Is the fear of “what if?” stopping you from investing in real estate? You could learn a thing or two from today’s guest. Despite a “nightmare” first deal involving every worst-case scenario imaginable, he still managed to come away with an enormous profit!

Mitch Krotz had always wanted to buy a rental property, so when a great deal fell in his lap, it was a no-brainer! But then, seemingly everything that could go wrong did go wrong. Shortly after closing, Mitch was already evicting tenants and wading through trash in his heavily damaged unit. But that’s not all. Police showed up and discovered a grow house in the basement right before Mitch’s ex-tenants broke into the property. To cap things off, Mitch was hospitalized for meningitis during his DIY home renovations. While he had every reason to give up on real estate investing, his persistence paid off to the tune of $115,000 in profit.

If Mitch can do it, you can too! Stay tuned as he shares some of the most valuable lessons learned during his painful first deal. For one, if you’re going to take real estate seriously, you need to manage it like a real business. Invest in systems, organization, bookkeeping, and other tools that will set you up for success!

Ashley:
This is Real Estate Rookie.
Well, it’s happened. BiggerPockets is putting me on this solo episode, so we have no idea what’s going to happen without Tony to rein me in on these episodes, but we are going to be here to listen to some nightmare horror stories. So throughout my years as a landlord, property manager and an investor, there’s been a lot of crazy things that have happened to me and I’ve also heard a ton of other crazy stories from different investors. And even just joining the Real Estate Rookie Facebook group or the BiggerPockets forums, you’ll hear some of these things that can happen. And as a new investor, some of these things can keep you up at night, but also stop you from taking action because you’re so afraid of that worst case scenario.
So what we’re going to do on this episode is we are going to hear all these worst case scenarios that are going to happen, or not going to happen, but could happen and you are going to know exactly how to handle it, what to do, what your options are, who you need on your team to make sure you can either prevent this or how to handle the situation when it happens. So sit back, relax, get into your coziest sweatsuit, and we are going to hear some true horror stories.
Mitch, welcome to the show. Thank you so much for joining me for a little therapy session today on some traumatizing deal that you had happen to you.

Mitchell:
Yeah. Thanks, Ash, for bringing me on and working through this. It was definitely an interesting project.

Ashley:
And it’s not always easy to talk about something that has happened to you that’s not always the best case scenario or that is a painful experience to kind of go through this deal. I know I can think off a couple deals off the top of my head where I don’t want to talk about them anymore and I don’t want to think about them. So thank you for coming on to share your experience with everyone so they can learn. And if this ever happens to somebody else, they have some of these same issues that they had that you had, then they can just kind of look back and be like, “I remember this guy from the Real Estate Rookie episode had this issue and this is how I solve it”
So Mitch, we’re going to be talking a little bit about a grow house being hospitalized, a year long rehab, and you’re also going to give us a secret market that you have found for short-term rental too at the end of this episode, which I am excited to dive into. But first, why don’t you set the picture for us when you are ready to purchase? And this was your first deal you’re going to talk about today, correct?

Mitchell:
Correct. Yeah, it was my first… I did own my main residence at the time. That was live and flip type of situation, but this was my first full out going to be an investment property from the start.

Ashley:
So kind of set the picture for us. Where are you at in your time of life? Were you working? Were you leaving? What’s going on in your life when you purchased this deal?

Mitchell:
Yeah, so I was at my company for a couple years, knew I wanted to get into real estate more and more. I wasn’t actually expecting to jump into a property that was going to be an investment property at that time really at all. My thought process was work on my main residence and then do the whole BRRRR situation, fix that up, and then eventually make that a rental. But a opportunity presented itself and I thought, “Why not? Let’s go for it.” Definitely really didn’t think twice about it, just kind of jumped all in. And as you hear my story, that’s definitely the action that kind of took throughout the whole process. Some good things happened from it, some lessons happened from it. But yeah, I mean it popped up because I always talk real estate with some coworkers. Actually, it was from my supervisor.

Ashley:
What kind of drew you to real estate in the first place to even start looking at it?

Mitchell:
So there was a couple of people that were around my family, definitely were a little bit, you could tell, a little bit more comfortable financially and so kind just asking what their background is. They all had W2 jobs, but they also all invested in real estate, and that was kind of what made it possible for them to live the lifestyle that they had. And then the more and more I researched, obviously real estate popped up, BiggerPockets popped up. Everything kind of seemed to filter back to real estate. And between that, and I loved the game monopoly growing up, I didn’t understand why, I had no understanding as to this will hopefully be my life down the road-

Ashley:
Now, it all connects. It becomes full circle.

Mitchell:
Exactly. I mean I love that game. I couldn’t get anybody to play it with me growing up because it was too long. But I mean, I took interest in it real quick, and I still do to this day. It’s what I do when I’m watching football games. I’m on the side, Zillowing it up. So yeah, it was just always been an interest.

