Residential Real Estate | Real Estate Investing | Foreclosure
Melissa Shea is the CEO of a Real Estate Integrated Company - Everyday RE Group, the President of the LIREIA (Long Island Real Estate Investors Association), has a NY brokers license, a licensed commercial lender for Everyday Funding, and EXIT Realty regional owner for Connecticut and Rhode Island. She has been an experienced real estate investor for the past 15 years and has raised over $35 million for real estate projects. She is committed to helping the homeless and is a mother of 8 children.
On this week's show, Melissa shares how divorce helped her get further into real estate, her unusual launch into owning LIREIA and mentoring, her mix of flips and holds, and how opportunity is emerging in states like New York and New Jersey due to the pandemic response.
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Show Topics
00:00 The Data Driven Real Estate Podcast Welcomes Melissa Shea CEO of Real Estate Integrated Company and President of Long Island Real Estate Investor Associations (LIREIA)
00:45 From divorce to running a REIA, Melissa's unusual path into real estate investing
07:00 Melissa's unexpected entry into mentoring and the important of action
10:37 The mix of flipping and buy and hold properties
12:26 Where is flipping best?
14:33 The number one skill she tries to teach her agents that has been a key source of her success
17:41 How New York's tenant rules has impacted local land lords and potential opportunity in struggling landlords
34:30 What data does Melissa use in identifying buy-and-hold real estate markets?
42:02 What real estate strategies is she currently focusing on?
43:23 Reverse mortgage strategies for real estate investors.
Show Transcript
Aaron Norris 0:07
Welcome back to the Data Driven Real Estate podcast, the podcast for real estate professionals dedicated to driving business using data. I'm Aaron Norris along with Sean O'Toole with PropertyRadar, and this is episode 41. We are very excited today to have Melissa Shea. She's the CEO of Real Estate Integrated Company Everyday RE Group, the President of the Long Island Real Estate Investors Association. She's got a New York broker's license. She's a licensed commercial lender for Everyday Funding, and an exit realty regional owner for Connecticut and Rhode Island. And since she has eight kids, I'm just excited she can talk to us. So, Melissa welcome to the show.
Melissa Shea 0:40
Thank you so much for having me. Yeah, it's a real privilege to be on here. So, that's great.
Aaron Norris 0:45
We don't talk to too many people with that many different licenses. How did you end up in this niche?
Melissa Shea 0:50
I'm just at a service for people, you know, they would, I would. My first passion was owning a REIA, right? A Real Estate Investors Association. I bought it about in 2007. Great year to buy it.
Sean O'Toole 1:02
Oh my gosh.
Melissa Shea 1:03
A really great buy. And I just kept asking the members, what do you need? What do you need? And so, they'd said, 'We need a hard money lender'. And back in those days, right, there was no hard money lenders. They all disappear, right? And then you got 50% LTV and stuff like that. So, I said, 'All right, let me start getting into it'. So, I started helping them, you know, raising capital too for different projects and stuff like that, to help my members out, joint venture, whatever. And then I realized you need a broker's license for it. So, I got a broker's license to do it. And then my members kept saying, 'Well, alright, now that you got us the money, where's the deals, so you have a broker's license, you got a broker's license and start a franchise.' So, then I started doing the real estate side of it. And we started helping our members out that way and then I got my NMLS to help people with their residential mortgages. I've since passed that on because let's face it, I got a lot to do and that's, that's I don't like working with the government that much. So, lots of detail and paperwork. That is not my forte, but I found a really good servicer for the industry and my members and I just care about the members. That's all it came from. That's how I just kept racking up those licenses and things like that.
Sean O'Toole 2:28
What brought you towards to buying a REIA? How'd you, how'd you reach that? So, just for the folks listening, a REIA is a Real Estate Investor Association. So, it's a local group of real estate investors.
Aaron Norris 2:43
Because it's so much it's so little work and you make so much money as running a REIA right, Melissa?
Melissa Shea 2:49
Well, in the beginning, yeah, it's a labor of love is, oh my gosh, I actually turned it into extremely profitable business. And I didn't, didn't intend to do that. It was again, just to add a service because I, my first year of real estate, I bought six properties. Then I bought 11, my second year, by the third year, I realized I'm in a lot of problems here because I didn't know it was around 2005, '06, '07, I bought on appreciation, and not cash flow. And I found myself in a big pickle. And I didn't know how to get myself out and I was only doing it by myself. I've read rich, I've read Carleton Sheets' book, I'm dating myself by saying that so I cover my grades but um, yeah, and so I got myself in some big trouble. And I was searching for somebody to help me like a group or something. And I did the Rich Dad Poor Dad. No, not Rich Dad, Poor Dad. I started Googling it online, you know, investors on Long Island and so it brought me to a REIA. And Sean, you're not gonna believe me. But when I walked in, I felt like angels were singing like, 'Ohhh', like, there's people like you, just as insane as you, you know, my friends were telling me, you buying another house, you know, more tenants, toilet problems, and you got to evict and, you know, I started losing my friends. My family wouldn't talk to me about it. And I got so much negativity, and then I walk into this room of like, you know, 50-60 people and like, they will all like, 'Go get them!' you know, so positive. And so, um, I found out it was right around 2007 right when the market was correcting. And the President said she was going to sell it to some person that was just going to dissolve it for it's own. And I thought, 'Oh, God, I can't lose my little heaven.'
Sean O'Toole 4:55
Yeah. So, self preservation that...
