Have you heard of the phrase “House Hacking”? It’s essentially where you purchase a property and live in it while renting out the other rooms. This can be done with a single family home, or an apartment complex. It’s also a great way to get started investing into real estate without spending (and saving) a lot of money!
Today’s guest is Dr. Ayush Gupta, a pediatric ER physician and is the founder and CEO of MD House Hacking, who helps medical professionals reach financial freedom through house hacking and real estate investing., Fresh out of his medical fellowship, Ayush wanted to get into real estate but didn’t have a lot of money. You’ll learn how house hacking was a perfect solution for him, and why he believes most doctors should consider it. He has now taken that money and invested more properties, and now teaches others how to do the same.
If you think you need a lot of money to get into real estate, you’ll think again after this very lively interview!
MD House Hacking – Financial Freedom for Medical Professionals
Mike Woo-Ming: Hey guys, this is Dr. Mike Woo-Ming. Welcome to another edition of BootstrapMD. Now, anytime we talk about real estate, it seems to be one of the most downloaded episodes that we have at BootstrapMD. So I’m really excited that I have my next guest on he’s a pediatric emergency medicine physician in New Orleans, born and raised in India.
You moved to the US in 2012, completed his residency and fellowship and residency and fellowship. And then he moved to New Orleans where he realized the importance of creating other income. And what started it was of COVID a lot, which really caused a lot of people to reevaluate where they are in terms of building in their net income building in their revenue.
One year later, he created MDHousehacking, which is to help other perfect medical professionals achieve financial freedom through house hacking. Now, if you don’t know what that’s about, we’re going to cover all of that. So excited to have him on the program. Please welcome Dr. Ayush Gupta. How are you doing my friend?
Ayush Gupta: Good, Dr. Mike, thanks for having me on your show. I’m super excited about it. I’ve listened to a lot of your podcasts and I’m thrilled to be a part of yours.
Mike Woo-Ming: Wonderful. Like I mentioned at the top, real estate is really a topic. A lot of medical professionals want to know more about. And I always like to first start off by learning about your financial journey, for physicians, we historically have been known as bad investors.
We don’t get any type of financial education in medical school or perhaps, very… very topically. I’ll hear something from, ER, doctor told me to invest in some type of stock or something like that. But other than that, we really don’t get any education. So where did it start for you?
Ayush Gupta: This is so true when I talk about it on my portal, on my podcast as well. It’s the same thing. As physicians, we get zero financial literacy and I probably came from the similar background. My father was a doctor in India is a doctor, but then really learn a lot about finances from there started from zero actually. Once I moved to New York for residency and then fellowship, nobody really spoke about finances over that.
I was heading towards of a similar life, which most of physicians and non-physicians high-income owners do bait. They finish their studies, they go buy a house and then they settled down. They have kids. And they have to pay the mortgage and car rent and everything. So it’s not a bit with COVID. It’s just started when everything was shut down.
You can’t really go and do a lot of stuff. Either, you could take your mind and brain to watch Netflix and Tiktok, or you could take it to learn about other streams of income. And that’s how I think I got into it. Started with a couple of courses, find out mandate mission. That was a real estate at that point.
And and as I said, I was just fresh out of fellowship. Didn’t have a lot of savings and have a lot of money to go into real estate. And I think that was one of my limiting beliefs that you need a lot of money. Now. I know we can do deals without any money. So that’s when house hacking started. I listened to some podcasts at that point who mentioned house hacking and read a lot about it.
Thought it’d be perfect for me to do that in New Orleans. And I think now I’m almost two years into it and I love it. And it has grown a lot from where it started.
Mike Woo-Ming: So you said you started it during COVID or at the beginning of COVID. At the time were you renting? Did you have a house with a mortgage? Where were you at?
Ayush Gupta: At the time I was renting a nice two bedroom, two bathroom place for $2,300 a month. And I was right before COVID I was looking at houses as well, like a single family house. Like I was telling you to go live in a, but yes, I was renting.
Mike Woo-Ming: And that was in New Orleans?