Ashley:
Okay, so what year is this that you’re purchasing this deal and you find it?

Mitchell:
So it is the very, very end of 2018. We’re talking December, is when I first heard about the property and walked the property.

Ashley:
Okay. And before I had cut you off before, earlier you said it was you were talking with your supervisor. Is that how you found the deal? Yeah? Okay.

Mitchell:
Well yeah, my supervisor, I mean he’s a great guy. We get along super well and he’s really into the finance, stock market, real estate. He’s fascinated with all of it. So he jumped in a couple months before that and he got two properties from somebody he knew that was deloading their portfolio. The second property he started working on first. The gentleman who he had working on the property was living in the second. So he was kind of trading that rent for work situation, which based off of his and kind of everything I learned, it’s kind of a no-no. It kind of muckies the water a little bit. But they went through it. And let’s just say after the first property, he wanted nothing to do with the second property. He just wanted to sell it. He just didn’t deal with that stress very well. So I was like, “Perfect, let me deal with the headache and see what I can do.”
So I essentially walked the property. And at that time, it seemed perfectly fine. There was a section of the basement that was locked off, but to my understanding, they had dogs, so I just figured, “Okay, the dogs might be in there.” But everything else, it was beat up, a little bit messy, but it seemed like a good buy. It was kind of a placed in the market, it is in Columbus, Ohio, that was on the borderline of what has already been flipped and what is going to be flipped. It was one of those main roads that on one side of the road you’re pretty good, on the other side of the road it gets a little bit rough. And then if you go one main exit down further, it gets really rough. But it was definitely a transition period for that area and I kind of understood that with talking to some local guys that are involved with real estate. And so I was able to kind of get on it a little bit early. I mean, do you want to go into details now with price and stuff like that?

Ashley:
Before we actually go into that, we’re going to take a quick break, but I think one of the things I really want to touch on when we come back is, was this advantage to you? You are talking so specifically like, “This side of the street is good, the other side of the street is not good” and I want to talk about how much of an advantage you can have if you already know things about your market instead of having to go into a brand new market. So maybe you can kind of break that down for us. And we are going to be right back to talk more about Mitch’s horror story right after we hear a word from our sponsors.
Okay, everyone, welcome back to the show. We have Mitch here. So Mitch, you were kind of talking about how you were analyzing your market. Do you think this played into an advantage that you were investing where you have lived in areas that you have known?

Mitchell:
Yeah, it was a huge advantage just being able to drive for dollars in that area and then going back to each direction of the neighborhood. It’s night and day at that time when I bought the house. The street that my house was on, one out of every six, landscaping is really nice, new windows. And then it’s right next to houses that have plywood over the windows and yards not taken care of. There’s garbage all over. But then as you kind of drove back, you saw, everything was kind of rehabbed. And then as you went south it got worse and worse. You could tell with just certain living situations, the amount of trash piled up, just the quality I guess, or how much people took care of their house, it drastically changed. And I’m talking within a half mile. It went from I guess what people would consider a B, B-, C+ neighborhood to a D, D- type of area.

Ashley:
Yeah. And let’s just kind of break that down real quick for anyone that doesn’t understand that kind of grading system, because there is no set hard and fast rule that, “This right here is what means it’s a C area. This right here is what it means to be a B area.” So could you just clarify real quick some of the things you use when you are determining what type of class an area is. So why would you say that one area is a C-? What are some of the indicators for you?

Mitchell:
Well, a big indicator, it would be the trash laying around. I’m not talking just a little bit of stuff here and there. I’m talking your hoarder situation. The boarded up windows is a huge red flag, unless you’re okay with taking on a property. And usually those type of properties lead to rough rental situations. Some people love it because a lot of times those properties can cashflow if you’re willing to put up with that. Other times, a lot of people aren’t because you are going to get headaches in those areas. So for me that C- is, I’m okay with starting in it, but I don’t want my property to end in that situation once I’m up and running. Whereas a B, a B-, I think is your working class. It’s somebody who has a steady 40-hour job. It might not be a highly paying job, but it’s consistent, they can afford rent type of situation.

Ashley:
So what was the property that you purchased? What did it look like? Was it one with trash outside? Was there boarded up windows? Was it nice on the exterior and beautifully already done? And what did you pay for it?

Mitchell:
So I ended up paying 36,500 for the property. I know now-

Ashley:
I just want you to know how many people are cringing right now that there are still properties out there for $36,500?

Mitchell:
Yes. Like I said, I did know the gentleman who owned it. He got the two properties super, super cheap. It actually gave him a couple thousand dollars profit, but he was also excited that I was excited to get started. So I think he helped me out there in that situation. But in terms of the property, when I first walked, it was a little bit messy. There was garbage on the inside. The outside wasn’t terrible. The windows were boarded up. There was a couple that were boarded up here and there. It was a little bit rough. Now, by the time I closed on it, and then I had to go through an eviction process pretty much immediately. And then that took me through the holidays, which kind of extended that a little bit. And then once I eventually got into the property, I think all but one window was boarded up. The garbage was up past your knees.

