How Bad *CASH BURN* is at my Housing Startup | HouseHack.

hey everyone me Kevin here it's time for

an update for all house hack investors

or anyone curious about a house hack I'm

going to reveal what our monthly burn is

for house hack at this point where we

might be able to save money and where

costs could change I'll also make some

projections but I want to be very clear

we don't do projections for househack I

don't tell you how much I think the

company's going to be worth in the

future I really don't like projections

because honestly any company that did

projections two years ago or in you know

2020 2021 it was all BS so I hate that

kind of stuff I just want to make an

honest investment opportunity for people

who are interested in house hack and as

I always have to say this video is not a

solicitation you have to go to

househack.com or read the PPM there

that's a solicitation but I just want to

be very honest house hack is a very

simple company it's a company that I

have a lot of great Ambitions for but

we're going to do very simple things

we're going to buy home and rent them

out now you might ask oh well how's that

similar or different from a Reit or

how's that similar different from those

companies that let you cut up you know

slices of homes into little shares and

then let you you know invest in those

look I've answered this in many videos

before you could look at the house hack

playlist and get a detailed explanation

but let me make it very simple I don't

think there's anybody else in the United

States that runs a real estate company

like this that buys wedge Deals they buy

deals based on the cash flow they think

they can get and they rent them out why

bother with wedge deals if the equity

doesn't really make you potentially more

money to be clear buy more money I mean

more cash flow right it's hard to get

wedge deals it takes effort it takes

work but the actual Equity boost

increases the value of the company it

increases the amount of deals we could

do it increases our margin of safety

even though it may not necessarily

change the cash flow on a particular

deal it's harder to do it but I I think

it's the model that should be used in

real estate and quite frankly I don't

see anybody else doing it and I think we

can create a very successful company

scaling the wedge deal model throughout

America right the companies just want

AUM and they rent them out that's why

maybe you could kind of say how Sac is

kind of like a read with a wedge

component right but we're not actually

filing as a read a real estate

investment trust because really we're

planning on building the company and

reinvesting Equity not Distributing it

that way in the future we can open up

other verticals like medium and

short-term rentals we can create a

branded Hospitality approach when the

time for that is right you know we want

to make sure we're building on strong

foundations and not get into crazy

airbnbs when the Airbnb bubble is

potentially popping in front of our

faces right we're not buying homes yet

because the real estate market is still

plummeting we've no idea where rates are

going to settle and we're not slicing

dicing properties where we have this

motivation to look for the highest cash

flow properties in day dangerous areas

or shady areas or take the worst

possible tenons just to pump up a cash

flow number and then sell it as like an

nft for a house or a token or a share in

a home I hate that because those kinds

of things just like syndications very

very high fee and they have an incentive

to invest in my opinion in lower quality

real estate that's just my opinion this

is totally my opinion maybe that's

exactly what you're looking for and

that's just what househack is not but to

be very clear househack is a company

where I plan to buy both apartment

buildings and single families though

probably predominantly single families

in Diversified markets in the United

States TV to TBD exactly where and we'll

look for properties that we think we can

buy for as an example four hundred

thousand dollars in a six hundred

thousand dollar neighborhood and maybe

spend fifty thousand dollars fixing the

property up so we can get a nice

long-term quality tenant for either long

term or even medium or short term

depending on what's most appropriate at

the time but we want quality tenants low

turnover in-house Professional Property

Management that we will handle and the

beautiful thing about all of it is we

think we're going to be able to buy

homes for 450 000 that are worth 600.

