You DON’T Need 20+ Rentals to Quit (I Did It With 6)
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This investor left his day job after buying six rental properties. And he did it by discovering a single strategy that maximizes cash flow. Then he just repeated it over and over again. You don't need a lot of starting cash or any secret sauce to replicate this exact investing path. All you need is just a little creativity to see opportunities that others might overlook. Let's dive into how this works.

Hey, everyone. I'm Dave Meyer, head of real estate investing at BiggerPockets. Today, we're bringing you an investor story with Miller McSwain.

Miller worked as a nuclear rocket scientist in Colorado until a few months ago when his real estate investing portfolio started generating enough cash flow that he could quit his job and invest full time. Miller didn't have any special advantages that allowed him to make this huge life transition. He lives frugally, he made some sacrifices, and he went all in on a co-living strategy that allowed him to turn his six investment properties into 41 separate units.

Co-living has become very popular recently because this room-by-room approach allows you to generate much more cash flow than you normally can with a traditional long-term buy and hold. Miller says he's seeing a 12% to 14% cash-on-cash return for some of his properties, which is huge. But...

Even if you're not as interested in this co-living model, which you might want to be after this conversation, you could still learn a ton from Miller's successful investing career because the lessons that he's going to share with us, you can apply to almost any investing portfolio. So let's bring him on. Here's my conversation with investor Miller McSwain.

Miller, welcome to the show. Thanks for being here. Hey, Dave. Thanks so much for the invite. Super stoked to chat today. Yeah, me too. Tell us a little bit about yourself. How did you come to be here on the podcast with us today? Yeah, so I was formerly a nuclear rocket scientist. That was my

W-2 day job, which just casual nuclear. What does that even mean? What like rocket scientist is good enough. Nuclear scientist is good enough. But you had to do both. Yeah. Well, really for social media, you know, you got to spice up a little bit. OK, yeah. Gives you a good title. So, yeah, nuclear engineering degree and then worked for a rocket company doing some nuclear things there.

Um, nothing classified. It's just probably not worth talking about, but I wouldn't understand anything you were saying, but I just have to say, it sounds very cool. Yeah. I will say though, you don't have to be a rocket scientist to do the strategy that we're going to talk about today. Um, so that is definitely a benefit, but yeah, so kind of started out doing that. And, um,

You know, that's how we made our money that allowed us to buy our first few properties. A lot of those were house hacks. And yeah, I've since transitioned into quitting that and doing full-time real estate. Tell us about how it worked for you on sort of a day-to-day personal level to make that first investment. Yeah. So when we bought the first investment, we definitely did not have a lot of cash. We bought the first one like two months prior to graduation. Oh, wow. So we were on the shoestring, you know, college budget, you know, doing all of that. So we...

you'll like this, but we did a bunch of market research and figured out where we wanted to live and where we could invest at the same time, right? Because the idea was definitely to house hack so that we could put, you know, 5% down and that's how we were going to, you know, start our financial journey. So we looked around the country first off and picked which state we would want to live in just, you know, qualitatively, like where has nice views or where has,

things that we like to do. So we picked Colorado. Nice. We actually drove across the country then. We were in Tennessee and drove over here. Again, college, shoestring budget, and car camped around the state for like three weeks, going to different cities and figuring out what places had the vibes that we liked and narrowed it down to a couple and then started diving into the numbers at that point to see which one had the best rental market and would have jobs for us and

and all of that. So that's what we did and landed on Colorado Springs is where we ended up moving. And, um, and that's where pretty much our entire portfolio is. So, so the day-to-day at that time was, yeah, uh, find the property, um, purchase that house hack a couple of months prior to graduation, then move in and,

At that point, it was like, well, what strategy are we going to do? You know, right. Like I'd read Craig's house hacking book and it's like you can either short term a piece of your property, you can midterm a piece of your property or you can rent rooms. And like it wasn't even called co-living at the time, but that's kind of what it is now. And so we looked at all the strategies and chose the room rental model. So you found the house hack in Colorado Springs and then I assume you started working full time. What was it like for you sort of like balancing the two different?

avenues being in real estate also having this W2 job at the same time. Yeah, it was a it was definitely a lot to start out, right? Because this room rental strategy that we were doing there, there wasn't really a book on it yet. You know, there's short term and there was midterm, you know, there were books for those, but we were just kind of figuring this thing out as we went. So it was very much Yeah, work, work the 40 hours at the job,