Ayush Gupta: Yes, sir.
Mike Woo-Ming: Okay. So you took a couple of courses and I looked, and I think I was listening to a podcast. You did first probably through Peter Kim is probably where is Leverage and Growth Summit people. You’re just a good guy. And then you took Kenji and Leti’s course. I believe correct. Yeah. And and if you’re not familiar, they talk a lot about single family homes and I don’t think they talk a lot about house hacking. So first off, what is house hacking? How would you define it?
Ayush Gupta: Yeah, great question. You’re right. They don’t talk a lot about that. Househacking is basically living in a portion of a house and renting out other portions.
There are various ways to do it. You can live in a four bedroom house, live in one room and rent out the other rooms, like example in a residency, I was living in a three bedroom house, but we were renting out all three rooms. If you own that house, You can have, you can live in that room and rent out the other rooms to other medical students, residents, and fellows, or even guests, and that can pay for your mortgage.
Currently, my house hacking situation is I live in a four unit apartment. And I live in one of the apartments and the other three are rented out. What how’s hacking does it it provides you a great strategy to get in because it’s your primary residence. So you really don’t have to put that much money down as compared to investment property, where you have to put 20 to 25% down.
So you can get in for a physician loan for 0% or a conventional for 5% or FSA for 3.5%. They’re very easy to get started. And then then if you, and if you do it right, and if you have all your numbers, correct, you basically, you can either live for free or even get some extra for living which is a great Saturday
Mike Woo-Ming: Now I don’t want to get too much into your personal life, but were you by yourself at the time when you’re renting? Married? Girlfriend? Significant other at the time.
Ayush Gupta: Yeah, it was I was by myself stood by myself. I live with my girlfriend right now and I think one, I think how… I love this question because I get this alot from people who are a little far ahead with the families and they’re like, oh, I have kids. I have I have two kids. I have a wife, we have this patient, we want a backyard. And I think those things can also be done with in hockey, but a lot of people that I know they, they do. You can Airbnb a part of your property.
You can do a midterm rental. You can also have a big space for yourself and a smaller unit for somebody else to offset some of your extra expenses for the month. It has been done for forever. People have been doing it forever, so there are different options.
Mike Woo-Ming: And again, I’m going to take you into your initial thinking of doing this, because I think it’ll inspire a lot of people who are listening this cause they can see how you were in your shoes. So imagining at the time you were renting where you month to month at a time, or did you have a long-term lease you’d had for break the lease?
Ayush Gupta: I didn’t want to believe actually. I started looking at it and in January of of 2020, but my least in until July, so I don’t know.
Mike Woo-Ming: And so why did you decide to do that versus going in and doing like what the majority of do is get a single family home.
Ayush Gupta: Oh, so many reasons. First. I said, I’m starting out. I was out of fellowship. Didn’t have a lot of savings. Didn’t have a lot of down payment when you do what majority of the people do. Just imagine I’ll give you a quick number example. If you buy a $500,000. You have to put 20% down if you’re buying as an investment property.
So that’s a hundred thousand dollars to come out of pocket. Excluding the closing costs, any kind of rehab renovations, you have to do the same thing for house hacking. If you buying a $500,000 house, you can put in 5% down, you can put in 0% down to 5%. Don is twenty-five thousand. That is $75,000 of leverage you can use from the bank.
That’s number one. Number two was done my first real estate venture. I want it to be a safer house. Hacking is easy, easily by far the safest way to get in to a real estate investing. You can get in, you have to live somewhere, I was paying 2200 or 2300 for rent. The worst case scenario for me was even.
Out of the three units, two units rented out. I would still be paying less than that. I would still be creating equity in the property. So that was, I think it’s extremely safe. That’s number two. Number three is like how you can leverage the other things by living in the house. So for example, you can use a heat.
Like I love using my heater for the house. Once you increase the value, you use your heat lock, you pull it out, you can’t do that. You can, but it’s very tough to do that investment property. Your lenders are very tough in getting a healer and that kind of jumpstarts you to other investment. Now, after my first house hacking, I was able to do a lot of other things and that’s because of the leverage that house hacking created for me.
