JF2125: Early Problems With Out Of State Properties With Elenis Camargo

Elenis bought 5 rental properties all acquired sight unseen and from out of state. She shares how she managed the rehab process with her properties being in an entirely different location. During one of her first deals, her tenant abandoned the property and she talks about how she was able to handle this difficult situation.

Elenis Camargo Real Estate Background:

  • Works full-time as a digital marketing professional in healthcare
  • Portfolio consists of 5 rental properties, all acquired sight unseen and from out of state
  • From Brooklyn, New York
  • Say hi to her at: www.thirdstoneproperties.com 

 

 

 

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Best Ever Tweet:

“I talk to alot of people, I learn from a lot of people, and I teach people as well. This is a people business, and it’s really important to learn from and help each other out ” – Elenis Camargo


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, Elenis Camargo. How are you doing, Elenis?

Elenis Camargo: I’m doing great, how are you?

Joe Fairless: I am doing well, and looking forward to our conversation. A little bit about Elenis – she works full-time as a digital marketing professional in healthcare. Her portfolio consists of five rental properties, all acquired sight unseen, and from out of state, from Brooklyn, New York. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Elenis Camargo: Sure. Thanks again for having me. I’m originally from Miami, Florida. My husband and I moved to Brooklyn, New York four years ago, and after realizing how expensive it was to buy an apartment that we wouldn’t really love in Brooklyn, New York, we decided to invest in Florida, and narrowed down the market to Jacksonville, Florida.

So like you said, we’ve had five properties sight unseen. We focus on buy and hold investments, so most of our properties are rehabbed, and we add value by rehabbing the properties… And then we’ve also been helping other investors acquire properties in Jacksonville, since I’m licensed in Florida.

Joe Fairless: Okay… So a lot to unpack there. When I was reading your bio, it reminded me of what I was doing, when I was living in New York. I bought four single-family homes, all sight unseen, in Texas… So I can certainly relate to your story, even though you bought five and I only bought four that way.

So let’s talk about your approach, because one thing that I know I wasn’t doing is I was not rehabbing properties, except for one, and it was a disaster, one of the homes. So talk to us about a specific deal, and how you managed the rehab process, and just from start to finish.

Elenis Camargo: Sure. I’ll go into our first one. That one we acquired with an inherited tenant, and at the beginning — this was our first rental, this was February 2018. At the beginning we thought we had a great tenant, she was communicating great, and paying on time. A few months in she started having personal issues, started paying late, and eventually she pretty much just disappeared. I couldn’t reach out to her by phone, email, text; I tried everything and she wouldn’t answer… So we posted a [unintelligible [00:05:14].27] vacate notice.

Eventually, once we started the eviction process, she emailed me saying that she abandoned the property and that we can keep her security deposit. So as a new investor at that time, five months in, to  have our tenant abandon, it was a huge deal for us…

Joe Fairless: Right out of the gate…

Elenis Camargo: Exactly. Most people it takes time, but with us it was right off the bat. Luckily, I had met a contractor online. I had started talking to him, and he really was the one that helped me a lot throughout this process. We didn’t even have keys to the property that worked. He ended up climbing through a window, and getting in, taking pictures… My husband and I wanted to fly down there and get things fixed, but the reality was it would have cost us more money to fly down there, and get a hotel and all of that stuff, versus just having him fix it.

So he sent us pictures, and we made a list of the things we wanted to get done. She left the place a huge disaster, as you can imagine…

Joe Fairless: Of course.

Elenis Camargo: A lot of personal belongings, everything needed to be taken out… So we made a list. Our contractor gave us pricing, started working on things, and a few problems came up along the way, like – he noticed that the bathtub had some sort of water in between when he stepped in it, and it ended up being that it had a bath fitter that wasn’t installed correctly over the bathtub, so he ended up ripping that out, refinishing the bathtub… We did new flooring, we tore down some walls, cleaned up the place, and reglazed the bathroom tiles just to make them look new. We painted the outside… Just made it a fresher look.

And then after that I had already started interviewing listing agents as well, so I was kind of working ahead of myself a little bit. We didn’t have a team in place ahead of time. We only had our realtor; that was pretty much it.

We quickly got the property listed after the contractor finished the rehab. We spent around $8,000 on the rehab, so it wasn’t too bad, considering all the work we did… And our listing agent got someone in there in about 3-4 weeks, and we raised the rental value by 43%. So it was originally being rented for $1,050, and we raised it to $1,200. That was almost two years ago, so now it’s being rented for $1,250 with another set of new tenants that we got in there.

Joe Fairless: Well, it’s surprising to me that you only invested $8,000 to get all that work done. It seems like that was a pretty good deal for you.

Elenis Camargo: It was. We did vinyl flooring, and he got it on special. The house is around 1,300 sqft. I think the flooring was most of it, around $4,500 if I remember correctly… And painted all of the insides. He did a lot of work for that amount of money, for sure.

Joe Fairless: And just so I heard you correctly – because I heard you raised it by 43%, but then I think I heard the numbers and for some reason it’s not jiving for me, but maybe I’m misthinking it. You said you raised the rent from $1,050 to $1,200 – is that correct?

Elenis Camargo: Yes.

Joe Fairless: Okay, so you raised it $150.

Elenis Camargo: Yes.

Joe Fairless: Okay. And I think I heard that you say that yo met the contractor online… Did I hear you correctly?

Elenis Camargo: Yes, I did.

Joe Fairless: Okay. Please elaborate.

Elenis Camargo: I met him through a real estate forum.

Joe Fairless: Bigger Pockets?