And especially, especially right when we first bought it, you know, come home and like furnish certain things and clean certain things and take listing photos and do all of that. So it was like a big rush in the beginning. Then it was a big rush to get the rooms filled, but then it kind of chilled out from there. You know, it's like, okay, they're filled. We have some breathing room. Um, it's only three rooms that we were renting out. So like it wasn't a ton. So there was some breathing room afterwards. Was it a single family house with them? Yeah. Yeah. So this is a single family house that what we ended up purchasing was, um,

Essentially like a ranch with a basement. So the top and bottom level were the same exact square footage. So fortunately, my wife is super cool and she let us live in the basement so that we could get the maximum rent upstairs. Nice. And so, you know, so that was a nice situation there. But yeah, so we lived in the basement. Honestly, super comfortably. You know, people talk about, well, how do you get your wife on board? You know, all those sorts of things. Honestly, this was an improvement over college. It's like we were in a small apartment. That's a good point.

You know, before. So us living in this basement where we had our own living room, had two bedrooms down there, had a kitchenette, had a bathroom. It was it was definitely an upgrade, even though we could sometimes hear people walking above. I guess that's the downside, right? But yeah, there were three rooms upstairs that we rented. There was a living room, there was a kitchen. So pretty close to a duplex by the time we kind of added a door to separate the two levels. But it was it was a single family.

And was renting out those three rooms, was that covering your entire mortgage? Yeah, not quite. It was pretty close to it, though. It was still definitely a big benefit. So, you know, it could be definitely scary buying the first deal, right? Especially when we were halfway across the country and purchasing sight unseen and doing all of this. But the way that I thought of it was house hacking is very low risk. It's like we have to live somewhere. Right.

So we're either going to move to Colorado Springs and we're going to be renting an apartment and paying, you know, I don't know, 1600 bucks a month or whatever it is. Sure. Or we could buy this place and yeah, the mortgage is, you know, 25, but surely we can rent out at least one room and now like it's net even, but on the, on the best case, we can rent out three and all of a sudden we're paying, you know,

you know, 300 bucks of the mortgage, 400 bucks of the mortgage and, you know, some repairs and whatever. But overall, definitely a net positive. We paid a little bit, but not much. So tell me a little bit how you scaled from here. Cause I think a lot of people, uh,

Especially when you talk about house hacking or, you know, just being out of college, the first deal, it's intimidating sort of on a mental level, but, you know, getting together 5% and getting the benefits of owner occupied that you can sort of wrap your head around, but scaling up from there becomes a little bit more of a challenge. So how did you go from this first house hack to whatever you did next?

Yeah, we definitely had to get more serious about it. We were thinking about the second property while we were in the first property. So I think that was a big benefit, right? Because like I said, there was no book. There wasn't even YouTube really about like how to do this co-living thing, which didn't even have a name yet. Once we moved to the second property, you have to be a little bit more intentional about things. So things like the shared supplies, so toilet paper, trash bags, paper towels,

we now provide those things because we found out that when somebody uses it and, but the other guy bought it tension. Yeah. Yeah, exactly. Yeah. Yeah. And maybe it doesn't cause an issue right then, but enough of that builds. Right. So while we were living in that first house hack, we built a lot of those systems where we were really thinking about how to systematize this thing.

And then so yeah, we moved to the next house hack 12 months later. And everyone that I knew who was house hacking and renting out rooms, like whenever I would go to a meetup and talk to someone, they would move to their next house hack and they would turn the previous one into a midterm like that.

That's just what everyone did, right? Like it definitely sounds simpler. It's like, oh, I'll just have one tenant now instead of having the five guys and gals. But I knew there was definitely some way to keep renting rooms. And I knew that there were reasons to do it. So whenever we were deciding which strategy to do, we were considering the short term, the midterm, and the renting rooms. Now,

Now, short term is like very regulated here, like it is in a lot of cities. So you can do it when you live there. But whenever you leave, it's there are some exceptions, but for the most part, you can't. So I didn't want to do that and then have to leave and switch strategies. So really, it was like, do we want to midterm or do we want to rent out rooms? And what really attracted me to co-living was the diversified income streams. You know, like you have five different people paying rent, probably each working in different industries. And

And so if one person loses their job, you're probably still cash flowing. If two people lose their job or vacate or whatever, you're probably still break even. Now, you know, after that, maybe you're dipping into reserves.

