Revealing the Profit (or Loss) of my Startup: HouseHack.

was my real estate startup a scam that's

a question that people have and today we

have the answer the first two times that

we fundraised we had no operations we

just had an idea well as of today we've

been operating for

175 days we generated approximately over

$4 million in Gross profits that's about

$22.8 th000 per day and just $24 million

of real estate that's because we haven't

even fully deployed the capital that we

have invested in the company yet now the

question is should we stop with the real

estate that we have Acquired and the

value we have created or do we keep

going in this video you're going to see

the vision we're going to show you how

not only are we opening up the

opportunity to be a part of this real

estate investment again but we're

showing you the path forward the path

for how we can turn this into multiple

Cycles rather than just a oneoff keep in

mind even if we were to stop today and

we completed Just One Mini fun cycle

with our company we'd be net profitable

and we've only been operating for

175 days in this video you're going to

learn a lot more this morning somebody

came to me and said Kevin what's house

hack that was on our Market open live

stream and I'm

like wow I think I need to remind

everybody that I have a real estate

startup and officially starting today we

are fundraising from accredited

investors and now we'll explain what all

of that means but first I think it's

worth you knowing what the heck house

hack does and quite frankly even if

you're not interested in being an

investor you're going to learn a lot in

this video about how the real estate

investing World works so that way you

can be a little bit more aware when

you're looking at real estate

Investments how you want to diversify

your money so we'll talk about a lot

let's get right into it so what is house

Haack briefly house Haack is a company

that makes money from buying fixed

uppers distressed properties

foreclosures or otherwise mismanaged

houses or apartment buildings we then

renovate them add value add accessory

dwelling units we improve the management

and we fully rent out the properties we

do all the property management inh house

and the renovations obviously we work

with our own contractors in-house or

Outsource then once the products the

properties are rented out we call that

being stabilized we bundle the

properties up and we sell slices to

institutions or on Exchange or people

who want to defer taxes and maybe invest

in our mini funds little pies of real

estate so to speak through a 1031

exchange which we'll talk about those

details in the future but the point is

our company makes more money the better

deals we get basically the cheaper we

can get the ingredients means we can

make more money because we're going to

sell those properties as pies for fair

market value that'll be independently

verified we're not trying to make money

by selling properties for more than

they're worth we just buy them for a lot

less than they're worth stabilize them

and basically roll them now the

difference between this and flipping is

we retain management and we're making

sure that these pies are stable for the

long term it's not like we're trying to

just get rid of these properties we're

still involved for the long term and

what I found is that as a licensed real

estate broker former licensed contractor

mortgage loan originator currently

licensed finra CR7 24 27 14 63 and 65 I

get finance and one of the biggest

things that I've learned over the last

14 years of doing this is real estate

agents dislike Wall Street Finance folks

and Wall Street Finance folks dislike

real estate folks this is possibly

because of the way people are

compensated real estate agents make

money through commissions and Selling

Houses fund managers make money by

allocating money to funds and so fund

managers don't make money if somebody

takes that money invest it into real

estate directly real estate agents make

money real estate agents don't make

money if somebody takes their money

throws it into a fun right so you've got

a little bit of this tension between

these industries in my opinion that

tension has created massively huge

missed profitability opportunities both

for investors and quite frankly

companies like house and house we want

to take that money and basically make a

lot of money for our investors and of

course our company our employees our

team the people working with the company

that's the point that's the point of

capitalism to find in inefficiency and

then solve the inefficiency providing

value to customers and making money so

how do we do that well first we got to

stop doing what everybody else has done

and struggled with so let's think about

that for a moment in real estate there

are few ways you can make money you can

buy real estate yourself this is great

and I actually encourage people buy real

estate I think this is great it just

comes with headaches and it's not right

for everyone acquiring real estate it

doesn't give you diversification unless

