JF1907: Turn Key Deal & A Duplex In Cincinnati, Breaking Down The Numbers with Amanda Cassiday

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Amanda is a successful entrepreneur who is still new-ish to real estate investing. We’ll hear about her turn key deal, where she found it, what company manages it, and how much money it’s making. Then we’ll hear about her recent purchase of a duplex in Cincinnati. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“9 months of owning this property, we had put $40,000 into it” – Amanda Cassiday

 

Amanda Cassiday Real Estate Background:

  • Entrepreneur, house-hacker, turn-key investor, and business designer and strategist
  • Recently started investing in real estate long distance and is growing that portfolio
  • Based in Brooklyn, NY
  • Say hi to her at https://www.amandacassiday.com/
  • Best Ever Book: The Alchemist

 


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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, Amanda Cassiday. Hello, Amanda.

Amanda Cassiday: Hi. How are you, Joe?

Joe Fairless: I am doing great, and looking forward to our conversation. A little bit about Amanda – she’s an entrepreneur, house-hacker, turnkey investor and business designer and strategist. Recently started investing in real estate long-distance, and is focused on growing that portfolio. Based in Brooklyn, New York… And we’re gonna be talking about some challenging stuff that she has come across on a property. First though, Amanda, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Amanda Cassiday: Of course. I’ve spent my 20’s living in West Africa, as a Peace Corps volunteer, earning about $8/day, doing a lot of microfinance and health education work. Then I went to grad school and got my MBA, incurred a lot of loans, and eventually got my first job in New York City at 28 years old [unintelligible [00:02:24].03] in the healthcare world. With $70,000 in debt, I had no savings, and by the time I moved to New York I was obviously super-overwhelmed by the cost of living in New York City… So I first started my real estate journey by house-hacking; I rented a two-bedroom apartment and airbnb-ed the second bedroom. It’s been great, I’ve been doing it for years; I earn about $20,000/year, and I’ve met some really incredible people all over the world.

Then I got into turnkey investing, which was a great opportunity for me to leverage these resources that I first started to gain in my job… And put them into something that was earning me more passive income. However, I think it was a little bit too passive for me.

Over the last year-and-a-half I’ve decided to get my hands a bit dirtier and get into real estate investing independently… But the problem was in [unintelligible [00:03:12].25] I live in New York City, and both markets are too expensive for me, so I knew I had to become a master in a market that I could afford, that also had potential to grow.

So through a several month analytical and intuitive process, I landed on Cincinnati. That’s when I first connected with you, Joe, through our mutual friend Carla…

Joe Fairless: Yup.

Amanda Cassiday: And you [unintelligible [00:03:32].07] who became my agent, and my friend and now business partner Jeff and I just bought our first duplex about a year ago, last September.

Joe Fairless: And with turnkey investing, did you buy any properties before you got more hands-on with what you’re currently working on?

Amanda Cassiday: No, I just bought one turnkey property, and as the name suggests, it was very easy; they hold your hand from beginning to end. So for me it was helpful having finally had some savings for myself that I had never really had before, to help me practice the idea of taking a larger amount of my savings and putting it into something else. It was a scary move for me. Even though it was a $17,000 down payment, that was a very big deal for me at the time… So the process I think helped shift my perspective around “Hey, I can do this over and over again. I can choose the market I wanna do this in, I can choose the property, I can choose the approach I wanna take to generate revenue.” So that’s when I ultimately decided to do this on my own.

Joe Fairless: The turnkey rental – what group did you go with?

Amanda Cassiday: I went with a company in Memphis called Mid-South Homebuyers.

Joe Fairless: Mid-South Homebuyers?

Amanda Cassiday: Correct.

Joe Fairless: And what did you buy it for and what does it rent for?

Amanda Cassiday: It was a $64,000 property, so the down payment was around 17k, and I’m getting about $750/month in rent. I’m earning around $330-$350/month.

Joe Fairless: Okay, so you get $300-$350/month in your bank account every month, barring something irregular with the property.

Amanda Cassiday: Correct.

Joe Fairless: Cool. And how long have you owned that?

Amanda Cassiday: Almost three years.

Joe Fairless: Any challenging things that have come up with that property?

Amanda Cassiday: The first year was pretty smooth. After my first tenant moved out we had a new tenant that came in, and they had a lot of trouble paying the rent. Eventually the property manager got them up to speed and I’ve been reimbursed for lost rent over the last month or two, but so far it’s been smooth sailing.