Elenis Camargo: Yes, through Bigger Pockets. He was the first contact that we made on Bigger Pockets, and just luckily he just happened to add me as a connection. I reached out to him, seeing that he was a contractor, and we started talking on the phone. He was an investor as well, and I just kind of wanted to start the conversation just in case this tenant ended up moving out; we knew that the property needed work… So the connection started from there. He’s helped us a lot on many of our properties.

Joe Fairless: One of the benefits of meeting people through Bigger Pockets is there is social accountability. So if you had met a person on Craigslist, or even through a referral – because I think the contractor might not be as concerned about burning a bridge with one person… But if they are concerned about you lighting fire to the reputation on an online forum like Bigger Pockets, that’s a whole other issue… That’s why Bigger Pockets is such a great tool for investors.

Elenis Camargo: Definitely. It was a huge trusting experience, because I had just met him two months before, and here he was, climbing through a window in my house and fixing things for me… [laughter] So it was a pretty big deal.

Joe Fairless: How did you meet the listing agent?

Elenis Camargo: The listing agent was one of my sister’s best friends at the time, and she was in real estate for a few years. Oh, sorry, that was the realtor. She gave us the contact for our listing agent that we used at the time.

Joe Fairless: Okay. What did you buy the property for?

Elenis Camargo: That one was 90.5k. It appraised instantly for 108k…

Joe Fairless: Wonderful.

Elenis Camargo: …when we bought it. Then a few months later we did a HELOC on it and it appraised for 118k at the time. That was November 2018. I’m assuming now it should be a little higher than that.

Joe Fairless: So you had 98.5k all-in to the property, which is 1.2% of rent to all-in ratio. A lot of people say you’ve gotta at least beat the 1% rule… You’re 1.2%.

Elenis Camargo: Yeah. We usually do with all of our properties, except one where we purchased it with the intent of rehabbing it in the future. This other deal – we bought it for 123k, it had tenants in there that had been in there for 12 years, so we were pretty certain they wouldn’t be leaving any time soon… And the ARV for that one is 190k or more… But it needs a complete renovation inside: new kitchens, new bathroom, everything…

So down the line when we’re ready we’ll give the tenant sufficient time to move out, rehab it, and then either sell it for a profit, or maybe cash-out refi it.

Joe Fairless: What would it cost approximately to get it to that level?

Elenis Camargo: That one should be 25k or 30k.

Joe Fairless: Okay. So all-in 150k-155k(ish) with ARV around 190k?

Elenis Camargo: Right.

Joe Fairless: Okay. And what does it rent for now?

Elenis Camargo: That one is renting for $1,100, so that’s the only one that doesn’t meet the 1% rule… And that’s because they’ve never had their rent raised in 12 years that they were living there.

Joe Fairless: And what are your thoughts on that? So you inherited tenants who had been there 12 years, they haven’t had their rent raised, and now new owner comes in – how do you approach it?

Elenis Camargo: Right. That was a little bit of a difficult situation. They didn’t leave a security deposit. We knew that they didn’t have enough money to leave a security deposit or have their rent raised significantly; they were on disability. So we raised it very little, $5… Originally it was $1,095, so we raised it to $1,100 right off the bat, just to kind of start the idea “We’re gonna be raising rents every year.” And then this past year I think we raised it another $5. It’s very little, but just to get a little bit more income coming in. Probably next year we’ll raise it a more significant amount if we’re not already rehabbing it.

But it was difficult to speak with them. They were very skeptical. The property has passed through different owners over time, and the previous owners, as with all of our other inherited tenants – we’ve had three – they don’t take care of their tenants… And when we come in, they immediately have a list of things that are broken or need fixing… So with this property, they actually didn’t have hot water for a month. And as soon as I introduced myself, they told me that, and we had it fixed within an hour. It was something really easy to fix.

So we take pride in making sure the tenants are good, living in a clean home, and with things that are functioning. And I think that built a lot of rapport with them, where they trust us now and they know that we’re not just gonna throw the property away, or just not keep it maintained.

Joe Fairless: Wouldn’t that come up in an inspection report?

Elenis Camargo: That’s really interesting… Yeah, it didn’t come up on that. I’ve never even thought of that. [laughter] But it did not come up on the inspection report.

Joe Fairless: So that was one house, 123k purchase price; the other was 90.5k. How are you financing these, and where are you getting the equity? Is it from your W-2 job, so you’re taking money that you’re earning from your W-2 job and you’re buying these single-family  home investment properties?

Elenis Camargo: With conventional financing. So we’ve usually put down 20%. On that 123k deal we’ve put down 15%, and we’re paying PMI. The numbers just made more sense when we did them… But yes, pretty much our jobs fund our investments at the moment. Eventually, we’ll want to get [unintelligible [00:13:55].19] and get into doing more cash-out refinance deals so that we can continue to invest more without taking time to save up the money.

Joe Fairless: How have you improved your process? And that’s pretty broad, I understand that, and I’m doing that intentionally… From your first purchase to the fifth purchase?

Elenis Camargo: Great question. So my husband built originally a model that we used to analyze deals, so that’s been improved over time… Our process now is we get MLS listings, we also get wholesale deals, and we look through those every day. The ones that look more promising – we put them on the list, and then we look at those together. Versus before, we didn’t write anything down, it was just “Oh look, this house looks good. Let’s send it to our agent and see if we can get more information on it.” It was just kind of like one shot here, one shot there. Now we have a list of properties that we’re looking at, and writing down notes; we keep track of them, if there’s any price drops or price changes, so we can see that the seller is more motivated if they’re dropping the price. So we have more of a system in place now…

We also use other tools, versus at the beginning we weren’t really using any tools to track anything.