But those are like some of the benefits that we saw. And so that's why when we left for the second house hack, we've tried to figure out how to keep renting rooms at the first one. And it was successful just because we did focus so much on those systems, like the supplies, like the cleaning, things like that. So yeah, I hear this all the time that people move out and either turn into a long-term rental or like a midterm, like you were saying. But I imagine that there are some sort of math or return benefits in terms of how much cash flow is.

you were generating in this rent by the room model. And I want to learn about this premium that you can charge essentially when you're doing the rent by the room or co-living model, but we do have to take a quick break. We'll be right back. Stick with us. When rent's late, it's not just annoying. It wrecks your whole month. Your mortgage is still due and it's time for an awkward conversation with

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So I tried explaining a sandwich lease to my insurance guy once, and he just blinked at me like I made it up. And that's sort of the thing, right? Most insurance companies don't understand how we invest. You go vacant for a few weeks, you switch strategies, you hold stuff in an LLC, and suddenly your coverage doesn't fit. That's why I recommend National Real Estate Insurance Group. They actually get real estate investors. Their coverage adjusts as your property changes, and you get one monthly bill for everything, no matter how weird your portfolio is.

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Welcome back to the BiggerPockets podcast. We are here with investor Miller McSwain talking about how he started his investing career doing the rent by the room model and deliberately chose to keep doing that after his first house hack. So Miller, before the break, I was curious to hear about your decision to sort of keep scaling this model. And we've talked a little bit about some of the challenges or at least just like the unique elements of co-living and some of the things you have to deal with. But tell

Tell us about the upside. Like, why are you excited about this and why should people consider it? It's definitely a mega cash flow strategy. It's a lot of work for a lot of cash flow, right? I know I keep bringing these up, but like if you compare short-term rentals, mid-term rentals, long-terms and co-living. On the income front, I would say that long-terms are, of course, going to be like the lowest. You know, just like your traditional single family, you know, long-term type property. It's going to produce the lowest income.

then I would say midterms are going to be higher than that. And then depending on the market, co-living or short-term could be tied or co-living could beat it a little bit.

At the same time, management is going to be different for each of these strategies as well. So the more income that you get, most likely the more work you're going to have to do to get it, right? Like that's kind of just how life works. So your long-term rental, little effort. Mid-term rentals, a little more. Co-living and short-terms, a lot of effort. So that is why you would potentially choose this strategy. If you're willing to put in a lot of effort to get a lot of cash flow, it could be a great option for you. Yeah, absolutely. And I think that's so important for everyone to remember. We talk about this a lot, but basically-

There's like a risk reward spectrum for real estate investing and honestly, any asset class, right? Like you could buy bonds that you're going to get a modest return, but it's basically no work. On the other end of the spectrum, right? You could be a real estate developer. You can make tons and tons of money, but it's a lot of effort and a lot of risk. And you just sort of have to decide for yourself where you want to fall on that spectrum. And Miller, I think you did a really good job sort of summarizing it that, you know,

I think actually this co-living model probably has a benefit because it's more work for the cash flow, but I wouldn't say it's riskier, right? Like I guess I don't see the risk in co-living in the same way I see risk in short-term rentals, like you said. You know, I invest in short-term rentals, so I'm not knocking it, but there's more risk there, at least in my opinion, than in the co-living model, right? Yeah.

Yeah, no, I totally agree on a few fronts. So regulation wise, maybe we can dive into first. So yeah, as far as regulations go, right, we've seen across the country more and more regulations, again, in the urban markets, like totally go do it in the vacation markets for sure. But but more regulations in the urban markets, the cities for the short term rentals. The reasoning there is, if you have a short term rental, you're essentially taking a unit

Off the market that would be available to a traditional family that's working in the market and all of that. And you're converting it into another use. So you're driving up the cost of housing for locals whenever you do that. Whereas co-living, on the other hand, regulation has actually been very favorable because it does the opposite. It provides more affordable housing for locals. So we've seen states like Washington State, Oregon, Colorado, all three of those have passed regulations.

