Episode #019 – How Cassidy Melhorn Went From Flipping Calculators To Flipping 100 Homes

You're listening to the REI Marketing Nerds podcast, the leading resource for real estate investors who want to dominate their market online. Dan Barrett is the founder of Ad Words Nerds, a high tech digital agency focusing exclusively on helping real estate investors like you get more leads and deals online, outsmart your competition and live a freer, more awesome life. And now, your host, Dan Barrett.

Dan: Alright everybody, welcome to this week's episode of the REI Marketing Nerds podcast. As always, this is Daniel Barrett here from AdWords Nerds. I don't know if you can hear it in my voice, I've been very sick. I got very sick after a family gathering and I've been sick for several days. Turns out when you are sick and you are a parent, you still have to yell at your kids all the time. So my voice is just completely shot. This week I actually did an interview with a really awesome real estate investor named Cassidy Melhorn. You might not know about Cassidy, it's not one of those people that's famous on the REI kind of guru scene or anything, but he's really fascinating person with a really fascinating background. He actually got to start essentially flipping all sorts of random stuff like calculators and used cars, and he's kind of partly that into this really high profit investing business down in Knoxville, Tennessee. And he's just crushing it, and this is a really good example of something that I'm trying to do more of, which is just interview these really interesting people that are out there in the investing space that don't get a lot of publicity, they're not out there promoting a course, he's not promoting a product, he is making his money investing, and really taking the time to dig in with those people and find out what's working for them and find out the mental models and the habits and strategies that they use is been really, really valuable to me, and I think it's going to be really, really valuable to you. So without further ado, let me pass you on to my interview with Cassidy Melhorn from Vol Homes in Knoxville, Tennessee, and I will catch up with you after the interview.

Dan: Alright everybody, it's Dan Barrett here and I am with Cassidy Melhorn from Vol Homes from Knoxville, Tennessee. Cassidy, how are you, man?

Cassidy: How's it going, man? Feeling good.

Dan: I am doing alright man, you can hear in my voice that I'm a little raspier. We were talking before the recording and I was saying this is my Lou Reed voice. So hopefully it comes off as cool and grizzled rather than just annoying and nasally.

Cassidy: Yeah, I actually think it sounds awesome. I would play a guitar from you.

Dan: That's cool, man. Do you play guitar? You're like a musical dude?

Cassidy: Well we played there for a little while, it was a lot of fun, but mostly nowadays it's just fooling around, practicing a little bit and that type of thing.

Dan: That's awesome. l love that stuff, I think it's it keeps you young and as they, say which is cool.

Cassidy: It also lets you be aware that you're getting old that's why I don't do it anymore.

Dan: You age very rapidly when you attempt to play music from other people, that's very, very true. That's funny. It's funny because when I called you, you said you're actually out. Are you out of the house now, looking in a house for some rehabs? What are you actually up to right this moment?

Cassidy: I stopped by with, I've got a project going on and always kind of like to sneak by there and just see how things are going. They got pictures tomorrow, so the day before the pictures, of course, it's a pretty late evening for those guys. So yeah, I just poke my head in there, but it looks nice, it's a West Knoxville house. This one was a lead from a bandit sign, it was an older lady, she was looking to move to Florida. Kind of downsize the house obviously, needed quite a bit of repairs. Yes, so it looks great now, we've done I'm, actually driving back in front of it now. I mean it's gorgeous, it's you know, what everybody wants basically. It's brick split foyer, four bedrooms, three baths, 2200 square foot with an attached garage, 70's build, a lot of mar around this area. It's a good one.

Dan: Yeah. So why don't you break down for people like what kind of investing are you doing involved homes, like are you wholesaling, I know you're rehabbing. So what's your combination look like?

Cassidy: It's changed, Dan. I really just kind of evolve with whatever I think is the best kind of bit. I started out rehabbing, it was 2013, you know, five, six years ago, and at the time I was in college. I've always been a hustler through and through, all my friends, they describe me as that type of guy. My dad, he's been a car dealer my whole life, so I learned from a car salesman.

Dan: Can you talk a little bit of I like what was that like growing up with a car dealer as a dad?