you can really manage properties in

multiple different areas you have to

work with agents and lenders renovate

the real estate work with contractors

deal with City permits deal with the

challenges that come with renting real

estate dealing with property managers or

doing that yourself and learning

Property Management dealing with tenants

and repairs and quite frankly tenants

and toilets and delinquencies or

hopefully not delinquencies but the

point is that's a lot to do or you could

buy a property and then just quickly

flip it for a profit but you also have a

lot of selling costs that can eat away

your profits often 7 to 10% sure you

could represent yourself as an agent and

try to save some money but let's be real

most people end up spending 4 to 6% on

commissions 1% on escro title fees

another 3 to 4% on repairs during escrow

that's typical of almost every

transaction that I've done with clients

it's just very normal now again you

don't have to flip you could hold on to

the properties and manage them yourself

and then the goal is to refinance but

rates have to be appropriate you're

still dealing with lenders and

qualifying so they still work involved

this doesn't even mention finding a good

deal and actually negotiating a good

deal and valuing the real estate

correctly it's a pain in the butt I know

I do it every day I just happen to like

it now option number three is you can

invest in some kind of fund the problem

though with funds is they're often

bloated with expensive acquisition fees

platform fees disposition fees

renovation fees Asset Management fees

Annual fees to basically manage the

manager add to that waterfalls like 20

is sometimes 35% of your appreciation

going away bu a $100,000 property it's

worth 200,000 in the future let's say

there's a 100,000 of gains well you

might have to give away up to 35% of

that to the promoter of the fund in a

syndication or a partnership and then

you have to deal with the K1 on your tax

return which is a pain in the butt it's

not that straightforward it all creates

work and effort and quite frankly lots

of fees the other option is maybe you

invest in a re or a DST but you have to

be careful about bloated book values and

fees here too look at Invitation Homes

or American homes for rent you're paying

$2 to

$230 sometimes even more per $1 of real

estate they have on their books that's

because REITs often sell for two times

Book value on top of that with American

homes and specifically you're spending

another about 11.8% of your rent on

operating

expenses plus another property expenses

line which presumably includes things

like taxes Insurance uh utilities

reserves whatever but you know who knows

what other kind of Opex is in there it's

not broken out at least I couldn't

quickly find it and obviously verify

this yourself this video is not to bag

on other opportunities it's just to say

like it's complicated the the choices

aren't that easy and we think that

creates an opportunity for us now I'll

explain that but first you might be then

thinking to yourself what about like

Vanguard like a Vanguard real estate

fund sure but what does Vanguard do well

Vanguard charges you a fee to allocate

you to different home builders and reats

so you get the same problem with just

the Vanguard fee on top okay what about

like fundrise or roof stock or arrived

homes okay well let's think about those

so roofstock they tell you their

advisory fee is 15 basis points so 0.15

but then they sneak in another 85% for

management and then they suggest

additional renovation and distribution

fees you got to read their documents

yourself obviously but these are things

to consider then there's arrived homes

let's just look at some of the arrived

homes documents to look at at their

latest filing this was on like a $7.8

million offering they did so we pay our

manager 2% of the gross proceeds okay

got it so if you raise let's just make

the math easy if you raise $8 million 2%

is

$160,000 going to the manager okay maybe

that's not that bad but then they charge

another 2% if you sell your shares

within the first six to 12 months so

that doubles that to potentially

$320,000 you know presuming everybody

were to sell within 6 to 12 months but

maybe you don't do that and wave the

Redemption fee over time fine but take a

look at some of these other ones what

fees and expenses do you pay your

manager or any of its Affiliates

reimbursements of offering acquisition

origination fees Asset Management fees

broker fees financing fees other

operating expenses Property Management

fees special servicing expenses auditing

valuation fees asset disposition

fees that's a lot but wait wait are some

of these actually broken down oh yes yes

indeed they are so here's the 2% of

gross offering proceeds for outof pocket

expenses for the manager receiving that

okay but then wait a minute what's this

with respect to our Equity Investments

we will pay up to 3.5% of the total

purchase price for any property in which

we make an equity investment in other

words the the fund is going to as a