Ashley:
Inside the house or outside of it?

Mitchell:
Inside the house. I mean, it was… So when we walked the property, should I talk about them taking over the property right now?

Ashley:
Yeah, go into what it’s like when you’re first purchasing it. And even maybe talk a little bit about your due diligence period too. So before you even closed on it, what are some of the things that made you feel confident? As a new investor, these are things that you decided that, “I can take on this deal. These are the things I’m confident on.”

Mitchell:
So in terms of the quality of the house, whatever’s wrong with the house, I’m pretty confident that I’m going to be able to work on myself, fix it. I guess my house that I grew up in, you could say was a full-time live and… It’s not really a live and flip, but live and add on. My dad’s very handy. He’s one of those very talented individuals that just somehow figure stuff out.

Ashley:
Jack of all trades?

Mitchell:
Yeah, he’s good at whatever he wants to be good at, it’s sometimes annoying. It’s like, “How did you do that so easily?” But that taught me at a young age that it’s okay to just jump in and do things yourself. So with looking at what I knew I was going to be able to get the property and then looking at what other houses have recently sold for that were also still beat up, I was like 30,000 to $40,000 under what people were buying it for. And then houses that were recently renovated within that… I mean we’re talking less than a quarter mile now above that road that it’s on, we’re being appraised for about 100,000. So I’m like, I could screw up multiple times and still end up where the rest of the house are being appraised for. So in terms of what I’m buying it for, what it needs to go into, I had a lot of safety net there, which I think also helped me just jump into it and was like, “Let’s figure this out as we go.”

Ashley:
So now that you’ve closed on the property and you have this huge wiggle room that if there are expenses that come up you’re not expecting, you have room to still make the deal work for you based on the comps in the area for the ARV, what I want to know though is okay, you said you had to do an eviction. So from the time you closed on the property, how long did it take for the eviction to happen? And you mentioned 4-ft of garbage. So is this just them trashing the place or is this how they actually lived in the property?

Mitchell:
I hope to God they didn’t live in the property. I hope they were only using it for their business, which we’ll get into. I don’t know how anyone could live in that. It makes you sick. I sent you some of the photos. You’re more than welcome to share those online. I would hope that no one had to live in these situations.
But yeah, from the point where I walked the property and was feeling pretty good, I’m like, “All right, this isn’t going to be bad too.” When I took over, they went full send on just destroying this place. The current tenant started violating the contract that was already in hand. I knew I did not want property manage it myself because I had no clue what I was doing with a tenant. I had no clue how to do a background check. So I needed to get somebody in there who’s been there, done that, and who’s worked in this area while it’s been being converted from what it was to what it’s becoming, right?
So I found a gentleman here who kind of deals with the rougher areas of Columbus, Ohio. Kind of told him the situation, gave him talks on what the current lease was about. The lease was already kind of been breached so we could act immediately on the eviction process. That took roughly… For Columbus, it’s pretty quick. And he’s kind of been there, done that, and so he knew the system, he knew the people involved with the system. So it took, if I remember correctly, about a three to three and a half week period. That was dealing with the holidays as well with offices being closed. So it was pretty quick.

Ashley:
Would you say that Ohio is a tenant-friendly or landlord-friendly state? Which way does it lean more?

Mitchell:
As far as I know, it was extremely landlord-friendly compared to what I’ve heard other people had to deal with their horror stories and trying to evict people. So yeah, it was very friendly.

Ashley:
How much did it cost to have him do this eviction and to hire him?

Mitchell:
The hiring in terms of he takes a certain percentage, I did have to cut a check for the lawyer for the court fees and all that. It wasn’t very much, it was like $500. So for $500, they’re taken care of getting this person out that obviously did not take care of the property whatsoever. And that’s a home run every day. $500 to not have to deal with that I think is a no-brainer.

Ashley:
I 100% agree. And I think that’s a great price, especially for how fast you were able to get a resident out because it definitely takes a lot longer than in New York state than it does for you. But I think it is very much worth it to pay a professional than to try to figure it out yourself.
The first eviction I ever had to do when I was a property manager, the owner of the property said to me, “I want you to figure it out. I think you could do it. The old property managers I had, they did it. They didn’t have an attorney or anything.” The judge made me cry. I was in tears. She’s like, “I’m going to give you a minute,” because there was two back-to-back evictions. And she’s like, “I’m not going to embarrass you in front of the next person. I’m just going to tell them the case was dismissed and you can go back and look the paperwork.”

Mitchell:
Ooh, man.

