From selling handmade stuff on Etsy to earning a full income from rental properties, stay at home mom Casey Franchini has definitely made investing work for her. In this episode, we find out how she was able to get over the fear of not knowing what you don’t know to start her real estate journey.
Casey started in real estate back in 2007. It was a terrible time as it was right before the market crashed. She was young, in her early 20s, and found it difficult to get property owners to list their houses with her as their agent.
She was later getting flips for investors, and then got motivated to do rentals. Being based in California back then, the idea of investing out of state was uncommon. But in 2013, she moved to Memphis, Tennessee and was floored by how cheap the houses were.
She soon realized that buying every $10,000 house in the block wasn’t a good idea. So she shifted to looking at B class neighborhoods as rental investments. While cash flow numbers might look great on paper, getting low quality tenants means they don’t have the means to pay.
Casey wanted to build a second income that wouldn’t need a ton of effort on her part. So she focused on single family rentals located in really nice neighborhoods.
Her first house was in a working class neighborhood in East Memphis. It had a $92,000 purchase price, and Casey and her husband did the rehab. They went above and beyond what was needed.
The house used to rent out for $1,050 a month in 2016, but now it rents for $1,125. With market rent for that area at $1,400, Casey is looking to increase rents once the tenants move out.
When Casey and her family moved in 2013, they used their savings to buy a fixer. At that time, they had a 2-year-old and a baby. While Casey wanted to buy a rental, they just didn’t have the funds to make the down payment.
With 2 kids, finding a job wasn’t an option, so Casey decided to start a shop on Etsy where she’d sell handmade things she made using her die cut machine. She’d sell bridesmaids’ hangers, personalized glassware, baby onesies – basically anything she could make.
After selling on Etsy and Facebook groups, she managed to save up $20,000-25,000 to make a down payment. After that, everything just snowballed. The $500 a month cash flow she was getting enabled her to earn an extra $6,000 a year. She used what she earned to buy the next rental property and the next and the next.
Now, Casey owns 5 rental properties that she earns a full-time income from. So as of 2020, her Etsy shop has been in a permanent vacation mode.
Investing in real estate has so many benefits on top of the income. Once you’ve done the initial hard work of getting the property, fixing it, and putting in a tenant, it basically goes on autopilot. Making all that effort at the start will be worth it because as Casey revealed, she hardly hears from her tenants all year.
This enabled Casey to earn an income and still spend her time raising her kids and going to all the school-related activities. She not only doesn’t suffer from the mom guilt of not being available to her growing children, but she also gets the financial validation of being able to earn and not let her education go to waste.
While most of her friends work jobs and put everything into a savings account. Casey prefers to buy an appreciation asset like real estate. A W-2 job that lets you save into a retirement account is great, but Casey’s portfolio is worth $1 Million already at this point in her life.
There are two things preventing people from jumping into real estate investing. One is they don’t have enough money for the down payment, rehab, and some reserves. Second is if they do have the money, they’re too afraid of failing.
Real estate investing is a risk. With most people renting in California and not being able to buy a house there, buying out-of-state is such an unfamiliar concept to them. They don’t know what they need to do to buy out of state. Since so many things could go wrong, their fear prevents them from taking action.
Casey believes that education, talking to people who have done it before, and getting a mentor are key to getting over that fear. She herself asked a guy who already owned over 20 rental houses to guide her.
He shared every detail about how he purchased his properties, and helped her buy her first one. He and his wife earned from the commission, but the most important thing was that Casey was able to validate what she thought would be the right way to do things.
This empowered her to push along the progress as well as skip out on a lot of the hurdles. Having a team behind your back is super important. But not yet having the perfect team should never be the reason not to get started.
You just have to start, find a team, and keep building to make it the perfect team. Casey found that buying properties from an MLS works for her. She has a couple tricks up her sleeve that help her close the deal. Bottomline, there are many ways to be successful, you just have to find the one that works for you.
Doing renovations can be very costly. So Casey decided that they would physically do the contracting themselves. She has found it very rewarding as what would have been an $80,000 rehab cost them only $30,000-40,000
She takes her kids with her into the houses they’re renovating. All packed with goodies and activities for them to do, Casey still makes sure they’re safe and out of the way from the work being done. For her, rehabs have become a full family affair.
Another perk is that now she is the go-to person of all her mom friends for any repairs and maintenance work because she often knows what the fix is.
Being highly risk-averse, Casey did the traditional loan with a 20% down payment to buy her properties. The properties are put in her and her husband’s name because he has a qualifying income.
They currently already have 6 houses under their name, including the house they live in. So they are close to tapping out as the rules limit to 10 houses per qualifying income.
But Casey believes that by the time you get to a certain point, you can either start paying cash for your property purchases, or you can just pay off your loans to get more.
There are also other options out there such as hard money loans. She also knows a private money lender offering her a 30-year long-term loan with interest rates below 5%. The best thing about it is that qualifying for the loan is based on the profitability of the property and not the income of the buyer.
Now, Casey is looking to buy a lake home in Arkansas. It is out of state, but only 3 hours away from them. However, the prices for lake houses are pretty high, reaching up to $600,000. The great part about them though is that they gross $80,000-100,000 a year as short-term rentals.
She also has an agent in Florida looking for a complex in Panama City. The real estate environment in Florida is so different from Memphis. Casey revealed that HOA fees for high rise complexes cost $700-900 a month. This is because the complexes are like resorts with pools, waterparks, beach cabanas, and even their own Starbucks.
Looking at it, with rentals there grossing for $40,000 a year and HOA dues costing her $10,000 a year out of pocket, it doesn’t seem to make sense buying into one. But purchasing a different type of property could then be at risk for flooding or hurricane damage. And this just isn’t something Casey wants to deal with.
As far as rental properties go, it is great. But there are lots of outlying cities that are also great rental properties. The market is hot, so there are many investment opportunities.
While prices have skyrocketed, interest rates have gone down. From a cash flow perspective, this actually balances out.
A new Amazon facility was recently built in Northern Mississippi. This means there are tons of job opportunities. Casey recommends finding properties that are surrounded by schools with better ratings. Check the crime rates and avoid neighborhoods with tons of shootings. This will set you up for success later.
Unlike California, there are no small multifamily properties in Memphis as they have a wide area of land. As an investor, you shouldn’t look at properties from the perspective of your own life situation, but from the life situation of the people who live there and have grown up there.
From there, pick out the best investment for you.
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