Melissa Shea 4:59
Yeah, I just so I asked her, I said, 'Please, I love this group so much, can you please make sure that, you know, I'd be interested in buying it'. So, and she worked out a deal, and I bought it. And I've never looked back. And you right, you're, Aaron, you're absolutely right. I didn't know what I was doing. I didn't know how to run it. I wasn't a good marketer. I did everything wrong. And yet it's my most successful business today. So, who knows? You can fail into success.
Sean O'Toole 5:33
It sounds like a lot of your other businesses came out of that right. So...
Melissa Shea 5:38
Yeah.
Sean O'Toole 5:40
...Real Estate brokerages and and other things all grew from that fateful day when you walked in.
Melissa Shea 5:47
Yeah, I wish I knew how much my life would change. Or maybe it's better I didn't. I became a mentor, which I never thought I would be. Because you have like that imposter syndrome in the beginning, because you like, I was just doing like, I'm a hustler if you can't figure that out already.
Sean O'Toole 6:06
Yeah.
Melissa Shea 6:07
I just like doing it right, and then ever. And then I went through a horrible thing called divorce. Anybody been through that? That's fun. So, it's like a reset in your life, right? Because they take everything mean, everything's gone. You know, once they find out, you got assets, they just lawyers suck it all up. So, our kids lost everything. And the beauty of that, the absolute beauty of that was I got to rebuild the whole real estate portfolio again, with so much more knowledge that I could do it so much faster. And I was actually on a radio show, like kind of like this. And the guy asked me, if you had to start it all over again, what would you do? And so I started saying it. And then he's like, 'Why don't you teach people?' I'm like, 'Oh, I don't think I have time, you know?' And do you know...
Sean O'Toole 6:57
I can't imagine that you don't have time, you seem to have time for everything.
Melissa Shea 7:00
I know, I gave up sleep, it's a great thing, you know, so, um, but what happened actually out of that was, you know, how a lot of times REIAs will have these people come in and educate the, you know, your members and stuff like that. And this guy took 10 I think it was five, five people he took $7500 deposits from and just vanished with the money. So, so my heart broke for them. And I said, 'Listen, I won't charge you anything. But I'm going to have to do it as a group. And I'm going to have to add five more people in that to offset my costs.' And that's how my mentoring program started, I have over 140 graduates, everybody, 84% of them make their money back in two years, or less, and 50 of them make it back in less than a year, so.
Aaron Norris 7:55
Those are really high numbers by the way, are you behind them with a lighter, like putting a fire under them or...
Melissa Shea 8:01
Oh, yeah, I kick their ass.
Aaron Norris 8:04
Seriously, a lot of people do not take action.
Melissa Shea 8:07
Yeah.
Sean O'Toole 8:07
I think that's the biggest problem. It's, it's, you know, it could be, I think it's often less the instructor and more the people that are attracted to those programs. So, do you weed out people when they apply? Because the only way you can have that level of success is by telling a whole bunch of people, 'No' because there's a bunch of people that just, will never, they'll pay the money with the hope and dream, but they'll never actually do anything.
Melissa Shea 8:32
Yeah, I think that's probably the biggest thing I don't it's not about volume. For me, I'd rather take 20 small, I think we're up to our classes are up to maximum 20. Because I know I can be effective with that. And with that, I meet with them one on one. And if I don't feel like they're a good fit for the program, you know, no harm, no foul, I'll give you money back or you go on to, I'll give you some recommendations of what you should be doing. But I'm looking for people who are just as motivated as I am, you know, I'm going places you want to come with me, then you come but you're not ready yet? Then, then there's a lot of other free content out there.
Sean O'Toole 9:13
Totally. Where's your REIA located?
Melissa Shea 9:17
I'm in Long Island. So...
Sean O'Toole 9:19
Okay.
Melissa Shea 9:20
And now we've branched out to Connecticut and Rhode Island.
Sean O'Toole 9:24
And you guys meet monthly?
Melissa Shea 9:26
Yeah, so, well, actually a lot more now. We used to meet monthly pre-COVID. Again, I did the same thing with the very first COVID REIA meeting we had virtually like this. We had about 80 members on there, which was great. And I said to them, what do you guys want from me? What can I do? What can I show leadership to you guys during this scary time? And they said they wanted more free content and more support during this time. So, we turned it into a weekly call and we have done doubled down with education. We give them six meetings a month now, and which is a lot.
Aaron Norris 10:11
That's a lot of work.
Sean O'Toole 10:12
Yeah. That's a lot of work.
Melissa Shea 10:12
Yeah. But I can't tell you how many more deals have come out of it, more students have come out of it. Um, you know, you give, you get what you give, right? So, I gave it for free for the whole year 2020 I gave, every meeting was free for all our members, and everybody was free. And then in 2021, we started charging, and it's been extremely successful and rewarding.
Aaron Norris 10:37
What kind of deals are you doing right now? Is it, I know you manage, you have quite a few rentals. But are you still flipping?
Melissa Shea 10:43
Yeah, so I'm flipping right now about 17 properties. And I have a portfolio about 100. And it ranges every day, because I'm buying and selling so often. But it's a range of about 120 to 130 units is where we're at right now.
Sean O'Toole 11:01
And how many of those are flipped versus hold rental?
Melissa Shea 11:05
So, 17 are flipping right now. And the rest are all buy and hold. I really want to double down on buying.
Sean O'Toole 11:12
...buy and hold. Yeah, yeah. And that since 2007, or actually since after the divorce, I guess when you restarted. So, how over what period of time did you do that?
Melissa Shea 11:26
Well, I've done over 600 rehabs, um.
Sean O'Toole 11:29
Wow.
Melissa Shea 11:30
Yeah. So, my, and here's the funny story, right? So, if anybody's listening and you think oh, my God, that's too like crazy, like, I could never do that. I, my first 11, I didn't make any money on. I made, I wrote checks at the closing table to get rid of my first 11 houses. How screwed up is that? Right?