Ashley:
Because I did it all wrong. The timelines, the timeframe as to like, “Well, this had to be done. This had to be done.” It was awful. I’m trying to hide back my tears as I’m tearing up, I’m like, “Okay.” And after that, I said to the owner, I said, “It is going to cost you more money because now we have to redo everything.” And yes, I’ll probably eventually learn, but it is so much more cost-effective to just hire an attorney who knows how to do it and can just take care of it. So I appreciate my attorney so much who handles these. He talks with the residents, tries to negotiate with them. He goes way above and beyond what it actually costs to have a tenant that’s in delinquency and having me try and figure it out and handle it and schedule court dates and schedule the marshal to come and all these different things. So I think that is definitely something that is really worth outsourcing.
And yes, for your first property, $500 is a lot to add too if you’re not having any rent coming in because you’re evicting that person, you’re about to spend this whole rehab, but at least you got to get started sooner than if you maybe tried to figure it out and it went on longer than you would’ve anticipated and probably hurt you in the long run. So now that they’re out, the fun begins. Did you find any treasures in there?

Mitchell:
Yeah. I mean, if it was in today with new laws being passed, I might’ve been okay. I might’ve been able to pay for my house with it. But yeah, actually the day they’re going to essentially haul the people out in handcuffs if they weren’t out, my property manager told me they were literally pulling in as the ex-renters were pulling out. And they go in and I’m at my W2 job at this point, and I’m like, “Do I need to be there for this? I want to be involved because I’m excited to get going.” And he’s like, “No, we’ll take care of this.” So they’re going around. It was roughly around 11 o’clock they were supposed to go and my phone rings a little bit later. I pick up and it’s my property manager. There is no, “Hello.” There is no, “It went great.” He simply goes, “What did you get us into?”-

Ashley:
Oh, no.

Mitchell:
… was his first word. So you can imagine I’m already excited, I’m already kind of slightly nervous and those are the first words out of your property manager. And I’m like, “Oh crap. Oh no, what happened?”

Ashley:
Does your heart just drop at that moment as to, “What do you mean?”

Mitchell:
Yeah. It was like being on a roller coaster.

Ashley:
Or do you kind of get a little defensive as to, “Well, it has great potential.” Like trying to rip yourself because I feel like that’s how I would be. I’d be so excited to dive in there and then somebody tells you like, “What did you buy? This is awful.” I feel like I would go into defense mode like, “It has potential. I know what I’m doing.”

Mitchell:
“Yeah, it’ll be great. I promise.” Oh, no. So they informed me that the Columbus Police Department was now over my property, and I’m like, “What happened during this?” I’m thinking maybe there was a scuffle before I got told that they were leaving. And it turns out that the basement, the section that I was not able to walk during my original walkthrough.

Ashley:
And why was that?

Mitchell:
It was locked up, to be honest with you. And I didn’t know. I asked, “Do we have the keys for this?” And from the rest of the house, I was thinking it’s more the same. And I was like, because I thought maybe the dogs were on the other side. Turns out it was a massive grow production. These people, and if you see the photos, it’s like a scene from Breaking Bad. It had all plastic off. There was fans, they had HVAC ventilation running. The lights were on a track. I mean, these guys were brilliant with what they were doing. I mean, they definitely knew what they were doing and they were being successful because they evidently hauled a bunch out. So they’re growing plants in the basement. But the thing is, the water was off, there was no electric, there was no heat. I later found out they were stealing electric from the old man next door.

Ashley:
Just like from an exterior outlet, they were just plugging into?

Mitchell:
Correct. They were plugging onto different outlets. And to kind of give you some background of the type of people we were dealing with here, he informed me that he kept throwing the extension cord back. He knew that it probably wasn’t a good situation they had going on. He didn’t want anything to do with it, but he didn’t want them stealing his electric. So at one point he ends up throwing the electric cords over the fence. And next thing he hears is he hears dogs barking. These people let loose their guard dogs and they attacked the old man and actually put the old man in the hospital.

Ashley:
Oh, my gosh.

Mitchell:
So I mean, that goes to show it was definitely worth hiring a property manager for the eviction because I didn’t have to ever have to deal with this people.

Ashley:
You didn’t have to get attacked by a dog?

Mitchell:
Right. So yeah, it was like something no other. So my property manager’s like, “We’re going to finish up here.” In my head, I’m like, “Am I in trouble? Because I own this property. How’s this work?”

Ashley:
I want to know about that too as to like, okay, the police come, is this going to hold up your rehab? And yeah, are you getting in trouble because you own the property now? But we’re going to take a short break and we come back. Let’s talk about that. And also some lessons learned. Looking back, what would you have done differently? So we’d be right back after this break.
Okay, Mitch. So you have law enforcement on your lawn of your first ever rental property. What happens? Are you hauled off to jail? Are you phoning in from prison right now for growing marijuana?