Joe Fairless: So they reimburse you if you don’t have a tenant living there?

Amanda Cassiday: I had only six weeks between tenants, but once they filled it with a new tenant, that’s when they were kind of delinquent in paying rent.

Joe Fairless: Okay, but the property management company didn’t reimburse you for the time lost…

Amanda Cassiday: Correct.

Joe Fairless: Okay, got it. Cool. So if you are making $300-$350/month in profit every month, then why change that approach and go into something where you’re more hands-on?

Amanda Cassiday: I have, I think, in my core, a  bit of an entrepreneurial spirit… So when I enjoy doing something, I typically want to end up doing it myself. I make candles, I now make ceramics… When I see things I enjoy, I take the expensive ownership of “I want to own the process and experiment, and learn more about myself along the way…” And turnkey – you’re right, it was very passive. All I had to do was wait in line every six months and buy a house… But I wasn’t learning about the Memphis market. I wasn’t building relationships with anyone other than my property manager and turnkey company. I wasn’t scaling my reach through knowledge and resources and partnerships, so I wanted to take the leap and really take more ownership of my financial future, and hopefully scale much more quickly.

Joe Fairless: So let’s talk about your most recent acquisition. Tell us about it, please.

Amanda Cassiday: It is a duplex in Cincinnati. The asking price was $115,000. It was positioned as two one-bedroom properties, but both of them had large square-footage and an extra room. So they could quite easily and cheaply be converted into two two-bedrooms. We put in an offer for $100,000 and it was accepted, so we went ahead with the due diligence process. The inspection was great, actually; the inspector said it was the best 100-year-old house he’s ever seen…

Joe Fairless: Wow.

Amanda Cassiday: …with the one caveat — yeah, it was great. It was so great to hear. It was almost too good to be true, which it kind of was, as we’ll see… But the caveat to his inspection was “This is a 100-year-old house. It has 100-year-old clay pipes underground, and I cannot guarantee the quality of those pipes.” Since this was our first purchase in Cincinnati, we paid for a little bit more due diligence. We brought in a plumber to scope the pipes, and the plumber found some clogs and issues. Clay pipes are a little porous, and so over time [unintelligible [00:08:23].22] and create clogs…

So what we ended up doing is we added an addendum to the purchase agreement that said that the seller had to ensure that the drain was clear and there were no faults between the house and the sewage line.

So the seller went ahead and paid what was around $6,000, used the same plumber that we used to scope the pipes, and then in September of last year we closed.

Joe Fairless: Okay. Congratulations on the close.

Amanda Cassiday: Thank you. It was a big day. We were pretty scrappy about — the first few things after that is we did a lot of the repairs ourselves… Since we were in Cincinnati to close, we went ahead and showed the space to tenants… It was a great experience for us, but it certainly could have been done more efficiently with experts. We ultimately got the place filled within ten days.

Joe Fairless: Wow.

Amanda Cassiday: Yeah, it was exciting for us… And the total rent that we’re netting through that  is $1,550.

Joe Fairless: $1,550 is what they’re going for between the two bedrooms?

Amanda Cassiday: Two combined, yeah. Just over $1,500, yeah.

Joe Fairless: Okay.

Amanda Cassiday: It’s between the 1% and 2%, so that checked out.

Joe Fairless: Sure.

Amanda Cassiday: And it wasn’t until the tenant moved in that the turbulence really started. The background for the house is it had been owner-occupied for many years, almost the entire life of the house… And that second unit had been unoccupied for quite some time. So when those tenants moved in, everything was a bit rusty and there were kinks that needed to be worked out.

Joe Fairless: Like what?

Amanda Cassiday: The first thing that happened right out of the gate is there was a gas leak. And I think it’s just those pipes hadn’t been used in such a long time for that unit… We weren’t quite sure what the issue was, but that gas leak ultimately took about two weeks to resolve, because the plumber who came in to identify the leak and fix the leak and the Cincinnati gas company weren’t talking to each other. So they each kept coming out at different times, the leak still hadn’t been resolved, and two weeks later our tenants are obviously upset and frustrated coming out of the situation.

Joe Fairless: How was the gas leak identified in the first place?

Amanda Cassiday: Our tenant smelled gas and called us right away, which was great.