Sean O'Toole 11:54
I call it education.
Melissa Shea 11:56
Yeah, it was...
Sean O'Toole 11:58
It's a different way to pay for education right? You pay a mentor, you pay somebody else or you pay out the deal. It's...
Melissa Shea 12:03
You're gonna pay it either way right? Yeah.
Sean O'Toole 12:05
You're going to pay it either way.
Aaron Norris 12:06
A personal short sale. All right!
Melissa Shea 12:08
Yeah, exactly. Oh, yeah, you know, the rehab, I used to get like a gut my stuff, I get, oh, this is gonna be the one, this is the one I'm gonna make money on. And, you know, you still lose a little bit here and there. But I've also made a lot of money flipping to I mean.
Aaron Norris 12:26
Where are you predominantly flipping? Is it in the Long Island area?
Melissa Shea 12:30
God? No. No, it's mostly out of state. Um, we, we have a lot of competition here in New York, we've got a lot of people with deep, deep pockets. So, very competitive. We used to do quite a bit because we were specialists in short sales. I unfortunately had to go through it with my divorce. So, I got a wonderful lesson on how to do it. And I got a wonderful lesson on the emotional part of it because a short sale is not about the financial matter for them, it's about the emotional piece of it.
Sean O'Toole 13:07
Yeah.
Melissa Shea 13:08
So, if you can connect to them, in that space of empathy and the fear, they feel, they have a lot more trust and confidence. And I've taken him to the finish line. And, and I enjoy it, I really enjoy it. Because watching, you ever do a short sale and watch them at the closing table? Like when they sign the last document and they get up, you see 1000s of pounds of stress, just leave, I always tell them, 'Tonight is going to be the best night's sleep we've had in years.' And so, we did get a lot of our fixed and flips from that. But when the COVID and moratorium hit is really, it dried up quick, you know.
Sean O'Toole 13:53
The empathy piece, right? Whether you're an agent taking a listing, or you're a real estate investor buying somebody's house or whatever, like that, that is really the, the key to the whole thing if you're working directly with the, with the owners, right? Like, understanding that situation. And the rest in that piece is so lost on everybody who's focused on I mean, we're in the list business, we sell lists, right but, but everybody's like focused on 'Oh, this list or that list,' and you know, you can have the best the worst list in the world and close a lot of deals. If you can connect with owners and you can have the best list in the world and not close any deals if you can't connect with owners.
Melissa Shea 14:33
Yeah, that, and it's a hard thing to teach. It really is ,I I have quite a bit of agents and you know, trying to teach that compassion. You either have it or you don't. I find the best ways to recruit for that is somebody who's actually been through a short sale. I always tell them make their mess, their message, message, because look, you can relate to them right like you look, you were in a financial mess, upside down, destroyed credit, blah, blah, blah and now you come out, you're, you're smarter, you're better you buy a short sale afterwards so, you know how to buy with equity. You, you can make money helping others such a, I know it's cliche-ish, but there's a real joy in doing that there's a real satisfaction in your work when you can help somebody and then still get a good pay day out of it so, you know.
Aaron Norris 15:31
Well...
Melissa Shea 15:31
That's why your lists are important, so.
Sean O'Toole 15:36
Yeah, lists are still a necessary part. We're here...
Melissa Shea 15:38
Oh, God, that's where it starts right?
Aaron Norris 15:41
I want to, before we go into the states that you're active in, I do want to talk a little bit about Long Island, you know, we have listeners all over the country. And so, some people might not appreciate your, your proximity to New York City and what you guys are going through to compare to what the city is, and I believe you have some inventory in the city of New York, right?
Melissa Shea 15:59
Yeah, so we have the whole Tri-State area pretty much except for Jersey, because, you know, New Yorkers in New Jersey...oooh taboo. Um, but yeah, so when COVID hit, right, if people don't understand Long Island is the island next to Manhattan, it actually has Queens and Brooklyn on it, but we don't naturally associate those two with Long Island. But when COVID hit, they all came to the island. So, our real estate jumped up, like many cities, right, the suburbs did so much better than the city did. And I can't tell you the increase in amount of activity just from that. And New York started all with the COVID, you know, you know, there was there was some scary times in the beginning like this time last year, a lot of deaths were happening, people just wanted to get out. And they were just overpaying ridiculous amount they had cash and they just kept buying. And so, our market went up quite a bit. Our, and the dynamic was our inventory shrunk, because any of the short sales immediately, were expunged because there was no evictions, no foreclosures going on. So, inventories shrunk fast, it created that increase in price. And we're still kind of experiencing that. Even though the city truly hasn't opened up yet. You know, gyms still can open up and restaurants still can open up fully, you know, so they're feeling it.
Aaron Norris 17:41
And for, how's the tenant situation worked out? You shared one particular story of a tenant that stopped paying in February where you offered cash or keys, can you can you walk us through that?
Melissa Shea 17:52
Yeah, so this is gonna sound really bizarre to a lot of other states out there. Especially 'cause I invest in Tennessee, it's very different there. So, I have 10, buying holes in New York. One is actually a shelter home that Nassau County is my tenant, and they didn't pay for four or five months, which is interesting. Um, and that was for homeless people, right. So, that's crazy. But the one story I was telling you about Aaron was they both stopped paying in the, the husband and wife stopped paying in February. The mortgage on it is 30 to 60 a month is my monthly payment. And they were paying $3200 a month. And they stopped paying. They are both on disability. So, they did not lose their jobs. They did not lose their benefits. And then they decided to rent out my basement. So, they were renting out my second level collecting $1800 bragging to me about this, realize that they don't have to pay New York's you know, because New York said pretty much you don't have to pay if you're a tenant. And we have been paying ever since. So, that's February of last year, so we're on our 13th month of pain. April 14 will be 14. And we can even start the eviction till June, if they don't extend it again. And an average eviction in New York prior to COVID was six to eight months. And then they did a law change that was now making it 9 to 12 because they added you had to give 90 day notice to them to vacate, right. So, I mean, I offered this woman up to $30,000 to move. $30,000 and she wouldn't take it that crazy.
