a tough update on my startup & mistake... HouseHack.

hey everyone me Kevin here boy oh boy it

is time for an important update because

look people on YouTube like to claim

that they're transparent and they tend

to just be transparent about the good I

try to be transparent about the bad as

well I'm human I make mistakes and I

want to provide some updates here about

my startup

and it's not just going to be the good

we're going to talk about the downsides

as well some risk factors and we're also

going to talk about some strategies to

make sure that we can really maximize

our potential while minimizing our risks

but risks will never go away so let's

talk about those the first and most

important thing and this this isn't a

mistake that has occurred yet or

anything it's just something that's

becoming more and more evident to me on

sort of a daily basis is we need to be

patient in this real estate market now

that doesn't sound very exciting to many

folks because a lot of folks are

regularly sending me emails or DMS or

messaging me and Discord saying hey when

are you gonna buy your first property

hey here's a wedge deal go buy this

property here's a fixer-upper oh it's a

good deal it's this much below market

value and I have to keep telling people

look we're not probably not going to buy

a single thing until at like the

earliest Q2 of 2023 but honestly

probably Q3 Q4 of 2023 like we are going

to be patient and and there's a real

reason for that see in the United States

we have a 30-year fixed rate mortgage

which is the most popular mortgage for

over 90 percent of Home borrowers and

when mortgage rates rise we don't

actually really see the pain for

existing homeowners for a while it's

really not until they lose their jobs

and realize crap in order for me to move

to get a different job in the event I

had to move I have to sell my house well

crap now I'm I'm increasing inventory in

the market like it takes a while for you

to see higher interest rates really

affect the seller Market in America

whereas you look at countries like

Sweden or Australia or New Zealand where

two-thirds of borrowers have variable

rate loans and half of borrowers have to

refinance this year or sell you're going

to see a faster housing crash than you

are in America and this is really

important for when we look at America

because first of all if the Federal

Reserve were to U-turn tomorrow and say

that's it we're dropping rates back to

zero the housing boom in America will

just continue like if that'll be the

bottom right there and we'll just keep

booming right what maybe we'll have seen

a an 8 or 12 percent decline but it

won't be very substantial but the longer

rates stay trending in the direction

that they are the more pricing will come

into our favor it's gotten so much so

and I've been talking about this since

January on the channel That now you've

got companies like Invitation Homes who

have realized this and not only have

they slowed or frozen their home

purchases remember they're a division of

well they're their own company now but

they were started by BlackRock with the

backing of BlackRock they have 85 000

homes they manage about 68 homes per

employee which honestly I think is

pretty sad like one employee could

easily manage two to three times as many

homes with the proper systems but that's

why I'm creating house hack right I

believe with the systems that we have we

can operate substantially leaner and

more efficiently leading to higher

margins and better profits and better

growth for for our investors

now uh but then again Invitation Homes

was created through the merger of many

different companies over the last decade

and when you throw a lot of money at a

problem you tend to get a lot of

inefficiencies uh and so I don't know

that there's necessarily that need to be

very efficient in Invitation Homes even

though their stock is down 28 they

should probably start considering it uh

they are now looking to raise one

billion dollars in a joint venture

partnership to raise more money to go

buy the dip in single family real estate

as the CEO is now saying quote we think

there could be some even better buying

opportunities and that's why they're

waiting right now if we do see the

market change in the way that's

favorable to us we can take advantage of

that that's why they're raising money

now it's the same reason I'm raising

money and you know that that leads a lot

of people to say things like oh Kevin

that means there's going to be a lot of

competition no there won't be look the

homeownership rate during housing

crashes during housing recessions

declines according to the housing the

National Association of Realtors we're

already in a housing recession it's just

a matter of time before we really start

seeing the price declines we've seen six

and a half percent already probably once

we get to march to May of next year

we'll be down about 12 to 15 percent and

then how much further we decline really

is just going to be dependent on the FED

are we going to get a small little

discount are we going to start getting

big Black Friday sales next year right

and this is what we want to be prepared

for but because of that lag I've been

talking about with how much longer it

takes for the job market to really be

affected in America and then once the