Joe Fairless: And then are they living in the unit during these two weeks?

Amanda Cassiday: So had we known this would have taken two weeks, we would have put them up in a hotel right away. It’s just not a good environment, for the tenants to be in a place without gas… But every day we were told that it would be resolved, and then every day something else happened and prevented that from being resolved… So we ended up giving our tenants a pretty large gift certificate to a restaurant in the area, we sent them heaters, we did everything we could to get them as comfortable as possible once we realized that this would take a bit longer than we expected.

Joe Fairless: Okay. How much was the gift certificate?

Amanda Cassiday: I think over $300.

Joe Fairless: Where was it to?

Amanda Cassiday: It’s The Eagle.

Joe Fairless: The Eagle. I don’t know The Eagle. Okay…

Amanda Cassiday: I think it’s in Over-The-Rhine.

Joe Fairless: Oh, it’s a cool, hip area that I never go to. [laughs]

Amanda Cassiday: Yes.

Joe Fairless: Fair enough. Alright…

Amanda Cassiday: All the young kids are going there.

Joe Fairless: Yes, yes. Okay, so that got resolved…

Amanda Cassiday: That got resolved. The next few issues were appliances shutting down… We actually had some tenants that were a little difficult; it was their first time living in an apartment together… They were very, very young, were accustomed to living at home, and just were fairly disrespectful to the property, disrespectful of the property management, of us… And it just took quite a bit of time and energy.

Ultimately, after we feel like we’ve had our fair share of issues, really the kicker came this past February, where we get a video from our tenants in the bottom unit of sewage literally spewing from the ceiling and getting all over the walls, couch and floor.

Joe Fairless: Oh, my…

Amanda Cassiday: Yeah… It was difficult.

Joe Fairless: Where were you when you received that?

Amanda Cassiday: I was at work, in a meeting. I had to step out of the meeting; my heart sunk… I was really hard on myself for the gas leak and for this. I wanna provide a safe, comfortable living environment for people as a landlord; that is my responsibility… And I felt like this was wildly out of our control. We did everything we could during the due diligence phase to make sure there were no issues, and then suddenly we have issue after issue… And then this was kind of one of the worst possible things that a tenant could live with.

Joe Fairless: Yeah…

Amanda Cassiday: So we brought in the same plumber who fixed the pipe a few months ago, and he stopped the leak immediately. We brought in sewage mitigation, which is a pretty lengthy process. It takes quite a lot of time to sanitize everything and make sure the walls are dry. We had to bring some other folks in to fix the ceiling… And then we kicked off what is a lengthy insurance claim preface to cover the damages.

Then a few weeks later, just as the walls are drying, just as our tenants are feeling more comfortable in the space, we get another leak in the exact same location.

Joe Fairless: Oh…!

Amanda Cassiday: [laughs]

Joe Fairless: At this point tell me you’re not going back to the same plumber.

Amanda Cassiday: I’m not. You’re exactly right. At this point I’m thinking “This is clearly a systemic issue, and we need to look at the entire system. We need a fresh set of eyes to really evaluate what the problem is here.”

Joe Fairless: Right.

Amanda Cassiday: So we bring in Roto-Rooters, and I’m mentioning their name because I’ve had a fantastic experience with them, and I highly recommend them. We bring them in, they do a full scope of the pipe, and they discover what appears to be a separation of the pipe underground, between the house and the main line. And based on what we know about the pipe replacement and the pipe separation, it seems like it is that exact same length of pipe that had been replaced, that has separated from the main line.

Joe Fairless: Oh… Bad plumber.

Amanda Cassiday: [laughs] So… Bad plumber. It seems like negligence… And at this time I’m drinking out of a fire hose. This is my very first issue with plumbing in my entire life. I am not an expert in any way, shape or form, and here I am in the middle of two plumbers. One is Roto-Rooters, and they’re telling me “Here’s my hunch based on a picture I have of inside the pipe.” And on the other side I’m hearing from the original plumber, who is adamantly against the notion that his pipe replacement from a few months ago had anything to do with this problem. He thinks it’s further down the line.

So it was really difficult at first for me to navigate these two conversations not being an expert in the field…

Joe Fairless: Yeah, yeah… How did you do that?