sponsor fee all of these sourcing fees

will be paid to our sponsor will pay

somewhere between 2 and 1/2 to

32% on top of the manager fee as a

sponsor fee to the fund manager okay

wait so it feels like we're paying the

manager twice here but okay this is

there for maybe I'm just

misunderstanding it but then they're

also going to charge a quarterly asset

management fee annualized to the rate of

1% and it doesn't even end there because

then they're going to pay a disposition

fee of

6% of the gross proceeds the manager

will be entitled to retain the

difference between fees paid to the

broker and the 6% charged to the company

so in other words if they're their own

broker they're just purposely trying to

keep their their own 6% as a dis as a

liquidation fee or what they're more

likely to do is pay a lower commission

to their agents so let's say they pay a

total of a 3% commission one and a half

and one and a half because you know

they're selling a portfolio and they're

negotiating a deal there they're

basically pay charging a 3% liquidation

fee ouch I just want to be very clear

about this is that's what's out there

and so at house hack we're looking at

this going this is ridiculous I'm not

here to bag on any one company because

they're all doing it they're all doing

this with the fees and it's nuts so what

is house hack do how does house hack

make money and how is house hack

different it's very simple house hack

makes money by buying great deals and

doing a great job managing them

hopefully we'll manage these properties

forever we we we're not trying to like

turn real estate and constantly sell it

in our in our mini funds over it's not

what we're trying to do because we don't

make money on acquisition or disposition

we make money by getting a good deal

house hack buys a good deal and then we

roll it to our mini funds and we manage

it ideally forever that way we have

stable assets and we make money on the

difference we manage our stuff in housee

so we can scale our own team control

quality and minimize costs so let me

give you an example on how this works if

let's say we buy a house which we did uh

and we're all in on it for $500,000

here's an example of one we're all in

for $500,000 the fair market value is

$600,000 so we sell it as part of a

bundle for

$600,000 so we're not selling it for

more than market value we just got a

good deal on it now obviously if we got

a bad deal we'd still be selling it for

600k we' just take a loss that's a risk

right but our goal is is to buy

properties for less than they're worth

here's a building we bought for $15.7

million it was mismanaged we believe the

debt was coming due so there was a lot

of pressure and we negotiated what we

think is a win-win deal the sellers got

a cash deal they're great people they

did a great job on their development but

the market is what the market is and so

we think we got a deal for $15.7 million

that once stabilized and managed the way

we manage buildings could probably sell

for $18 million okay well that's $2.3

million in what we call the wedge that's

how house hack makes money the more we

can do the wedges the better let me

phrase that a little bit differently

think about mini funds so we buy homes

we stabilize them we rent them out think

about mini funds as like little pies we

buy all the ingredients that's getting

everything ready and then we roll that

pie or sell it to a mini fund which we

manage and somebody can buy little

slices of the pie so you get a Delicious

Pie that offers you no fees

diversification predictable cash flow

appreciation because the people who own

the pies get appreciation

diversification cash flow the benefits

of no fees Asset Management fees

disposition fees a you know whatever

renovation fees all that nonsense we're

not charging all that crap that's that's

what we're doing we're creating what we

think is a really good product we're

creating the pie house is the pie maker

we make the pie and then our job is to

sell the pie we make the pie we sell the

pie it's simple if we can get the pie

ingredients really cheaply we make more

money that's how house makes money and

again that's because we're negotiating

really good deals that's hard for people

to do but we think we can do it at scale

obviously there's risk in all of this

none of this could work out at scale you

know the first time we fund raised all

of this was an idea we weren't operating

today we're operating we've got 12

excellent employees we're doing a

phenomenal job in my opinion but now I'm

biased so you have to conduct your own

due diligence read our perspectives

understand the risks but consider this

so we get Pi ingredients at a really

really good negotiated rate we're not

flipping on the market so we're not

paying crazy selling costs we're

actually retaining management of these

buildings so we're vested in the

long-term quality of what we're buying

because we got to manage it so we think

we're putting together a really

delicious pie and people can buy slices

of this pie now who would buy P slices