job market is affected then we start

seeing the pain of housing via more

people having to dump their homes uh

whereas otherwise they would just stay

put if they could that's when we start

seeing pain see The Economist notes that

a younger individuals who are actually

more likely to move for a different job

they're the ones who have the least

housing equity in fact we expect that a

15 drop in housing prices in America

could destroy over two-thirds of the

equity that home buyers have who've

bought in the last few years now all of

a sudden you're starting to get to the

level where you might very soon once we

have maybe a 20 decline in certain

markets especially like Boise Idaho or

Florida Texas you might start seeing

people with negative equity and that's

when you start getting these potential

short sales now I'm not actually

projecting that we'll have like a short

sale foreclosure crisis but my point of

all this sort of Market background talk

is is just to say that I need to be

extremely patient because remember my

reputation is on the line with househack

like I'm 30 years old I've been doing

real estate for 11 and a half years I

want to keep doing real estate and being

part of the investing community in Wall

Street for the next 40 to 50 years like

I don't see myself stopping me think

about 50 years that's a long time it's

like you know Warren Buffett's what 90

or something now or maybe even older I

don't even know what he is maybe he's

almost 90 I don't know but the point is

if I'm 30 plus 50 that's that's 80 right

hopefully knock on wood I'm still going

uh and I plan to because like this is

just part of my life I I like traveling

to look at real estate you know I I like

getting ready need to buy real estate

and I like buying real estate I like

remodeling real estate I love dealing

with tenants it's great

but the issue is that we face right now

is the potential of being impatient I

mean today you can already as a fund

like what what we have or or a

corporation that's raised a money uh via

a fund you know we've raised uh over 29

million dollars of commitments we'll

talk more about that in just a moment

you know we could buy bulk homes from

home builders today at 15 to 25

discounts depending on how we negotiate

which is really remarkable but why would

I do that now if I expect home prices to

fall 20 and then I could get another 20

discount buying in bulk on top of that

right so I the most important thing that

I found is be patient Market turns

usually take longer than we expect

that's I believe one of the big mistakes

that I made in the stock market uh this

year is I was right to sell what I did

but I bought back in way too early and I

I think that's somewhat uh my

personality is that okay like the pain

happened we were right let's get back in

oh crap nope it's actually still got

another leg down to go right uh that

that is a mistake and that's the kind of

mistake I really don't want to make in

in real estate and I don't expect to the

beautiful thing about real estate though

where you can really minimize the risk

of of these sorts of mistakes is the

following uh oh okay well I'd like to do

a picture certain picture here oh no yep

there's there's that and then let's oh

look at that there we go okay

picture-in-picture on the mobile Studio

works okay all right so what I really

want to do is I want to be in a

situation where if we do get this sort

of Market dip we're not necessarily

trying to be perfect and buy everything

here because the danger of trying to buy

everything right at the bottom is now

you've got to rent out all these

properties and you got to remodel all

these properties right so we really want

to go shopping all around this area

around sort of the bottom and we expect

that sort of bottom in the market to

really last for years and that's really

a change from what we've expected you

know from the pandemic what you got used

to in the pandemic in the pandemic you

really had the Larry Kudlow v-shaped

recovery where the market crashed and

then interest rates were cut to zero and

and housing boomed within two months it

was remarkable I remember on a daily

basis in March and April and you can go

back and look at these videos from 2020

and look at the comment the comments are

brilliant look back at these videos and

we see oh my gosh week after week I'm

like this is weird prices aren't going

down inventory is going down prices are

trending up it's time to buy and so what

did I did when I saw the signals that

were actually at the bottom of the

market is I bought as much as I could

without over extending myself I bought

eight properties myself within the span

of the next three months march to like

August and that was remarkable because I

was buying before the market really

started zooming at the end of 2020 at

the beginning of 2021 and that's what I

want to do as well with house hack now

that recovery was very fast and we were

right to move as quickly as possible

because rates got slashed so quickly but

the longer we just stay at you know fed

funds rate of four and a half percent

and then we pause and we we don't go

down for over a year and then maybe we

go down a quarter of a percent this

could be a years-long process so we have

a lot of time and that means we have to

