Two Rentals, $3,000 Each: The Guide to Closing with Close-to-Nothing

Ashley:
Thomasina Myresa spent years doing what she thought financially responsible people were supposed to do, work hard, avoid debt, and save. But when the pandemic stopped her modeling income almost overnight, she realized a savings account alone could not give her the security she wanted.

Toni:
That realization eventually led Thomasina from a New York City apartment to a $63,000 rental in a city she had never visited. Buying remotely was only the beginning because her first attempt at managing an inherited tenant forced her to rethink what responsible landlording actually looks like. And a later 10 bedroom duplex helped her discover the investing strategy she actually wants to build.

Ashley:
Welcome to the Real Estate Rookie Podcast. I’m Ashley Kehr.

Toni:
And I’m Tony J. Robinson. And with that, let’s give a big warm welcome to Thomasina. Thank you so much for joining us on The Rookie Podcast today.

Thomasina:
Thank you guys for having me. I’m so excited. I’ve been a long-term listener, so this is kind of like a full circle moment for me.

Ashley:
Now let’s start with before real estate even entered the picture. You were modeling and working as a social worker. What did those two jobs kind of teach you about earning, saving and personal finance in general?

Thomasina:
Well, I would say my personal finance journey started when I was even younger than that. My parents instilled in me to just save, save, save, but I never knew what I was saving for. I had my first job at 14, and so by the time I graduated from university, I had saved up a substantial amount. So I moved to New York City and like you mentioned, I was working as a social worker at night and then modeling during the day. And I was exhausted to say the least, but it allowed me to save money because a few months later after moving to New York City, the pandemic hit and all of my money or a big chunk of my money was paused.

Toni:
When the pandemic shut down your modeling work, Thomasina, what changed in the way you thought about financial security and the money that you had saved up?

Thomasina:
Yeah, I think the pandemic and having the modeling industry pretty much halt made me realize that putting money in a savings account, because I hadn’t even had a high yield savings account at that point. So I just knew that I needed to find another way to make money and also build wealth because the modeling industry is so volatile and it’s always been that way, but I had never experienced it halting completely. So that was definitely like a smack in the face and just made me realize I needed to find another way to make money.

Ashley:
Now, during COVID, you probably did not have a lot of modeling jobs come up. I would assume that they were kind of shut down during COVID. What kind of impact did that have on you? You had said you had learned to save, save, save. Did you find that you had financial security with just saving as your plan or what else did you learn along the way?

Thomasina:
Yeah, so I did have a pretty. I felt secure in terms of finances because I had so much saved up. So it wasn’t like I was desperate when the modeling industry shut down, but I knew that I had to think about the future. And because the modeling industry had paused, I had a lot of idle time on my hands. And so I started reading a lot and I came across Rich Dad Poor Dad, which was kind of pivotal in my financial and real estate journey. And it made me realize this seems easier. Building wealth seems easier than what I though. And investing was not something that I was exposed to early on. So after reading all those books, I went into a research rabbit hole and that’s how I found BiggerPockets.

Ashley:
Okay. Well, we always love to have somebody on that has found BiggerPockets and it became an integral part of their journey to start real estate investing. But I also learned that you actually got a mentor too. So I’m really interested in that aspect of it is how did you, a rookie investor who’s never done a deal, didn’t have any experience, didn’t really have anything to bring to the table to a mentor, how did you actually land one?

Thomasina:
So that is a funny story. I reached out to someone on Instagram completely unrelated to real estate. I just though that she was pretty and we had the same vibe and I was like, “Oh, I want to be friends with this person.” So I reached out to her and we ended up setting a time for lunch. And through our conversation and meeting, I realized that she was a real estate investor and I’m like, “No way. I just learned about this thing.” And so we get to talking and she tells me that she’s investing in Cleveland because obviously New York City is very expensive. And although I attempted to buy my first property in New York at the start, I was coming to the conclusion that it may be outside of my price point. So meeting her was kind of amazing timing because I knew that she was investing in Cleveland because it was much cheaper.
Anywho, she had a friend who was also investing in Cleveland and that friend was Yamu who actually has been interviewed on BiggerPocket several times now. She has an amazing story, but she was also investing in Cleveland at the time and offering mentorship. And so that is how I found my first mentor through a mutual friend. I

Toni:
Think it’s so interesting. It’s like you just reached out to this other person on a whim and it’s like that one conversation led to another conversation, which led to another conversation. That’s how it happens so often. Sometimes you’re lucky like Ashley where just everywhere you go, there’s just people who are like real estate investors want to hand you deals. I think Ashley’s gotten deals at football practice in the deli aisle at the grocery store and picking up her mail at the post office. So you never know where you might find the person who’s going to change your life.

