% of young adults that are living with roommates, which is actually has been trending upward for four decades. And so it's like, we're just kind of coming in to meet that need. So really our core tenants are, you know, we are, you know, fair housing compliant.

11:36: Everyone can live with us, but at the average age is about 27. Okay. So, and the average credit score is about seven 30. Most of them are young professionals. You know, engineers, nurses, we have a few doctors and a lot of them can afford other things. But I would say, you know, a decent chunk of our residents have the, to live elsewhere, but they enjoy the idea of meeting new people when they come to a new city, especially if they're high caliber and potential friends. So when I came to Kansas city, that's why I picked her remains. You know, I had, I could live wherever I wanted really, but I chose to live with roommates and I, you know, it was totally worth it. I mean social connections quickly. Yeah.

12:12: Nice. So, and this is something that's definitely catching on because a friend of mine is a developer in Philadelphia and she couldn't even get the shovel in the ground. She's building like a 56 unit apartment building and a co-living company came and leased out the whole entire building, made her redesign the building to meet the need where, you know, they move walls and things where I think it was like four bedrooms to every kitchen and two bats or something along those lines. And literally did a 10 year lease on the entire building, financial wild. Like it was unbelievable. Like she cashed out her investors before they broke ground. It was insane. But when she told me this story, it was like, this is, co-living like, there's I think when you say it's growing and you know, year over year, I think you're right. I think it's becoming much more popular for a lot of these reasons that you mentioned. And you know, it's just one of those things where I think some people don't even realize exists, you know, I don't think they even know what's out there. That's very interesting.

13:06: That is very interesting. And I, and I think, you know, for investors is there's so many advantages to it. You know, you're getting more dollars per square foot and that's basically the foundation of why it's a better deal for everyone. But you also have adults generally it's pet free. We have yet to have to evict someone because the quality of tenants is so high and the roommates do screen of the future roommates. Right. So we have an extra layer of screening. And so it's just, it ends up being like a very low maintenance way of maintaining a single family home.

13:33: So if you have one room empty in a home, for example, those roommates get to vote on like that new person coming in, they get to have a choice. Yep. Okay. And like, so you just said it's fair housing, but like, do you screen like by sex? Like do you mix males and females?

13:48: Yeah. We're pretty much open to everybody. Male, female, any age. We do have a tip. Like I said, we have an average, we have male females. Everyone has a lock on their door, so their safety, but we've never had any issues with that at all. Right. And just a high caliber tenants, but also there's other people there. Right. Everyone's social, everyone knows each other. They've become friends. Right So generally how many people to a, is it a building or is it like single family property, single family property. So typical. What do you have? Three, four rooms. So how,

14:17: At least three, you know, it'll go up from there. We're always kind of mindful of the cities that we're in and kind of like those regulations. Yeah. And we've found, you know, I've heard of people that are doing up to nine in a single family house and that's not something we've ever done, but they say, Hey, it works great. So I think, you know, at each size you have to, there's a little, there's some other things you have to keep in mind. But as long as I, frankly, personally, I've lived in roommates with up to seven, it's like, well, now if we have like a social gathering, we already have six people attending or seven people attending. It's a lot easier to have like watch football with friends over some beers. You just hit your, so they're

14:52: Obviously sharing the common space, the living area, the kitchen there's one. Did you try to get two full baths in a house like that? Or So full best are commonly accessible. That's important. So when we may have a master bedroom, we might actually like jailbreak the master, like create a hallway. So it's publicly accessible. So we do, we'll do some minor stuff to do like that, to make it better for roommates, you know, a master bath does not help everybody. We want to have that publicly accessible bathrooms. Gotcha. Gotcha.

15:18: Anything changed during COVID? I mean, obviously people are living together already. So like the, I can't imagine it doesn't really create that much changing. Right. Well, my stress level went up like 400% in March because when you're doing a community housing and the time of a pandemic, you know, you're like, am I in the right business right now? Should I be in the apps? Should we be doing like phone apps now that'd be better. I wish I had done a phone app. So yeah, there was definitely some stress, some panic panic, a little strong, but frankly, we haven't seen much difference. We actually had 0% vacancy across from March through the end of September. And we were pivoting our models. So we just slowed our growth just a little bit. So from adding two or three houses a month tatting, just one. Additionally, we have like a COVID protocol that we follow very religiously. We have had houses get it. We've actually never had one roommate. Give it to another roommate though. And we think it's because our protocols are so good. We have to be, you know, we have to fly an action. We hear someone has it just so other people don't get it. But our average age is young. So that makes it a lot easier. Sure. Wow. Good stuff,

16:21: Man. Johnny, what I forgot to ask, what else did we cover? You know, our markets and our goal is to be in 40, 45 markets. We explained Austin today. So today, so we're in Kansas city, but that's our home market. And we are, you know, we're, we expanded Dallas in August, which we're like pretty proud of like expansion during COVID 2020. It's like, it's like a big one for us. And so we're expanding to Austin right now. We have a list of investors are looking for houses. We're hoping to have 20 there by the end of the year.

16:50: That's fantastic. What's the goal by the end of the two years, three years from now, where are you? What are you trying to do? Our goal is four 35 markets, 3000 houses by the end of 2025. We'd like to our goal, our goal is to become a public company eventually. So as I know, I read that. So I always ask people, what's the big goal you want to do before you die? He said, it says IPO companies. It's the one, I think this is the one. This is the one. Nice man. Awesome. Awesome. So Johnny, how do people get a hold of you? And you know, what's the best way for them to learn more about this or potentially get on that list so they can, they could invest.

17:21: Yeah. So you can reach me or johnny@livehomeroom.com. That's my personal email, very responsive, always on email. My girlfriend hates it and you can also go on our website, live hummer.com/invest. We have like a pretty cool three-minute video about like our process, the benefits, the returns. There's also some proformas and actual properties we've done with investors. So you can see their returns and what they've actually received over the last year. So that's pretty cool. Yeah. That's more or less it know. We're all, I'm always happy to do a video call and kind of share with our investment process with people at any time or just answer co-living questions. I think it's a very new industry. Everyone in the industry is very open to like kind of sharing about it because we think it's amazing. And you know, w we love people that like, think it's cool to like you joke, even though you're not in it. And don't we just try to try to share the spread, the word, like co-living is a thing it's great for young adults. It's great for cities. It's great for neighborhoods and we've made it, we found a way to make it great for real estate investors to absolutely brother. Good information, man. Great share. I appreciate it. I'm sure our listeners can get a lot out of it. Good value. So Johnny Wolf, thanks for being on show brother, Joe. Pleasure to meet you. Pleasure to be on the show. Absolutely. Matt talks again.

18:30: If you are ready to put the immense power of whole scaling to work for you, then head over to Joe evangelists.com/downloads and get your free business in a box download. Or if you're a true action taker, ready to blow the lid off your results. You can apply now to work with our team, to build a business of your dreams faster than you ever thought possible. This call costs $500 to weed out the tire kickers, a mental, a feed. The real ballers will make back many times over on the first deal. Even if you don't get selected to work with us, you'll get a full year of access to our private coaching group, a $1,200 value and a 30 minute coaching call with Joe. So you win either way, go to www Dow real estate money, mindset.com to apply and change it.

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