that way we're insulated in case the

market goes down if the market goes up

we've got more equity and in the future

we can slice out portions of the

portfolio to retirement funds or

whatever and get more funding to buy

more homes and so in my opinion this is

a very simple model it's not like we're

creating some kind of widget that's like

that much big of a surprise the hardest

thing on me is going to be traveling to

the probably four three to four

locations to start with that we're

investing in and basically be an expert

in those areas uh now I think I'm a very

well versed real estate investor I've

got a long background in real estate

it's how I got started you could look at

my real estate playlist and see all of

my information about buying wedge deals

all the wedge deals I bought the wedge

deals I've sold my Theses on real estate

right this video isn't for that this

video is instead to focus on all right

Kevin what's the monthly burn that's

what we came here for all right so let's

uh let's just go through it and and keep

it very simple

so uh I think the easiest way to do this

is uh just kind of uh delete things here

one at a time and then that way I can

kind of undo the deletes uh and we can

kind of go through them in a way that I

can explain them so I have a little

spreadsheet that I put together this is

not like unofficial accounting this is

just a very simple ballpark for everyone

I don't want people to to hang their

hats on this right this is not a

guarantee these are just ballpark

estimates and the numbers could be wrong

okay but I don't expect they're too

terribly far off so uh Lauren me the

board we make no money it's zero very

very simple it's zero okay then we do

have uh an investor relations uh

accounting person they've got a lot of

work ahead of them issuing the stock

certificates making sure everything is

correct helping people make sure that if

they're investing in their Roth or their

retirement account they're uh properly

accounted it for them they have

certificates issued to the correct

entity whether it's an LLC or themselves

personally or their trust or their

retirement account it's

grueling painstaking work to make sure

everybody's situation is perfect but I'm

a big fan of making sure it's all

perfect so we're really investing money

in IR to make sure that everything is

perfect so this is about a ten thousand

dollar a month uh expense uh one third

of staff so I have an individual who

then helps with investor relations and

emails and and office work for three of

my companies and so we're only building

one third of his salary to house hack I

think that's fair and the nice thing

about that is you've got somebody who

really has their hands in all businesses

and is is really aware of everything

that's going on and the nice thing about

that is not only do I feel like if we

had somebody full-time just for this

company they wouldn't have enough to do

but then we'd be overpaying them right

so we're able able to kind of spread out

their daily workload which I think is

really good so one third of them

then we've got a one-third of another

licensed CPA that works for three of my

companies it's about five thousand

dollars that's one third

then we've got one third of cyber

expenses utilities computers

Administration rent like office space

miscellaneous expenses property taxes

insurances you name it it's probably

about three thousand dollars a month I

I'm I think I'm being generous with that

it's a ballpark we're still signing for

new insurances right now like we're

we're establishing our board and

directors Insurance like all of these

things are are uh you know it's a

startup so like uh some things need to

be renewed some things need to be formed

uh filing for trademarks right some of

these miscellaneous things these are all

things that I'm kind of lumping together

here so plus or minus about 3K

then we've got uh marketing monthly I

think this is high and so that way if uh

if my number above is a little low this

is probably a little high we pay for the

texting service that's probably

somewhere around two thousand dollars a

month in the email services like

MailChimp uh so that's that and that's

you know you have to remember we have to

market for investors to some degrees to

some extent communicate with investors

in Mass because obviously we would like

to have more investors for househag even

though we don't really need more money

for househack to be viable the more

money we have the more power we have in

negotiations potentially in the future

when we want to buy uh from Builders or

conduct bulk purchases or whatever we

have more power to do that if we have

more cashola so there's obviously a

benefit to expanding the reach for house

hack investors

and that's also why we're doing the reg

a which the reg a is kind of a plus or

minus TBD exactly what this is going to

be but we think it's going to be about

50 000 that's not a monthly burn figure

that's sort of one time that covers like

the audits the filing fees the attorneys

and everything involved with the reggae

that's on top of the other expenses for

starting the company uh the wedge finder

app the deal finder you know buying that

the startup costs for the initial legal

fees and all that that wasn't paid out

of cash though that was paid out of some

initial stock uh and so this right here

is the reggae we expect to be plus or

minus 50k and the cool thing about the