statewide regulation that says, Hey, you can have unlimited number of people, you know, live together as long as it's safe, you know, and like, and things like that. Um, but the regulation that you can find for co-living is you'll see in some cities, you're allowed to have five unrelated people or, or less in a property or three or seven or eight, but like

that that's the one that you would want to look for. But like I said, some states have totally blanket wide said it's cool. Arkansas has a bill right now that's looking like it's going to pass doing the same thing. I saw this week, Texas has one that's proposed. I don't really know the status on that one yet, but then there's certain cities that don't have rules or are favorable as well. But we're seeing this like kind of sweeping movement towards co-living because of that affordability piece. That just is good strategy in my mind, because it's,

You want to sort of go with the trends. And short-term rentals have been great for a lot of people for a long time. But look at the trend, especially in large metro areas. The trend is towards restriction, right? We see this all over the country, red states, blue states, big cities, small cities. If you're in a city, there's a lot more risk of regulation right now. I agree with you. Vacation area is still a great place for short-term rentals.

Whereas on the other hand, cities and municipalities, they are looking for ways to create housing. And this is a no cost way, essentially, to create more housing. You don't need any more construction. There's no time in permitting. All they have to do is say that it's allowed.

And that's happening. It's similar in my mind to the idea that we've talked about a bunch on the show in the last couple of weeks of upzoning or basically cities allowing more ADUs or taking away parking requirements to add additional units. They're just trying to look for ways to create more housing. And so you're sort of going with this co-living model, I assume. You're sort of going with the flow. You're just latching on to pop

So since we did kind of buckle down and really think about our systems and processes and implementing those certain things to reduce tension and all of that, I think it's important for us to think about how we're going to do that.

Honestly, it was not bad. I think that of the strategies that we've talked about today, this is the easiest one to do remotely, which sounds kind of crazy. It sounds like, oh, you have five people, six, seven people in this house. Managing it when you don't live there, that's got to be super hard.

But there's actually a lot of things that you can lean on the current residents for that make it a lot easier. So for example, I treat all of my properties like I'm managing them remotely. And if you read the book, that's exactly how it's set up. Things like property tours. So now that I'm at the second house hack, when somebody wants to move into the first one,

well, am I going to drive over there and give them a tour? Uh, well I did it first and then it got really annoying. So what we started implementing afterwards was a resident led tours. So, so now if someone's interested, I just emailed the whole house. Like I said, you can lean on them for a lot of things really. Um,

I just emailed the whole house. Hey, this guy or gal wants to tour. If they sign a lease and move in, we'll give you 50 bucks off next month's rent. Right. So it kind of aligns your your your incentive here. Yeah. So that now they're kind of a salesperson. They're not being mopey and walking around and whatever. It's like, no, no, this place is awesome. You know, it has all these great things. We do these community events. They take care of the supplies, yada, yada.

So we can lean on them for that and they just give the tour for us. So that was pretty easy. I mean, even just small stuff like, you know, the door lock hub that's in the house, like if it comes unplugged, I just email them and see who wants to plug it back in. Like someone's available because there's so many people. Right. So it's actually not too bad to do remotely. So what happened next for you? You're two units into this, right? You're still working full time, I assume. Correct.

Okay. Then how did, how did you scale up from there? You've done two, were you all in on co-living then, or did you ever start thinking about other tactics and strategies? Yeah, definitely didn't start diving into any other strategies. Um, one of my favorite quotes is from, uh, is from Andrew Carnegie and, you know, he's like the steel tycoon from the industrial revolution, you know, late 1800s kind of thing.

And he's talking about basically anti, like he's against diversification. He was like, you know, I think if you want to get really wealthy and this isn't an exact quote, but it's something like this. He's like, you need to put all of your eggs in one basket and just watch that basket like a hawk. So that was kind of our approach was,

Hey, we have two of these and we're doing pretty good. Let's really dive in on this and just become the expert at this strategy. And that's how we could get wealthy rather than doing a little bit of this and a little bit of short term and a little bit of bonds and a little bit of whatever. We're just going really deep. So that was kind of the strategy. So from there...