Mitchell:
Right. Well, so obviously my property manager had records of when I took over the house, the days that they posted, because you have to post flyers like, “You have one week left. You have five days left. This is the day we’re coming.” So they get warning shot after warning shot that they’re going or that we’re coming in. So evidently, there was proof enough that essentially I had nothing to do with what was going on. I am just taking over the property. So I actually never even had to talk to Columbus Police Department. My property manager to lawyers, they took care of everything. So once again, just tip my hat to them with how they handled the situation.
So that night, my property manager’s like, “Well, we’re going to get this all locked up. You can come get the keys at the end of your workday.” So this is December. Actually, no, I’m sorry. This is the beginning of January and it’s freezing. I go to private manager, get the keys, he says, “Everything’s boarded up except the back door.” I’m like, “Okay.” So I get to the house, it’s dark out. Once again, no electric. I go around back and the back door is wide open, and I’m like, “What the heck?” I walk in, it’s been broken into and to the point where there’s just stuff everywhere around the kitchen. I mean garbage. There’s gasoline containers. There was literally a machete on the counter. I’m just like, “What?”

Ashley:
Did you keep that as souvenir?

Mitchell:
Oh, I have put it… Actually, that was a tool I ended up using a decent amount, which we joked about during the renovation or something.

Ashley:
“I have a sword from a house before that I [inaudible 00:26:47].”

Mitchell:
Yeah, it was interesting. But in my head I’m like, “Shoot, are these people still in there?”

Ashley:
Right, yeah. Are they going to come back.

Mitchell:
Right. So I call up my one buddy, I’m like, “Hey, look, I’m about to walk this property. You don’t need to come in with me, but if everything goes wrong, if you hear screaming, call the police immediately.” So I wait, I’m at the back door. He comes around, and it’s like a scene from cops at this point. We got the headlamps going. I grab the machete off the counter, he’s got a little pocket knife, and we’re walking this house room by room.
I do have the GoPro video somewhere of the first time walking this. And so we walked into the room, no one was in there, but there was brand new holes busted in the wall. There was some money filtered out. Well, here, they broke back in because they evidently had some drugs and money stored throughout the house that they wanted to make sure they captured that they didn’t have time to get before the sheriff showed up earlier that day.
So starting at that point, I remember I FaceTimed my mom and dad that night after everything. I didn’t tell them about any of that situation, but I walked through and they’re like, “Oh, oh.” Well, I later found out my mom called my sisters and started crying like, “What is he doing?” My mama Cross is an absolute saint, but she was like, “I don’t know what he’s thinking, but that place is a disaster.” So then starting at that point, relocked everything up, got everything kind of cleaned out. And at that point, there was a couple nights where I was still nervous because the windows haven’t been replaced. You can’t really see inside the house.
And so I actually pulled up an air mattress and slept on the couch just in case someone was coming in. That first couple of weeks, I stayed over there a few nights just because I had my tools over there. I finished working on the house or doing what I was working on at 2:00 AM. I didn’t want to take all my tools out and so I just stayed there. At that point, it was a week where we’re having kind of weather similar to now where it’s sub-zero degrees. Well, I called the gas company, I can’t get the gas turned on to heat the house. So I actually was heating the house with propane tanks down in the basement while sleeping on it. I’m like, “Man, this wasn’t the safest situation for me.” But luckily, it all worked out in the end.

Ashley:
So a propane tank exploding you were at risk of, somebody coming in and attacking you to get more money out of the walls. The list goes on here. Or freezing to death. But okay, so already this is an adventure for you. And it is funny listening to what you sacrifice and do and as a new investor, as a rookie investor. This is your baby, your first investment. So how long did the rehab end up taking and what were those lessons learned that you had from this deal?

Mitchell:
It took just over a year to finish. We did pretty much everything on it.

Ashley:
And you did all the work yourself, you and your dad?

Mitchell:
All the work. Me and my pops. My pops came down quite a bit of weekends, which was nice. Actually, I kind of look back and reflect on. I got to learn a lot and just, we had games on the radio. It reminded me of childhood of him working on our house and me getting in the way of him trying to work on our house. So that was actually really nice and enjoyable. But it took just over a year in a house.
One big lesson, and you guys are going to laugh at this, but always tied down your stuff when you’re hauling it in the back of the truck. I actually bought one of those all in one shower tub from Home Depot. I loaded up everything, all the plumbing stuff, all the fixtures. It was probably close to $2,000 worth of material in the back of my truck. And so me and my dad are driving from Home Depot down 70 one day with all of this loaded and a semi goes flying past me. This thing lifts straight up and falls out the back of my truck. I see it going down, I swerve it. So luckily, this big fiberglass thing ended up falling to the side of the road. But all of my fixtures, all of my plumbing pipes, everything is just scattered on 70.

Ashley:
Just blew out? Oh my God.

Mitchell:
I mean, people are running over these pipe things and they’re whizzing past you. It was like real life Frogger swear.