Joe Fairless: Like what?

Elenis Camargo: We use Cozy for payments and for property management repairs, and then we use Stessa for our expenses and keeping track of value accounting.

Joe Fairless: Oh, cool. I’m very familiar with both of those companies. The challenge that you might have come across is the renovation part and overseeing renovation  – even though it sounds like you hit a home run with the contractor, but you’re still in Brooklyn, they’re in Jacksonville… How do you oversee the renovation process? And the reason why I ask that is – one, for obvious reasons, but two, I mentioned that I bought four single-family homes while living in New York City, sight unseen, and the fourth one was more of a renovation project, and it was a disaster, because the renovation team was not doing what they said they were gonna do. They didn’t have much work, so they were all on the job for  a very long period of time, just kind of hanging out, milking the clock… And my sister happened to drive by and see them, and she’s like “Joe, how do you keep track of them?” and I’m like “I don’t really have  a process.” So can you talk about your process?

Elenis Camargo: Sure. I have two contractors that I use at the moment, and we’ve done three renovations and now we’re about to do the biggest one for another investor that just purchased three multifamilies and he’s rehabbing 3 out of the 7 units next month… So it’s more than just that one that I got lucky with; we have another one now. And there was one that we got rid of throughout the process, but… It’s also about not paying them in advance. So with one of them I do pay materials in advance, because I guess he doesn’t have the bandwidth to do the renovation without the materials, and then we pay the job when it’s done… And the same with the original contractor. We actually didn’t pay him anything upfront, so they’re more motivated to get the job done… And if it is a bigger job, like the ones that they’re doing next month, we’ll do payments over time; probably maybe two payments. But the key is just making sure that they’ve finished it as quickly as possible, staying on top of them…

I’m in constant communication with them during a rehab, pretty much every day, and my job is flexible enough where I can take calls and get on video chats with them or see pictures and go back and forth.

And then I also try to save money by ordering some materials myself online, and having them pick up the materials… So it’s pretty much a joint effort to get the rehabs done, and get them done quickly, so that they can get paid quickly and we can get the property rented out.

Joe Fairless: What deal, if any, have you lost money on?

Elenis Camargo: If you consider the money we’ve put into all of them, we still haven’t broken even on any of the properties… But it’s a long-term play for us, so…

Joe Fairless: Right. So you haven’t sold anything.

Elenis Camargo: We haven’t sold anything.

Joe Fairless: Okay. That makes sense. What deal is the most profitable so far? I guess it’s a poorly-worded question, considering your previous answer… So what deal has generated the most cashflow as a result of the income minus expenses, to date?

Elenis Camargo: Sure. I would say most likely our fourth property that we purchased with a partner of ours. That one didn’t need a rehab or anything. We just put in probably around $1,000, getting it cleaned up and painted… And then we had tenants in there within two weeks, that have been paying on time every month… So I would say that one.

We’ve put the least amount of money in that; we’ve put 30%, our partner put in 70%, and then we split everything down the road 50/50. Now, we haven’t had to obviously do any renovations or get many things fixed, so I’d say that one’s the highest right now.

Joe Fairless: How does the loan approval process work with a partner?

Elenis Camargo: It’s a little trickier, because usually all loans are set for two people, usually a married couple… So having a third person involved, it required having additional forms and making sure that he was on all the paperwork… And we all have umbrella policies if we’re buying these under our personal names with conventional loans. So he had an issue with his umbrella policy where he needed to be the first person on the homeowner’s insurance… So everything is set for two people, and here we were, trying to do things with three people. So we had a situation where we had to cancel our existing homeowner’s insurance policy and rewrite it with him as the first person on the loan. I think I was the second person and my husband wasn’t even listed on the homeowner’s insurance… And he was able to get his umbrella policy. So it was a little tricky, things like that…

We are planning on purchasing more properties. We’ll most likely just put his name and either mine or my husband’s name on it, and not do it with three people again.

Joe Fairless: Okay, yeah. What lender do you use to get that type of transaction done?

Elenis Camargo: This last time we used Carrington, and I pretty much followed my loan officer… We used a company called Ditech and they ended up filing for chapter 11, so that’s why we’ve got such great deals at the beginning… [laughs] With our points, and with fees, and things like that. So he went to Carrington and we ended up following him there. He tried to match the same rates he was giving us before. But with Ditech we were able to get origination fees waived, very low points and things like that just because they knew they were filing for chapter 11 down the road.

Joe Fairless: Hm… The inner workings of corporate America.

Elenis Camargo: I know, it was interesting.

Joe Fairless: Alright, so the fourth property has brought the most cashflow, for multiple reasons, it seems like. One is there was no rehab, or little rehab, up to $1,000. Two is you have less money in, but you’re getting a disproportionate amount of profits based off of your expertise and the work that you’re doing, correct?

Elenis Camargo: Correct. Our investor is completely passive. He trusts us to do all the work. I manage the property, obviously without charging the partnership any additional money, and he put in more money at the beginning of the deal. So it works out really nicely for us, and I think down the road we’ll be able to acquire more properties with him than if we were just on our own, trying to save up all the money.

Joe Fairless: For someone looking to buy single-family homes as investment properties, who’s listening to this but has no purchased their first one yet, what’s an activity that you recommend they take on in order to eventually  purchase that property?