Mike Woo-Ming: Yeah, that’s what I love about real estate and what a lot of people don’t know. It’s really the leverage. We get scared about debt, but it’s when you have things like a heat lock, you already have that equity in your home. And that just opens up, really. To other different types of investments.
So you’re renting at the time. You’re looking, you decided you wanted to go the house hacking route, which way did you go? Did you go through a duplex fourplex? W what would you thinking? Did you, was this in you’re in New Orleans?
Ayush Gupta: Correct? Yeah. I live in a nice neighborhood, very close to where I used to live. Very safe. It’s a four unit apartment buildings, so it’s a fourplex. And I probably live in the nicest of the four, but all four are beautiful. I think my, my tenants know me, one of the things that I get a lot is like, what if I want to be like not known to my tenants, but I can tell you as physicians, your tenants respect you a lot. They know you, they respect you. They don’t call you out for anything. There are systems in place that I have, even though I live over here in which I don’t have to do anything. I’m an ER physician. I cannot come and change toilets in the middle of the night and I would not never want to get into real estate for that reason.
So there are all these systems in place. I think there was a long answer to your small question, but yeah, it’s a fourplex in New Orleans, in a very good neighborhood.
Mike Woo-Ming: How long did it take you to find that perfect place?
Ayush Gupta: I would say around, around three months I looked at some of the properties and but that’s the advantage of house hacking as compared to buying a real estate investment out of state.
You know the area really well. Like I knew my area after doing maths and looking around calculations and looking around the neighborhood. I knew if a property opens up in this neighborhood, it’s going to do well as compared to if I’m buying something in Texas, but I don’t know the neighborhood that well. And it’s a lot of, and I have to put in 20% now. So that’s why I think this is another advantage of.
Mike Woo-Ming: So let’s talk about funding. You said you didn’t have a lot of money to, to invest in. And you mentioned things like a physician loans, just so for the people in the audience, because physician loan gets thrown around. But in actual fact, there really is no such thing as a physician loan, but maybe.
Ayush Gupta: Yeah, it’s a special kind of, it’s like a portfolio loan, like a lot of banks you go to, they will have multiple types of portfolio loans, like a VA loan, a physician loan. They might have a building like you have to build something, you have a builder’s loan.
So a lot of portfolios, but physician’s loan is one of them. What it does. As a physician, a lot of us have debt when we finish our residency or fellowship because of med school. Once you start using the debt to calculation, calculate a DTI or debt to income ratio, a lot of banks are like I don’t think you’re going to qualify to buy a $500,000 house because you have such big debt for med school going on.
What physician loan does is they don’t calculate your med school debt. That’s the number one thing. Number two thing is if you are paying less than 20% down on a house, you have to pay something called PMI. It’s like a mortgage insurance physician loans always excludes that for you. And a lot of times you can buy a big investment property with traditional, but they do allow you to buy two to four unit apartment building using a solution.
Obviously you have to shop around, but I think that’s a very good way to start. Like it was asking me how I did not have any funds. Yeah. That was perfect way for me to get into a very expensive property by putting no money down.
Mike Woo-Ming: You said you put it around 5%. Was there other expenses you had to do in terms of rehab for your place?
Ayush Gupta: Yeah, absolutely. So I did put in 5% down. My vision for this property was to make it a million-dollar property and cash out, refi it. So I did do another hundred thousand of renovations after putting in the 5% I staged it. But I use a lot of private money. Okay. I, yeah, that was that was again, leverage that I used because I knew that this property had value in it too. So if I use that, I can pay them off back. No private money, actually, I connected with some friends. The difference between private and hard money is like private money is doesn’t check on your credit at all. It is based on one legal document of promotionally note, hard money is more like longer term has more points up front than private money.
Mike Woo-Ming: And again we can always edit this later. What type of load were you getting in terms of, was it a 30 year fixed? What did the physician let off?
