While Hill and Kiyosaki’s books were about theory and adjusting your mindset, Neal’s was the down and dirty, nitty gritty real world of rentals. He built his empire in Columbus, Ohio, a rust-belt working class secondary city very similar to Wilkes-Barre. He worked a low paying job, much like myself, and began investing in rentals as a way to replace that income and become independent. His philosophy of building a profitable business for himself while bettering his city really resonated with me, and in 2008 Good People Good Homes was born out of that inspiration.
Eagerly I began turning the pages once again. Then I had to put it down.
We had fucked up.
We made every mistake Neal warned about in the opening chapters! Somewhere along the way, we forgot that our primary goal was to generate income. Instead, we focused on acquiring many properties. When we got stuck in the Suck Zone in 2013 (when managing the properties was more work than their incomes justified) we started looking around for other sources of income. That’s when Steve started wholesaling, when we flipped our first house, and when Steve took the test and became a licensed realtor.
I don’t regret expanding into these other sources of income. Our business will embrace all of them – we will flip houses for resale, we will offer homes on the rent-to-own market, and we will maintain a portfolio of rental units. We also have plans to enter into the world of joint ventures and private money lending. Steve is talking with a partner about starting a real-world real estate mentoring program that offers more practical advice for much less money than the gurus: http://thisgingerjustsnapped.weebly.com/blog/expensive-advice
And I would like to do something with this blog. By the way, if you like reading what I write every week, please share it because the more readers I have, the more chance I’ll have of making that dream happen!
It’s just that somewhere along the way, the rental engine stopped driving the ship, and I’m trying to figure out why because I would really like to start it again!
H. Roger Neal never had a baby. I know I may be playing the Woman Card here, but it’s true. I don’t know much about Neal’s personal life. He may well have become a father during the building of his empire. But I can guaranty that he never carried a life inside him for nine months, had the hormones swirl around in his brain and knock him a good 500 miles off the course of his life: (http://thisgingerjustsnapped.weebly.com/blog/how-it-all-began-part-4-a-tiny-little-detour)
Prior to September of 2009, when I found out I was a Mom-to-be, all I cared about was building a real estate empire. By January of 2010, I had let go of it entirely. By then, Steve had made the decision after layoffs at WVIA Public Media that he wasn’t going back to work for anyone but himself ever again. So he took it over and did the best he could as a one-man show. He learned how to work the tax sales and increased our holdings substantially. Meanwhile, it was all I could do to keep up with my grueling full-time job as Assistant Program Director of WKRZ. Pregnancy took a lot out of me – I was tired! Things got better once Savannah was born, but I wasn’t able to look at our business again until I was laid off from KRZ in 2012. And then I had a 2-year-old at home!
These aren’t excuses. Just facts. It was a different experience being a young, childless couple going after our real estate dreams than it is being first-time parents trying to build a solid business. There’s a lot less flash. And there’s a lot more to lose if things don’t work out right. No pressure!
H. Roger Neal didn’t have to deal with One Strike. I’m sure they have messed up ordinances in Columbus, too, but nothing like Wilkes-Barre’s unconstitutional One Strike ordinance. This law, still on the books although it’s been challenged by the ACLU, allows Code Enforcement to shut down a rental unit for six months over the actions of a tenant. It makes my blood boil and it’s the reason I started this blog. It’s why the blog is called Ginger Snapped! – Here I was, putting everything I had on the line to start a rental property business that would benefit the city of Wilkes-Barre by putting formerly blighted properties back on the tax rolls. Losing six months of income from a unit could kill a small investor! There really is nothing a landlord can do about it, other than standard tenant screenings. One Strike could hit you as arbitrarily as a fire in your building. Only with the fire, you have insurance!
One Strike seems to have quietly faded into the background with the exiting of former Mayor Tom Leighton, his cousin, former Assistant City Solicitor Bill Vinsko, and the pending federal lawsuit. But as far as I know, it’s still on the books. And between September 2013 and sometime last summer, landlords were getting shut down left and right. It happened to a close associate of ours.
H. Roger Neal, like most investors, would look at the situation and say it’s bad for business, sell and get out. But what if you can’t? It’s not like investors are flocking to buy property in Wilkes-Barre with the current climate, at least not for what we would need to get from selling our buildings. I’m not selling at a loss. Plus, we actually care about this town. So here we are, 16 of our units within the city limits. We’re here for the long haul. Lucky for us, the new city council appears to be more forward-thinking.
The stomach for fixing our real estate business. I can’t read Streetwise Investing in Rental Housing while I’m eating lunch. When I found the book again that’s what I did – and it soured my stomach. We made all the mistakes Neal tells us to avoid in the first chapter! Our biggest mistake, according to Neal, was that we “chain-invested” – cashed out the equity in one property to buy another, and another, and another. That built up our holdings quickly, but left us with a lot of work for not a lot of income. Neal would have purchased one property, with the shortest-term financing possible, and would have put off purchasing another until he had the cash in hand to do so. If we had done it his way, we’d have a lot fewer holdings. We’d also have a lot less debt.
Looking back I wish we’d listened to Neal’s reasoning the first time out. But it’s too late for that. We have what we have – and it isn’t half bad! I’m confident we can turn things around, bring the rental portion of our business back in line with our original vision back in 2008-2009. By selling a few off, we can bring the debt back to manageable levels. Steve and I will be rewriting some policies and procedures to systemize operations. I’m learning that business is all about systems, and rentals are a business. We’re already planning our next Policies & Procedures Meeting somewhere where flights of craft beer are readily available. That meeting will be tax deductible, by the way!
Meanwhile I’ll prepare for that meeting by re-reading Streetwise Investing in Rental Housing with a highlighter. Just not while I’m eating.
I wonder if H. Roger Neal would consent to being interviewed for this blog? What would I ask him? I want to hear about how he started off in real estate the first time – and failed. He briefly touched on that in the preamble to the book. It was his second attempt at investing that built his empire. I want details – did he completely wash out the first time? Or was he just a small-time landlord who got frustrated, sold his rental, and then tried again years later? What did he do to turn it around?
What do you do when your hero is just as clueless as the rest of us? A quick Google search of H. Roger Neal reveals a short-lived stint as a real estate education guru. He was offering a course called Fast Flip Real Estate in 2011. He had a Fast Flip blog in 2008. His domain fastflip.com is parked at Go Daddy. I’d be very curious to hear what happened there, since my husband is considering offering a similar real-world mentoring course.
To me, the definition of success is stretching beyond yourself, trying something different, and if you fall on your face you get right back up and try again, a little smarter this time. What I like about H. Roger Neal is he’s real, he’s accessible, he was a low-wage working schmo like me and he became financially free with rental real estate. Maybe his Fast Flip business venture didn’t quite work out as planned, but he had the guts to try. And I bet even if it was a spectacular failure, he is still enjoying financial freedom.
I’m going to call him at his Columbus office phone number.