the pie well simple potentially anybody

who just wants to swipe up on Robin Hood

and diversify into real estate through a

publicly listed entity or somebody who

wants to 1031 imagine you own three

rental properties and you're like I'm

done I just want to diversify I want to

defer taxes I'm going to sell my

portfolio and I've got $2 million but if

I touch that money I have to pay say 40%

in taxes so all of a sudden you're down

down to $1.2 million well that sucks

well what if you could take that $2

million and put it into one of our mini

funds which you can email us at IR house

act.com now what happens well you have

the full $2 million in there and you're

deferring taxes now obviously talk to

your CPA but see we're creating a really

delicious pie for people with a need

people with a need who want to diversify

on the public market people who want to

1031 into this Delicious Pie uh family

offices Banks Goldman Sachs Morgan

Stanley JP Morgan we have a relationship

with JP Morgan wealth managers hedge

funds Pension funds you name it so many

funds they're not just going to be one

entity we have many different flavors of

these pies for people to invest in and

since we don't charge a fee on our pie

maybe wealth managers add their own fee

to it and sell it to their clients I I

don't know that's an option uh but again

we're not charging fees on those pies

because we just want Delicious Pies that

people love like in and out right it's

it's a The Price is Right and it's great

quality it's simple and so where do we

make the money again buying the

ingredients cheaply and then we sell for

fair market value based on valuations of

what other things are selling for in the

neighborhood that's simple and so again

we buy wedge deals we buy the

ingredients inexpensively and we sell

Delicious Pie that's our company the

more pie we can sell and the more

earnings per share we could generate the

greater the valuation for house hack

house hack is the company that does the

management the acquisition the

negotiation the renovations house hack

deals with all the headache so house

hack is a service business that makes

money and will probably be valued based

on how well it handles all of these pain

points in real estate we are also buying

assets where we think there's little

competition you know we play a bigger

game than mom and pops but we're not as

big as a Blackstone that's going for you

know a 500 or1 billion do skyscraper 500

million to1 billion skyscraper right so

we think the opportunity are really

endless for us and timing frankly

couldn't be better multif family loan

defaults just skyrocketed per the Wall

Street Journal we went from 4% defaults

in multif family in January 2023 to 9%

that means almost one out of every 10

multif family buildings is in

default that is an over 22% increase one

in three multifam loans approximately

are late on their loan yeah see the

opportunity delicious

so okay so again that's what house hack

is and how can you invest well you have

to be an accredited investor the minimum

investment amount is

$40,000 and if you invest $100,000 you

get warrants the warrants will be

available uh it's for call so that's

when they're due as early as 2026 which

is nice because it basically gives you

at minimum 18 months uh where you could

decide in 18 months if you want to

invest more but if you invest 100K you

get 50% of your investment in warrants

so if you invest 100K you'd get $50,000

in value in warrants at the current

share price to buy more shares 18 months

down the road or more and you don't have

to it's sort of a free option but the

minimum investment is $40,000 and if you

invest $100,000 you get warrants it's

very simple the share price is $2 per

share also very simple now it's

important to remember what an a credited

investor is and that this is a regular D

offering which means it's only available

to accredited investors we had a non-

accredited round last year if you didn't

invest in the non- accredited round

maybe there'll be another one in the

future but I can't guarantee that at

this point when I talk regulation D it's

very important that you remember this

means there's a PPM private placement

memorandum this is called a perspectus

basically it's important to read the

risk factors remember I've just gone

through problems in real estate I've

gone through how we think we can solve

them but you have to remember even

though I have a back CR in real estate

we haven't done many funds before we are

in talks with wealth managers who are

like this is a great idea please bring

us these products we're in talk with the

NASDAQ New York Stock Exchange what

these these are all great things but

none of those guarantee that the company

will be a success in fact if you invest

in the company you could lose all your

money that's the nature of a startup

investment this is a startup so I want

to be very clear and I you know anything

we're talking about here can change and

evolve when we started this company we

made it very clear that goal is to

acquire real estate and then

strategically and opportunistically sell

