This blindsided us. We knew there were problems. The house was not an easy renovation. There were many time consuming extras he ran into, that he couldn’t have known about until the walls came off. He could have written change orders, but he didn’t. Because he “doesn’t do change orders.” Very noble of him to fall on his sword like that, but in the end it didn’t do any of us any favors. He ended up stressed out and burned out. We ended up with a flip that went way past deadline. Two months late! Our investor was very concerned, but we backed up our contractor. And then he walked out on us.
I suppose he blames us for his stress and burn out. In another life, that would bother me. But he is a grown man and he is responsible for his own happiness. I hope he finds it.
Lucky for us, that investor still wants to work with us. We just need to find another competent contractor. One with higher frustration tolerance and better stress-management skills. Until that happens, we may have to roll up our own sleeves and get to work!
Our 6-year-old daughter is learning the tricks of the trade. Since we’re self-employed, there really aren’t any “weekends off.” It isn’t all work and no play, we mix it up. But most weekends there are at least a few work hours on both Saturday and Sunday. If we both have to be on the job, Savannah tags along. I think it’s healthy – this is the family business after all. It will pay for her college, and offer her some unique work and life experience. It will teach her the value of money, hard work and the American Dream, which I believe is still very much alive.
Plus, the girl can paint!
I know, I know. The gurus all tell us to be hands-off with our real estate investments. This is supposed to be passive income. You never swing your own hammer. That is beneath the real estate entrepreneur, who should be spending his time making deals.
I’m calling bullshit on this one.
I realize I am writing from the perspective of someone who has only been in the real estate game for eight years. But if I spent eight years in college I’d have a doctorate, so consider me a PhD from the School of Hard Knocks. Dr. Ginger Snapped.
The hands-off passive investment strategy may work for the well-heeled professional with the six-figure salary who is buying real estate the way he’d buy stock. He’s still going to get burned, a lot. But if he’s savvy and falls in with the right people to manage his investments and manage the people who swing the hammers, he will win more often than lose. And as long as his returns beat what he could make on the stock market, he’s happy. He may never even see his rental properties!
People like this do exist. I’ve met some of them at seminars. A loss to them means a nice tax write-off. A loss to me means much more serious immediate financial concerns! And that’s why I’m calling bullshit on the gurus’ advice.
A Small Real Estate Business Comes Full Circle
When Steve and I closed on our first apartment building on February 4, 2008, we were 100% hands-on investors. We were there the next day, introducing ourselves to tenants and sweeping the basement steps.
That building was six units. We bought three more buildings – ten more units – over the next 13 months. Now we had a little rental empire. I was managing the rental office, and Steve was handling the maintenance and looking for more deals. We were building a system. We both kept our day jobs for awhile. Steve was going to get laid off anyway, so he took a voluntary lay-off and went full-time. And then Savannah came along.
We thought we could keep doing it ourselves. Steve took over 100% of the business while I concentrated on motherhood and held onto my full-time job. My salary was sufficient to support us – it didn’t matter if our rentals only broke even. But then I lost that job in 2012.
It was a mixed blessing – I wanted so much to jump into our business full-time, at my husband’s side. But I had a two-year-old now, and the rentals were turning a profit but it was very small. Not enough for one salary, really, let alone two. This even though we had more units! I had to get another job.
And that’s when we turned to the gurus.
The gurus gave us valuable information. They got us into wholesaling – matching private sellers with investors off the traditional real estate market. And they got us into flipping houses. I love using my creativity to redesign an outmoded space into something a modern family will love. This is work I’m passionate about, and it has been pretty profitable so far.
But the gurus also told us to farm out our rental management. We shouldn’t be wasting our time on that. We should be doing deals, flipping houses. Steve and I wholeheartedly agreed. Neither of us really liked managing rentals. And after Wilkes-Barre shut down one of our associate’s rentals under their now abolished One Strike law, I worried I wasn’t qualified to manage our own rentals. So I called a professional.
Two months into our relationship, it became clear it wasn’t going to work out. I expected professional management to blow away the mickey mouse system my husband and I came up with. But the property management firm didn’t do any better than we would have done ourselves. In fact, I think we did better on our own. Three months in, that firm “fired” us because it clearly wasn’t working out for them, either.
We worked with another manager for awhile, a fellow landlord. But then two things happened: we decided to stay put. Things were changing politically in Wilkes-Barre – a new mayor, a forward-thinking city council, an ACLU shut-down of the One Strike law. Our daughter was becoming established in the Wyoming Valley West school district. She had her school and her friends. And we really love our house – our first flip that we decided to keep because I saw a vision of my infant daughter at age 6 riding a bike with a pink helmet.
The other thing that happened: I decided not to go back to work full-time. I was done with putting off my life for the “security” of a paycheck. I want to work our business. I want to structure it properly, build it up, grow it, employ others. The thought of this excites me, makes me bound out of bed at 5am. The thought of getting a full-time job, even in radio, my career for the past 30 years, makes me wonder how much time or energy I’ll have left to give my business so I can build it up and quit already.
So we’ve taken the management of our properties back. We are building our system anew – adding to our old system everything we have learned from the past eight years at the School of Hard Knocks. We are learning how to do rental management AND flip houses AND wholesale. Savannah is older now. She can help.
It’s a good thing, because we need all the help we can get! We have just renovated and re-rented five of our units. We have eight more we need to do that for.
Today, the three of us went to Barney St., which was that first building Steve and I bought way back in 2008. We have three empty apartments there, and a fourth on the way as the elderly tenant was taken to a nursing home. That building has some major curb appeal issues, but nothing that can’t be solved with a little love. Barney (that’s its name!) hasn’t been loved in a long time. We can’t expect a hired property management firm to love our properties. Not the way we can.
Good People Good Homes is a family business. Mommy, Daddy and Savannah spent a Sunday afternoon laying colored gravel over a broken concrete walkway littered with cigarette butts. We washed dirty windows and wiped street grime off doors. We raked dead leaves out of gutters and bagged up trash. It felt like family therapy.
Steve’s contract workers will pick up my punch list and finish the job tomorrow and Tuesday. And then maybe we can rent some of these apartments. Here’s hoping our love will attract the right tenants.