Cassidy: At the time it was like we were going to these auctions and we were, you know, he worked a lot obviously, he's a business owner, and at the time it was kind of like boring. You know, we were looking at cars and he was saying, "Here's what you want to look for and you always want to point out things like this to sellers. However, when you're selling, you want to let them point those things out, you don't want to point them out yourself." As I'm getting older, and obviously as I started investing in real estate, my dad grew up with rental property and buying land, and not really as like a full time thing, but it was more as part of the hustle. It was part of what he does and what I do. I learned kind of in hindsight, it was like, "Man, this is almost like the perfect storm." It was like I've been training my whole life to do what it is that I'm doing now and what it is that I love. I mean obviously, got those experiences growing up looking and evaluating different types of investments, and physical investments. In college, I decided to be an engineer and I wanted to be an engineer, and so I went to engineering school, and I was like, "Wow, this really hard. There's no way I can have a job." This is what a lot of people that I talked to really, I guess like to hear about, and it's true, and a lot of people that have been with me along the way, they know it sure. But you know, been broke in college, I was trying to figure out how in the world am I going to go to school what with the amount, the level of effort that I had to put in, which was probably greater than the average level of effort of another, just you're your average engineering student. It didn't come as naturally to me as I think it did for a lot of them. There's another part of my training was just learning how to grind and work hard consistently every day at a goal, but I'm trying to figure out how and I going to money, how am I going to pay the rent, how am I going to buy books and all these other things and go to school. We had to buy these $150 graphing calculators for engineering school. I got on a kind of a classified website and there was a guy that had one for sale on there and it was 40 bucks, something like that. I met him and bought it for $20. He was like, "Hey, I got another one here if you want it, I'll sell you for $20, it's my girlfriend's." I was like, "I don't need two.", and then it hit me. I was like, "I don't need two." at that moment I realized they sell for 60 bucks used. If I buy that one and then sell it for $60, then I got mine for free. What I learned was in this off season when it's like spring break time or whatever, there is that just a boatload of college students who want to go on spring break who are just as broke as me, and the only thing that got any value is the calculator. I would always like buy 50 or 100 calculators and then sell them on e-Bay immediately. That's how literally, that's how I made it through college, that's how I paid my rent. It kind of evolved from, as I said earlier I play music, it evolved from $20 calculator, I would buy and sell guitars and music equipment, cars, little cheap, crappy cars. I would buy and sell them. So I built up not a whole lot of money, but it was enough money to kind of, I guess, spark my interest in investing. The week before I graduated... I had kind of been reading a lot of online, reading a lot of blogs, I've been talking to a lot of people who had done some real estate investing and that type of thing. I was really just wanting to buy a house, but I knew that I would want to be able to buy it the same way that I bought everything else, which was I wanted to buy it where when I decide to sell it I could obviously make a profit on it and ended up getting a little foreclosure. And close to where I'm at actually now in West Knoxville and paid $51,000. Obviously needed some updating, but it also, kind of the basement was, needed some finishing and some stuff like that going on. I think I bought it for $51,000, I used a 203K loan, which was very difficult now that I buy them, other easier way to buy them. And lived there a few years. I think when I evaluated the house, I evaluated like $20,000 in rehab and sell it for 109, I ended up giving $30,000 in rehab and I sold it for $159,000. I lived in it a couple year, but it was really a pretty good deal. But while I was living there, we started putting out signs, "We buy houses." I put out my sign, "Cash buys houses" or "Vol buy houses." and putting up ads on classified sites and that type of thing. I had probably $8000, $10,000 literally to invest with. I knew a gentleman that he was an REO agent in the area and we were kind of acquaintances, he knew some of the guys that I played in band with. At the time had the Vol Homes website, it was producing absolutely nothing, but that's all that I had to pitch this guy with. I call him and I talk to him, I'm like, "Yeah, I got this website." and this is probably four years ago. "Got this website Vol Homes. I'm bringing in all these leads and I need somebody to buy them with." He's like, "Well I'll buy them." He had a lot of the funds that was necessary. And so we were pretty much off to the races. The first flip like purely investment house but I bought that I wouldn't live in, bought it for $8000, it was on a rough side of town, needed everything. We sold it for like $14,000. Second one was $8000, sold it for $12,000. Third one was $70,000 and sold it for $120,000. Didn't do anything to it. That kind of got me up and going where I had the funds that I needed to where we just started splitting all these deals, and so it was kind of, it was wholesaling, but it was not necessarily wholesaling in the I think context that a lot of people think about wholesaling now, which is assignment deals. This was actually double close, forward close and then remarketed, that type of thing. We did probably over three or four year period, we did probably a 100 houses. Anywhere from literally we bought a house one time for $2000 and sold it $11,000 next day. So anywhere from $2000 up to, we bought one for $150,000 and held it two weeks and sold it for $265,000. All we did was clean it out.

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Dan: I think the thing that is so fascinating to me about your background is all the stuff you were doing before you're investing, which is kind of just investing but like in other things. Right? You're essentially doing calculators and cars, essentially the same business model, right? It's arbitrage. So it doesn't strike me as something that's super common. So how do you think that background, like what skills or mindsets or just kind of ways of viewing the world did that background give you that helps you today when you are... You're not talking about flipping calculators, you're talking about slipping homes. How did that stuff affect you in the way that you run your business now?