that real estate but we hadn't fully

formulated yet exactly how we're going

to do that now we think not only do we

have the vision but we've got the

operation already in the works on

Acquisitions rentals Property Management

Renovations this is going great and

we're in a position where we think we're

getting pretty close to launching our

first mini fund which could be a

publicly listed entity but then again

that might be subject to investment

bankers or maybe a private fund is like

Kevin don't forget doing that give us

that product we want that product so we

can put our fee on it who knows I I

don't know there are so many things that

are unknown I just want to be very clear

please please please read the PPM

understand the risks involved in

investing in this company so that way

when you hear me say hey these Shares

are selling for $2 and I think you know

my goal and and I'm hanging my

reputation on the success of this

company is to grow these shares

to120 per share or more I can't promise

or guarantee that it's I don't even

calling it a projection that's my hope

it's my vision I think so far we've been

executing phenomenally well but always

remember investing in startups is risky

so read that PPM very carefully it's not

something where I could give you a

summary of it either because legally

you're supposed to read all of it so

just keep that in mind uh I can't even

highlight it for you everybody always

liked when I used to go through bills

and I highlight things and the SEC is

like you can't highlight any of it I'm

like really make it easier for people

gota read the doc so anyway keep keep

that in mind the deadline of this offer

is expected to be June 30th 2024 so

while we could close the offering early

it's probably going to be June 30th 2024

you could always email us with questions

at IR house.com make sure to click the

link down below to go to hous hack.

invest ready.com to get your invest

ready letter remember you have to be an

accredited investor to invest I'll

explain that in a moment uh today we we

have about 30 stabilized units we're

about $29 million uh in and that does

include a chunk that are in construction

so obviously our average cost per door

is going to be way lower we're trying to

get to about a hundred doors here before

we do our first pie so to speak uh there

are plenty of other updates on this

channel that you could watch I think

it's very important to stay tuned to

this Channel or uh our Twitter Channel

where we post these videos and updates

also worth noting that we're in two

states right now about five a little

more than five different cities by the

way more of this information and

spreadsheets will be found at house

hack.com just click the investor tab or

the link below but remember to be an

accredited investor the easiest thing to

do is go to house.in ready.com and get a

letter from them you'll have to show

them your W2s your tax returns or

something to prove that you're an

accredit investor about 18% of people

are accredit investors today and it

looks like the SEC is probably going to

start changing the accredited investor

rules so pay attention to that I think

they're doing that in April I'm not sure

but it's possible that they'll reduce

the amount of accredited investors from

like 18% of households to like 5 or 10%

which means the income criteria will go

up it'll be harder to be a credit

investor currently you have to as an

individual make

$200,000 or $300,000 as a couple the

other option is having a series 765 or

82 license being a family client of a

family office or having a net worth of

over $1 million outside of your primary

residence now again go to house hack.

invest ready.com to get your letter and

then sign up and follow the steps at

house.com after reading the PPM there

you go our fundraise is live thank you

so much for watching and see you in the

next one not advertise these things that

you told us here I feel like nobody else

knows about this we'll we'll try a

little advertising and see how it goes

congratulations man you have done so

much people love you people look up to

you Kevin pafra there financial analyst

and YouTuber meet Kevin always great to

get your take

even though I'm a licensed financial

adviser licensed real estate broker and

becoming a stock broker this video is

neither personalized Financial nor real

estate advice for you it is not tax

legal or otherwise personalized advice

tailored to you this video provides

generalized perspective information and

commentary any thirdparty content I show

should not be deemed endorsed by me this

video is not and shall never be deemed

reasonably sufficient information for

the purposes of evaluating a security or

investment decision any links or

promoted products or either paid

affiliations or products or services we

may benefit from I also personally

operate an actively managed ETF and hold

long positions in various Securities

mentioned including potential short

positions however I have no relationship

to any issuers nor am I presently acting

as a market maker