Ashley:
Honestly, that’s more of a nightmare than finding a grow house going on in one of my properties, is that happening to me. If I’m riding with somebody and they say, “Ashley, just watch the back, make sure it’s okay. It’s tied down good or whatever” No, I can’t. I can’t do that. That’s too much pressure because I’m already nervous that it’s going to fly out and it’s going to hit the car behind us. That is a nightmare for me. And also it’s scattered across the road. There was somebody that had their suitcase fly out that was on the side of the road the other day, and I was like, that’s worse too. Just going and picking up their belongings, their broken suitcase. I just don’t ever want that to be me.

Mitchell:
It was terrible. My dad tried to joke about it later that day and I looked at him like, “Really?”

Ashley:
Yeah. Too soon, dad.

Mitchell:
Yeah, too soon. He’s like, “If I don’t make you laugh, it’s something that you can cry about. Live and learn.” So we didn’t even get majority of it back. It was a mess. But yeah, I mean the rehab, we ended up redoing everything, the bathroom, the kitchen, got the flooring done. Pretty much the only couple of things I did hire out, I found a great window guy in Columbus. He came in, great price. I’ve actually used him at my personal house. I try to use him for another property in another location, but it was a little bit too far from him. And then I got the floors redone. But everything else was done little by little. I did a little traveling during that year, so that took up some time. I was in Japan for almost two weeks during that year.

Ashley:
What did that rehab end up costing on that? What did you end up putting into it?

Mitchell:
Well, because I did everything myself, it was just under 25,000 to the best of my knowledge.

Ashley:
Okay. And have you had it appraised?

Mitchell:
So I actually cashed out refinance when I refinished it. I haven’t done it again. Right now. The market’s like 175,00. I was able to cash out refinance for 135,000 when I finished it.

Ashley:
So all in you were 60,000?

Mitchell:
Zero.

Ashley:
Well, I mean, but when your purchase price was what? 36,000?

Mitchell:
About 36,000.

Ashley:
Yeah. And then 25,000 into it?

Mitchell:
Yep, but I actually did traditional bank financing when I first bought it.

Ashley:
Oh really?

Mitchell:
Yeah. I didn’t know any better. I just thought that’s where people got their money from, was from banks.

Ashley:
I’m super curious because a lot of banks that I’ve run into, they won’t even do a loan for that low because it’s just not worth it for them.

Mitchell:
Right. Well, when I did the financing for my main house, I had a three ring binder that had everything completely organized, tagged. Overkill like crazy. I handed it to my lender when I had to do the paperwork. And so me and him got along real well because that made his job easy. So then when I went to this investment property and I was like, “Hey, can you do this?”, he brought that up, he’s like, “Man,” he goes, “we don’t typically do this.” He’s like, “But…” Me and him kind of had a conversation that I want to get involved with real estate. I want more and more property, so-

Ashley:
You built that rapport with him.

Mitchell:
Right.

Ashley:
Cool. And that must have been a small local bank where they have more flexibility as to what they can do?

Mitchell:
Correct.

Ashley:
Yeah.

Mitchell:
And my realtor is [inaudible 00:34:54] had a great realtor in Columbus.

Ashley:
It’s amazing how your network can connect you to other people that you don’t even plan on meeting and having those relationships develop. So what are a couple of the other lessons learned? Was there anything as far as being a landlord, having your own business for the first time, different things like that that you may have learned lessons on?

Mitchell:
Yeah, I definitely wish I would’ve ran it more like a business and not something I’m just doing on the side. In terms of a little bit more organization of what I’m working on when I’m working on it, maybe a little bit more understanding of how I’m going to budget out to get things done just to make the whole process faster. Take a better look at what would’ve been worth to outsource. Sure, maybe I saved a couple hundred bucks by doing it myself, but it took me two weeks to do it when someone can come knock it off in a day or two. Just a little more pre-planning.
And then definitely better bookkeeping. I’m seeing that kind of come back and bite me a little bit down the road. When it comes to your tax write-offs and helping to budget for future renovations, is I should be able to have a resource with a binder of timeline, how long stuff took for me to do, and prices. And obviously that stuff all varies, but definitely at least a starting kit. And I don’t, because I just dove in and just did it without being organized. Like I said, it was a side hobby, it wasn’t a business.

Ashley:
I think a lot of people do that. I mean, I did that. Going back, I wish I would’ve done the same thing because there was a lot of properties I just dove into and it’s like, “Okay, I know how to do bookkeeping.” I was an accountant and I have this, but I never put the systems and processes in place to actually just have it roll each one. I had to redo everything. Yeah, so definitely a lot of learning experience. As much as you want to jump in and take action right away, there are some things that you should be implementing now so that when that property, that deal comes up, you’re ready to take action.
So Mitch, one thing that I had seen in your application when we kind of talked about coming on the show to talk about this is, during this time you were actually hospitalized too, which just made the whole rehab process worse for you. You want to tell us about that quickly, briefly before we wrap up?