Elenis Camargo: I would say at least analyze one property a day. I think a lot of new investors get hung up on trying to learn everything, or build their entire team before investing in their first property, and in our experience it wasn’t necessary to do that. We built our team over time. But I think analyzing at least one property a day kind of gives them an idea of what the current market is like where they’re wanting to invest, what the properties are like, and it just kind of gets them used to it and more comfortable… And I would say start placing offers. I know it seems scary for a new investor, but it’s free to place an offer. They can back out at any time. And then it most likely wouldn’t get accepted on the first shot anyway. We’ve never had an offer accepted on the first shot, so… It just gets them more comfortable with the activity of going through with a deal, versus just sitting on the sidelines and trying to learn.

Joe Fairless: And now, based on your experience as a real estate investor – and this doesn’t have to be directed towards first-timers, just overall, based on your experience… What’s your best real estate investing advice ever?

Elenis Camargo: Wow, that’s a good question. I would say don’t be scared to put in lower offers. That’s something that other people have asked – how much lower can they put an offer in for? And since I’m working with multiple investors as well, they’re scared to lose a deal by putting in too low of an offer… But I feel like you need to put in the offer that makes sense for you, and not fall in love with the property and get it just because you want another property. It has to make sense for you, and don’t be afraid to put in a lower offer than what it’s listed for.

Joe Fairless: Can you give us a specific example of what a property was listed for and what you offered, and the result of that?

Elenis Camargo: Sure. Our latest purchase was listed for 222k, and we originally offered 170k, so it was much lower than the listing price… And we ended up settling at 195k. We went back and forth a few times; our best and final was 200k, and their best and final was 210k. So after we told them we can’t go up to 210k, they waited a few days and then they came back to us and said “Okay, we’ll take your 200k deal.”

And at the time we wanted to delay the closing a little bit because of our job situation… I was switching jobs and I wanted to make sure that that was secure beforehand… So I asked them for a 90-day close, and the 200k price, and they agreed to that. And then eventually, down the road, during the inspection we realized there was foundation issues, and also the appraisal came in lower at 195k, so they agreed to the 195k price. We closed 30 days sooner than they originally asked for, and they paid the 5k foundation repairs; they put that in escrow for us. So we ended up with a much lower price.

But all of our properties – we’ve acquired them at least 10k below what it was listed at.

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

Elenis Camargo: Yes.

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

Break: [00:24:22].26] to [00:25:13].17]

Joe Fairless: Best ever resource that you use in your business?

Elenis Camargo: I would say people. I talk to a lot of people, I learn from a lot of people, and I teach people as well. So I would say this is a people business, and it’s really important to learn from each other and help each other out.

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

Elenis Camargo: I would say the same way I talk to a lot of new investors, I write a lot of content, a lot of blogs, and I have a newsletter, so I like to give back to the real estate community by writing the knowledge that I’ve acquired over the past few years, and then a lot of new investors reach out to me and ask me questions, and I pretty much give them my time, just as I would have wanted someone to do for me when I was starting out.

Joe Fairless: And on that note, how can the Best Ever listeners learn more about what you’re doing and read that content?

Elenis Camargo: Sure. So they can sign up to our newsletter on our website, which is ThirdStoneProperties.com. They can also follow me on Instagram @investoremc. I post on there regularly and share our content on there as well.

Joe Fairless: Thanks for talking about how you’ve built your portfolio remotely, sight unseen, and how you have built your team on the ground to help you execute on those projects… And then how you got creative with a business partner to continue to grow the portfolio.

Thanks for being on the show. I hope you have a best ever day.

Elenis Camargo: Thank you so much.

Joe Fairless: Yeah, I enjoyed it. And talk to you again soon.

Elenis Camargo: It was great being on.

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

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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Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


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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JF1763: 25 Year Old Investor Walks Us Through His First Apartment Syndication Deal with Mo Bloorian

Apartment syndications are very complicated as many Best Ever listeners know. Many times, investors are in the real estate space for many years before they think about trying to do their own syndication deal. Mo wasn’t afraid of taking the leap, going from a duplex to a 21 unit in a short amount of time. He also worked hard to find great partners with strengths that differed from his own. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“Our relationship has grown since investing together” – Mo Bloorian

 

Mo Bloorian Real Estate Background:

 


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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, Mo Bloorian. How are you doing, Mo?

Mo Bloorian: Hey, Joe. What’s going on?

Joe Fairless: I’m looking forward to our conversation. A little bit about Mo – he is the founder of Grey Hill Capital. He is a 25-year-old real estate investor with 100 units in his portfolio. Him and his partner have a private equity firm, and they syndicate deals. Based in Brooklyn, and are investing in Upstate New York. With that being said, Mo, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Mo Bloorian: A hundred percent. We’re primarily focused on multifamily, in Upstate New York, just like you said. A little bit about what I’ve done in the past two years – I’ve gotten into real estate about two years ago roughly, started off in sales, I got my real estate license; at that point I was pretty lost in regards to my career. I was actually a computer science major. I really had no direction. I started off with my real estate license, did a few sales, was great at it (I thought I was great at it), and at that point I realized there was really more to it… So I tried to find a different direction in regards to real estate, what other options are there out there… And I found real estate investment, and it kind of blew my mind, the concept. Everything was just incredible… And I made it my goal to start investing.

I had about $80,000 in equity at that time, and just under a year ago I bought my first duplex; just over a year ago, actually, I bought my first duplex. Since then, we’ve acquired just under 100 units, and we also have our own self management companies, so we essentially don’t give any of our properties to third-party vendors. We’ve created a sister company with our company as well, and it’s just been phenomenal. Life is incredible, and it’s been a crazy ride.