Aaron Norris 19:53
Oh, 'cause she knows that she's gonna be able to park it there till 2022 and you'll be out 70 grand and...
Melissa Shea 19:58
Yeah.
Aaron Norris 19:59
Yeah.
Sean O'Toole 19:59
You will, you will end up with a judgment you know...
Melissa Shea 20:02
Oh, yeah...
Sean O'Toole 20:03
not sure what good that does you, but you...
Melissa Shea 20:04
So, they just file bankruptcy and wipe that away with a $2,000 payment, you know. So, yeah, I think what, what our state did was sinful and taking away our rights as landlords, because I have a commercial mortgage, you know. They're like, 'Oh, just ask for the forbearance.' Well, forbearance doesn't forgive the debt, first of all. And the second part is, is that you're gonna have a lump sum due when it comes up, and maybe you can modify, but that's not the luxury we have with commercial mortgages, right? Because it's not FHA-backed or anything. So, I'm paying like 7%, looking to refi, because the rates are better now. But I can't refinance, either, because I don't have a paying tenant, right?
Aaron Norris 20:49
Doesn't look good on paper, does it?
Melissa Shea 20:51
Nope. So, I think, you know, and that's why we invest out of state, right? Because who wants to deal with that? You know, and it really ruins it for other people. I'm very active in the, you know, homeless, homelessness, I have a non for profit organization, too. And it really ruins it for them, because where are they going to go? You know? And then let's like, take it, you know, you guys are gonna have some serious list coming up in our market, because you're gonna have two things. One is, you're going to have all these landlords that want to sell, right, I put that house up for sale as is with the tenant occupied. You can't even believe how many people are making offers on these houses like that.
Aaron Norris 21:34
Really? Well, they're going have to deal with the tenant after, right? I mean, can...
Melissa Shea 21:39
Yeah, but they're so desperate to get houses...
Sean O'Toole 21:42
A deal, anything, right. So, and they figured they'll make it up on the back end.
Melissa Shea 21:46
Yeah, I'll sell it at a $60,000 discount, just get out of the damn thing. And they'll pick up a deal. And they'll deal with it. So, and then, if it's a residential mortgage, they're getting rates in the threes, right? Or in the sixes, you know, so, or fives now.
Sean O'Toole 22:04
If it's a homeowner that buys it, the eviction law is different, right? They can actually kick the person out.
Melissa Shea 22:09
No, not New York. Not in New York. Is that crazy?
Aaron Norris 22:15
Well, that's it is interesting, like why they would take that risk. They're just so desperate to own something?
Melissa Shea 22:19
Yes.
Aaron Norris 22:20
Wow.
Melissa Shea 22:21
Yeah. Is that crazy? But um, yeah. So, that's, that's what the next major fall is all these investors that only single-family houses, right? They're behind on their mortgages, because these tenants are not, not paying for months and months and months of time. I have 10 houses, out of all 10 houses in New York, only one tenant is paying, one.
Aaron Norris 22:47
Oh!
Melissa Shea 22:48
Yeah. So, I'm floating $35,000 a month in mortgage payments, just in New York.
Aaron Norris 22:53
And these tenants do not have to prove any kind of...?
Melissa Shea 22:59
Nope.
Sean O'Toole 22:59
At least in California, at least on paper, right, they've required proof of, you know, of a loss there. And that seems to me, like just a base case requirement like, you know, why should somebody get a windfall? You know, at that, that's just, it's not fair. It's not right.
Melissa Shea 23:20
And here's what the other problem is, there's the let's, let's get through the wind, you know, forget the amount of foreclosures that are gonna happen because of this incident, where those tenants gonna go when they eventually get out, if you know that they haven't been paying during COVID do you think any landlord is going to even take them? The shelters are going to be over flooded. And because the county wasn't paying us, we closed down our shelters. So, so many shelters closed down. It's a big mess. So, my solution is go to Connecticut. Go to, you know, South Carolina, North Carolina, Tennessee, anywhere else you know.
Sean O'Toole 23:55
The pendulums always swinging, you know, even in places like California, and sometimes things have to get really bad before the pendulum starts swinging the other direction. So, you know, maybe this is a, you know, the cure, right, like having a get so bad to one side, then things start swinging going the other directions? Just, I don't know. That's the way things go over time.
Melissa Shea 24:17
Yeah, there was, it was to landlord, to tenant-friendly state. I mean, literally, a Manhattan eviction would take you two years. No, it just it, that's insane. That's an average and a foreclosure. The average time to foreclose in New York is seven years. So, five to seven.
Sean O'Toole 24:40
I've got a guy who's always reaching out to me and about, you know, he still thinks in you know, New Jersey, New York, that whole area that there are, and we don't really know, right? We kind of believe this is true in Nevada, because we had we, were tracking Nevada back through the crisis and Nevada changed some laws and basically made it criminal, you know, to foreclose, right. It's crazy. It's a long story when you go there, but, um, but what we saw happen was the foreclosures went away.
Melissa Shea 25:13
Right.