be very patient with house hack now that

is an opportunity because it gives us

more time to buy the dip with less

competition from first-time home buyers

why because lending standards tighten

when lendering standards tighten and

people have less disposable income

because if you're not already a home

buyer you generally have less equity in

these sorts of situations because you

don't own real estate uh and it's harder

for you to get in lending standards

again or tighter we're going to be able

to buy cash and refinance in the future

and so our goal now is let's raise the

funding that we can over the next year

but we are in no rush to buy real estate

right now the uh beautiful thing about

that is we're operating this company

extremely lean in fact we technically

have nobody on payroll right now now

that doesn't mean we don't have some

expenses we have some tiny expenses but

here's I'll give you a breakdown just in

full transparency as to how this is

working and we'll talk about the good

and bad and everything so uh what we've

got is obviously myself and Lauren we're

not taking any kind of salary but we'll

be compensated with stock based

compensation in the future uh once uh

you know we'll have some kind of stock

based comp plan that's that's very

reasonable probably like Elon Musk ish

really designed to make sure that

investors are getting some kind of uh

very good return knock on wood before we

even get any money or even have the

opportunity to sell after an IPO or

whatever we'll have really strong lock

up so we never want my reputation to be

like oh Kevin's 35 he ipo'd a company

and you know uh he he you know burned

his investors or something like that

I'll never be able to raise money again

uh that would be very very stupid right

we can't do that

uh so uh and of course we've got a board

of directors as well making sure that

everything we do is extremely reasonable

and so the beautiful thing about our

payroll is the following so we've got

myself a Lauren we're we're free with

payroll but again we're we we're going

to have equity in the future uh and then

of course whatever we buy in now we've

got a construction manager uh right now

we're not doing any construction at

house hack and the beautiful thing about

this is so we've got a really great

construction manager I mean phenomenal

we've really got two amazing

construction managers they know my

formula they could go into a house and

remodel it the Kevin rental way and it's

safe it's to code or above code and it's

a great property that we could rent out

easily to a long-term tenant or a

short-term tenant whatever we want to do

to maximize cash flow it's another risk

factor we're seeing by the way right now

is it's a lot of the markets I'm

visiting including where I am now I'm

seeing a large increase in the number of

airbnbs available but not getting rented

this is a red flag a big red flag

probably as as more hotels have

occupancy and more business Travelers

are just using the convenience of a

hotel over dealing with a potential risk

or hassle of an Airbnb because Airbnb

landlords are so generally

non-standardized in the service they

provide anyway those are opportunities

by the way for house hack as well for

improvement so as uh as as our

construction manager and really two

construction managers we've got this

phenomenal uh staff of four people two

managers and and two workers and of

course the managers are working managers

as well it's not like you're just

standing around watching two people

right that'd be crazy but they cost

house hack nothing right now but we have

them they're kind of like ammo in your

in your weapons Satchel ready to go

we're like ready we're ready but they

don't cost us anything we kind of have

them reserved how do we do that well we

do that because I personally have two

rental properties left that's all I've

got I've sold 85 of my properties this

year all at the beginning of the year

the two properties we have is one of

them finally got approved we're going to

turn a three unit apartment building

into six now that's gonna be dope that's

gonna be amazing and I'll show you some

of the progress of that in separate

videos uh then we're going to turn a

single family into two units potentially

three units but we don't have the permit

for the third yet we do have the permit

for the second so we've got six months

of work if not more for those

individuals and the cool thing is I can

really

finesse that because I could say hey

looks like you know we're going to be

buying sooner than expected let's start

subbing out to more contractors rather

than doing stuff ourselves if we need

them to be busy for longer let's do more

ourselves and sub out less I guess we're

painting instead of hiring the painter

right so we have this flexibility with

these projects which are big structural

remodels which actually is really really

cool because house hack pays zero to

have the benefit of these people

eventually coming to House High payroll

and they're already trained or getting

better by the day for house hack like

they're going to be our coordinating

staff for House app we're not going to

do a lot of work ourselves for househag

I want to be clear about that we're

going to be subbing out most things for

househag because when we buy homes we're

going to be buying homes quickly we