Joe Fairless: Let’s unpack that. I’d love to dig in there and learn more. You bought your first duplex how long ago?

Mo Bloorian: I closed on February 1st of 2018.

Joe Fairless: Okay, about a year ago you bought your first duplex… And then what happened?

Mo Bloorian: So at that point, that was probably the hardest deal I’ve ever done.

Joe Fairless: The duplex?

Mo Bloorian: It was my first time. It was a duplex, which is crazy. But it was a complete gut job. Honestly, the second I saw the property, it was at a great price, and I’m like “I  just want it. I don’t even care. I have the cash, let’s just do it, let’s just get it over with.” It turned out to be about a four-month job, even though we had estimated two month. We got it done, we got it rented.

From there, I bought another duplex, and then another duplex after that, and then at that point I realized I really needed to expand, and I have something over here, because the market in Upstate was just so phenomenal. Coming from Brooklyn, and  — obviously, I’m sure you know what the market is over here in the City…

Joe Fairless: Sure.

Mo Bloorian: It’s ridiculous. You can’t buy.

Joe Fairless: Yup.

Mo Bloorian: And then it hit me, that I can drive an hour and a half from New York City, and I can buy a duplex for $80,000. Are you kidding me? And then from there, it just made sense. I’m renting it out for about $1,000/unit. It all kind of clicked. From there, I really knew I needed to expand. I obviously had weaknesses. My primary focus, what I’m good at is management and acquisitions. I got a partner that really understood the back-end of things, and also really understood the management part of it.

We got under contract a 21-unit over the summer, and then since then we’ve just really been buying, getting investors, and just growing.

Joe Fairless: How did you find that 21-unit?

Mo Bloorian: It actually was a hidden gem in Orange County. It was just a property that was mismanaged, the owners didn’t care. It was in Upstate New York, and we have a lot of investors that are coming from the City. They just parked their money there, they hired a management company, and it was just mismanaged or misused. It wasn’t the greatest building, but we got in there… The tenants weren’t the greatest, but we kind of cleaned it out already.

We realized the rent market in that city is just ridiculous. Way more than what we projected… So right now that deal is — we’re giving our investors about a 16% return right now annually. So it’s just going amazing.

Joe Fairless: What return?

Mo Bloorian: About a 16% return annually on that deal right now.

Joe Fairless: You said it’s mismanaged, but how did you find the deal?

Mo Bloorian: It was on the market. A broker that was in my area realized that I’m looking for a deal in Upstate, a random broker, and he just said “I have this deal, a 21-unit.” He had a hard time selling it. It was on the market for like six months. We bought 21 units for about $610,000.

Joe Fairless: And how did you get in contact with that broker, do you remember?

Mo Bloorian: Yeah, it was just a friend I was still in touch with. He actually primarily focuses on the Bronx, but a lot of these brokers in the Bronx and in the City – they randomly have these deals in Upstate… Because obviously, Upstate is not their focus. So when they do, I’m really on top of every one of those deals that come out.

Joe Fairless: Okay. And you said it was for $610,000? Did I hear that right?

Mo Bloorian: Correct, $610,000.

Joe Fairless: $610,000 was the purchase price for this deal… How much did you need to raise in order to get that deal done?

Mo Bloorian: The total equity that needed to be raised was $347,000, and it was obviously very difficult. I would say the hardest part of my business currently – I’m a 25-year-old investor – just getting investors… But it’s been going pretty great over the past few months… But it was a $347,000 raise.

Joe Fairless: Of the $347,000, how many investors does that comprise of?

Mo Bloorian: Well, if I’m not mistake, we had a 50k minimum to get in… I believe it was comprised of about seven investors.

Joe Fairless: Seven.

Mo Bloorian: I believe it’s seven.

Joe Fairless: Yeah, okay. Fair enough. And thinking of those seven – I’m not looking for names, but think of the person who brought the most amount of equity… Was there one who brought more than others?

Mo Bloorian: Oh, a hundred percent.

Joe Fairless: And how did you know that person?

Mo Bloorian: It was a family friend who actually suggested another individual that just had money and wanted to invest… He had about a million dollars liquid at that point, so I believe he invested 150k. So that was the biggest one.

Joe Fairless: Sure. Almost half of it.

Mo Bloorian: Yeah. That was phenomenal. Right away we clicked and it just worked. Again, being a 25-year-old investor, I have a lot of friends that are starting out their careers, so they have one guy with 10k here, 15k here, so… It was funny to put that together, but it ended up working out really well. I’m currently invested with a lot of my friends, which makes it a lot of fun.

Joe Fairless: Makes it a lot of fun… What about the relationship with one of your friends or all of your friends has changed – if anything – since they’ve invested with you?

Mo Bloorian: Honestly, it’s become a lot better. In my circle, like I said, there’s not that many people that are doing what I’m doing, so they just wanna grow with me. I’ve realized the best part about raising money, and being in my position at least, is that I know that I have a friend that’s becoming a doctor, I have a friend who’s becoming a lawyer… These guys will grow with me. They invested 10k with me on my first deal, but I know that’s gonna grow and our relationship is gonna grow.

And our relationship is just growing. We’re talking about business now, and it’s just an incredible experience.

Joe Fairless: You live in Brooklyn, the property is an hour-and-a-half away from you… How do you get to and from the property?

Mo Bloorian: We’re actually invested currently in two cities. We’re invested actually in Orange County, but we’re also invested in the Capital Region. That’s three hours away. I drive. Again, having this management company as well, we have a setup. Our property managers that have small salaries, we have guys that we can depend on consistently through the night and through the day… And I’m driving, generally once or twice a week, for three hours at least, back and forth, to the properties.