Sean O'Toole 25:14
But I don't think it was because people started making their payments. I think the banks just said, 'Forget it, we'll let them not make their payments. And we'll just sit on these properties until they, you know, whatever.' So, you know, It wouldn't surprise me at all today, if there are 10s of 1000s of owners in Nevada, that haven't made a payment since 2007. And banks have just said, 'We'll wait till they die or sell or move or whatever,' right. And because it's not worth foreclosing, and the prices have gone up, and so that, you know, the assets still there, we're continuing to accrue the interest and stuff, we'll get paid someday, but we're not going to worry about it for now. And...
Melissa Shea 26:00
But I gotta be careful about that, because they could do a quiet title action and clear their debt out. And that's it.
Sean O'Toole 26:06
Maybe, yeah, maybe. So, you know, it's, it's interesting, you know, and so anyways, he feels the same things happening in, in New York, New Jersey, etc. and that there are 10s of 1000s of people that haven't made a payment since 2007. And no foreclosures. Because we didn't really see the volume of foreclosures there that we saw in other places.
Melissa Shea 26:28
In Nevada?
Sean O'Toole 26:30
No, no, I'm saying even in New York, New Jersey, Nevada. Certainly.
Melissa Shea 26:34
Yeah. You know why a lot of that was? So, because, we're such a reputable state. There was a, the largest attorney was fraudulently foreclosing on people, Stephen Bounds office. So, they had to reverse all the foreclosures. Everyone of those foreclose, you knew what a mess that was? And they put a moratorium for 18 months on foreclosures. So, what happened was they just settled out. And that's why our short sale business did so good. Because we were just settling out with the bank. The banks were hungry to just settle at that point, because they knew they couldn't foreclose. And..
Sean O'Toole 27:12
Yeah.
Aaron Norris 27:13
Do you have...
Melissa Shea 27:14
That's really where our strength comes in. Is that that short sale market, which will come back eventually.
Aaron Norris 27:20
Do you see a lot of members sort of preparing for the opportunity that you're talking about maybe picking up some properties for over-leveraged investors not prepared to do what you're doing?
Melissa Shea 27:30
Yeah. The investors, you know, you don't even have to wait for the foreclosure part. They're just so desperate to get it like investors are a little bit different than homeowners, because they don't have the memories of you know, bringing Johnny home from the hospital and watching them grow up in the house. You know, it's, it's a different emotional attachment, right? It's like...
Sean O'Toole 27:48
And they don't have legal protections.
Melissa Shea 27:50
Yeah, they don't have the legal protections.
Sean O'Toole 27:53
Not being foreclosed or evicted.
Melissa Shea 27:55
Yeah. And well, actually foreclosure, they still can't foreclose on them either. But it's going to destroy their financial life, right? Because the financial hit to them is, is too much. And so, if they can get out of that, they'll take, they'll take a hit and move on. You know, it's unfortunate, because it's out of our control right. And, and I think that's the part that, you know, losing our constitutional right to execute, you know, you don't pay you have the right to evict and I don't mean, like, you know, throw them out heartlessly. But like you said, there's a lot of good reasonable states that said, 'You know what, you have to prove that you actually got impacted by COVID before we have before we can go up though' there is a three month grace period, four month grace period some.
Sean O'Toole 28:43
Trillions and trillions and trillions of dollars of support, right, so much in the name of homeowners so much went to a not homeowners, but to renters and the rest, right. And so, there's been a lot of support for these folks. And, you know, so to the degree that we were gonna put trillions of dollars of support out there to have it go to making sure their housing payments, so it supports the entire chain and doesn't just pick and choose. And, you know, I keep hearing stories of like folks that are, you know, not paying their rent, but investing in GameStop, that, that shouldn't happen.
Melissa Shea 29:16
Well, that was a stupid thing that they did a lot of legislation didn't think this one through.
Aaron Norris 29:21
No.
Melissa Shea 29:21
They wrote the checks to the tenants, they should have been writing it to the homeowner or to the landlord. And so, the tenants got the checks and they still weren't paying the rent, like you said, they went...
Sean O'Toole 29:32
Write the check to the tenant and let them make the decision, but then don't protect them from eviction if they use it, you know, on a new big screen TV.
Melissa Shea 29:39
That's true, too. That's true, too.
Aaron Norris 29:42
Are there... I've seen different states doing different things. In California there's some nonprofits getting CARES Act money to backfill specifically working with landlords or is any money available in the New York market for landlords making up past rents as grants?
Melissa Shea 29:57
We've been, we've been trying to actively come together as a community, it's a little divided right now. But it's, it's taken such a hit that we have to get united on it. But no, there's no resources for, they view the landlord is the big, ugly, rich people. And meanwhile, it's your mom and dad, your neighbor next door. It's not, it's not conglomerates, it's not. Hedge Funds are smart. They're buying in, in places where there's low taxes, right? They're not buying in their own backyard right? And here's the funny part is most of them investors that buy these rental houses live in New York, you know what I mean? So, that's the ironic part, you're actually hurting that whole economy of scales, like you said, Sean, like, if they had just paid it to the landlord, it would have kept the whole economy going, you know.
Sean O'Toole 30:50
This thing something happened to small businesses, right. So, you know, like, in a lot of cases, small businesses, right, you gave people this extra unemployment benefit, which I think was awesome. And you know, there's a lot of good things about that. But then, I know lots of small business owners who are trying to survive and keep their business open. And they're asking those employees to come back, and they're saying, I'm making too much money on unemployment. I don't want to go back to work ,right?
Melissa Shea 31:16
Right.
