JF2149: Mistakenly Making It With Cameron Lam

Cameron is a full-time business analyst for McKesson and a part-time real estate investor. He started investing in 2017 by house hacking his first property and now has 12 properties under his name. He shares how when he first started looking to invest he didn’t have all the knowledge necessary, skipping important steps and taking the wrong advice. His story shows the importance of jumping in and being open to learning as you go. 

 

Cameron Lam Real Estate Background:

 

 

 

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“My niche is getting good tenants into a home fairly quickly” – Cameron Lam

TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Cameron Lam. How are you doing, Cameron?

Cameron Lam: Good. How are you, Joe?

Joe Fairless: I’m doing well, and looking forward to our conversation. A little bit about Cameron – he’s  a part-time real estate investor. He started house-hacking in 2017, currently owns/co-owns (and we’ll talk about that distinction) 12 properties. Based in Gilbert, Arizona. With that being said, Cameron, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Cameron Lam: Yeah, sure. I moved out here to Gilbert, Arizona about five years ago. I was looking for a place to live, found something on Facebook Marketplace, joined a roommate then, now a great friend, that was paying $325/month, so not really expensive; actually, a great price. I started working at Intel, and just for those two years saved a ton of money. I kind of got the idea from him, I said “Well, he’s renting out all his rooms and we’re paying his mortgage for him. It’s not very expensive, but why don’t I do the same thing?”

So I was driving around, there was a lot of open land, a lot of new construction down here… I saw a home that I liked, brand new build… I’m from California originally, and they told me “Hey, this home is $260,000, 4-bed/3-bath.”

Joe Fairless: Sticker shock.

Cameron Lam: I’m like, “Man, back in California that’s a million.”

Joe Fairless: Yup. You’d get a shed there maybe.

Cameron Lam: Yeah, right?! So I pulled the trigger on that one, and then essentially started doing what my friend was doing – house-hacking.

Joe Fairless: Okay, so that’s how you got going. That was 2017. You’ve been busy since then – 12 properties. I introduced you and your bio as a part-time real estate investor… What do you do full-time?

Cameron Lam: I’m a finance business analyst. Originally, I was working at Intel Corporation, then I moved to McKesson in Scottsdale. I work from home most of the time, which is nice…

Joe Fairless: They just moved their headquarters to Las Colinas.

Cameron Lam: They did.

Joe Fairless: But you don’t have to move there?

Cameron Lam: I don’t. Maybe I’ll go down there occasionally, but… No, I don’t.

Joe Fairless: So full-time business analyst… How does that help you with what you’re doing in real estate?

Cameron Lam: That’s a good question. I run numbers a lot for our business. It’s sort of like a business finance job, so running the budgets, what’s the variance to the month-end gonna be… That kind of parlays perfectly into real estate investing when you analyze a deal.

Now, to be honest, when I first started doing real estate investing, my rationale was really just so I could pay less money; just to have people pay my mortgage for me… So my thinking was (when I first started) “Hey, I’m paying $400/month to my friend. If I buy this house and it’s got four bedrooms and I’m living in one of them, my mortgage is $1,300. If I can get three people in there to pay me $500 each, I’ll make a little bit of profit.” So it’s actually less expensive for me to own a home than to rent. That’s what got me started.

I wasn’t really looking at numbers at the time. I also was single at the time, and I said “Well, then I can buy a really fancy car, I can buy a BMW and impress all the girls…”

Joe Fairless: That’s right. It’s all about the car.

Cameron Lam: Exactly. Yeah, that’s how it started, and real estate was just sort of like a side-gig for me. I learned how to be a landlord with different people living with me, and that was fun. I’ve had a ton of roommates throughout the years, being in college, and even coming out here… And then the light bulb didn’t really click for me until actually I was about to get married. This was about a year later, September 2018. I was trying to convince my now wife that “Hey, why don’t we just live in a master bedroom in that same house and rent out to my buddies?” And she wasn’t having it.

Joe Fairless: Ohhh…! If you had convinced her, I was gonna ask you what type of psychological tools you recommend for doing so.

Cameron Lam: [laughs] There are none. So pretty much she said “No, you’ve gotta kick them out.” I’m thinking to myself — I was always good with numbers, and I’m like “Oh, man… Am I preparing to pay $1,300 a month, and have no more renters income?” And the decision was no. So we found more of  a fixer-upper about ten minutes away. 4-bed/2-bath, 230k. I kind of had it in mind — I was really looking at bedrooms, like “Okay, I can just fill this with lots of bedrooms and rent out to young professionals and college students after we move out of it”, and that’s where everything started to click for me… And I’m like “Hm. There’s gotta be a better way to analyze all this real estate stuff. How do I analyze all of these deals?” and that’s where I started going on forums like Bigger Pockets, and listening to one of Brandon Turner’s books, I can’t remember which one it was…

Joe Fairless: So what did you find out? So you got that 4-bedroom/2-bath for — I think you said 220k purchase price, that was a fixer-upper?