Mitchell:
Yeah, there was a couple of times where I probably actually could have gone in. There was another time where a ladder ended up giving out and while I was coming up on the roof, so I ended up falling into a mess of stuff from the roof. But it did wear me down. There was a lot of funk in that house, I guess is a nice way to put it. So I’m not sure how or why, but it definitely beat me up mentally and physically to the point where I somehow, some way end up catching meningitis towards the end of it. I had meningitis, I had shingles. And because of the spinal tap that didn’t repatch, I was leaking spinal fluid as well, which if anyone has ever gone through it, the headaches that you get from that is something I wouldn’t want to wish on anybody.
So yeah, you could definitely tell that it broke you down because the normal day was work from 7:30 to 4:30, try to get a workout in from 5:00 to 6:30 and then work on a house from 6:30 to 1 or 2 A.M. Repeat. It’s not sustainable. I’m working on my second property now and I’m doing the same thing. I already know in my head, I’m a little bit more organized this time. I’m writing down the things I definitely want to outsource, the things I actually enjoy doing and I maybe always want to do or prefer to do myself. You’ll get burned out if you try to do everything yourself and not organized. So it was definitely an experience. Didn’t realize the how severe meningitis can be.

Ashley:
Yeah, definitely scary.

Mitchell:
Yeah, I was sick in the hospital. I’m vaccinated and all that, but somehow I caught it and my whole family’s down, I’m like, “Why are you guys here? I’m just tired.” I’m actually named after my dad’s brother who died of meningitis as a little baby. So that would’ve been poetic if something went wrong, right?

Ashley:
Yeah, weird connection. I mean, kind of scary as you’re thinking about it in the moment as you have meningitis, yeah.

Mitchell:
Yeah. And when this all went down, I was rounding third and halfway to home with the whole renovation. So I’m just wanting to get back to it, wanting to work on it, which just kind of delayed the process, probably by the time I got up and going again, probably close to another month.

Ashley:
I think this is a huge lesson in itself too, is that burnout can happen. And as much as you want to be on social media, “I’m grinding away. I’m the hardest worker. I’m up at 5:00 AM, work until midnight,” there is that burnt out that you don’t want to have because like you said, you got sick and then it causes a delay in your project. But I think it’s great that you propelled yourself to get that motivation back because I think that’s also something that can be difficult too, is when you feel that burnout is getting back into the groove of things. We don’t know per se that your meningitis was caused by that, but I am an investigative journalist, so I did do some research and I did see that there was a woman in California who did get meningitis from smoking weed that had a fungus on it. So I want to know, were you smoking weed that you found in that house?

Mitchell:
No.

Ashley:
It sounds like it could be a dirty house and a fungus growing again.

Mitchell:
I mean, I wouldn’t deny that there was definitely some funk in the house, but no. Sadly the cops took it all when they first came into the property so I didn’t get any benefits from it.

Ashley:
Well, I’m glad you’re feeling better. And to wrap up the show today, you do have a secret to tell everyone as far as this little market that you have found for short-term rental and you’re currently working on a project there. So do you mind sharing with everyone where that market is and just give us a little recap as to why you think this is the next up and coming short-term rental market?

Mitchell:
Yeah, so I came across the area because it’s actually my hometown area. Growing up when I graduated high school, I’m going to age myself now, back in 2009, there was a couple of wineries that people would come and there’s live music during. And ever since then, there’s now just under 40 wineries within this little 5 to 10 mile radius in northeastern Ohio, right on the lake. So you have all of the lake opportunities. That’s actually during the summers when people actually want to visit Cleveland because it’s not freezing. And then you have all of these different wineries with the music and you’re starting to see a lot of PA and a lot of New York.

Ashley:
Is there a wine trail established there? I know near me there’s the Niagara Wine Trail or whatever. Does this one have a name to it?

Mitchell:
Not yet. I honestly think Geneva and Madison are doing a terrible job marketing it because a lot of people don’t know about it unless it’s word of mouth. But it is growing, it’s exploding. There’s also a state-of-the-art Olympic training facility that’s on the Geneva exit, which is I think 3 miles down the freeway. And you have literally thousands of viable AAU players and basketball players. This is where NCAA, the MAC Championship, indoor track and swimming and everything’s hosted. So you have a lot of things being pulled to this area that is just underdeveloped and is not ready for it, to be honest with you. There’s only a couple hotels within the few exits that were just put up a couple years ago. So it’s a sweet little spot and it’s still farm cheap, as I like to say in Northeast Ohio.

Ashley:
Just give us an idea of what did you purchase your property there for?

Mitchell:
So I actually went in on it with my sister. It’s my first partnership and it’s been interesting. But it was 156,000 I believe. It came with 3 acres, but then when we got it surveyed, it actually because of the variance, it actually ended up being a little bit over 5 acres, which is amazing. It’s right along the river. We actually own down by the river, we own 150-ft of river property, which yeah, evidently is a great spot for ice fishing. Who knew? But I’ve been told by a bunch of people here in Columbus, “Let us know when you’re up and running,” because we go up there two or three times a winter to ice fish. I’m like, “Amazing. That’s the slope here.”