Sean O'Toole 31:16
And , and so now, wait a second, wait, you know, so, yes, this helps in a way. But there were jobs available over here that people weren't willing to take? And, you know, so it's, we're not very good as a country at, at stimulus. And it's one of the reasons right, we have it. We put all this money out there. And ideally, right your reflating, the economy, right? COVID is incredibly deflationary reflating the economy, and getting it back on track. But because we're not good about how we do that the money pops up all these unexpected places. And, you know, you've got a run on exotic cars, and you've got to run on GameStop. And you've got Bitcoin going through the roof. And like, the money pops out in these places where it shouldn't, and yet small businesses and landlords aren't helped at all, and they're getting just absolutely hammered. And, and, you know, the rich get richer, because both parties think that the $250,000 a year small business owner or, you know, small landlord that owns five properties is rich person, and not, not the guys who are actually profiteering off of all of this?
Melissa Shea 32:35
Yeah.
Sean O'Toole 32:35
Anyways, I'll get off myself....
Melissa Shea 32:39
Yeah, but you know, what's interesting about that, is that, you know, thank God, we're in real estate, you know what I mean? And that's probably the message. And that's probably why, you know, my big, my big mission, if you want to put it on life is to empower and educate people for financial independence through real estate. So, it doesn't work in New York so great. So, what, you know, take your lickings, but don't give up, right, that's my 600 rehabs, I would not have my 600 if I gave up after my fourth, writing my check, you know, and there's real estate available everywhere else, I'm still making a lot of money. Thank God, because that's offsetting My New York mess. But...
Sean O'Toole 33:15
And my guess is, is if you ,if you survive through this thing in New York, you still do really well in New York, like everybody wants to be down in California. But, you know, the investors I know, in California, all kind of crushed the investors I know, everywhere else, right, in terms of absolute income and rest. And, you know, you're making 50 $100,000 a deal versus two and ten, like, so.
Melissa Shea 33:40
That's true.
Sean O'Toole 33:41
I don't know. But it does. It can be very frustrating at times.
Melissa Shea 33:46
Yeah. And if you do it, right, like, ironically, Florida is the one I made the largest spread on, but they're, you know, our average flip is between 40 and $60,000 still, you know, it's it's got a good chunk to it. I mean, there's, no I'm not gonna lie. There's times when we meet it's really, really good money. And then there's times where you just get beaten down by the town or something. I'm writing a check for $20,000 to get out of the deal. And, you know, but it's just a big boy game, and you got to get into it. And you got to survive, you know, and I'm a woman and I do it anyway.
Aaron Norris 34:21
You're in New York woman you are a watch out.
Melissa Shea 34:23
Yeah. Yeah, I'm going to...that's where you really got to watch.
Aaron Norris 34:29
Let's talk about the data, you talk about different states, what data did you use to, was it strictly landlord friendly or how did you select your states?
Melissa Shea 34:37
So, I evolved over the years as I grew my knowledge base, right. So, my first mistake was, I bought in Florida, similar to a market we have now right? I bought new construction back then it was very popular, right? So, D.R. Horton would buy a house, you know, build a house, a community, whatever. I was like gambling on us. He was addictive, right? So, I put down $10,000. And then I wholesale that contract off in two months for another $10,000. And it was cool to me, right? So, and it was, I, can you know, it's like going to a casino, right. So the first time I did it with 10 grand, I was like, oh, wow, I got 10 grand back. So, I did it with three houses. And I think I made like 15 grand between 10 and 15 on each house. So, what did I do? I go in with 11. Yeah, 11, right. 11 and, um, yeah, that's right. My magic number, right. That's the one I should never gamble on. And I got stuck holding the bag. And I couldn't wholesale them. So, to not lose my down payments. I closed on all 11. How stupid was that? So now I have 11 negatively cash-flowing properties because I didn't think, look, see, and feel. Right? I didn't, I didn't do the data right. I didn't see that yeah, 1000 people a day and moving in. But just you know, 1200 are dying. You know what I mean? Like that, you got to look at those numbers. You know what I mean? You got to look at who is actually buying those houses. It was only investor to investor was hot potato. Right? And then so, that was my evolving in data there is that I had to look for jobs, markets where there was stable income. And that's when I learned like, okay, cash flow is the game. So, I got myself out of that mess by doing a strategic deal where I was able to buy six apartment buildings simultaneously. That was a little stupid, too. But I went for cash flow, right? And cash flow did me well, I did well. The divorce didn't do me so well, but that the cash flow did well. And then when that all got taken away, I had to go through my divorce. And I lost my house. And I went, Oh my God, if I'm going through this, there's got to be other people that going through this. And so, then we started doing the Lis Pendens list. And so, we would buy in strategic markets. And we did research, New Jersey can set, um, Suffolk County where I actually lived was the top 10 in the nation of foreclosures. So I thought, wow, this is, of Lis Pendens so we...
Sean O'Toole 37:25
Filling. Foreclosure filings, but they weren't getting completed.
Melissa Shea 37:28
No. And that actually that dynamic worked really well for us because the bank was willing to work with us because they knew they couldn't get to the finish line. We could talk to the homeowners in a way that said, 'Hey, don't look at this and milking your life. Look at it as a launch to start your life.' Because the real truth of the matter is nobody wants to stay in their home not paying rent. I mean, it sounds great and sexy and fun and or mortgage. But mentally, it does something to them. They don't thrive, because they're always afraid of like who's gonna pull my credit, or it's just as a negative way of living, when you can free them out of that bondage is when you can help them overcome their fear right? When you can tell them 'Listen, there is a better way. Let me show you how.' And they listen. I have people who come back to me two, three years later, and they're like, Oh, my whole life is all better. They move out of state they do this they move in with family, they buy another short sale. Life can begin when they stop.