Cameron Lam: Yeah, 230k purchase price.

Joe Fairless: 230k.

Cameron Lam: I guess my intuition was “Okay…” I started running cash-on-cash return, doing all the analysis, revenues, running vacancy… I didn’t do any of that before, so I’m sure a lot of real estate investors probably didn’t do that and they just jumped in… Or other people just have analysis paralysis and do that way too much before they jump in… I’m actually glad I just jumped in, but I had to start running numbers with the vacancy, repairs, maintenance, cap ex, landscaping, all the stuff that you know about… Then realized that for the first two properties I had purchased, the first one I had put probably too much money down. I put 20% down, because everyone and their dog was telling me “Yeah, put as much down, so your mortgage is less.” Okay – I don’t personally like that advice.

I followed that advice, and the first home I had we actually added — we turned a loft into a fifth bedroom, so the cash-on-cash on that one was 14,5%, which isn’t terrible… And then the second home we had – I knew I should put less down; we put 7% down, and probably could have gotten even less than that… And now that one is rented out for $1,900/month plus all the utilities are paid for by the tenants, so that one is 16.5%-17% cash-on-cash return.

So yeah, I think after those two properties the floodgates opened. I was just looking at Zillow all day, looking at the MLS and just trying to find other deals where I could fill the spots. I do it sort of a different way – I fill them by bedroom. You can make more per bedroom, and then people are really open to paying all the utilities that way, because it’s split.

Joe Fairless: That’s a double-whammy I personally hadn’t thought of – when you rent out by the bedroom, they’re open to paying the utilities, because if it’s four bedrooms, divided by four… Now, just so I’m clear, the first two houses that you purchased were more of  a house-hack, correct?

Cameron Lam: The first house was a  house-hack, and the second one was [unintelligible [00:09:53].09]

Joe Fairless: Okay, the first one was a house-hack, the second one was the 4-bedroom/2-bath fixer upper.

Cameron Lam: Yeah.

Joe Fairless: Got it. How long between the first and second purchase?

Cameron Lam: A year and a half.

Joe Fairless: Okay, a year and a half. So let’s just say you hadn’t been — I don’t know if “told” is the right way to put it, but you hadn’t been told you couldn’t do the house-hack. Let’s just say you and your wife agreed, or your fiancée at the time agreed “Yeah, let’s do that house-hack.” From a long-term standpoint, would that have been better, worse or neutral to your financial well-being?

Cameron Lam: That’s a good question. I think it actually ended up being better for us to move out into the new house, because I had to get creative. I said “Well, I can turn that loft into another bedroom for extra income, because I have enough people asking me…” Once I put a group of people in there, their friends wanted to move in and I didn’t have any rooms, so I said “Well, I can turn this loft into an extra bedroom.”

Joe Fairless: Which made it five beds?

Cameron Lam: Yeah, a five-bed. That one was bringing in $2,400 gross revenue, versus a mortgage that’s $1,300, plus all the other expenses. So that [unintelligible [00:11:03].21] maybe $500 to $600/month. I think I wouldn’t maybe have had the idea to start scaling if we hadn’t bought that second property…

Joe Fairless: Why?

Cameron Lam: I probably wouldn’t say that I really think super-big all the time. I am ambitious, but… If I just stayed with the one property, I probably would have just been comfortable… But with the second property, I’m thinking “Oh man, if we move out again in a year…” – you’ve gotta stay in it for a year – “…now we’re gonna have three properties.” At the time I was 28, so I’m feeling fairly young, compared to a lot of maybe other real estate investors, and saying “Wow, I could have three properties by age 28.” Now, obviously, stuff here is a lot cheaper than, say, California, where you’re priced out of the market… But I think that kind of kick-started everything. So that’s where I really started thinking “Hey, what can I do to get out of my 9-to-5 job?” Hopefully, my employers don’t listen to this, but — my manager knows I love real estate. He’s cool with it.

But the goal after we bought that second home as the primary home – I really wanted to see “Okay, how can I get to a six-figure passive real estate rental income (because you know, it’s not always passive) within the next five years, so that way I can replace my dayjob, I have more time for my wife, our future family, and just have more time in my life?”

Joe Fairless: So let’s talk about now where you’re at, because I introduced as “owns/co-owns 12 properties.” We’ve talked about two. The first one you purchased, and then the second one – it took a year and  a half… Based on quick math, you purchased at a more frequent pace than that for future properties, so talk to us about how you scaled and the details there.