We had experience at this point, right? We had the knowledge and we'd had applied that knowledge and had success with it. So at that point we did start bringing in partners that we, that would, you know, help fund things. And we both have some decision-making power and all of that, but I'm doing more of the day-to-day type work. And that's how we have scaled from there. So once we, once we started doing that and started producing significant cashflow, that's when I was able to

and, you know, lose half of our household income, but we were already pretty frugal anyway, and we were saving half of our income to purchase the next house hack all the time. So we lost that, but now we had partners that were able to help fund our future acquisitions. So that's kind of what helped clarify

pushed me out of the W-2. Okay. How long did that take? Like how many years were you doing this before you quit your job? Honestly, it wasn't long. I surprised myself. It was like two and a half years, I think. Oh, wow. Okay. That's really quick. Just out of curiosity, you have this very impressive degree. Like, did you ever have pause about giving that up?

So let me say that's definitely what my parents thought. My parents were like, dude, you went to school for five years and then two years later, you know, three years later, you're going to throw it away. I wouldn't be where I am right now if I hadn't gone through all that experience and done the work to get that degree and learn really learn how to solve problems and learn how to think creatively and all of that. So it was totally useful in getting me to this point.

But unless we went bankrupt and lost everything and I had to go have some active W-2 income again, that's the only reason I would go back. I mean, I did leave the door open. So I guess I will say that. I gave my work a four-month...

heads up because it's like a very specialized skill set. Like it is difficult to find someone to refill that. So give them a huge heads up and they're like, please come back. Please, you know, please come back if this doesn't work, you know, fingers crossed. And I'm like, you know, thanks. But no, it wasn't really, it's not on the table. All right, great. Yeah. I mean, I think it's important because a lot of people get into real estate with this aspiration to quit their job, to do this full time, which is great.

But I also think there's something hard about that. Like a lot of people put a lot of effort and years into a career. They get training. They have friends in that career. You know, it's not always as simple as people think it is. But I'm glad for you that it was kind of just like a clean break and you had this like clarity of purpose in mind that hopefully made it easier for you to quit.

So, Bill, you brought on partners, you scaled up. Let me just get a snapshot here. Like, how many properties are you managing now? And would you be able to tell us, like, what your average cash on cash return is for a property? Yeah. So six properties, which is like 40, a little bit over 40 rooms.

Um, and then as far as cashflow and cash on cash and all that. So, right. It depends on if you house hack or not. Right. So one of your house hack, you put such little down, your cash on cash is like stupid. It's like 50%. It's like 60. It's ridiculous. Yeah. Um, but if you're buying non-owner occupied, like we're doing now with 20, 25% down, uh,

We're getting around like 12%, 12 to 14% cash on cash. That's excellent. Yeah, I mean, depends on the market, but that's around $2,000 a month in cash flow is kind of what that equates to for us. Wow, amazing. Yeah, I think comparatively, you know, it's different for everyone. But if you just go out and buy a property on the MLS right now, in most cities, you're hopefully breaking even. There's places in the Midwest and Southeast, maybe you're getting...

four or 5% cash on cash return on a long-term rental. Short-term rentals, the upside is a little bit higher, but I mean, 12% is better than most long-term rentals that you can get in most places. So that is very compelling. Well, and I'll say too, we're in more of an appreciation city as well, like an appreciation market.

I mean, there are ones that are even further than us. But I mean, there are markets where you could cash flow even more. But of course, there's tradeoffs with that. So kind of my thinking was if we can buy in an appreciation market, right, because that's the long term wealth generator, right? If we can buy in an appreciation market and then find a way to force cash flow, then that's the sweet spot, right? Like that's a double edged sword that gives us both things. So that was kind of the goal.

Got it. Yeah, I mean, that sounds like you nailed that goal for sure. Being in a good market and able to generate that really solid cash flow. I want to learn how to do this. And I'm sure there are a lot of people listening who hear about this 12% return and also want to learn how to employ this co-living model. I'm going to ask you more about that, but we do have to take a quick break. We'll be right back.

If Miller's co-living strategy sounds appealing to you, you may want to check out his new book. It's called Co-Living Cashflow, A Bigger Pockets Guide, and it's available everywhere books are sold, including Amazon or biggerpockets.com slash co-living. If you buy the book on Amazon, don't forget to leave a review. When rent's late, it's not just annoying. It wrecks your whole month. Your mortgage is still due and it's time for an awkward conversation. With

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Welcome back to the BiggerPockets podcast. I'm here with Miller McSwain. We're talking about how he has created a 12% cash on cash return in an appreciating market.