Sean O'Toole 38:34
Because their credit situation none of that starts improving until after they get the deal done and move on.
Melissa Shea 38:39
Yeah. And that's so that data was so important because we had callers calling constantly, you know, once they were at auction dates, or when they went list pendants and developing those relationships. And now, so then we moved into other states, we moved into Connecticut, Rhode Island, down south so our data led to where good jobs right so I have a big portfolio in Tennessee in Memphis. I love Memphis. Nike built their plant there, Bear built there. Same thing with Pittsburgh did a lot of research and data on that what's, where's jobs? Right. So, here's a hint for all you listeners, you want to find where the good deals are. Don't go for the home runs go for the steady eddie cash flow, where there's good solid jobs, where there's good employment, you know, and it helps when you guys can provide good data like that where, where absentee landlords, you know, that's a really good thing. We're going after that in Connecticut, you know, absentee landlords.
Sean O'Toole 39:41
Especially if you have a holding power and you can bail out the folks like, you know, New York and get our absentee landlord list in New York right now. If you've got holding power, it's good time to get some discounts.
Melissa Shea 39:52
Yep, that's and that's the truth right? So, you got hedge funds that are looking for those kind of deals because New York inherently doesn't lose its value, really, it doesn't. That bad. I mean, we can cry and complain all we want right now. But it's like California, right? California holds its value just does, you know, because it's California to New York. But I find that for the average investor, especially when they're starting, you don't need to hit the heavy hitter areas go with the bread and butter bar, the non-sexy areas, right, Alabama was great for me. I made so much money in Alabama. It was easy. And it was 5, $10000 here and there, 20,000 here. But it was easy you know.
Sean O'Toole 40:35
What about like in New York, New Jersey, right? So in California, there's, they're only miles apart. But there's a big difference between trying to invest in Newport Beach, and Riverside, right. Like those, those are completely different markets. And what, an hour drive Aaron? You've been down there.
Aaron Norris 40:51
Without traffic.
Sean O'Toole 40:53
Without traffic one hour.
Melissa Shea 40:55
Without traffic, one hour.
Sean O'Toole 40:56
Do you get... do you see some of that where there are those markets where that, you know, closer to you that are growing and thriving, and you know, still going to be more expensive than Memphis but do you look at that? And do you look for those kind of more micro opportunities within your market?
Melissa Shea 41:13
Yeah, so for Long Island, the bread and butter sweet spot, like the entry level is between 350 and 550? I don't even think there's a house for 350 on in Long Island anymore.
Aaron Norris 41:25
I was going to say, 'Where?'
Melissa Shea 41:26
Yeah, that was like in the hood, right? The hood has changed, right. And that's probably why we go out of market, our taxes are really our biggest drain on us. You know, a simple little house, like my house property taxes are close to 16 grand, and I don't have a big, big yard or a lot of thing, you know, for 16 grand. I mean, that's crazy money. Our second house in Maryland, and that's not too far from DC. The taxes are $6,000, $10,000 less, you know, it's crazy difference. So, you get so much more value out of state and um...
Aaron Norris 42:02
So, what strategies are you liking? You mentioned absentee? Is there a specific data set that you're tackling when you're going into these markets?
Melissa Shea 42:10
So um, I like fatigued and absentee landlord. So, like, people in California, just because they have money will invest in turn-key properties in other states. Like how I said that right.
Aaron Norris 42:26
So you look for a mailing address from California, got it.
Melissa Shea 42:30
Or New York or Canada, you know.
Sean O'Toole 42:33
Out of state absentee owner list is one of our more popular for sure right.
Aaron Norris 42:37
Yep.
Sean O'Toole 42:37
Yeah.
Melissa Shea 42:38
Because they think it's like that, what is that George Foreman Grill, like, set it and forget it, that's what they think it is. And that's the danger, you should be a note holder, not a property owner, right. And that's the difference, right? If they can understand that. So they don't understand when the tenant calls and they have a problem, or there's an issue with their tenant or something like that, so...
Sean O'Toole 43:05
Older absentee owner, too, is another really popular list. So, as you know, folks start hitting 70, 75, 80, right, they're kind of done with being a landlord. And, you know, they probably need or want the cash for other things and stuff, you know, so that post retirement, absentee landlords another good one.
Melissa Shea 43:24
Well, you know, what's also good about that, because they want to do their either 1031 exchanges, and they'll do it to like a DST, you know, so. So then, at least it's just kind of more stagnant. they've exhausted their tax benefits. You know, another good market list I'd be interested in, is I was pretty passionate about this is the senior market, because in our particular area, reverse mortgages are going to really hit hard in New York, New Jersey, and California, where there's high property taxes, because for anybody who doesn't know what a reverse mortgage is, that's on the call, is that basically, they don't have to make a mortgage payment, but they have to still stay current on their property taxes and their, their insurance, but they essentially are using the equity in their house to live off of whether it's in monthly payments or a lump sum. Now, a lot of mortgage pay, companies back in the day, were incentivized to get the lump sum money. And so, a lot of these seniors had never seen this kind of cash in their life, right? So, they kind of feel like they won the lottery, right? So, they get their house, it's worth $600,000, right? They get a reverse mortgage, they get a lump sum of $300,000 they don't have to make a mortgage payment on it, and then they can live in it till they die. That sounds great. So, now they spend all their money on you know, all their grandkids paying for their weddings and fixing up you know, buying cars.
Sean O'Toole 44:57
Cadillac.