Cameron Lam: Yeah, so the second property was September 2018, when we got married. In November I saw another house that was six-bed/three-bath, five minutes away, and just running the numbers I’m like “Okay, this one is gonna return 16% cash-on-cash.” I’d say I probably still made a mistake here on how much money we put down. I worked with a local credit union and they had programs — with the dollar craziness going on right now with the coronavirus who knows what programs people are gonna have left now anymore… But they had 10% programs, and 15% down programs for investments. I just bought a house, so I didn’t have the cash for that, and slung a deal with my parents and I said “Hey, I feel like I’ve done a good job on this first home. If you guys will loan me the money for the down payment, co-sign with me, I will pay you guys back over time.” And they said “Yeah, sure, we’ll do that.”

Joe Fairless: Any interest?

Cameron Lam: No, no interest. I tried to tell them I’ll pay them interest, but they’re just– I don’t think they even really expect me to pay them back, but I am.

Joe Fairless: Okay. Have you started?

Cameron Lam: Yeah, I’ve been paying them back ever since. It’s funny, my mom – she’ll send money for my birthday, and I’ll just give it back to her for down payment money.

Joe Fairless: So that deal – what was the purchase price?

Cameron Lam: The purchase price was 320k, 6-bed/3-bath. It rents out right now for $2,900 plus the utilities are paid for.

Joe Fairless: What’s the typical resident profile?

Cameron Lam: The resident profile is usually just college-age kids, or young professionals. I really find here that we have a lot of students who are going to community colleges, [unintelligible [00:14:24].13] ASU, dental schools out here… There’s just so many schools. And a lot of times you find that they don’t really wanna pay $800 to $1,200 just to live close to campus. They’re not really making a ton of money… So I kind of fill this niche where “Hey, each bedroom’s priced between $450 to $600”, and they totally love that. So that’s really where I kind of carved a niche here, and I find a lot of my tenants on different Facebook groups.

Joe Fairless: That’s property three. Now, taking a step back – you have 12 properties… How did you scale so quickly?

Cameron Lam: Man, my wife didn’t see me the last couple of years… So we scaled — the next two properties I went in with my brother. He kind of saw how I was doing; I’d say my niche is really getting good tenants into the homes fairly quickly… So with property number three, actually — I don’t even know if this is allowed, and I say something I shouldn’t say, but… As we were closing on the home, I brought in six potential people to come look at it, and they wanted to sign the lease agreement before we had officially closed. I said “Okay, I think we can do this”, so they signed the lease agreements, and then when we closed, they moved in literally the day after.

Joe Fairless: And how did you find them? Through those Facebook groups, or other…?

Cameron Lam: Facebook groups, yeah.

Joe Fairless: Okay. So you’re a member of the Facebook groups for those local schools… And anything else other than — like Arizona state, for example… What Facebook group are you a member of for Arizona state?

Cameron Lam: ASU Leasing/Housing — I can’t remember the exact name.

Joe Fairless: Okay, so something like that, where it’s — if I’m an ASU student and I find this Facebook group, it’s clearly dedicated for me finding an apartment or a place to live.

Cameron Lam: Exactly.

Joe Fairless: Okay. That’s helpful.

Cameron Lam: There’s so many people looking. They have 30,000+ students, so  there’s no shortage of tenants. So I utilized my brother on the next two deals and went 50/50. I manage, we both put in 50% of the equity… Because he would really be my first official business partner.

Joe Fairless: There was no zero-interest loan with your brother…

Cameron Lam: No, no… [laughter] By then I had some funding available for my job, so… That was 3-4 months after purchase number three, so four and five. One of those was a smoking deal. I think right now its cash-on-cash return is 46%.

Joe Fairless: How did you find it?

Cameron Lam: I’ve found it just on Zillow. I don’t think I’ve actually ever had any off-market deals. Actually, I take that back; I had one off-market deal. Everything else, I’ve usually just found on Zillow, or now my realtor sends me stuff on the MLS.

Joe Fairless: Okay.

Cameron Lam: So I did those two with my brother; I bought a tiny home, and that one probably wasn’t the best purchase, but now that’s being rented out… And that was a couple months after that. I purchased another property as a primary residence for me and my wife a year after property number two, so September 2019 we moved back by property number one actually, in the same community… And then rented out property number two. And then within the last six months — I actually posted a post on Bigger Pockets just to document my journey with the eight properties, and by then I was netting 40k-50k/year on these different properties… So I just said I’ll title it “How I was able to scale to 40k+ a year in two years”, and that really opened the floodgates. A lot of people started messaging me, interested in joining me, doing investments… So the last few months we’ve scaled up to 12, and now 18 total units.

Joe Fairless: And how do you structure that with people? I know with your brother it’s 50/50, but what about the other structures?