Thomasina:
Just got to talk to

Toni:
People. You just got to talk to people, right? Now I think it’s a good question, Thomas, because I wanted to get on this a little bit, but for rookies who are considering mentorship, because there are a lot of different options out there and there are some that probably fall into the old camp of just being very gury where they’re peddling something that isn’t all that great. And there’s others who are really, really great options to help folks who are kind of on the sidelines. How did you vet or make that determination on who you wanted to actually?

Thomasina:
That’s a good question. And I’ll be honest, my number one factor was the price point. How much is this girl going to charge me for mentorship? Because that was one of the main reasons why I was afraid to make that first purchase because this is the biggest purchase that I would have made during that time in my life. I mean, I think I was 22, 23. So the price point was a big factor for me. So I wanted to know how much she was charging. And then the rapport, because this mentor came from someone that I knew and liked and trusted, I felt more comfortable at least opening that conversation. And so when picking mentors, because I’ve had several mentors after Yamu, but I always try to see if I know anyone in my network or in my circle who has already worked with that person and kind of what they have to say.
So that rapport is very important to me as well. I would also say to the rookies, do some research into their experience. How many deals have they done to what scale are they doing what you want to be doing? Because if you are just looking to buy your first property, seeking mentorship for someone who is niche down in Airbnb may not be the right mentor for you if it’s super, super niche. So kind of do some background on what their experience actually is to see if it aligns with what you want to do. I would also say how patient are they? From my experience with mentors, there’s often an introductory call before you actually execute on the mentorship. And obviously as a first timer who hadn’t purchased a property, I had a lot of questions, but Yamu, we had maybe a 30, 35 minute phone call.
And of course you want to be respectful of their time, but she was just very patient with me and was kind of empathetic to the fears that I had with making such a big purchase. And so that was something that went a long way with me as well. It wasn’t like a salesy call. She wasn’t trying to pitch anything to me. She was just very patient in fielding all of my questions.

Ashley:
And Tony, you actually got started by going to a seminar with a mentor, right, that I was putting on?

Toni:
Yeah, that was my first real estate event. And this was before we had transitioned to short-term. We were just doing long-term at the time, but I wanted to get into apartment syndication.That was my initial goal as a rookie investor was to do these big apartment complexes. And I’d done a few single family homes and long-term rental space. There was this guy I’ve been following who had this event in Los Angeles, and me and my partner went down there and we spent three days. The event itself, I don’t know, it was like a thousand bucks or something for the ticket. And then we ended up joining their mentorship program, which was like, I don’t know, a five figure investment. But the best part from all of that wasn’t even the mentorship. It wasn’t even what I learned at that seminar, but it was the other people that I met while I was there.
And there was a guy who I had bumped into at a meetup several months prior who just happened to also be at that event. And we just kind of started chopping up like, oh yeah, I remember you from the event. And we exchanged numbers and all those things. And that same guy was the guy who introduced me or encouraged me to buy my first short-term rental. So it’s like you never know kind of connecting the dots when you start investing in yourself where those things can lead. But I do think there’s time and place for it. So I’m glad it worked out well for you. But going back now to the actual deal itself, because one of the biggest challenges, Thomasina, I think that people face when they do want to get into investing is the financing side. Now, obviously you had very steady income with the social work, but as a model whose work was maybe somewhat impacted by COVID, which I’m assuming was 1099 where you were a contract role, how did you prepare yourself from a personal finance perspective to actually get qualified to go get the debt for your first investment?