Ashley:
So you got ice fishing, the Olympic facilities, and then also you have the wineries right there. So three different kind of industries instead of like, if you’re analyzing a long-term market, you’re kind of looking at what are the three job industries, but you’re looking at the three attractions that are happening in that market right there. So that’s awesome.
Well, Mitch, thank you so much for sharing this little secret with us. I’m sure there’s already people that are Googling on Zillow looking for properties right now. But thank you so much for coming on and sharing your advice with us. We are going to close out with the Rookie exam. So you got time for three more questions?

Mitchell:
Yeah, sure. Let’s do it.

Ashley:
Okay. So first question is, what is one actual thing rookies should do right after listening to this episode?

Mitchell:
What I would say is just get started, but do it in an organized manner. Like I said, I literally decided to buy my first investment property three days after it was presented to me with no game plan. So whether you’re looking for properties and that’s the step you’re on, or you have the property and you’re kind of the next best step, just think it out, make sure you’re not doing it as a hobby. If you really want to do this long term, there’s many different ways you can be successful in real estate, but the fundamentals of your bookkeeping and your setting up systems, there’s a right way and a very wrong way to do it. And I’m speaking from experience of the wrong way. So definitely just prepare. Do it and do it organized in terms of setting up your systems and stuff.

Ashley:
And what is one tool, software, app that you use in your business today?

Mitchell:
I actually started using QuickBooks. So the property, the Airbnb that I’m currently working on, and essentially if I’m in the state of Ohio, I’m going up on weekends, so that’s logging my mileage of driving from Columbus to up past Cleveland, which is two and a half hours. And that’s keeping me organized this time around in terms of all my Home Depot receipts and stuff like that. You can snap and everything’s filtered right away for you.

Ashley:
And the last question is, where do you see yourself in five years?

Mitchell:
Within five years, let’s hope my systems are in place. I would love to have 10 doors by the time I’m 35, with maybe one or two additional Airbnbs and locations that I like to visit so I can use that benefit. But definitely kind of streamline of that small but mighty portfolio where the goal is to get 10 and then maybe get those paid off before I expand to too much, because I don’t want a whole lot I have a look at, but I want it to be successful of what I’ve already invested in.

Ashley:
And Chad Carson writes a great book for BiggerPockets called The Small and Mighty Investor.

Mitchell:
Yeah, I’m currently reading it right now actually, so…

Ashley:
It’s really good, yeah. Okay. And I actually have some extra credit for you. I don’t always do this, but Mitch, for you, I have another question for a little extra credit. So looking back, what is one regret that you have once you started? And no, nobody, if you ever get asked this question, is not allowed to say you have no ragrets, spelled R-A-G-R-E-T-S, and flash me a tattoo from [inaudible 00:48:22]. Okay, go ahaed.

Mitchell:
So I guess my biggest regret is probably dealing with financing, maybe bringing in whether that’s an equity partner or someone who’s just straight cash that’s giving me a loan. Something to help speed up the process. I did have to wait paychecks to get things done because I’m doing things little by little where if I would’ve just understood what partners are available out there or what funding is available out there, that I have a little bit more knowledge now just from listening to podcasts and stuff, I would be much farther down the road. I’d be closer to my 10 property goal. And so for that, I did learn a lot. I definitely wanted to believe you learned from your mistakes. And the hard times, those stick with you longer and they stick out more in your head than your successes, but it definitely set me back.

Ashley:
Well, Mitch, thank you so much for sharing your experience with us. And if anyone would like to know more about the Columbus Ohio market where Mitch told his horror story today and you also want to buy a grow house, you can reach out to Mitch. We’ll put his information in the show notes and maybe you can find out some more information about his deal because I feel like there was a lot that we didn’t even get to uncover because we were so focused on the traumatic parts of it. But I mean, really a great deal in the end. I mean, you were able to refinance at 135,000. So, awesome job there, Mitch. I’m glad it worked out for you.
A couple of the things that I wrote down that I wanted to highlight is that you did extremely well building a team. You found a property manager. You had an attorney take over the eviction. You used your real estate agent to help you find a loan officer that would work with you for what you needed on a property. So fantastic job at that, building a team. And then also you left major room for error. You knew that you could go way over budget and this deal would still work for you. And then also just building relationships, how you went into that loan officer, building those relationships and having your binder, your information ready and building kind of a rapport with him. So congratulations on that deal and on the rest of your journey.

Mitchell:
Thanks, Ash.

Ashley:
If you want to find out more about Mitch, you can check him out in the show description. If you’re watching on YouTube, thanks so much for watching. And don’t forget to subscribe to the channel. If you like this episode, please give the thumbs up because this is my first ever solo episode. So I’m Ashley. And Mitch, thanks so much for being my guest/cohost today. And we’ll see you guys next time on another episode of Real Estate Rookie.

 

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