Todd Baldwin: Real Estate Success Requires House Hacking and Living For Free

As a part of my series about the ‘Five Things You Need To Know To Succeed In The Real Estate Industry’, I had the pleasure of interviewing Todd Baldwin.

Todd Baldwin, known on CNBC as the Millennial Millionaire, is an American entrepreneur, investor, and real estate enthusiast. He lives in Seattle, Washington with his wife Angela where the two of them have amassed a House Hacking and Airbnb Empire. He is using the knowledge he has learned in these endeavors on his YouTube channel to help others build wealth and gain financial independence.

Thank you so much for doing this with us! Can you tell us the “backstory” about what brought you to the Real Estate industry?

Unfortunately, my story is not uncommon. I was raised by a single mother who struggled every day to put food on the table for three kids. Seeing my mom worry tirelessly about finances led me to decide at 12 years old that someday I would become a millionaire.

By the time I was 22 I was making 6 figures working in sales, and I used every last penny to buy real estate. Today at 29, I’m bringing on $1.4 million per year.

Can you share with our readers the most interesting or amusing story that occured to you in your career so far? Can you share the lesson or take away you took out of that story?

I once had a young lady apply to rent one of my properties. She had a very low credit score and very inconsistent income. My gut told me not to rent to her. There were far too many red flags and I didn’t want to take the risk. But this woman was in a really tough spot. She explained to me that she grew up in a bad situation, and her foster parents used her social security number for all kinds of shady stuff. That’s why she had the low credit score. Because I grew up poor, her story pulled on my heart strings a bit and I decided to give her a change. I agreed to rent to her and I helped her move in. Shortly after she moved in, I came to realize she never intended to pay rent. She wanted to live there rent free for as long as she possibly could. I was very proactive at finding rental assistance programs, and these programs covered 100% of her rent until she finally moved out. I was very lucky that I didn’t lose a dime of rent, even though this woman didn’t pay. The programs kicked in and I was made whole. So what’s the moral of the story? Go with your gut. Don’t ignore the red flags, and even if you feel bad for someone you have to protect yourself first.

Do you have a favorite “life lesson quote”? Can you share a story or example of how that was relevant to you in your life?

Nobody can time the market. Don’t wait to buy real estate. Buy real estate and wait.

Are you working on any exciting new projects now? How do you think that will help people?

I am actively seeking an apartment building specifically for section 8. This will be to help folks who are low income find safe, affordable housing that is really nice. I will be working with section 8 so that the government guarantees the rent.

What do you think makes your company stand out? Can you share a story?

We built an innovative company that is completely unorthodox. We think outside the box and that’s what makes us succeed.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?

My wife Angela is my rock. She is very supportive and a key part of my success. We built this empire together and I wouldn’t be nearly as successful without her.

Ok. Thank you for all that. Let’s now jump to the main core of our interview. Can you share 3 things that most excite you about the Real Estate industry? If you can please share a story or example.

Investing in real estate is the ultimate life hack. I wish more people were taught this. The first thing that excites me about real estate is that everyone needs a palace to live. In 2015, my wife and I bought our first house. It was a 6 bedroom 4 bathroom home with a three car garage. The purchase price was $500,000, but we were able to buy it with a small down payment of $19,000. Every month that the mortgage was paid, we were buying down equity so we were building wealth by just living in our home. The second thing I like about real estate is rental income. In that first house that we bought, my wife and I occupied the master bedroom, but we rented out every other bedroom in the house. Because of our rental income from all of those bedrooms, my wife and I were living completely for free in a house that we owned. Each month that we made the mortgage payment on the house, all of that money was coming from the rental income from our roommates. When you live for free, you’re able to save a huge percentage of your income. Once we moved out of that house, we leased out the master bedroom that we used to live in, and across all 6 bedrooms we were bringing in $5,900 per month, just for one house!! After the mortgage, taxes, insurance, and utilities, we were pulling in $2,000 per month in cash flow, meaning that we were making about $24,000 in profit every year! Remember, we only put $19,000 down, so imagine making $24,000 per year off of a $19,000 investment!! That is a 126% cash on cash return, not to mention the mortgage was getting paid down every month. Well this brings me to the third thing I love about real estate. Appreciation. We bought this first property in December of 2015 for $500,000. In September of 2021, we sold this house for $875,000. So in addition to collecting about $400,000 of rental income for this property over the last 6 years, we ended up selling it for $375,000 more than we paid for it.

Can you share 3 things that most concern you about the industry? If you had the ability to implement 3 ways to reform or improve the industry, what would you suggest? Please share stories or examples if possible.

One concerning thing is that real estate is such a great way to build wealth, but it is a relatively high barrier to entry. I would like to make it so more people have the ability to buy properties. The second concern that I have is that it makes the rich get richer. I’m a rich man who has gotten richer every year because I own real estate. Owning rental houses is actually a great way to pay no taxes…..legally. Admittedly, I am profiting quite nicely from real estate, but it will certainly contribute to wealth inequality. The third concern about real estate is what to do in a market crash, but I’m not worried about that. Markets go up and down. Ride the wave and don’t panic sell. If you buy real estate in a crash, you will become rich. If you sell real estate in a crash, you will go broke.

What advice would you give to other real estate leaders to help their teams to thrive and to create a really fantastic work culture?

Treat your employees like family and treat your tenants like high valued clients. Always strive to do the right thing.

Ok, here is the main question of our interview. You are a “Real Estate Insider”. If you had to advise someone about 5 non intuitive things one should know to succeed in the Real Estate industry, what would you say? Can you please give a story or an example for each?

I think that everyone should househack. Househacking is when you buy a primary residence to live in. This can be a single family home, a duplex, triplex, or a fourplex. If you buy a single family home, rent out the extra bedrooms to offset your mortgage. If you buy a duplex, triplex, or fourplex, rent out the other unit(s) to offset your mortgage. By doing this you can live completely for free.

Because of your position, you are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. :-)

I would want mandatory financial literacy classes all four years of high school. I think that would be the first step in closing the wealth gap.

How can our readers further follow your work online?

Instagram — @toddjbaldwin

Thank you for your time, and your excellent insights! We wish you continued success.