Cameron Lam: Yeah, the way that I’ve actually structured it – and I don’t know if this is the best way; I’m still learning. So since I’m kind of hands-on, boots on the ground — I know a lot of people take salaries; what I do, the way I structure it is I’m actually coming into these deals with no money down. My co-investors are putting all the money down, securing the down payment, securing the property, and what we’re doing is in exchange for sort of my equity into the home, any cashflow that we receive — let’s say we cashflow $1,000; if it was gonna be split 50/50, my 50% portion would actually go towards paying down my equity into the property.

So usually for all these properties we’re acquiring now, it takes about 3-4 years for me to  be 50/50 in. And I’m okay to do the sweat equity, because when we sell, I’ll get 50%  of the sale, and then after 3-4 years I’ll get 50% to 60% of the cashflow, depending on the deal.

Joe Fairless: What’s an example of a deal that you’ve lost money on?

Cameron Lam: A tiny home.

Joe Fairless: Tell us about it.

Cameron Lam: This lady was selling her tiny home for $35,000 on Facebook Marketplace, and I was like “Man, this would be awesome to put in my backyard and rent it out on Airbnb”, and there was another guy doing it in Gilbert, and he had always booked… So I just bought it, got it transported over here for a couple grand, put it in my backyard… And I was like “It won’t cost me that much to set it up.”

I started getting bids from different people… The plumber who had to plumb the sewer stuff out to the street, that was 100-foot – that was gonna cost 5k-10k. And then running new electrical… And just all this money, and I was like “Man…” And then there’s permit issues; you’re technically not allowed to do that in our city. And I’m like “Okay, well — I have this tiny home sitting here now, and I’m paying this lady…” I was actually paying her no interest, five years, for the $35,000; I was paying her like $550/month… Which was a good deal. But it was just sitting here, just sucking up cash… And I actually moved it to an RV park, and it had all the hookups there, and now it’s being rented out. I think net I’m losing $200/month.

Joe Fairless: [laughs] It doesn’t rent for more than $550?

Cameron Lam: It does, but the RV park cost is like $400+, so…

Joe Fairless: A month?

Cameron Lam: It rents for $800. Yeah, $400+ a month.

Joe Fairless: [laughs] Conceptually, it sounds like a really good idea. You could have  a little tiny home village in your backyard. Put like 4-5 of them, and put a little garden for everyone… You could make a little community. But yeah, then you need to think about logistics, plumbing, electrical… And oh, by the way, permits.

Cameron Lam: Never again, man… I think it was a nice idea, and maybe once stuff gets more regulated here and more favorable towards the tiny home movement, then things will be better.

I guess the silver lining is that thing will be paid off, and — I’ve had it for a year and a half, so three and a half years, so… That’s fine. I’m kind of ready to be done with that thing.

Joe Fairless: Taking a step back, based on your experience, what’s your best real estate investing advice ever?

Cameron Lam: I feel like I don’t know a lot about real estate. I’m still learning every day. A lot of people ask me “How do I get started?” and I think it is a big decision to buy another investment property… But if you already own a home, or even if you’re just leasing an apartment, why not house-hack just to get started, so you get experience being a landlord, you get experience having tenants, screening tenants…? That will give you just a really easy way to see if you’d like real estate investing, or give you a feel for if you maybe want to purchase that first investment. So I’d say try house-hacking if you’re unsure, and just do it.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Cameron Lam: Yup.

Joe Fairless: First, a quick word from our Best Ever partners.

Break: [00:21:54].23] to [00:22:38].19]

Joe Fairless: Best ever book you’ve recently read?

Cameron Lam: The Millionaire Next Door. I’ve just re-read that. I love that book.

Joe Fairless: Best ever deal you’ve done?

Cameron Lam: Phoenix duplex, 46% cash-on-cash return.

Joe Fairless: Best ever way you like to give back to the community?

Cameron Lam: Pricing things really affordably for all my renters, so that they can save money.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?

Cameron Lam: SixFigurePassiveIncome.com.

Joe Fairless: Thank you so much for being on the show, Cameron, and talking about your process for how you’ve built the portfolio, with partners, with your family members initially and with partners now… And talking about how you aren’t gonna be buying any tiny homes and putting it in your backyard anytime soon, and how when you purchased your first property you might have been sitting there idle longer if you hadn’t been forced to evolve the process based off of relationship stuff, and how that ended up being a more profitable way of doing business, and how it kick-started some things.

So it’s interesting, because Tony Robbins talks about “Change is inevitable, progress is something that we have to be intentional about.” I’m paraphrasing… It’s basically something that he says. So it’s interesting that — you probably would have changed your approach eventually, but this really forced your progress earlier on, and it’s helped you get to where you’re at.

Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.

Cameron Lam: Yeah, thanks a lot, Joe.

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