Ayush Gupta: For my the prop. So I ended up getting, going for an FHA loan, which was very similar to a physician loan. But it was because there’s limits to an FHA loan.
So for example, for 4 units in New York, you can get an FHA loan for probably 800, 900,000. But in New Orleans, you can’t. I think the limit was six 50. My property was over that price. So I had to put in I got a 30 year fixed mortgage using an FHA loan instead of 3.5, I had to put 5% down.
Mike Woo-Ming: Okay. Gotcha. Another thing too is because there’s just so for clarification with anytime somebody thinks of multifamily, they think more. Often it’s a commercial loan but in this case it’s not right because you have as many doors, is that correct?
Ayush Gupta: Correct. There’s like big multifamily and the like smaller, multi-family smaller. It’s two to four up to four units. More than four units is when starts getting a little more on the commercial side. And then you have to go through. The value of the prop value of the income, your net operating income, the cap rate, rather than over here, when you look at the comps around the neighborhood.
Mike Woo-Ming: Okay. So you got qualified, you got the house now it’s time to look for roommates. So tell me that process. When I hear house hacking, the first thing is. I hear them saying I want to live rent-free so that’s what I’m going to charge is what was your thinking in terms of pricing and then how did you find your, how did you find the tenant?
Ayush Gupta: Yeah, good question. So I had to change all the tenants in the house to get the rents up because when I caught the property, the rents were way lower than what the market trends was. The way the, my formula for finding the rents was looking at the comps around the neighborhood. So they’re like places around for two bedroom, two bath, two bedroom, one bath, they close where I live, which was available for rent.
I would just go and check them. And while I was doing rehab, I was like, oh, my property is going to be way more. Well done then their property. So that would help. The second thing obviously was Rentometer. I use Rentometer a lot for calculating brands. And then I have a pro version of it, which you can actually narrow down the miles, the amount of months out and look at all those things and actually click on those photos.
That was very helpful to those two things I use for rent calculation in terms of tenants. I use Hemlane right now for property management. No blood, anybody, but I, this is the things that I use. So what you can do I think as a lot of physicians, they think “I don’t know how I’m going to be to the tenants. I don’t want them to know that I’m there. I don’t have time to show.” I had the same belief. Honestly I was very skeptical about walking in and showing units. And the first time I showed a unit to somebody, I was like I don’t know about this, but I can tell you as physicians first fall, once you tell somebody who’s coming to see your property that you are the owner. The perspective change is complete. They are like, “Oh, wow.” I don’t have just any random folks, this is an owner who’s actually believes in his property. Second thing is once you tell them you live next door, they know that they can’t like do a lot of things that they would do in the there’s an absentee owner.
So that was very helpful. I put it on a lot of portals online and for each unit I had 50 to 70 applicants. To apply for the housing and to live over there at one time I had to like, just be like no, I cannot. I just, the first person gets it. That’s it. And all my tenants are great. I love them.
They know me personally. They can, they, if they want, they can text me, but the agenda go through the property management if they need anything. Yeah, I think it was a great process as physicians. We have this leverage this persona outside that these guys are going to be honest, they’re not going to be just like any other landlord. So I think that is where house hacking is so powerful for any physician who wants to try to do it.
Mike Woo-Ming: And so your property management is taking care of all the, the toilets and all that.
Ayush Gupta: Yes, sir. Yeah, so they they do all the documents over there. Any tenant communication is through any management stuff is through that. I do have two VAs virtual assistants who helped me through a lot of like social media helped me through real estate. So I think the system, once you create systems, I think it becomes very powerful and you can leverage it.
Mike Woo-Ming: Yeah. Just as in any business, that the key to success is having the system. So in that, just as we do in medicine, you’re an ER medicine, we have a checklist to follow. As long as we follow that checklist, for most of the parts that most of the time we’re going to be successful. Can we say you’re living rent-free?
Ayush Gupta: I do live rent free. I actually make a good amount. I make around 1500 bucks on top of it a month apart from living. Used for other purposes and actually saving for buying the next puppy. So it was always like these coming in and having to do the next one with that. Yeah.