Cassidy: First of all, it allowed me to identify motivated sellers, like within two questions. I don't spend a lot of on my calls. I mean I'm not going to say I'm short or certainly not abrasive, although there's a lot of people that would argue me on that one. Whenever I talk to a seller I try to understand where they're coming from, build rapport, but then I want to know what's the address, how much you'd like to get for it, why are you selling it, how much do you owe on it. Let's say those three questions, three or four questions, I can pretty much determine whether it's going to be something that I'm interested in pursuing or not. I think that I kind of learned that through having invested in these multiple little miscellaneous things over time. Because you talk to so many people, you know what I mean? And I guess there's just an awareness there of this sounds like... I think it's just recognizable. I tell people this all the time. It's more about the seller than it is about the house. You know what I mean? I don't have to like the house in order to make $50,000 on it.

Dan: Right.

Cassidy: I don't even have to see it for that matter. But if the seller, if I can tell that they're motivated seller and it's going to be a win-win situation for us, then that is where my ears perk up.

Dan: Yeah, you're making a lot of sense, because no matter how great the property is, if that person is not motivated to sell it to you at less than market value, there's no room for you to really make a profit on it. Right?

Cassidy: Right. Other than you maybe pivoting in my spiel, if you will, to them, and redirecting onto say having them listed with an agent that I may be friends with or something like that, if it's something that I think will sell to a retail type buyer, then I may pivot to that, but otherwise, if it's not going to sell, I can't buy it, I'm get off the phone. You know what I mean? I'm going to get back working on something that I know is going to put money in my pocket.

Dan: You have such an interesting background, you're out there, you're doing deals right now, you're out of in front of a deal right now. So for you right now, as you kind of look out, you know, like you said you've been doing this since 2013 or so, how's the market changed around you since then, and how has your business changed since then?

Cassidy: When we first kind of... When I say "we", you to remember, whenever I first started investing I had a partner, now I don't, it's just me. When I say "we", that's why I'm saying that. When we first started, there were a lot more foreclosures and things of that nature that were kind of out there floating around. There were a lot more I think seasoned investors that were buying consistently, and the wholesaling was easy. There was a lot of people that were out here doing them, flipping them who have been doing it a while because it had been easy a while. With the supply, especially two years ago, the supply in this market kind of, I'm not going to say drying up, but it certainly, the supply shrank significantly. I think that put some of the old school guys maybe in a position where a lot of those deals weren't as attainable, or they were already gobbled up before they could get a chance to buy them. So I think now, it seems like I'm seeing in a lot more new investors that are ready to get it flipped. On one hand that's great, on the other hand it's more difficult to wholesale because I know how it is starting out. Getting the funding together, as well as just the lack of experience I think. I would love to go back and buy some of the deals that I walked away from when I first started. Right now I would love to go back and buy some of those deals for what I could have bought it for then. I would buy some of the deals that I sold two years ago from myself for what I sold them for.

Dan: Well if you can figure out how to sell it to yourself, you've got a pretty awesome business model there, got to say. Let's kind of turn that into something constructive. If you're running into one of these like really new investors coming on the scene right now, what piece of advice would you give them to help them kind of make their way in this kind of a current market?

Cassidy: I would tell a new investor same thing that I learned from experience and that I would have told myself. You've got to start somewhere. I can talk myself out of any deal that I want to. I can find things that are just too much work or I don't know how to solve that problem, but in order to become an investor, I've just got to... I've got to pull the trigger on something. Even if it's not the best one, even if it's not a homerun, if I buy it at a price to where even if I'm close on the margin I'm trying to make, I'll still walk away with something, and even more valuable than that check at the closing table. Because that experience from actually having done the first deal, because with that comes the confidence to do more deals. I think a lot of people, they kind of psyche themselves out, they get really excited about investing and become overwhelmed because it is relatively difficult to get going, and then maybe throw in the towel before ever really giving it a shot to take hold. Real estate investing has changed my life. I graduated college, I went to work as an engineer, you know, what I thought was my dream job, and we had flipped a couple of the small houses before I had started, and a year and a half in I'm realizing this engineering job, it kind accentuates all of my bad qualities and doesn't make room for my creativity. There's really not as much room for that creativity in the job that I was working, so here I am, I'm working in a spot where I'm accentuating my bad qualities and my good qualities are kind of handcuffed, and I was making, for instance I think it was February before last. I left the engineering job approximately two years ago, so it was a February before last. I made more money doing real estate investing in Knoxville then I would have made that entire year with my engineering salary. Recognizing that was like, "What am I doing? Why am I wasting time?" There's that fear there of letting go of what good in pursuit of what's great. I thought a lot about that, and eventually an opportunity kind of came along that allowed me to exit the engineering career in good graces and do investing full time. I took it. It was a great decision. I've done over 150 houses since I started. I kind of switched from doing wholesales to primarily doing renovations. And part of that was I'm looking, I'm doing... I think two years ago I did 48 deals or something like that, the average, I think the average probably was right around $5000 per deal. What has happened in the market with the lack of supply the prices have been increasing, I think it was roughly 10% the year before last, and maybe another 5% last year. Looking back at some of those deals, it's like, man, there was a lot of meat there on the bone, and you know, there are not as many deals that are coming along. And I'm not saying that in a negative way, I'm saying that in just the straight up way. There's a limited supply right now. I really wanted to increase my profit per deal and try to maintain the same amount of deals annually. I've come close to doing that. I think last year I did 38 houses, so it's almost at that 48 mark, but the profit per deal has increased substantially. I mean it's, I think right now the average profit per deal is right around $35,000.

