Lauren Clugston on House Hacking Rental Properties
Lauren and Kyle Clugston are a husband-and-wife investing team who have been building wealth through real estate and long-term investments since 2017. They’ve used the power of house hacking and the BRRRR strategy to build a small but mighty rental portfolio they self-manage to fund life's adventures. When they aren't tearing down walls or managing properties, you can find them down at the Jersey Shore with their family and rescue pup, Bodhi.
We recently asked Lauren to share insights into how they’ve found success with rental properties and real estate flipping.
What’s your backstory? How did you get into real estate investing?
Kyle and I started out like many newly engaged couples, excited to start our lives together and eager to find our first home. Fortunately, through years of saving, I had a small nest egg that I wanted to invest, so I began researching the best way to utilize this money.
I stumbled upon the concept of real estate investing and house hacking and thought, we’re going to buy a home anyway, why not make it an investment as well? But we were scared. None of our friends or peers were buying homes, let alone investment properties, but we knew this was the right move.
So in 2017, we bought our first home — an up-down foreclosed duplex that needed a lot of work. We spent over 6 months renovating the property ourselves but eventually moved in and welcomed our first tenant. As soon as we got that first rent check and realized we were almost living for free, we were hooked!
What is your favorite part about what you do?
We have two!
1. Real estate is all about solving a series of problems. How to find the deal, how to fund it, how to fix it, how to stay on budget, on schedule, and still deliver a quality product. How to manage teams, build relationships, and grow. All of these challenges force us to think critically and out of the box to find creative solutions each step of the way. It’s honestly so much fun!
"Real estate is all about solving a series of problems."
2. As husband and wife, working together can sometimes cause friction and create stress in the relationship, but having a common goal that we’re both passionate about and working together to get there has taken our relationship to another level. We love building this business and designing our life together. We each have our own strengths and weaknesses and watching each other excel in our designated business areas has only made us closer as a couple.
Can you tell us about your first investment?
Our first investment property was an up/down foreclosed duplex. We found it on the MLS [multiple listing service] with our real estate agent and placed a bid online. Since it was a HUD home, it was restricted to owner-occupant bids for the first 14 days, which helped give us an advantage over investors. We bought it for $117,000 and put about $70,000 into it. We did all of the renovation work ourselves, minus things that required a license like plumbing and electric, and learned so much from this project! We welcomed a tenant in the first-floor unit while we lived in the smaller second-floor unit.
When you first started out, what were some of the mistakes you made?
Most of our “mistakes” were related to the renovation. We of course went over budget and ran behind schedule. This was our first home and first large project. While we had both done some small DIY work, we’d never tackled such a large project. So our first big lesson was that you should renovate by type of work and not by room. So instead of renovating the bathroom, then the kitchen, and then the bedroom, you should do all the demo at once, then all of the rough plumbing, and all of the rough electric, etc.
Doing so creates a more streamlined renovation and cuts down on costs and time. We learned this the hard way when we renovated the first-floor kitchen. We put in new sheetrock and a new ceiling. Then, we began work on the upstairs bathroom. We encountered a huge leak in the bathroom doing plumbing work that ruined the new sheetrock downstairs, causing us double the work and double the cost. We’ll never do that again!
"Our first big lesson was that you should renovate by type of work and not by room."
How did you acquire the knowledge to be successful in this field?
We are 100% self-taught. Through books, blogs, podcasts, and YouTube videos, we were able to gain the foundational knowledge to start investing. Then from there, most lessons and knowledge can’t be truly taught without lived experience. Every step of the way is new and scary the first time, but the only way to learn is to push through the fear and do it anyway. On-the-job experience far exceeds anything you’ll read in a book, so we always advise people to just get started. You will mess up, but take that as a lesson and try again.
Then, we’ve learned a lot from other investors we’ve met at local meetups. Surrounding yourself with like-minded individuals is key to being successful in the space. The local knowledge and contacts are invaluable and it’s helpful when you’re in a pinch to have friends who can help you out.
"On-the-job experience far exceeds anything you’ll read in a book, so we always advise people to just get started."
What is the best investment you've made and why?
Every deal and investment has taught us so much, but our best deal yet was an off-market single-family home. This deal pushed us out of our comfort zones and ended up being very financially successful. We found the deal by sending hand-written letters to expired listings in our target area. We got a call from a tired landlord looking for an easy sale and to relocate out of state. We listened to his pain points and were able to make him a fair all-cash offer that solved his problems. This was our first time sending direct mail, first time negotiating directly with a seller, and ultimately the first time we closed on an off-market deal.
We purchased the property for $38,000, put about $8,000 into it, and it appraised for $110,000. With an inherited tenant paying $1,225/month, we were able to cash flow $170/month with an infinite cash-on-cash return. While the money was great, the lessons we learned and skills we gained from closing this deal are the best part because it gave us the confidence to source more deals this way and grow our business. A full deep-dive into this deal can be found here.
What do you think the real estate industry will look like in five years?
Such a hard question! I think there will always be a demand for housing, especially rental homes. People will always need a place to live. Where we may see some compression is in the “luxury home” space. If we reach a recession that causes personal budgets to be constricted, consumers may move down a notch in their home cost. Those in luxury apartment buildings may sign a new lease in a more affordable option. Those already in the affordable option may move to a lower-cost town nearby. There will always be consumers in the mid-range section, but who will “step down” to the luxury options if there’s nothing above?
What advice would you give to anyone starting out in real estate investing?
Your first deal is not meant to be a home run. It’s supposed to be a proof of concept that gives you the experience and confidence you need to realize this was a good choice. You can read books and blog posts and listen to educational podcasts every day, but some lessons can only be learned from doing. Every step of the way will be scary the first time, so the sooner you can dive in, the sooner those steps won’t be intimidating.
"Your first deal is not meant to be a home run. It’s supposed to be a proof of concept that gives you the experience and confidence you need."
Can you share your top three book recommendations for our audience?
For those who want to self-manage their rentals, we highly recommend The Book on Managing Rental Properties by Brandon Turner. For those looking to grow and scale their portfolio, we recommend Raising Private Capital by Matt Faircloth. And for those who want to treat their side hustle more like a business, read Traction by Gino Wickman.
Where can our audience find you online?
Interested in learning how Azibo’s free platform can help you manage your rental property finances more effectively?