Thomasina:
That’s a great question. So I utilized BiggerPockets to research lenders that people were recommending. And to kind of backtrack a little bit, when I was first looking to purchase a property, I was attempting to go through the NACA program, which you guys have talked about on the podcast a lot. And so through going through the beginning stages of the NAHCA program, I realized what kind of documentation are they going to be looking for to make sure that I can afford this purchase? And so that really helped prepare the materials that I would then take to a lender once I realized the NACA program wasn’t going to work out for me and the timeline that I was working with. So I had all those documentations prepared and I talked to several different lenders and the 1099 income was a little difficult. So it was nice that I had the social work W2 job at that time.
And I also had a substantial amount of savings because again, I had been saving since I was 14 years old, so that helped me as well. But just understanding what kind of documentation the lenders are going to be looking for, I think really helped me out. And some lenders who have experience working with 1099ers, because I sought that out as well, kind of knew how to legally play the system or to make you a more, I guess, reputable buyer.

Toni:
I love that point, Thomasine, that you said of trying to find a lender who had experience working with 1099 type borrowers because we say this all the time in the rookie podcast, but not all lenders are created equally. And there are some lenders who specialize in one type of loan and there are other lenders who specialize in different types of loans. And there are some lenders who will tell you something is impossible and there are other people who tell you we do this all day. I’ll give you guys a real life example. I was just talking to an investor yesterday. She was working on closing on her first short-term rental. And for whatever reason, the lender she was initially working with was like, “Hey, we actually can’t qualify you for this. You need to go talk to another lender.” And she already paid for an appraisal and she went to two different lenders.
And the first lender she said, “Hey, I already paid for this appraisal. Can you use this appraisal?” They said, “Oh, absolutely not. We have to do our own appraisal.” She went to a second lender. They’re like, “Oh yeah, we take new appraisals all day. Just fill out this form.” So it’s like had she just stopped at that first person, she would’ve hit a brick wall, but because she didn’t have to wait for the appraisal, she was allowed to move more quickly to actually still close on time. So I just love that you did that because it’s a step that a lot of people miss and they just go with the first lender they talk to and assume that that’s the only option for them in the entire world.

Ashley:
Now, after you figured out what your funding was going to be, you decided to look into Cleveland, and I’m assuming this is partly because you knew investors that were already investing there, but did you do any other kind of vetting or verification on the Cleveland market?

Thomasina:
Yes, I did. Probably not as much as I should have in terms of different neighborhoods and such. But again, going back to the BiggerPockets Forum, those were my Bibles when I was looking to buy my first property because people had already been investing in Cleveland for so many years and they had that experience. But I was really looking at crime rates, appreciation rates, which I didn’t really know much about, but I was trying to dip my toe in that field. And price point. Price was a big factor for me. And then rents, how much could I rent these properties for if I were to buy within this price point? So that was the research that I did at the time. I was just learning as I was going and really leaning on my mentor as well. And my mentor was more of the frame of mind of just get it done, like messy, massive action.
And so the reason why I implemented the mentor in the first place is because I found myself getting into analysis paralysis. And so I knew the more that I researched, the more I was going to scare myself from making this first purchase. So Ashley, to your point, could there have been more research? Yes, but I did what I could with the knowledge that I had at the time.

Ashley:
Now, since you had never been to Cleveland even, how did you build your team there and who did you need as an actual team to actually help you find your property and then to run it once you purchased it?

Thomasina:
Great question. So first things first, I need an agent. So I did utilize BiggerPockets like agent search to see who was doing the most business in that area, who came highly recommended. So I reached out to a couple of people on BiggerPockets, but I also just went on Zillow and kind of searched through recently sold homes and looked at the agent who was listed to see who was the most active in the area. So I ended up finding one agent and I did submit a couple of offers with her, but it just didn’t feel like the right fit. So then I found another agent and that was my girl. I ended up closing another deal with her as well, but she was the first member of my team and she had been an agent in the Cleveland market for years and longer than I had been alive at that time.
And so she had a very extensive list of referrals and recommendations for contractors, inspectors, lenders, et cetera. So I leaned on her for the rest of the team that I was building out there, but I found her from Zillow.

Ashley:
Now, Thomasina, you said that you just didn’t feel like it was a right fit. We have a lot of agents that are also investors and listen to this podcast. What would be some advice you would give them as to why maybe you didn’t feel like it was a great fit for you?