I want to learn how to do this. Miller, tell us if I've never done this. So genuinely, if I wanted to go out and start doing the co-living model, where should I begin? Yeah, right. So starting with we can start with like property acquisition. It does take a very particular property that really does cut down on our deal flow. So only 10% of the properties that we look at kind of pass the

the feature test, like seeing if it has the right location and then other things like the right parking, the right size, all of that. So it's very limiting. So that is a downside of the strategy, I would say. Okay. See, I already was sort of like, you can buy any single family home and make this work. I was kind of assuming the opposite. Like, oh, you could just, if it's at four or five bedrooms, probably work. So you mentioned parking. What are some, and location, like what are you looking for in location? Yeah.

Yeah. So I will say you could pick up any old property and it'll do better than a long term, but it won't, any old property won't be worth the effort. It's like, yeah, like it'll be better than a long term, but like you have to get pretty significant returns for it to be worth the effort. So what we're looking for in location, right? I think you need to think about the sort of tenant that is in need of a room.

So whenever you think about midterms, you guys have heard about traveling nurses. That's like the classic, classic tenant demographic, right? So in the co-living world, the classic tenant demographic is just like the lower income worker, anyone making anywhere from minimum wage to less than the median in the market. So probably anywhere from like $25,000 a year to like $55,000 or $60,000. Like that's kind of your prime demographic demographic.

And that's because if you're making that much, if you're somewhere in that range and you're renting a studio apartment, you're probably spending more than 30% of your income on rent, which is financial experts. You know, personal finance guys say that you should spend 30% of your income or less on rent. So, for example, the minimum wage type worker that I was talking about, if they're renting a studio like nationwide average, they're spending 70% of their income on their rent.

Which is totally not sustainable. And that's why there's demand for this strategy in the first place. Because there's no room for them to invest, save, even like, you know, buy groceries at that level, you know, hardly. So you need to think about who you're going to rent to. But that's a big group. You could throw some other, you know, types on top, like military. We went to rent to a lot of military guys, you know, just enlisted younger guys and gals coming out of boot camp and all that. Students, right? I mean, that's a classic example of co-living. That's like one of the original ones, at least over the last 30, 40, 50 years.

students, interns, those kinds of folks are the ones who are probably going to want to rent a room. So when you're looking for location,

You want to be close to where they work or where they hang out. That can kind of help you narrow down a little bit. And then once you do that, you do need to really look at parking. A way that you can determine how many parking spots you need, you can look at the walk score for a property. So like if you look on – you can go to walkscore.com or you can look on like a Zillow listing. They'll have it listed there. And it just kind of tells you like a score for how great the public transport is. Yeah.

And anyway, in the book, we have like a table for, oh, if the score is this, you need 50% of the people to have parking, you know, 100%, whatever. Nice. That's super helpful. Yeah. So it's kind of a good way to estimate it because really you don't want to make the neighborhood angry. Like there's no sense. There's enough properties. You can find one with good parking. Okay.

And then tell me a little bit more about the management. You talked to me a little bit about screening tenants, but is it basically the same as a long-term rental for identifying tenants, listing it? I mean, at least in my naive perspective, it doesn't seem like it would be all that different. Yeah, I mean, all of that's similar with some variations. So on the listing front, I would say,

there are unique services that you'll be listing on. So you'll still be listing on Zillow. Like they officially have like a room for rent section now. So like, again, just trending towards like, this is becoming a real thing. Right. So you'll list there and like Facebook marketplace. And then there's certain rooms, specific sites, like there's roomies and, and, and certain places like that. I guess a special thing that we do on the listing front, a couple of things. One, we always have a YouTube tour for the property and the room listed there. Um,

just because it's a very high volume strategy, right? It's you have to find five, six, seven, you know, residents. So if you can cut down the number of tours, that's fantastic. So a lot of people will watch the YouTube tour and just be comfortable to move in based on that. Otherwise, as far as the screening itself goes, it is similar to a long term rental. We still do credit checks and background checks. You know, that's all pretty standard. But, you know, you do want to make sure that you have quality people moving into the property, especially since they're sharing space.

So the biggest thing that we do is we actually contact the rental references, which, by the way, no one ever does. Yeah. We've had 80 tenants and no one's ever literally zero landlords have ever called me. Really? Zero? Ever. Zero. I'm surprised. I don't get a lot. But yeah, it gets up. Zero is very surprising. Well, because I think a lot of them, you know, might move into another room rental in another city or whatever.