Joe Fairless: When you make a point to drive out there, why are you driving out there, versus having your team handle it?

Mo Bloorian: Because I’ve realized if you really wanna get stuff done, you’ve gotta be there.

Joe Fairless: What’s an example of that?

Mo Bloorian: For example, when I first started I had some guys that were working for me who just weren’t getting the job done, so I made it a priority for me and my partner to go there, to the property, stay there the entire day while they completed the entire job. I believe it was [unintelligible [00:09:44].26] it wasn’t going up, and I was getting very frustrated. Basically, I didn’t stay on top of him, but I was there the entire day while he got the job done, and he got the job done.

Sometimes you need to really be on top of these guys, but then as you grow and create a relationship with them [unintelligible [00:10:00].05] really focused on acquisitions. My partner, thank God, focuses on management as well, so it works out really well… But whenever I’m in the City, I’m primarily focusing on looking at properties, and also a part of the day with management.

Joe Fairless: The 21-unit – and then we’ll get into some of the other properties that you’ve gotten since then – I assume is a value-add play, where you’re renovating and increasing rents?

Mo Bloorian: A hundred percent.

Joe Fairless: Okay, so just talk to us about the business plan a little bit, please.

Mo Bloorian: A hundred percent, you got it. Again, all our properties are value-add. [unintelligible [00:10:30].27] but in this specific deal we got in where the rents were low. Again, like I said, mismanaged. It’s as simple as putting in floating floors, painting the room, putting in a new kitchen. It’s that simple. Sometimes on these smaller deals you don’t really need to do much in order to increase the rents. So that’s what we’ve been focusing on.

I didn’t get in there and cause havoc, evict everybody, and make a whole entire mess. We’ve slowly been going through the units, and tenants are just leaving naturally. We’ve just been turning over the units and increasing the rents by 30%, 40% sometimes. It’s been pretty incredible.

Joe Fairless: How much do you need to put into each of the units in order to get that 30%-40% rent increase?

Mo Bloorian: Okay, so we had a $60,000 turnover budget. We usually have 40k-60 for contingencies… But I would say roughly between 3k-4k to really make a unit really nice. I’m talking about, again, floating floors, new kitchen… Enough where they can really live a happy life and be really satisfied. That’s really our end goal.

Joe Fairless: And will you break down that price a  little bit in terms of what makes up the 3k-4k? For anyone who’s looking to do renovations on an apartment unit, just so they have an idea of where the big costs come from.

Mo Bloorian: I think the real big issue when it comes to renovation is the labor. We figured out that if we can cut down the labor as much as possible – I’m not saying under-paying our workers – then our renovations will come down. At the end of the day, the cost of buying floating floors, [unintelligible [00:12:00].11] but that’s not gonna change. Putting in a decent kitchen for about $1,000-$1,200, that’s not gonna change. It’s really the labor for getting that done.

We have supers that we have on each of our properties, that are consistently doing work for us during the day. We’re with them; we make sure that they can live a happy life, our workers. We supply them with homes, we constantly have jobs for them around the clock… And with that, they give us fair prices in return, so that we can keep to that minimum.

So I wouldn’t say it’s really a per product cost; it’s pretty standard. We buy all our stuff from Home Depot right now. We’re not that big yet. But it’s really, I think, about the labor that really has to be prioritized.

Joe Fairless: The type of financing you got on it – will you talk a little bit about that?

Mo Bloorian: 100%. We got a pretty standard loan – 25-year, at 5.25%. We ended up getting about 75% loan-to-value, got a $480,000 loan, and we’re paying about $35,000 a year. Our NOI is roughly about 55k on that.

Joe Fairless: And where did you get the loan from?

Mo Bloorian: We got it from a local bank. In Upstate New York – I’m not sure if you’re familiar – in most cities it’s very difficult to  get a loan on these properties here in the City… So we found our best bet to be local banks. We’re using a bank called Ulster Bank, in Upstate New York. As you know, it’s pretty hard to get a loan and then refi from the same bank; I wish it were that easy… But local banks are the way to go in Upstate New York. That’s what we realized, 100%.

Joe Fairless: How many banks did you go to before you were able to get this loan?

Mo Bloorian: To tell you the truth, my partner did most of that work, because he’s the back-end guy.

Joe Fairless: Sure.

Mo Bloorian: He did most of the phone calls and the research. I don’t think it was that much, because again, the  debt coverage ratio is almost a three. So it was not really that hard to get a loan on this.

Joe Fairless: [laughs] Alright, that’s a good ratio right there.

Mo Bloorian: [unintelligible [00:13:58].28]

Joe Fairless: Yeah, and I’m sure most of the Best Ever listeners know what banks to look for… I mean, at least like a 1.25x is what they look for, so if you’re at a three, then that’s some good cashflow.

Okay, so that’s the 21-unit… And now after the 21-unit you had 21 plus your duplex, so that is 23 total units, correct?

Mo Bloorian: At that point I actually had 25, because I bought another duplex after my first duplex. That actually turned out to be my best deal that I ever bought, which is pretty funny.

Joe Fairless: Alright, so 25 units… Let’s skip over that second duplex, let’s get into the larger stuff. So you had 25 units at this point, after you closed on the 21-unit. Today you’re at 100, so fill in the gap, please.