Thomasina:
Yeah. I mean, as the saying goes, time kills deals and her communication was just very, very delayed. I would be trying to submit offers and then she would respond two days later and I’m like, “That’s not going to work for me.” I also don’t think she was as knowledgeable. I think one of the main questions that I did not ask her, and I learned this later on in my journey, but I didn’t ask if she had experience working with out-of-state investors. And I think that’s a big question to ask agents when you’re interviewing to see who’s the right fit for you. And it became very clear after our time working together that she maybe wasn’t as experienced in that department. And I don’t think she had as much experience working with real estate investors in general, even locally. So a lot of the questions that I was asking and when we were running the numbers, it just wasn’t as thorough as what I needed, especially as someone who’s buying for the first time.
So that’s why that relationship didn’t work out.

Toni:
I love that you were cognizant enough to recognize that because I feel like a lot of newer investors, they’re just kind of like, “Oh man, my agent sucks, but what am I supposed to do?” But the truth is you can go find a new agent, which is exactly what you did. But I also just want to highlight, because I think you hit something super important for all the rookies that are listening. It’s that we tend to focus on markets where we have familiarity or proximity like that. That’s where most rookie investors start. And we do that because there’s this level of comfort that we know things about that market, but we can bridge that gap in a new market by simply connecting with someone who already has all of that knowledge, oftentimes at a level that’s deeper than what you could ever accumulate yourself. And what I mean by that is if you just go get a really good agent in a market, they can be that conduit to connect you to all the right places and know all those right things.
I’ve talked before about on the podcast about us looking in Oklahoma City to do flips. When we first had that idea, I reached out to a bunch of agents through the BiggerPockets Agent Finder, got a bunch of people that replied back to me and immediately I had a list of like, “Hey, here’s some contractors, here’s some handymen, here’s someone that does roofing, here’s a lender that works locally.” So when you tap into an agent who knows that space, it makes a world of a difference. I guess the question that I’m getting at here though is as you had that first experience with agent number one, when you went to go find the replacement agent, were there questions that you didn’t ask the first time that you found were good to ask the second time around?

Thomasina:
Yeah, absolutely. That investor question was probably the biggest question. Do you have experience working with investors and do you have experience working with out-of-state investors specifically? And so that was number one question on my list when I was finding a new agent.

Ashley:
Now let’s talk about the actual property that you ended up purchasing. Tell us about how you found it. What was your offer? Did it get accepted right away? And let’s start with that piece of it.

Thomasina:
Yeah. So the first one that we got accepted, or I guess the first one we closed because we did have another accepted offer that we didn’t move forward with, but it was a single family home in Cleveland, Ohio, which again, I had never been to. We closed at $63,000. I went with a conventional loan, 20% down, and we structured it utilizing a seller concession. So that was one thing I really appreciated about my agent is that she was very knowledgeable and suggested things that I wouldn’t have known. So I would tell her my goal is to bring as little money of my own to the closing table as possible. So I would tell her that and then she would take that and run with it and see, okay, how can we get creative so that we can make that happen? And so she recommended that we ask for some seller concessions instead of just lowering the purchase price outright.
And so I ended up coming to the closing table with maybe three grand when I was expected to come to the closing table with 12 grand. So it was a significant difference and those numbers might be a little rough, but I was very happy with the amount of money that I ended up coming to the closing table with. And that was just based off of her recommendation and her knowing what my ultimate goal was with closing that property.

Toni:
Can you educate our rookie audience? Why was it better to ask for a seller concession as opposed to reducing the price?

Thomasina:
Yeah. So with a seller concession, what you could do, if the sellers want a specific price, so in this case, the sellers wanted to walk away with $63,000. So we offered higher than the $63,000, and then we asked for the difference in a seller concession so that we could use that money at closing to buy down the interest rate. So I ended up buying down the interest rate to 6%, and then I still had a little bit of money left over that was just mine or it could go to closing costs and fees and stuff. So those fees that would normally come out of my pocket ended up just coming from the difference in what the buyers were walking away with versus what we offered.

