Ian Ugarte Small is the New Big

Success comes at a price. If you’re time poor, you need to learn to create it. Not enough capital, find it. Need cashflow, make it.

I turned 1 into a HMO then turned it back. Wasn’t suitable.
Current ones are all sublease.
I manage it with my gf. Once we hit $150k we will hire our own manager between myself and another friend.
Setup costs vary.
How many depends on what you look for. Some make $50k, some $15k. Depends if you know what you’re doing.
Yes on top of day job and cashflow from owned investments + starting to develop (looking).
Sounds great, reality is different. Some days I question why I bother, other days I can’t stop smiling with satisfaction.

 

Thanks Gocki, what did you find challenging about executing it if you dont mind sharing? Was it lack of time? Too much effort? Not enough confidence? Numbers not adding up?

 

Could you find people on airtasker to manage this. Sounds like you have all your subleased where you live making it possible to manage it.

 

The main route people use if they don't have a property/ies they can turn into HMOs is actually then the "normal" way you could do it is find properties to rent from owners then subletting rooms. Few owners are open to that. Otherwise you could try JVs but you have to be open to that.

 

Possible. There is reason to my madness.
You can figure it out as you carve out your own path.

They are close together. That is by design, not by chance.

 

Thanks Gockie!

 

Anybody going to the Sydney event this weekend?

 

I received an email ad for Ian Ugarte's course, hosted by Zadel Property. It said...

"Approximately 60 - 80% of people looking for rental accommodation are either singles or couples, BUT 80% of the rental marketplace is 3, 4, or 5 bedroom houses".

I did some calcs. Out of all properties advertised for rent at some point in the month of July 2018 only about 55% of them had 3 or more bedrooms and only 58% were houses.

Looking at nearly 4 years of rental data, around 3 million listings, I found that only 49.8% were houses with 3, 4 or 5 bedrooms.

I couldn't find any data available on the family structure of those "looking for rental accommodation". I suspect this data is fabricated, but that's just my opinion.

I calculated average vacancy rates for houses vs units and found them to be very similar. This confirms there is no chronic shortage of smaller sized accommodation as their marketing suggests.

There was not a single mention in their marketing of how this "multiple occupancy" strategy affects annual vacancy rates. My guess is that vacancies will rise the more people you try to cram into the one dwelling - regardless of how many new toilets you provide. (I believe Ian Ugarte used to be a plumber).

 

Does anyone think it's viable to do this as a Social Enterprise? Homelessness amongst the elderly is horrible, as are the conditions in aged care homes. I'm thinking it might be possible for an experienced investor to develop and manage a multiple occupancy property and plough all profits back into the system and grow from there. For instance, I'd be willing to live in a unit as my own home and draw an average income from property management, without needing much profits, just enough to make the project sustainable, as I don't need much to live on, really. Just a home and a job. Or is this a crazy idea?

 

The bottom line and truth of the matter is, even bargain basement rent hunters want their privacy - that means no shared bathrooms, no shared kitchens and no shared hallways/entrances.

A granny flat meets that criteria, even an attached one...but rooms in a share house?, don't think so.

The utopia portrayed up by these guys where complete strangers (want to) sit around a fireplace at night and swap stories and get along like best friends is probably BS. One rotten egg and the common areas are a no go zone.

People want their privacy, even people who are 'sociable' - full stop.

 

I really honestly love this idea. A viable way for us to do something like that. At the moment I have two negatively geared properties, both have retired occupants, I wish they had their own homes.

 

Yes it is-many, if not most, rooming houses in Inner Melbourne have a charity angle-Boroondara Council for instance give out yearly grants to rooming houses because of their low socio-economic status. The VIC state government also gives out land tax exemptions to certain rooming houses for the same reason.

 

I bought a house that was previously used as a rooming house. It was trashed. I think the problem (especially in low socio economic areas, which is where mine is) that you are going to get the worst of the worst tenants, usually through charity/housing organisations. I don't know how successful you would be at physically getting the rent out of them either. I saw signs up in the house I bought that said "Your rent is late, I will be here tomorrow to get it" etc. I think it would be more stressful than a regular job managing these. I think people who are decent and will be good tenants value their space and privacy and would not want to be mixing with the types your likely to attract. Having said that, I have another IP with a tenant as the head tenant and she shares with two other people and I have never had an issue. House is always clean, never any damage and rent is paid on time.

 

Looking at it the wrong way.

There's an assumption that people who rent by the room are broke for some reason.
It's about creating affordable/flexible housing. Affordable can still be $400+/wk in lots of areas.

This is a full-time business, as would be any profitable enterprise. I meet A LOT of people who think they can set one or a few up with minimal effort and quit their job. Doesn't work this way. They either give up from burn-out, or to try and stop hemorrhaging cash. It makes very good money when done right. However to do it right, you would need to be or become the sort of person that would make very good money doing anything else also.

As for doing it for social-enterprise. My experiences have been negative. I set 1 of my own houses up this way in 2016.

1. House got absolutely trashed. Was picking cigarette butts from the bedroom carpet after evicting a tenant. Someone had peed on the couch. Boundary fence had to be replaced do to a fight breaking out in the backyard.
2. Heavily pregnant woman who had escaped an abusive relationship. Well, turns out she 'still loves him'. She called him. He came by, put other tenants at risk.
3. Multiple X more difficult to manage. Was picking put garbage from the vases around the house for hours. Threw some out entirely.
4. Actually was loosing money on a weekly basis even fully tenanted, I just wanted to do my part.
5. My latest share house was last used for social enterprise. It had graffiti on the walls, I covered it up with artwork.

The stories of the civil divorced older lady who didn't get a chance. My aunt would fall into that category. She wouldn't room share. She wants her own place, not a shared-room.

I'll leave low-end accommodation to charities who rely on donations/government to subsidize their causes.

 

Hello is this course $5000 how long is the course I realise it's a old thread.

 

You will find if you subscribe to his email list, that he will post regular live webinars-usually within the webinars he gives offers of the course at a much cheaper price (a grand or two off).
As for the actual length of the course-I think it is at your own pace=you basically get access to all his materials & community of other 'alumni'. He does offer fast-paced weekend workshops as another product, but you have to purchase the base level course to begin with.
Thank you.

 

Did you do it Henry

 

No actually I didn't, but I have met Ian, watched his webinar, met people who had done his course & receive his marketing emails.
My thoughts are:

• Rooming houses are a great concept (used to look after one) when done right
• NHG is right that they are definitely more hands on
• They should have a much bigger role to play in Australian real estate future
• The business model of Small Is The New Big is unique in the sense of creating a community & seems to create very loyal followers similar to Steve McKnight's bunch
• I do agree though that some of the figures he uses are dubious to say the least & that combined with the lack of depth in his webinars put me off a little=a couple of grand for I don't know what...
• He is also rather niche with his rooming houses=no students & most rooms having toilets=more upmarket style. I would prefer flexibility.
• You can buy pre-built rooming houses off him if you end up reading through all the education & going 'too hard'

 

Thank you Henry I will be giving it a real crack I am either doing his course or Melissa Russo is another who has done well I just need to figure out the best areas and how to secure the leases.

 

No worries. Let us know how you get on.