can't go do everything I mean if it's

something quick like oh it's all a light

fixture fine you may as well do that

before you try to go sub it out to

somebody else but otherwise most things

will be subbed out in the markets that

we're buying in and people will be

assigned to the different markets that

we're buying it's we're going to be

Diversified and I'm going to be there a

lot in all the different markets can be

a lot of traveling but then so we've got

those four people that basically cost

house hack nothing then we've got a CEO

of really all of my companies which is

great because the other companies mostly

pay for this person uh minus a small

contribution that house hack makes to

their salary and they're phenomenal

because they really uh came into sort of

my life with with like no experience and

what's so great about that is they've

learned to be almost this replica of

Kevin over the last nearly year that

they've been working for me and so now

as they've started working on house I

thinks they do some things better than I

do just because they've taken everything

I do and then they try to improve on it

like they're real self they're a real

self-starter real learner and it's

really great because look there's always

a benefit of having somebody with a lot

of experience but then you also want

people with almost no experience so that

way you could kind of teach them to do

things your way and then and then work

with you on learning and perfecting

those really incredible so what's

awesome is uh you know I've got multiple

companies I've got uh and registered

investment advising company the

education company that's that's YouTube

and courses uh link down below and then

of course we've got house hack and so

they can spread themselves over all of

those and if let's say uh you know my

education company and the register

investment advising company those pay

most of the salaries and it's nominal

what house hack has to pay so it's

really really great uh then we've got a

uh two contractors at sort of our CFA

staff uh or CFO staff I should say CFO

staff bundle and it's really two for the

price of one a really really phenomenal

CPA staff over 40 years of experience

running a CPA practice second person has

over 20 years of doing investor

relations for a real estate company

extremely detail-oriented like they work

together closely with my CEO and so

we've got a really really great staff

here but they also do work on like my

books or filings for the registered

Investment Company

for for my education company so again

sharing in the cost that's less

basically burn that we have for house

hack it's really really cool because

we're lowering our costs for house hack

to virtually like almost like no burn

which is really really cool because

again myself and Lauren no payroll uh

we're compensated by YouTube uh and and

you know core sales the CEO would be

like you know maybe a third of their

payroll and the same thing for the CFO

folks be a third which is phenomenal

like this is so great

and so then uh and then again the

construction managers are being paid

zero uh in the construction Folks by

house type because they're not working

for house hack right now so really

really incredible system going on now we

did have to uh and then and then we have

a third party uh CMO like a marketing

officer as well but they also work for

all three companies it's so phenomenal

but uh we did unfortunately have to uh

let one oh and they're only the CMOS

compensation the only compensation we're

expecting them to get is some a stock

based comp so they're not even costing

us payroll now in the future like post

IPO that'll be a cost but I mean it it'd

be so worth it uh for the company anyway

we did have to let one person go and uh

you know I'd like to be I really believe

in the phrase uh you know higher slow

Fire fast you know unfortunately I'm

just going to give you a few examples of

really what it takes to be let go

um if when I hire you on day one I give

you a list and I tell you look the most

important thing to do do is make sure

these 20 bills are paid that is your one

responsibility I don't care what you

have to do I don't care if you have to

climb Mount Everest you make sure those

bills are paid because if they're not

you mess up my credit score you mess up

my credit score now it makes it harder

for me to personally guarantee real

estate and that creates problems and so

this is a you know these expectations

are very very clear and unfortunately

there are just sometimes people who you

might whom you might assign to a task

like hey your task is to create a new

receipt system to make sure we're we're

like perfectly ready for an audit

because at some point in the future

there's always going to be an audit in

fact when we go through the reggae

processor they're going to be Audits and

that's good because it's good for

investor transparency but you have to

actually be prepared for those and it's

easier to prepare for audits when you

actually deal with the receipts as you

get your receipts rather than trying to

go find them all after the fact that's

terrible right because we're like hey

why don't you since you're in charge of

of the receipt system and bills why

don't you make sure you've got very

strong system going on uh and uh and let