Melissa Shea 44:58
And they get Cadillac, you know, splurging, and they don't save for their taxes and their insurance, and they don't save for or do the repairs to their house, because for the next 20 years, they're going to live there. They think that they're not going to have a repair, you know, a roofs not gonna go or a heater elements gonna go. And so six, eight years later, they can't pay their property taxes, the roof is leaking. And it's so sad because they probably lived there 20, 30 years, and now they have to find out that they're gonna get kicked out of their house because they can't afford their mortgage sucks. It's, it's heartbreaking, honestly, it's heartbreaking. And so, we do a lot of short sales right before COVID we were getting about 30% of our short sales were all reverse mortgages, it was so sad. It's so sad. And I would be interested in the data just to see how many people have reverse mortgages in our market areas. Because the reality is. Oh, and then the beauty of it is, let's say they did say for that rainy day, right Nassau County increased their taxes, something like 17% their property taxes and like a two, three year period of time, if you're on a fixed income, boom, you just lost your home, you just lost your home.
Sean O'Toole 46:19
Yeah.
Melissa Shea 46:20
So, that's ...
Sean O'Toole 46:21
People are really against Prop 13 in California, but it's it is, you know, you know, let property taxes not increased more than cost of living index, you know, because why should government grow faster than cost of living? And, you know, that just that one drives me insane. And one of the things I do like about California. But yeah, I know that the reverse mortgage list is another popular one and a fairly unique one that we have that a lot of people don't. So, yeah.
Aaron Norris 46:52
We're thinking about that. So, you could because we have the demographics of the owner as well, would you be interested in, in the age of the owner combined with how long they had the the loan in play? So, the reverse mortgage, how many years? Would you want to see it season?
Melissa Shea 47:07
Yeah, and the reason why is because they don't really feel it in the first five years, right right. It's anything after that five is where they really start feeling it. And that's because they, they don't really plan out that far. And then the age. Yeah...
Aaron Norris 47:22
A new list idea.
Melissa Shea 47:24
I know, I'm gonna give you more.
Aaron Norris 47:27
I'm on it. I wrote it down.
Melissa Shea 47:28
Have me back for another show, I have more ideas. But um, yeah, I really do think that, that's, look, I've come to this philosophy in life that when you serve others, you, when you solve other people's problems, you solve your own problems, right. So...
Sean O'Toole 47:46
Yeah.
Melissa Shea 47:46
It is a heartbreaking problem. And I'd love to solve it for some seniors because, and they're so embarrassed to tell their family members what happens, you know, and then they're out on the street, and they don't even know why, you know, so, I started this thing called the Golden Girls. So, we would get a few of these single women, you know, their husband passed away, they're in the house, they don't know how to do the defer. They're in the reverse or embarrassed. So, we would get, the only way they could live together was if I put a couple of them together. So, we had like, three women move into a house for women. So, I called it The Golden Girls because, program because that was the only way they could afford to live here and still see their grandkids. Otherwise, it was move out of state, you know, so...
Aaron Norris 48:30
I love that.
Melissa Shea 48:31
Yeah.
Sean O'Toole 48:31
That's cool. Yeah.
Aaron Norris 48:33
We have to end.
Melissa Shea 48:34
Yes.
Aaron Norris 48:35
If they wanted to get in touch with you. What's the best way to reach out?
Melissa Shea 48:38
Probably go on Long Island REIA. L-I-R-E-I-A.com. Um, definitely email me, Melissa@longislandreia.com or info@longislandreia.com. Um, we have every second, I'm sorry, every fourth Wednesday of the month, I do a free give-back webinar. So, you can sign up for free and it's intro to real estate investing, ask where, whatever questions, you can pick my brain for that whole time and whatever you want to learn or it's all free. It's really...
Aaron Norris 49:07
Is it on Zoom?
Melissa Shea 49:08
It's on Zoom. Yep.
Aaron Norris 49:09
Very good. Okay.
Melissa Shea 49:10
Everyone in the nation could go we have people from California to Florida to Canada, to join us and even the UK, so...
Sean O'Toole 49:18
It's crazy, you have seen this with the better REIAs. And sounds like yours is one of those where we zoom now they've suddenly have this much broader, you know, audience than the local folks that would drive, you know, maybe an hour to come to a meeting. It will be fun to have the in person meetings though, too, because, you know, going to the REIAs and throughout California, like you meet a lot of people and you make a lot of friends and you know, a lot of familiar faces, and I do miss that. So, it'll be nice to start again. So, will you do a mix? Will you continue doing this and go back to doing the live...
Melissa Shea 49:55
Yeah, we could. We do semi live so we'll have a live audience and um, zoom at the same time, so I can hold up to 25 legally here, whatever with the COVID restrictions. And yeah, so we do that on our second Wednesday, our general meeting. We have that here so that there's a little networking still, but yeah, I can't wait to the day. Sean, I really look forward to that.
Sean O'Toole 50:21
We're close, we're making a lot of progress. I feel good about it.
Aaron Norris 50:24
All right.
Melissa Shea 50:24
Thank you so much for asking me to be on your show. It's fun.
Aaron Norris 50:27
Thanks for being here.
Melissa Shea 50:28
Very cool.
So long, everybody. Thank you.
Aaron Norris 50:35
Thank you for listening to the Data Driven Real Estate Podcast, you can find show notes and links to some of the resources mentioned in the show at datadrivenrealestate.com. Click that join the community, and you'll be forwarded to the PropertyRadar community where you can ask questions about the current show and even see upcoming guests and ask questions there. We'd love to engage with you in the community. So check it out. Please don't forget to like, favorite, subscribe and share on your favorite platform where you're listening to the show. It helps us out a great deal. Thanks for listening, and we'll see you next week.