Mo Bloorian: For sure. We’ve closed since then on another 10-unit in the same city, another duplex, and then the biggest one that we bought – we bought a 56-unit portfolio in the Capital Region, consisting of a bunch of duplexes, triplexes, fourplexes. We bought them from an investor. He really was not a slumlord, thank God, and he really took care of his properties… And we got them at a really great price. It was a long-term relationship we created with him, and he came to us first. That turned out to be a phenomenal deal. That’s probably the biggest deal.

Joe Fairless: Please educate me and the listeners on “It was a long-term relationship.” Will you elaborate on that?

Mo Bloorian: I met him on Bigger Pockets, actually. I wish I was more active on Bigger Pockets. I’m actually listening to your podcast now and then, I get your tips a little bit here and there… But I met him through Bigger Pockets, and it was about a year that we’d been talking on and off… I’m not gonna lie, when I started, I was a newbie. It wasn’t easy at first, and it isn’t easy now… So he kind of was guiding me here and there about what needs to be done and what doesn’t, and what we should and shouldn’t do.

After about a year, when he knew that — we had equity, meaning we had money ready to go. We were able to raise — we’ve raised so far just about 3,5 million dollars… So at that point [unintelligible [00:16:00].05]  deal, he trusted me, and I was the first one he came to.

Joe Fairless: When you initially spoke to him via Bigger Pockets, was that to talk to him about his portfolio, or was that to connect in general?

Mo Bloorian: Connect in general. Again, that was the time where I was really going through my renovation on my first property, and at that point I didn’t know he owned that much. When you’re dealing with investors in Upstate New York, there are a ton of investors out there, thank God, which is a great thing… So everybody owns these smaller, smaller portfolios. I had no idea that he owned something like this… So when the time came, he initially offered it to me. That’s really how it went.

Joe Fairless: That is a long-term play(ish). I mean, it was within a year. How many times did you communicate with this person over that year timeframe? Approximately.

Mo Bloorian: The real way the deal ended up happening was through a broker that I was very close with. Obviously, networking within the city, I talked to a lot of brokers… It was funny and veryb weird how it happened; the broker and him are really good friends. It kind of happened that they both kind of proposed it to me, and… Now that I think back, it was a very unique situation, because I had a relationship with him and the broker, but the broker was his main man… So we all talked to each other, which made the deal happen.

These deals don’t really happen that often [unintelligible [00:17:19].08]

Joe Fairless: Sure.

Mo Bloorian: So it was actually a really fast closing. We closed in about two months, and we’ve made it easy for him, and it just happened.

Joe Fairless: That is a lightning-quick closing, especially since it’s a 56-unit portfolio that’s made up of duplexes, triplexes and fourplexes… Because that’s a lot harder to do due diligence on than just a 56-unit apartment community. How did you do that?

Mo Bloorian: To tell you the truth, a lot of it was trust. I knew who he was. Unfortunately, as you know, this is a big problem in the current world that we live in with regards to the real estate community – there are slumlords out there; I deal with a lot of tenants on a daily basis that are coming from awful, awful situation. So you’ve definitely gotta be really careful when you’re buying, to really not buy from a slumlord, because chances are they don’t care about the property. They’re buying these foreclosures, putting no money into it, renting it out for the most that they can get, and usually it’s a gut that has make-up on.

So from there, it was really just the walkthrough… We didn’t do an inspection, none of that; I had no interest in doing all that, because I knew what kind of owner he was, and I knew that he had a great setup. The tenants loved him. The properties – again, we’ve owned them for almost six months (a little bit less), and we’ve had barely any problems, and we’ve just gone through a really cold winter.

So thank God — on a normal deal, you can really tell by walking through the properties the first time what kind of owner you’re dealing with.

Joe Fairless: How much money did you raise for that deal?

Mo Bloorian: We ended up raising just over a million dollars of equity, and we actually had a 1031 on that, and that was the hardest thing ever.

Joe Fairless: Oh, gosh…

Mo Bloorian: We had the whole TIC situation… Honestly, Joe, I would never do that again. It was very stressful, very time-consuming. Even though that investor put up $430,000, which was incredible, I don’t think it was worth it, because we have a lot of investors, thank God.

Joe Fairless: Yup. So you are jumping in the deep end quickly. The plot thickens the more and more we hear this story. I love that we’re having this conversation. A couple things – one, you raised a little over a million dollars, and you said you did the walkthrough, but you didn’t do an inspection… So I imagine – but perhaps not – some investors are like “Well, what due diligence do you do?” And if you had said at the time – which turned out to be correct, it sounds like – “Mrs. Investor, the owner has a great reputation. I’ve known him from this online website for about a year, so don’t worry about it. The tenants love him. We don’t need an inspection, and I’m not gonna do an inspection.” What was your answer to that question? I’m sure it wasn’t exactly what I’ve just said, so what did you say?

Mo Bloorian: To tell you the truth, my investors trust me, and at the end of the day it is a good question. It’s a very good question. Obviously, we did not get asked that question at all… And to tell you the truth, we felt that this was the way to get the deal done. We got the deal at a great price, we negotiated perfectly, we took out the properties that we needed to take out… There were some properties that needed work in there. It actually started off as about a 66-unit. We took 10 units out which weren’t interesting, and he sold them individually.

Joe Fairless: Okay.

Mo Bloorian: So it’s not like we just went and bought the entire thing and just moved forward. We didn’t get into the guts of the property, but we knew exactly what we were buying, we knew which properties needed the work, we knew which property had roofing problems, we knew which properties had a little bit of flooding in the basement… And we’re going through it now.