Toni:
Absolutely. And I love that strategy. We’ve used it to great success in the past as well, where if the appraised value is higher than the contract value, you can go back and increase the contract value to match the appraised value. But instead of just giving that money back to the seller, the seller agrees to give that money back to you to either buy down your interest rate or help with your closing costs or things of that sort. We’ve interviewed folks on the podcast before who’ve gotten money back at closing because of the way they’ve been able to structure some of these deals. So you get into it 20% down, you’re closed, amazing. Just out of curiosity, from the time that you had lunch with the friend who was a model to actually closing on the property in Cleveland, how much time had passed?

Thomasina:
That’s a good question. Maybe about five months.

Toni:
Oh, wow. That long at all. That was fast. Yeah. Yeah. You were not playing about trying to move quickly. I love that.

Thomasina:
Yeah, I was ready. I just needed someone to push me off the cliff and Yamu, my mentor, she pushed me. So that’s what I

Toni:
Needed. Five months. I love that. Okay. So five months later, now you’re the proud owner of your first rental property. Now walk us through because you’re in New York, the property’s in Cleveland. I’m geographically challenged, but I don’t think those are close enough for you to get too quickly if something were to happen. So how are you managing this remotely from New York City?

Thomasina:
So as a first time landlord, a lot of people recommended that I try my hand at self-managing so that I can know how to manage. And once I employ another property manager, I would know whether or not they’re doing it correctly. So I’m like, okay, I’m going to try to self-manage. I’ve never been to Cleveland before. I’ve never owned a property before, but we’re going to try it because why not? I went in guns blazing, and this is probably the biggest regret of my real estate investing career. It’s not something that I’m proud of, but you guys don’t judge me. I’ve never done it before. I went in guns blazing. I bought the property. It already had a tenant in there. The tenant was paying, and according to my real estate agent, the tenant kept the property in great condition. So they were a great tenant, so to speak, but the rent was severely under market.
And so I’m like, “Okay, I’m going to raise the rent immediately.” No questions asked, not even a conversation. I did maybe a small intro email to the tenant to let them know, “Hey, I’m the new owner.” And then after that I was like, “Hey, I’m raising the rent this much.” Now, I didn’t raise it to market rates. I just raised it a little bit, but it was still substantial enough to impact her expenses. And so immediately she was like, “No, I don’t want to pay the higher rent.” So I was like, “Okay, well, we’re not going to renew you. Bye.” And this whole time I thought I was doing the right thing. So we ended up not renewing with that tenant. And from that, I did not like that experience at all. I lost sleep over that experience. I am a super empathetic person, social worker experience, and I just felt really guilty by the way that I handled that.
And I immediately thought, “Okay, self-managing is not for me.” So I went to researching property management companies in the area, found the one that was rated the highest, so the one that people were using most often, and I employed them immediately. They had already had a tenant that was looking to move in pretty quickly, and they had already had them approved and everything. So once my tenant moved out, this new tenant moved in, they were utilizing Section eight. So this would’ve been my first experience with a tenant utilizing Section eight.

Toni:
Thomasina, I appreciate you walking us through just your own thought process behind that. But I guess my question is, do you think that that experience meant that you were ill-suited to self-manage or something that you were still learning? What was the trigger to make you say, “Hey, let me just stop trying to self-manage all together,” as opposed to, “Hey, this is a lesson that’s going to help me self-manage better moving forward”?

Thomasina:
Great question. I don’t think it signified my lack of ability to self-manage, but it was very emotionally daunting for me. And I’m a Pisces. I don’t know if anybody’s into signs, but I felt that experience was very, very heavy because again, I was not proud of how I did that to that tenant. And because it was so emotionally daunting and I was also dealing with my modeling work and just lifestyle stuff, I was like, “I don’t have the emotional capacity to self-manage at this time.” So it was more so a mental health decision as opposed to a capability decision.

Ashley:
Now, when you were self-managing, were you using any softwares or tools or apps or anything?

Thomasina:
At the time that I was self-managing that first property, I had not even implemented any softwares, any tools. Yeah, because I hadn’t even started the search of finding a new tenant. I just kicked a tenant out and was like, “Okay, nevermind. I don’t want to self-manage anymore.”