And this city, this strategy is so mom and pop, so not sophisticated. It's maturing right now. So I don't think people are very advanced with it yet. But so we definitely do talk to the rental references to get a gauge on their personality and how they interacted with the landlords or if there were other tenants there.

And what this is kind of special. One thing that we do to incentivize people to provide those rental references is we adjust the security deposit based on the number of positive reviews we're able to get. Whoa, that's a cool idea. So, yeah, it's honestly you could do this with any strategy. I think it should become the new norm, but it's but it's super useful for this one for sure.

So as an example, if somebody provides three rental references and we get in contact and they're like, oh, she was great. Yeah, she lived with some other roommates and she left the place. Great. Awesome. Okay. Well, we're only going to charge her a half month rent of security deposit. So 300 bucks, 400 bucks, you know, something in that range.

Whereas if someone provides zero rental references, it's probably because they were poor tenants, right? Like they behaved poorly. So all of a sudden now we get to the end of the screening process and we're like...

hey, we told you up front, but you had zero references. So now it's two times the monthly rent. Interesting. Again, they just kind of naturally screen themselves out. They're like, I'm going to go find somewhere else then. Right. So that's kind of good kind of screening. Nice. Very cool. And one potential downside or just consideration to the strategy. So I imagine the turnover is pretty high. Is that true? I think it depends on how you run it for sure. The big thing that we do and that I'm trying to emphasize with this co-living model is the community piece of it, right? Like community living, like I said.

So I think that that is a huge lever that helps you increase your retention and

So as an example, some things that we do that are pretty easy and cheap, and it sounds like it would be a management headache, but it's really not. We'll host certain events for the house. So we'll do like a pizza night, for example, pay $50 to get pizza delivered. It's done totally remotely. Like I don't have to show up. And what that does is it just provides that spark for people in the house to be able to meet. Because naturally what happens is somebody moves into the house. They go to the kitchen every day and heat up their food. And then they go back to their room. And like, that's it.

that's it, right? Like they're not interacting with anyone at all. But all of a sudden you provide this little spark or this opportunity for them to meet each other. If one person makes a friend at this event that we do, they're probably going to stay six months longer, you know, 10 months longer, whatever, just because they now have one friend. And all we did was pay 50 bucks. And now we've reduced our turnover and increased the retention. So,

Yeah, totally worth it. Things like that are like the new one that we're trying is like a bowling night. So we'll pay for them to go bowling again, like 50 bucks. So totally worth it. Yeah. I'm a weirdly good bowler next time. We're going. All right. Well, that's that's that's great. I think that that makes a lot of sense. And it just shows that that sort of level of intention and care about your tenants and wanting to provide a positive experience creates that mutual benefit. Right. It works for you. It works for them. That's a great situation.

Anything else that you think the audience should know about how to get started or to manage sort of the co-living model? I'm sure you put it all in the book, but any last key things that I haven't asked about yet? Yeah, I mean, I guess the only the last thing that I'll say is along the lines of being able to manage it remotely.

With this strategy, you do have extra eyes that are on the property that are useful. So for example, the existing residence, if people are partying or having their girlfriends over or boyfriends over or whatever, you're probably going to hear about it. Yeah. When your cleaner goes over there, if there's issues, you're probably going to hear about it. We have a handyman go through on a quarterly basis to do routine things as well as record an entire video of the property, including inside the rooms. So we're going to get eyes on it then too. So again, it's

honestly easier to manage remotely, I think, than a long-term. Like how often do you get eyes on a long-term rental, like on the inside? You see it three years later, right? We have eyes, yeah, every month with a cleaner. So that's a big benefit. All right. Well, Miller, thank you so much for sharing this with us. It sounds, you know, I'm getting a little bit of FOMO. I think this sounds like a great strategy, 12% cash on cash returns. And although it is more work, which you're very candid and honest about, that

that's a decision that all of you listening can make. You can find cash flow. This is a perfect example if you're willing to take on a little bit of extra work. So Miller, thanks again for sharing all this with us today. Cool. Thanks for having me. Thanks again to Miller for joining us today. If you want to order his new book, which is called

Co-Living Cashflow. It's available everywhere where books are sold, including on Amazon or at biggerpockets.com slash co-living. If you buy the book on Amazon, please make sure to leave a review. I'm sure it will help Miller out tremendously. Thank you all so much for listening. We'll see you next time.

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