Right now we’re turning over 2-3 units/month and increasing the rents by 10%-20%. Our net is just climbing and climbing on a monthly basis, and the deal is becoming an absolute home run… And we’re looking to buy more of them.

Joe Fairless: What type of financing did you get on the deal?

Mo Bloorian: This is interesting, because we actually ended up getting a hard money loan on it. To tell you the truth, my partner is the whizz, because he was in financing originally. Our end goal is to get our investors cashed out as soon as possible, as you know. So we decided that — we were getting on different banks 6,5%, close to 7% quotes… We ended up getting a hard money loan for just under 9%… And we ended up getting a 56% loan-to-value covered. That enables us to pay that off in about 18 months. Essentially, post that we’re gonna be able to own it full and clear, and at that point do a complete refinance. You have to understand, we bought these properties almost 30%-40% below market.

Joe Fairless: What was the purchase price for the 56-unit portfolio?

Mo Bloorian: 2,2 million. To get it even to the value at a 10% cap, I’m only gonna need to take out about 65% in order to get my money out… And that’s being generous. So that was our plan going in, because again, our goal is to get our investors’ money as soon as possible; they were all in… So that was kind of the way we went forward.

Joe Fairless: What’s your best real estate investing advice ever?

Mo Bloorian: My best real estate advice I think is to really jump in. I think at the end of the day people start off very late. I can’t look at it as a guy who’s 30 years old, I can’t look at it as a guy who’s 35 years old, but in my eyes, I knew that I had zero risk as a 22-year-old. There was no risk that I had to take. I knew I had to just do something, and if I would have failed, I would have failed. So I think that’s the priority. Once you get in – this is your chance; work your ass off and get it done.

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

Mo Bloorian: Let’s do it.

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

Break: [00:22:57].28] to [00:23:39].14]

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

Mo Bloorian: Best ever book I’ve recently read was by Gary Keller, The One Thing. I really enjoyed it. But the best book I ever read, just because it’s a classic, it’s cliché – I know everybody says it, but it was Rich Dad, Poor Dad, because that really was the one that got me in. And I’ve recently also read your book, which was an incredible book… The Best Ever Multifamily Syndication Book.

Joe Fairless: Thank you for that. Best ever deal you’ve done?

Mo Bloorian: Best ever deal was my second duplex. I bought it for 50k, and it’s yielding me about 75k/year, after refi.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Mo Bloorian: The biggest mistake was not starting earlier. I was delayed with college, unfortunately, which was an incredible opportunity for me. I would have learned so much more if I would have jumped in a little bit earlier. And another mistake was using my property manager brother as my contractor. Huge mistake. No one should ever do that.

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

Mo Bloorian: I give 10% of my income back to charity. No matter what I’m doing. Everybody should do it. I believe it’s a beautiful thing. So no matter how much I make, whether I make 10k or 100k or 200k, I will always give 10% or a little bit more than that back to charity.

Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on?

Mo Bloorian: They can reach me on LinkedIn. I’m pretty big on that, Mo Bloorian. We also have a website, www.greyhillcapitalholdings.com, and my e-mail is mo@greyhillholdings.com.

Joe Fairless: Mo, I really enjoyed our conversation, and you have broken through the barrier that a lot of investors come across when they live in a city like New York City, or like Los Angeles, or Miami, where there is just not a lot of room for investing, the traditional value-add approach. You just took it an hour-and-a-half North, and in some cases three hours North, and are able to make that happen.

I loved the case studies and the deals that you’ve done, and I love that you talked to us about the specifics, and we got really into the nitty-gritty stuff. Congrats on everything you’ve done today. I really enjoyed our conversation.

I hope you have a best ever day, and we’ll talk to you again soon.

Mo Bloorian: I really appreciate that, Joe. Have a great day, and I hope to talk to you soon.

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JF559: What BIG THINGS You Could Do with the Equity in Your Properties

His Best Ever advice will shock you, and especially real estate agents. Today’s guest is a bridge lender and has extensive experience in equity funding. He shares with us his parameters for funding and what he is looking for in the numbers, listen in and prepare to reach out with your properties.

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Mike Zlotnik real estate background:

  • Debt and equity investor in real estate for more than 15 years
  • He’s done over a $100,000,000 in underwritten loans
  • In 2009 Mike joined Tempo Funding and is the Managing Director
  • Say hi to him at tempofunding.com
  • He’s based in Brooklyn, New York
  • His Best Ever book: Retire Rich by Nora Peterson

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JF251: How to Negotiate the Interest Rate on Your Mortgage Down…A LOT

Today’s Best Ever guest shares just how important it is to do you due diligence with everything. From negotiating the interest rate on your mortgage rate down to an unheard of number, to learning about different zoning codes and what they mean to you.

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David Reiss’s real estate background:

–          Professor of Law at Brooklyn Law School

–          Research Director for the Center for Urban Business Entrepreneurship

–          Editor and writer for http://www.REFinBlog.com

–          He teaches Real Estate Practice class and other real estate related courses

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JF 37: Entrepreneur Builds Successful Side Biz in Real Estate

Listen to today’s Best Ever guest as she walks you through how to build a profitable business by renting out other people’s apartments. You know of Airbnb, right? Well, she uses that site and others to create her own profitable bed and breakfast.

Tune in to listen to her Best Real Estate Investing Advice Ever!

Lauryn Ballesteros’s real estate background:

–        Started wholesaling out of college in Buffalo, NY

–        Created a La Brooklyn Haus in Brooklyn – a 5-bedroom bed and breakfast

–        TED talk speaker on entrepreneurship

–        Visit her at http://laurynballesteros.com/

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