reggae is it's going to expand our base

to more investors who don't have to be

accredited we expect that to maybe

launch gosh at this point probably

leaning towards the end of February

maybe early March I'm still optimistic

about January but I think that's turning

into hopium it's probably Feb March for

the a non-accredited and and I don't

know that there's a massive huge rush

but hey look if if we have more

investors who want to come in with the

reggae I think that's going to be a

wonderful opportunity for them to take

part uh in the company and remember the

way we're raising money for the company

the valuation of the company is roughly

roughly plus or minus because we've got

some small little adjustments for for

some of the startup costs uh it's

roughly one to one uh we can break all

of that down and we will probably when

we do the uh when we release the audited

financials and then we're gonna have

like a real audit right and that's cool

because that's all going to be part of

our reggae filing so this is more of

just sort of like an interim little

update here and uh we want to make sure

that uh we're as transparent as possible

but without having all of the exacts

right now we're not going to be able to

go through all that but that is coming

so stay tuned for that big reggae

audited accounting I just want to give

you an update of kind of like okay where

is money right now right okay good so

continuing on reggae uh one time plus or

minus a 50k all right uh travel right

now is is really next to zero and that's

because we don't really have a need to

do much out of the office at this point

that we expect to change though in the

future right in the future there's going

to be a lot of traveling and we want to

make sure we're as cost effective and as

efficient as possible while also

actually being able to go right we don't

want to be in a situation where like oh

you know we're not going to go until two

weeks from now and and we lose some

flexibility on getting deals so we have

to figure out exactly how to be very

flexible and I've already got some

solutions lined up for that so I'm very

excited about that while at the same

time keeping travel costs reasonably low

so if we add this together not including

that 50 sort of one time there that

works out to roughly a monthly burn of

about twenty three thousand two hundred

dollars now we're sending out an

investor relations update letter uh

about uh what we have updated here which

is we have moved 21.5 million dollars uh

yeah okay I'll talk about that note I

put a little note there for myself to

talk about this we have moved about 21.5

million dollars into a ladder treasury

portfolio and the the fee we're paying

for this laddering is so so so so tiny

we we could not do it like for that fee

we could not do it ourselves so we think

we're in a really really great

reasonable position we're on 21.5

million dollars of cash which is not all

of the cash that we've raised but it's

it's a large chunk of it we are

expecting to earn a rough yield net a

fee and this is plus or minus okay I'm

not I don't wanna anybody to think these

are guarantees this is just rough

numbers the rough yield right now net of

fees uh is about 4.1 which is kind of

cool because on an annualized basis

assuming we can maintain that yield for

an entire year which we might not be

able to right it depends the yields

could go up the yield could go down it

depends it's a ladder portfolio roughly

right now the net annual yield should be

about 881

000 which is really really awesome uh

because the bonds that we're buying are

bonds that we think will actually be

worth more money when it's time to buy

real estate that's because when it's

time to buy real estate we believe is

when interest rates start falling again

when rates fall bonds tend to go up in

price so if you're holding bonds and all

of a sudden rates fall your bonds at

higher yields are more valuable and so

then you can actually sell them back for

more money that's trading bonds we don't

really plan to trade bonds we plan to

just hold a ladder portfolio and then as

they come due and like May of next year

and July of next year in October of next

year we get cash and then we could

either reinvest that or we could buy

real estate which we want to buy real

estate we're just not exactly sure yet

when the perfect time to buy real estate

is the point is we're ready to strike

right like this money we should be able

to dump back onto the market if we

needed to the bonds hopefully sell the

bonds at a profit

if we needed to or we just wait for them

to expire and roll off which is fine

because they're all short term you know

a few months out uh to a year out you

know some of them a little bit more some

of them a little less uh we can just

wait for them to roll off and we don't

have any Market risk that way that's

really cool and let me just clarify how

that works if you buy a bond today that

has a four percent yield and it's due in

October 2023 and you pay a thousand

dollars for that bond that thousand

dollars can fluctuate in value it could

be worth eleven hundred dollars one day

it could be worth nine hundred dollars

one day doesn't matter though because if

you hold it to maturity that market risk

goes away you get a thousand dollars

back plus your yield basically I'm

oversimplifying because bonds are bought

at a discount and so you're you get a