Dan: Wow. That's awesome. That's your average?

Cassidy: Yeah, that's the average on the rehab. Those are obviously not wholesales, but they've ranged from, I took a big hit on one, I used several different sources. I've got about five lead devices from VolHomes.com to "we buy houses" signs to go into foreclosure auctions, online auctions and foreclosures, listed foreclosures. So I've got my iron on several fires. A couple have been phenomenal. For instance, one that we just listed is actually on the market, I think three or four days now Maryville, Tennessee, which is effectively where the Knoxville airport is located. It's kind of a suburb of Knoxville. That deal was a purchase for $88,000, we put in about $50-60,000 and we listed it for $319,000. It'll sell for close to that. That's obviously going to be a homerun in my opinion, but where I was going with that is on the bad side of it, going to auctions, you learn so many different things trying all these different methods in investing and learning new things, learning new niches that I bought a property on the courthouse steps $60,000, it was $200,000 condo. I was like, "Yes." Whenever I walked away from that auction it was like I was so happy. This was on Wednesday. Well, a guy called me from a bank, this is Friday, literally closed 5 o'clock probably, had a whole weekend ahead of me. This guy was like, "Hey, did you purchase blah, blah, blah condo?" I was like, "Yeah." He was like, "Oh. Did you know that we hold the first mortgage on it?" I was like, "What?" It turns out that I purchased the second mortgage on the condo and had to reconcile the first mortgage. What thought initially was a homerun turned out to be "thank God I broke even" type of scenario.

Dan: Oh my God.

Cassidy: It's all great experience, man. I mean I wouldn't trade what I do for any job in the world; it's truly been a blessing.

Dan: Yeah. Well you know, it's one of those things man, it's one of those industries where, man, you sure learn a lot very quickly just by doing it. You know what I mean? There's no replacement for that. Well hey man, so listen, if people want to check you out or check out your website or the investing that you're doing, where do they find you online?

Cassidy: You can go to VolHomes.com, check us out there. There's also a Facebook page, Vol Homes, Twitter. You can get us on LinkedIn. We're on all the social media.

Dan: Yeah, just so people know, it's spelled Vol Homes. Right?

Cassidy: Correct.

Dan: Okay, cool. I'll put all those links in the show notes, so we'll link to Cassidy's stuff all over the place. Hey man, I got to say, this was a really, I know you said in the beginning you didn't think we were going to fill the whole time, it was a really fascinating conversation. I really want to say thank you for jumping on the podcast and taking this time to talk about your business with me, it was awesome.

Cassidy: Yeah, I appreciate you having me, and you know, I'd like to thank your listeners, and it was a good experience.

Dan: Yeah, man. Thank you so much, and everybody, like I said, if you want to check out Cassidy's stuff, we're going to link everywhere on the show notes, you can come check that out at AdWordsNerds.com/podcast. Cassidy, have an awesome rest your day, man, I hope the
rehab goes well and those pictures come out awesome, and yeah, I'll be talking to you very soon.

Cassidy: Alright, thanks Dan.

Dan: Cheers.

Alight everyone, that's it for my interview with Cassidy Melhorn, I hope you got a bunch of value out of that. I know I did, he's a really, really interesting dude, and gave me an opportunity to let someone else talk and rest my voice a little bit, so I appreciate him very much for that. Like I said, if you want to catch up with Cassidy, you can check out all the links we talked about on this week's episode at our show notes, which are at AdWordsNerds.com/podcast. You can find the show notes for this episode and all our other episodes. And look, if you are not in our free Facebook group, the REI Marketing Nerds Facebook group, you are missing out. I am in there every week doing free trainings, sharing data, talking about what's working for our clients, and it's really, really valuable place to share strategies and tips with other investors. And you can find that group at AdWordsNerds.com/group, that will take you right to the Facebook group, it's AdWordsNerds.com/group, or you can just go on Facebook and search for REI Marketing Nerds, and you'll find it. Anyway, that's it for this week's episode. As always guys, I hope you have an awesome rest your day, I'll talk to you next week, and thank you so much for taking out the time to listen to this podcasts every week. It means the world to me, and I hope I'm delivering some value into your life by doing this, and that's it. I'm going to rest my voice, so I'll talk to you guys soon. Cheers.