Ashley:
Now let’s talk about the cash flow on the property. When you switched to property management, did you originally run your numbers with property management in place or did it really affect your cash flow once you did hire the property manager? And what did they charge? Was it a percentage?

Thomasina:
Great question. So the property management company at that time charged 10% of the monthly rent, and I had run my numbers using property management and without property management. And there was such a large gap that it was a drop in the bucket to pay that property management company. On that property, utilizing the property management company with the property at market rates, I was cash flowing about $900 a month.

Ashley:
Wow, that’s great. And you had put 20% down on the property and you had bought it for 63,000 and your cash flowing 900 or 800? 800,

Thomasina:
800.

Ashley:
So Tony, I know you just did the math in your head. What’s the cash and cash return on that?

Toni:
Well, it’s even better because I think you said after seller credits, you only came to the closing table with like three grand. Isn’t that what you said?

Thomasina:
Exactly.

Ashley:
Yes.

Toni:
Yeah. 800. Yeah. I mean, that’s a crazy good return. So did that cash flow hold up, Thomasina, as you look back and you. Yeah, talk it through because sometimes we model something on paper and then real life comes and shows us what to actually expect. So what actually was the kind of net net and what was that gap between?

Thomasina:
Yeah. So on paper, this was a slam dunk deal. I was rolling in the dough at this point. It’s my first property. I’m super excited. However, that cash flow, most of it I ended up dumping back into the property because the new tenant that the property management company placed did a lot of wear and tear on the property, a lot of expensive wear and tear. So we had to make repairs on that property on two separate occasions. And so yeah, all that cash flow, I would say about 80% of the cash flow had to go back into the property, unfortunately.

Toni:
Do you still own the property today, Thomasina?

Thomasina:
I wish, but no, after two years, I made the hard decision to sell it because I joined a new mentorship program and they talked a lot about rent to own and lease options. And so I realized that I did not want to renew the lease on the tenant who was utilizing Section eight. And so my thought process was, okay, once that tenant moves out, I’ll offer this house with a lease to own, which if you guys are not familiar, it gives a tenant the opportunity to lease the property until they are ready to buy, but the only caveat is that they give you a upfront down payment or deposit on the property, and that would go towards the purchase price. So because I was in that mentorship program and I was learning about that, with lease to own options, the tenant is responsible for all the maintenance and repairs.
So I’m like, okay, if I’m getting market rent and the tenant is also responsible for all of the repairs, then I’m just sitting back and recouping my cash flow. So I posted it on all of the websites, Zillow, all the aggregate websites, and I was getting a lot of interest, a lot of traction. However, people could not come to the table with the deposit that I was looking for. And then I also had a few tire kickers who would just come see the property and then never follow up with me. So after about a month of showing the house, mind you, I had it completely renovated as well, so it was in good condition by this point. So after about a month, I was like, “You know what?” Oh, and I had been to Cleveland. So I had visited the neighborhood in person, and I think the driving factor of choosing to sell was that when I got to Cleveland, I realized it wasn’t a neighborhood that me as a young woman would feel comfortable walking through at night.
I’ll just say that. And so because I was managing this myself and doing all the showings myself, I’m like, “I don’t know if I feel as comfortable investing in this area anymore, so I think I’m just going to sell it.” I didn’t get really any bites from the lease to own advertising. And so again, I went back to Zillow, found the agent. I chose not to use the agent that I had done two other deals or another deal with because I felt like there wasn’t as much investor experience that I needed. And so I found someone on Zillow who was doing a ton of deals in that area, reached out to him, reached out to several people, and I went with the agent who though that they could sell the house at the highest price point. And we ended up doing that. So we sold it for.
I bought it for 63,000. We sold it for 110,000 two years later.

Ashley:
And how much do you think you put into the property over that time with those two renovations?

Thomasina:
About 24,000 maybe.

Ashley:
But you had said that was pretty much your cash flow that was paying for that. So it wasn’t even like you had to bring money to the table for it?

Thomasina:
Correct. Correct. All the cash flow that I had saved up, I just put it back into.

Ashley:
So really not a bad gain over two years.