Amanda Cassiday: One thing is I leaned on experts within my network. We use Hemlane to manage our property, and Dana Dunford was calling us probably every week at this point and giving us a lot of very, very sound advice. She was fantastic throughout the entire time. But the other thing I really tried to focus on is, while I might not know anything about plumbing, I know about people, and I know that gut feeling of when I can trust someone and when I can’t. And it was through those conversations with both Roto-Rooters and the original plumber that I realized I cannot trust that original plumber. He is not there to help me as a customer, he is there to save his own butt.

Joe Fairless: Yup.

Amanda Cassiday: So we went ahead with Roto-Rooters, we broke ground… Sure enough, the pipe had been separated. So when you count the repairs of fixing and replacing that pipe, when you count two rounds of sewage mitigation, and when you count vacancy, because at this point [unintelligible [00:16:31].25] “Tenants, you guys have been through the wringer, and we’re not providing a safe, comfortable living environment, and quite frankly at this point we don’t know when we will be able to.” Based on our track record we kept uncovering things, and I wasn’t comfortable yet in assuring them that this would be it.

So they’re out, so we have a vacancy. When you add all of that together, we were at about $20,000, which was the cost of our down payment.

Joe Fairless: Wow. You said that equals your down payment, right?

Amanda Cassiday: Yeah. So basically at this point — all of this happened by April. So nine months of owning this property we had put $40,000 into it.

Joe Fairless: Huh.

Amanda Cassiday: Down payment plus this.

Joe Fairless: And was the original plumber recommended to you by your property management company, or someone else, or how did you get in touch with them originally?

Amanda Cassiday: It was by my agent. And if you look this person up on Yelp, they have 4,5 stars. They are very well-reviewed. Look, people make mistakes; I’m not questioning whether or not he is an expert… But licensed professionals are ensured and sometimes bonded for a reason… And it’s for reasons like this. When there is an issue of negligence, or just a simple honest mistake, you can tap into those resources and pay for the damages done. But in the case of us, he was completely unwilling to tap into those resources.

Joe Fairless: Got it. Well, it’s interesting… I was just talking to a local real estate investor, and he was talking about a contractor who skipped out on a job, and basically took this investor’s $900. Then that investor’s friends reached out to the investor and was like “Hey, would you recommend this contractor? I’ve got this $5,000 job” and he’s like “No, I don’t.” He skipped out on $900, and… What the contractor doesn’t see in the long run is you do what you’re supposed to do or what you’re committed to do, and that $900 will turn into a $5,000 job with that investor, or some other investors…

Amanda Cassiday: Right.

Joe Fairless: But instead, he’s missing out on some larger stuff because he didn’t fulfill his obligation to some smaller stuff.

Amanda Cassiday: Absolutely.

Joe Fairless: But that’s just how the cookie crumbles.

Amanda Cassiday: Absolutely. And there is a happy ending to this… Even though we talked to a number of people and they said “Look, this is going to be a really tough case”, but we ended up getting every single penny of our $20,000 back.

Joe Fairless: What?! How?

Amanda Cassiday: Yeah… I can’t tell you all of the details for legal reasons, but I can share some of the key steps that I took, that I think you and your Best Ever listeners can also take. In the case of this contractor there are tools that we can use to try to get as much as we can out of negative situations like this. Because at the end of the day, we had dropped $20,000, it just didn’t feel like this was over. We might as well try, but spend a little bit more to make the effort and try to get some of that money back.

Joe Fairless: Yeah.

Amanda Cassiday: So there are a few strategies, and I’ll list them in order of magnitude, because at the end of the day you don’t wanna go to litigation. It’s extremely costly from a finance and from a time perspective. So take those steps little by little and build to there if you absolutely have to get there, and decide if it’s even worth your while.

The first thing is have a conversation with your service provider directly. Oftentimes they really care about the quality of their work, and they care about whether or not their customers are happy… So maybe a simple conversation and they’d be willing to tap into their insurance and help cover the work, or maybe if you trust them to go in there and fix what was done improperly. That wasn’t the case for us, so the next step I took was I shouted my experience from the rooftops. Service providers really care about their ratings and reviews on Yelp and other platforms, and I felt like given this experience I had a duty to share my experience with the world.