us know how it is in a week from now and

then a week later it's like how's your

receipt system going oh I asked the

other person to send me some receipts

but they never did like dude I don't

care what you need to do if you need to

drive over there go get the receipts you

make sure you get the receipts each very

simple and we're giving you the autonomy

like we're not micromanaging we're

giving you the autonomy to figure it out

but this is your job your job is making

sure you figure it out and don't miss

payments on those bills

a week later we get a late on a bill on

one of my personal bills so it doesn't

really affect anything it didn't affect

my credit either which is fine uh but

I'm like what how are we late on a water

bill

and how is your receipt system I still

haven't gotten into your seats what are

you doing buy uh so like like that's not

the kind of person you wanted a company

because then it also sets a bad standard

for your CMO your CEO your CFO now all

of a sudden other people are like what

how how is that person here getting paid

right now that person didn't get

compensated by house hack one dime so

it's not like a cost to house hack which

is good

so uh but but it you know I mean that's

just the nature of having a business

right so really we've got this this

fractional payroll and the Beautiful

Thing is we're going to be putting a lot

of uh the cash that we have into

treasury soon once we get to 25 million

in wires now this is where a little bit

I want to be transparent with some of

the the uh you know things that have

come up

September was really great we launched

uh somewhere around September 10th I

think it was something like that and uh

we raised over a million dollars a day

in commitments uh and now we're at about

29 million in commitments we're almost

at 25 million in wires which is great

because once we unlock the 25 million

wires we're going to be able to uh Park

that money into six to 12 month

treasuries we can't do it until we hit

25 million in wires because that's what

we committed to people in the purchase

or the private placement memorandum at

househack.com

you could read that you can you can join

the investment there and you get founder

shares remember there's there's no

dilution you up front you get you get

founding shares in the company so you

get the same sort of shares that I get

that I'm buying uh I'm almost saying one

million dollars myself and that's going

to grow uh as time goes on here and uh

you know again in the future and this is

the beautiful thing I think about this

company and it's it's all being based on

why I want to make sure early investors

are so well rewarded because my

reputation's on this right I want early

investors to be like oh my gosh I can't

believe I made so much money with Kevin

I wish I invested more so that way when

in the future I'm like hey I got another

you know fund race for house hack or

whatever people like yes like I don't

even need to know why or what just yes

like that's the goal in the future right

so I really have to take care of these

first people and that's why we're doing

founder shares no dilution up front and

uh we'll talk about on non-accredited

investors in just a moment

uh yeah and again the only dilution will

be in the future after IPO uh with

strict lock up some form of stock based

comp but again I say that not like it's

dilutive to today's valuation because

it's not because every company has stock

based comp so you know it's it's it's

like they're two separate things but

anyway I know that that's confusing for

some folks but dilution is really a

toxic thing I mean people people raise

you know things at a billion I think

like boxable as like a two or three

billion dollar valuation but they've

raised like 200 million dollars I'm like

oh my gosh the poor investors who are

going into that are getting deluded so

terribly but that's that's the way it

works anyway so uh the the problem

that's come up is we have these

deadlines at the end of each month we

have a deadline in terms of how much in

uh basically call options you get so

here's how that works they're

technically called warrants because call

options are on the market warrants are

are done with a company

if you invest a hundred thousand dollars

into house hack by October 31st and your

course member at some point in the

future probably in like 2024 we can call

you up and go hey you can contribute

another 60 or 60 000 in that case at the

day one valuation so that means we're

already buying real estate we already

have rental properties our valuation is

going to be higher but you can

contribute another 60 Grand at the day

one valuation

now some folks are like wait a minute

Kevin isn't that dilutive technically no

because for example if you contributed a

million dollars and we raised a hundred

million dollars you have uh well one

percent ownership of a hundred million

dollars or one million dollars

if we then raise an extra 50 million

dollars well then technically your

ownership share goes down to like point

six seven percent but that still

represents one million dollars in value

right 0.67 times 150 it's still going to

be one million dollars and that's the

beautiful thing about this let's do a

quick little fact check on my math there

1 million divided by uh 150 million yeah