Thomasina:
Yeah. I was very happy with the gain that I got from selling that property. I just wish I had given myself a little bit more time. I think I could have kept the property, but hindsight is 2020. What

Ashley:
Do you think the property would be worth today if you sold it? Did it appreciate a lot more, you think, or the market kind of has been stagnant in some areas. Do you think it would’ve held steady at that price?

Thomasina:
I think I could have gotten more had I held it. I get the alerts for that property still for some reason, and I think they had it at 145. So yeah, I think I could have lucked out had I kept it a little longer.

Ashley:
But you could have also had a bad tenant that destroyed it and now you got a $50,000 renovation. So like you said, it all depends on the scenario.

Toni:
Thomasina, what did you do with the proceeds? So once you sold, this is your only rental property at the time still, what did you pivot into next?

Thomasina:
That’s a great question. So the proceeds, I bought a duplex before selling that single family home. So the proceeds did not contribute to the duplex at all. I still have the proceeds and I plan on using that towards buying a small business. So that is my next venture. So that’s what the proceeds will be used towards.

Toni:
So talk to us about this duplex. So you go through your initial kind of learning curve on the single family in Cleveland. I guess a few questions. One, why a duplex next instead of a traditional single family? And how did you vet the area for the second deal to make sure you didn’t feel that same emotion that you felt about the first property?

Thomasina:
Yeah, great question. So I was kind of following the strategy of the small but mighty investor. You start with the single family, then you double and then you double from there. And I knew that I wanted to do a house hack situation for this second property. I had never been to Cleveland and I felt like maybe it could be, because I wanted to really scale in Cleveland, I was like, maybe it could be beneficial for me to actually be there and visit. So I signed with a modeling agency that was local and found this duplex. And in terms of the area, I asked more specific questions to my agent to get a better sense of the area, the school system, what’s going on? Is there anything in development? Is there anything up and coming in the area? And we fell upon Shaker Heights, Cleveland Heights area.
So I really ended up loving that area, just all the traction. There are so many universities around that specific area. So a very big young adult and student population.

Toni:
So the property being a duplex and potentially a better part of town, I’m assuming maybe also more expensive. So just walk us quickly through the numbers on the duplex.

Thomasina:
Yes. So I closed on the duplex for 325, which was a big price jump, but I used a different loan product for this duplex. I used an FHA loan, so I came to the table with 3.5% down, which I had in savings. So I was fine with that. And I believe we used seller concessions on this sell as well. So I came to the closing table with maybe like $3,000.

Toni:
Man, 3,000 is the magic number for you. I love that. I just want to go back because you mentioned that maybe house hacking, this was going to be the strategy for you, but given that you, from a lifestyle perspective, didn’t enjoy self-managing the first time, now it being a house hack, what was your plan for the management with the duplex?

Thomasina:
I was going to try self-managing again because again, I wasn’t afraid of my ability to do it. I just needed to emotionally recover from the first experience. So with this duplex, it’s five bedrooms on each side, so 10 bedrooms total. So it is a massive 4,800 square foot, massive jump in property and square footage. So my plan was to self-manage the entire thing. I wanted to rent out a few of the bedrooms on one side and then rent out the entire unit on the other side. So the half that I was occupying, I furnished it within a week. My friend flew into town and helped me furnish it and build things. And that was amazing, very big blessing. My parents flew into town and helped me paint some of the rooms. And so I really am so happy that I have the kind of tribe and community that would support me in that way.
But we got that one side up and running. I listed the bedrooms on places like roomies.com, Facebook Marketplace, Zillow. I would say my biggest return was definitely between Facebook Marketplace and Roomies, but I had those rooms filled probably within the first three weeks of having it furnished. So there was never a time where I paid the full mortgage on my own since closing on the property, which I thought was a really big deal. I was very proud of that. Now, the other half of the duplex, I was still attempting to self-manage and it took me. Mind you, I closed in September, so we were creeping into the winter months of Cleveland, which is very, very harsh and people don’t really like to move in the winter. And so it took me about three months of trying to, or maybe two months of trying to fill the other side before I threw in the towel and I said, “Okay, I’m going to implement a property management company to just manage the one half of the duplex.” So I hired a property management company, fired them a week later, and then hired a new property management company.
And you may ask why did I fire that property management company? I fired them because the communication was terrible.
So once they listed my property for rent, they were charging exorbitant amount of fees to tenants and applicants. And I just thought that that was outrageous and unnecessary and it was going to deter people from wanting to stay at my property because nobody wants to pay all of those unnecessary fees. And so I realized that I also saw how they were marketing my property, didn’t really like it. And when I tried to get them on the phone to kind of walk through these things, it was very hard to communicate with someone. So I ended that contract after a week and then found my dream property management company who I’m still using to this day. I recommend them to everyone who is in Cleveland. They have been amazing and they’ve been amazing because their communication is top tier. Their turnaround time for repairs and such once it’s been submitted, top tier, very transparent, very honest.
And one thing that I appreciated is that as an owner, if something on the home needed to be repaired, they gave me the option to have it repaired myself to outsource it or have them do it. And they didn’t charge me any additional fee if I chose to outsource it, which I thought I really appreciated because a lot of property management companies will charge you extra if you choose to outsource that. So it took this new property management company maybe three weeks before they found the tenant and that tenant has been there for two years. They’ve been great. The property management company has been great. The other side that is rented by the room has also been operating great. And knock on wood, the property is still standing and cash flowing and doing a really good job.