thousand dollars back but that

encompasses already the premium that

you've I'm oversimplified but that's

roughly how it works and so that makes

our monthly cash cash flow roughly no

guarantees things could change about

fifty thousand dollars a month as we're

just waiting for uh the market to uh to

fall in real estate which it already is

Moody's is expecting home prices to fall

15 they've already fallen six to ten

percent uh not only that but I think

Moody's is wrong I think home prices are

going to fall 15 to 25 percent the

longer rates stay high the more pain

we're going to have we're starting to

see I mean obviously 31 declines in year

over year sales volume we're seeing

listing cancellation Skyrocket price

drop Skyrocket it's just when we get to

March or April we're gonna see

year-over-year numbers for real estate

and I think every headline on newspapers

is going to be year over year home price

is negative and that's going to create a

lot of fear for housing so I think we're

in a safe spot to be patient uh not only

because we're literally farming yield

but our burn for a corporation for a

company is extremely low low extremely

low I mean this is there's like no burn

okay and and I want to be clear the

reason we can do this is because uh

myself and Lauren uh the board and and

some core individuals aren't actually

expected to get any compensation until

after this company IPOs so we'll at some

point get some kind of stock options and

we expect those to essentially be locked

up or not really vest until after IPO we

may never even IPO but but that's my

goal is to IPO

and uh and and then even after IPO we

don't want to just be able to let people

with stock options dump at IPO because I

think that's the wrong way to run a

business so there should be some sort of

strict block-ups where it takes like

four or five years to be able to fully

sell if somebody was even fully inclined

to sell they might not want to sell I I

don't think I would sell all my shares

like I I love this like this is this is

my baby this is this is my dream so I'm

really really excited about this

so uh super low monthly burn

uh the stock the future stock options

obviously helps with that oh but what

also helps is that I've got these other

businesses right so I'm able to take uh

accountants or staff and have them work

on my other businesses while house hack

is not really doing much right now other

than raising money so for example we

have four construction workers they're

employed by another business of mine in

the future when it's time to start doing

our in-house Property Management all I

have to do is go okay you're done over

there whoop now you're on house hack

payroll when we're actually operating

right and that keeps our cash flow low

to basically uh well that keeps our cash

burn low very very low while we sit

around and wait and in the meantime

we're yield farming which is freaking

awesome uh and so we're very very very

very excited about that obviously uh

your incentive to invest in house hacks

sooner is your ability to get extra

bonus warrants you can learn more about

that at househack.com or watch the

househack playlist you can see that

playlist by going to metcaven.com Links

there's a link for the house hack

playlist uh or just go to househack.com

you should see the playlist there or the

videos there

if you have any questions you can always

email us at IR househack.com you could

leave a comment down below is another

option but uh yeah I'm excited stay

tuned for the reggae audit I think

that's going to be done in a week or two

it's been going for like three weeks now

uh the Auditors have everything it's

really it seems like it's going great

and I'm very excited about that audit

because then we put this entire company

in front of the SEC

and uh we'll we'll get to see what kind

of comments the SEC has for us they're

pretty scrutinizing about real estate

which I actually think is a good thing

for investors uh you know a lot of

people are like oh I don't like the SEC

I actually think a lot of what they do

is is needed I think it's uh it's

wonderful so I'm optimistic uh and I'm

very excited about about just the

opportunities we have ahead of us so I I

couldn't be more excited to buy real

estate in the future also I wanted to

clarify uh and I don't know if I I like

how hard I want to commit to this but

I'm pretty committed to this idea Lauren

and I we have just two uh development

projects left and what we're thinking

about doing is selling those and then

Lauren and I personally will never have

rental property uh tentatively again

again I I'm not like 100 clear on that

commitment level

so that could change but this is a

conversation Lauren and I were having

we're like why would we personally want

any tenants we don't want any househack

investor to think that like oh we're

scooping up deals before house hack

we're just gonna let the tenants be at

house hack and that's where all of our

real estate exposure uh could eventually

be so uh you know with the exception of

like a personal residence and stuff like

that

um but yeah we're very excited so this

is uh this is a full little update here

uh ballpark numbers obviously everything

subject to change read the solicitation

at househack.com

and uh super excited to have you here

watching and supporting the channel and

supporting the Endeavor it's gonna be

fun thanks so much folks and we'll see

in the next one