0.67 exactly so so the cool thing about

that though is it gives house hack

another opportunity to raise more cash

so we can go buy more deals at what we

think will still be the bottom of the

market and it again rewards early

investors

and so we have a deadline at the end of

every single month at the end of

September we had a deadline where you

could get up to 65 percent of these up

these warrants options basically and

they're free right they don't cost you

anything to have these which is great UH

60 at the end of October 31st so as long

as you sign your subscription agreement

by the end of October 31st and you wire

by the end of the first business week of

November you're in at 60 percent

uh if you wire by the end of December uh

or I'm Sorry by the end of November 30

well 30th that would be if you sign by

the end of November it'll be down

another 10 by December the end of

December it'll be down another 10

percent

and probably by the time we do the

non-accredited round the opportunity to

get warrants will be pretty low or zero

uh but at this point it looks like

because the accredited the non uh the

process for non-accredited investors is

going relatively fast it looks like we

might be able to get non-accredited

investors in at the founder evaluation

the minimum investment for

non-accredited investors will probably

be twenty thousand dollars unless you're

a course member and then the minimum

investment will be five thousand dollars

that's what we're tentatively writing uh

which is really cool so that way you

don't have to be accredited but

obviously if you're accredited and you

sign now you get more options so it all

sort of depends on on when that the SEC

approves our non-accredited route but

we're working on that and so the goal

really is uh oh yeah well the downside

the downside is we had a really great

run going up to the end of September

because the people who wanted to invest

invested to get those options

but it's really slowed down in October

and that's I think because we kind of

hit a pull forward a pull forward is

kind of like when you have a Black

Friday sales event and so many people

buy or so many people fund right then

like the the first couple weeks of

December your sales are like really low

because everybody was going to buy

already did during that sale and it's

like the pull forward is like a painful

moment

kind of like a pull forward that you see

with like solar panels right before

December 31st everybody wants to spend

their money to get their tax credit

right before the end of the year and

then sales plummet in January super

super typical we're feeling that right

now so additional commitments have

slowed down a lot now that's not

necessarily a bad thing because the

company is going to happen like we will

be having house hack and it's actually

it almost makes it easier for me to have

less money because I I feel like I can

and no guarantees okay now just I'm just

hypothetically speculating here if if I

have

25 or 30 let's say I have 30 million

dollars right and it gives me about a

hundred million dollars of purchasing

power for Real Estate uh I could

probably you know 5x the value of that

company quicker than I could 5x the

value of the company if I had uh you

know 500 million dollars and and uh of

cash and you know maybe 1.5 or or closer

to two billion dollars of purchasing

power just because it's going to take

longer to get that much kind of staff

I personally think a real good Target

though for us by March is to be really

somewhere around uh 50 to 150 million

dollars raised so for example I mean if

we get to 75 million dollars by let's

say February 28th and then we do our

non-accredited round and we do another

75 that's 150. that's good we don't need

more than that but the company is

valuable already at at 30 million

dollars which is roughly the amount of

commitments we have so we're viable

we're great and we're just in our first

we just passed our first first month of

fundraising but that does mean there was

a deadline coming up here at the end of

October for if you are an investor and

you want to come in Now's the Time to

get your letter from

househack.investready.com get your

accredited investor letter and uh sign

the subscription agreement if you have

questions email us at ir househack.com

and join if you're non-accredited stand

by for the beginning of next year which

will be very exciting and uh yeah we're

super excited it's everything is is

honestly going way better than I

expected and if you think about it we're

like at the bottom of the market I mean

I have a lot of investors sending us

emails and stuff saying look dude Tesla

stock is down right now we're just gonna

wait until task stock is up more and

we'll just have to sit out on some of

those options

so I mean we have multi-millions of

dollars of commitments from from Tesla

investors but they're like we're just

going to wait a little bit for Tesla to

rebound a little bit or have a euphoric

Rally or something I don't blame them

anyway go to house act on

investready.com to get accredited go to

househack.com to upload your letter and

folks hope you appreciated the update

leave questions in Discord at

metcaven.com chat and I'll personally

reply under the seed company

Discord channels thanks bye