Ashley:
It’s that saying is to fire fast and hire slow. And I think that’s exactly what you did there is you fired them fast. I feel like you were actually very fortunate that you had the ability to make that decision that quickly or else it could have dragged out even longer. And unfortunately, I was one of those people that didn’t make the decision that quick. I waited three long years with the property management before I actually cut ties with them. And there was just so much money lost, so many mistakes made along the way. So that’s amazing that you were able to take charge and that relationship and find someone else who has been amazing for you. Now, last question here before we wrap up is what do you cash flow on this property today?

Thomasina:
So I cash flow about $800 a month on the duplex.

Toni:
And just quickly talk to me about the economics on the room rental side. So you’ve got now five bedrooms. Are you still househiking or have you since moved out?

Thomasina:
Oh yeah, I moved out after the first year.

Toni:
Got it. Okay. So you’ve got all five bedrooms rented. How does that management workload or just that strategy compare to the traditional long-term rental on the other side and which one do you like more moving forward?

Thomasina:
So I don’t rent out all five bedrooms. I don’t want to get any kind of legal trouble, but the way that the duplex is split, the top floor has two bedrooms and a private bath. So I rent that out as a whole. So I get a little bit more money on that. But in terms of the economics, just for numbers, for the rent by the room side, I get 2,905 total. And then for the other side, I get 2,100. So there’s a big difference in how much you can get when you rent by the room versus just the standard rental. So that was something that really stood out to me. And I’ll just say through renting by the room, I still self-manage that side. I really found my niche and I found what kind of fueled me in the real estate industry. And now I know that I want to take the rent by the room strategy and run with it.
I will tell you guys that I’ve had some turnover in the rent by the room, but I’ve had young adults who come in, they’re able to save money on housing and then they go buy a car. Are they able to save money on housing and then they go buy their own house. And so I’ve been able to see my tenants go through those experiences and it makes me so proud as an owner and as a landlord, but also as a young adult myself, especially living in New York City, one of the most expensive cities in the states. And so I’m really passionate about renting by the room and just affordable housing in general. And I’m glad that I worked up the courage to attempt to self-manage again because it has been very fruitful.

Ashley:
Well, Thomasina, thank you so much for joining us today on the Real Estate Rookie podcast. Where can people reach out to you and find out more information about your journey?

Thomasina:
Thank you for having me. People can connect with me on Instagram and YouTube at Tomasinamyresa, and you can also connect with me on the BiggerPockets forums at ThomasinaPierce. I’m very responsive. Feel free to send me a message if you have any questions. Happy to help.

Ashley:
Well, thank you so much for taking the time to share your story, your lessons learned, and also congratulations on your success so far as an investor. It’s rookie stories like yours that help all of our rookie listeners get started or get their next deal. If you’re not already subscribed, make sure you check out our YouTube channel at RealEstateRookie, and you can follow us on Instagram at