I can tell you, there are some people who have a single family home that would love to get 5,000 a month on their returner.
What two years ago I was paying 2300 for rent. And even before that I did residency, I was paying 1300 and rent fellowship, the same amount of money. I think going back to one of your first questions about teaching and we don’t get education about it, I wish. Real badly that somebody taught me this when I was in residency or fellowship, or even in med school that, Hey, this is a strategy.
This is something that works very easily. It’s easy to get into. You really don’t have to imagine. As a resident, you save a thousand books. That would be, that would mean the world to you. So that’s what I think I’m like way passionate about I bet nobody taught me this and I can help people.
Mike Woo-Ming: So it sounds like that’s why you started MDHousehacking. So tell me about the site you created and what’s the mission.
Ayush Gupta: The mission actually is to help medical professionals, whether it’s students, residents, fellows, physicians, nurses, techs, anybody who want to get into real estate in a safe way, do not have a lot of money and do not have a lot of time and want to get into real estate. There is a lot of competitive markets out there. There’s a lot of people who are trying to buy this properties using 20% down. But! There are people who don’t have that much money, the people who are very scared of getting to real estate.
So I help people walk through all those limiting beliefs, help look at their properties, have them go through the numbers for house hacking as compared to just buying a short-term rental or a long-term rental. And and show them the power of it. A lot of people don’t take into account that while I was one, I’m not paying $2,000 a month, that adds up that is like $24,000 a year saved into doing other activities that you actually can enjoy or the other investments.
So that’s my mission. That’s my goal to help people create awareness about this. Have younger professionals start on it earlier than.
Mike Woo-Ming: Perfect. Perfect. So you mentioned you, you’ve got this additional income doesn’t sound like you’re going to rest on your laurels. You said you’re investing in other projects. Is that more real estate? What’s next for you? Yeah,
Ayush Gupta: So I have now I have what of another four unit that I have, and then I have a short-term rental. So I do have these two properties. I’m part of this the group and I think I’ll plug a GoBundance and I think that has changed my mindset a lot.
Yeah, it’s it’s a good, it’s a group. We have some physicians over there from around the country. But it basically talks about like overall 16, it’s like health, authentic relationship, horizontal income, accountability, and it talks about contribution and adventure. So basically when I make my goals for the year, I think about all of these things, six things that I want to get better at.
So when I talk about investment these days, I might not have that much property that I think I’ve good right now. But I also put investment in this other aspect of my life, which I didn’t do before. That has helped a lot. Like fitness is great. I love fitness health, I think. I think that’s where I wish I can talk to more people about it that creating passive income is great and everybody should do more and have more than one source of income. But you need to do a lot of other things as well to get into,
Mike Woo-Ming: And I know you’re an attending physician, so is that some things that you tell to the. Oh all
Ayush Gupta: the time. It’s even to a fellow attendings too. Like I think what has happened now, like two years into it I just had a dinner with two of them yesterday and a lot of them are.
They’ve seen what’s going on. They’re seeing that, how I’m creating other sources of income and they want to come partner. Now they want to come talk to me. They want to just hear a lot about it. And I think that’s the event is when I was starting out, nobody over here was investing in the real estate.
Nobody was doing apart from like the usual, having a financial advisor come in. Having a portfolio, which is everybody does it. Now. People are seeing the advantage or the benefits of doing other kinds of investments. So yeah, educating as many people as I can.
Mike Woo-Ming: I love it. The website is MDhousehacking.com. We’ll also have a link in the show notes. Ayush thank, you for sharing more about your journey. It was really great to having you and best of luck in the future.
Ayush Gupta: Thank you, Dr. Mike, you’re doing a great job interviewing everybody. I love your podcast and I’m so glad that you invited me. I’m looking forward to hearing more episodes of the podcast!
Mike Woo-Ming: And thank you for joining us on this journey about educating our fellow colleagues and not only talking about passive income, but although those six areas that really can really make a big difference in your life.
So thank you everybody for listening and as always keep moving forward.