I also reported him to the Better Business Bureau. They reached out to hum several times, and he never responded. So that complaint through the BBB became public. And again, some people may be willing to bargain with you after that. “Those reviews mean everything to me. Hey, if you take those down, let’s go ahead and work something out.” But that still wasn’t the case for me, so that’s when I decided to get a lawyer, and I’m happy to recommend my lawyer to anyone in the Cincinnati area. He was fantastic. I interviewed a few and I’ve found someone who I felt like really heard me, who was confident but also really curious and passionate about this issue.

The other thing I wanna say here is how important it is to document everything. And I don’t mean document everything once an issue occurs, I mean document everything over the life of the property that you own… Because the minute something comes up, you’ll have the evidence you need to support yourself.

Joe Fairless: What are some things along the way that you can document?

Amanda Cassiday: Inspections… Obviously, all inspection records you wanna hold on to that. When we had that plumber scope the pipe, he actually sent us a video of the original pipe, so we filed that away. When the seller did the work, we got a copy of the invoice of the work that she did, and we filed that. Obviously, pictures of the sewage leak and all the damages done is important… But I would say frankly comparing the original scope video of the clay pipes with the separation of the pipes, it was really clear — you can’t see PCV pipe in this first scope, and you can see a separation between clay pipe and PCV pipe in the second scope. So I think that really helps support our evidence.

The other thing I did in terms of documentation is reach out to local ordinances to find facts. I learned through reaching out to local the local Cincinnati district that the original plumber did not pull a permit to do the work. And had he pulled a permit and had he gotten an inspection, he would have been told that he had to encase that pipe with cement, due to the depth of that pipe cell underground… And he didn’t; and that could have been one of the reasons why the pipe wasn’t supported and dropped.

So it was important for me to get a holistic picture, and I think if Best Ever listeners can — just any receipt, any work done in particular to the house, names of people who did them, contact local counties and ordinances for documentation… You’ll be able to have people who are willing to testify to say “Hey, this is correct. I looked up this person’s name and they didn’t file a permit.” All of those things can help build your case even more.

Joe Fairless: Very helpful. I did not remember — because I think you’ve told me, but I did not remember that you got the $20,000 back… Because we have a mutual friend, and we were hanging out at our mutual friend’s wedding this past summer when you were telling me about this… And I was like “We’ve got to do an interview about this…”

Amanda Cassiday: [laughs]

Joe Fairless: And wow, I’m so glad that we did. Based on your experience as a real estate investor, what is your best real estate investing advice ever?

Amanda Cassiday: I would say you really wanna make sure your incentives are aligned in any deal or partnership that you make. For me it was with the seller. When we had that addendum to the purchase agreement that said the seller had to fix the pipes, they’re not incentivized to do their best possible  job. They wanna spend as little money as possible on the house that they’re selling.

So I think what I would have done had I done it over again is just negotiate the price of the house lower and then use those savings to fix it myself.

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

Amanda Cassiday: So ready.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:24:49].23] to [00:25:25].22]

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

Amanda Cassiday: I would say personally The Alchemist, by Paulo Coelho. For me it was a really transformative book. It helped me understand that you don’t need clarity in your path in life; you just need to stay true to yourself and have faith in yourself to take that next step forward.

Joe Fairless: It’s powerful. What’s the Best Ever way you like to give back to the community?

Amanda Cassiday: I advise entrepreneurs in the U.S. [unintelligible [00:25:44].01] entrepreneurs in Africa, and then I’m actually happily doing my very first Habitat for  Humanity build later this year.

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

Amanda Cassiday: Folks can reach me on my website, which is www.AmandaCassiday.com.

Joe Fairless: Well, Amanda, thank you for being on the show, and my bad earlier on your last name. I just realized that I think I pronounced your last name Cassidy instead of Cassiday… So thank you for bearing with me on that.

Amanda Cassiday: No worries.

Joe Fairless: I really enjoyed our conversation… Such helpful advice. I love talking about case studies, and some case studies go according to plan, some case studies don’t. This one did not. However, there’s a lot of things that you shared with us that I’m sure you’ll be applying in your future career as a real estate investor… But boy, you helped out a lot of people with this advice, especially when we come across a situation that a contractor, a vendor or a subcontractor does not live up to the billing. Here’s a process that we can go through – talk to them directly, shout from the rooftops, report to the Better Business Bureau, get a lawyer, and it’s important to document everything along the way. And then check local ordinances, too.

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

Amanda Cassiday: Thanks so much, Joe.

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