What’s the weirdest thing you ever found in a house you bought or rented? Steve was cleaning out one of our small handful of new flips – and found an urn containing the remains of a former resident! The family was immediately notified that they’d “forgotten something” – wow! I suppose it happens! Please comment here or e-mail me your story: [email protected]. This may be next week’s blog post!
This week, a little ENCOURAGEMENT for my fellow real estate entrepreneurs. Or entrepreneurs of any stripe. Even those still in the dream stage.
Rain pours down as I write this. The last gasp of a cold, wet spring. Next week the sun comes out again, temperatures are set to soar into the 70s and 80s. The grass will grow high at our rental properties, and we'll scramble our team to tame the jungle. For sale signs on houses will pop up like flowers. We already have one flip near completion and two more in the beginning stages of reconstruction. A few more deals are in the works. Did we really get this big, this fast?
This isn't the real estate empire I dreamed about, not yet. But it's safe to say that we are now a bona fide small business. I wouldn't call my husband or myself “real estate moguls,” even though some of our friends have. But we have been doing this for nine years now. We've made some mistakes, learned from every single one of them, and become a lot smarter. We've passed the point of no return now. We're going to make it. Even if our current business should somehow fail, we have become the type of people who would simply start another venture. I never say never, but it's highly unlikely that either one of us will ever go back to work.
So why all this self back-patting? Because as independent entrepreneurs, we need to learn to encourage ourselves. Lord knows we don't get a lot of encouragement from the outside world! That's why it felt so good when the selfie of me dressed up in a business suit got 85 likes on Facebook. We all need a cheering section, especially when we're doing scary stuff on a daily basis.
This week, a little ENCOURAGEMENT for my fellow real estate entrepreneurs. Or entrepreneurs of any stripe. Even those still in the dream stage.
Rain pours down as I write this. The last gasp of a cold, wet spring. Next week the sun comes out again, temperatures are set to soar into the 70s and 80s. The grass will grow high at our rental properties, and we'll scramble our team to tame the jungle. For sale signs on houses will pop up like flowers. We already have one flip near completion and two more in the beginning stages of reconstruction. A few more deals are in the works. Did we really get this big, this fast?
This isn't the real estate empire I dreamed about, not yet. But it's safe to say that we are now a bona fide small business. I wouldn't call my husband or myself “real estate moguls,” even though some of our friends have. But we have been doing this for nine years now. We've made some mistakes, learned from every single one of them, and become a lot smarter. We've passed the point of no return now. We're going to make it. Even if our current business should somehow fail, we have become the type of people who would simply start another venture. I never say never, but it's highly unlikely that either one of us will ever go back to work.
So why all this self back-patting? Because as independent entrepreneurs, we need to learn to encourage ourselves. Lord knows we don't get a lot of encouragement from the outside world! That's why it felt so good when the selfie of me dressed up in a business suit got 85 likes on Facebook. We all need a cheering section, especially when we're doing scary stuff on a daily basis.
Entreprenuers need to be around other people who are doing scary stuff, too. It's so important to create community. My husband and some other real estate entrepreneurs started Investors Network NEPA, which meets the second Wednesday of the month at Perkins in Pittston, PA, 7pm. There are informal groups like that, as well as formal Real Estate Investors Associations (or REIAs) in just about every market. There are workshops, like the one I go to in New York City, that teach creative-types like myself the skills to run a business. You can find them on meetup.com, on craigslist, on the bulletin board at your favorite coffee shop, on the internet with a Google search. If you find one meeting and go to it, I guaranty you'll leave with the knowledge of at least one other meeting you could go to.
What about the Real Estate Guru programs?
Of course you can buy into one of those real estate investment guru programs and become part of a community that way. We did, and it made for an interesting story in two parts!
http://thisgingerjustsnapped.weebly.com/blog/how-it-all-began-part-5-taking-on-the-real-estate-gurus
http://thisgingerjustsnapped.weebly.com/blog/how-it-all-began-part-6-when-we-bought-the-gurus-program
If I had the chance to do it again I'm not sure I would. There are so many resources available at a much lower cost, or even free! On the other hand, we work with quite a few people who swear their guru program was their springboard. The Fortunebuilders people seem especially pleased with their results. Our experience with Dean Graziosi's program was a springboard of sorts – it got us thinking of possibilities other than rentals, and taking action toward those possibilities. Now our business has multiple streams of income.
Probably the best thing that came out of that guru program was a 3-day one-on-one with a mentor who flew out to Wilkes-Barre to impart his knowledge on us, specific to our business. He advised us to:
1- Keep the rentals, manage them ourselves with a management company of our own making.
2- Start a line of business finding properties for other investors (wholesaling) – but take it further.
3- REHAB the properties for those other investors! We already have experience rehabbing our own rental properties, so why not?
4- Manage the rental properties of those other investors alongside our own with our management company. (Well, turns out this is a legal gray area in Pennsylvania, plus it's a big pain in the ass dealing with other peoples' tenants. However, there is a huge hole in this market for good rental management companies, so I do plan to address this again at a later date. For now, we just manage our own.)
5- Flip houses. Specifically: Every month, have two under contract, two under construction, two on the market, and two on the closing table.
So this is what we have been, and are, working toward. That is A LOT for just two people to handle, so it's been going slow. Actually, it was only one and a half people before I finally quit the world of W2 employment! Now it's two. And slowly, we are building our “A Team.”
The “A” Team – Contractors, Lawyers, CPAs, oh my!
We have a very short list of independent contractors who work with us consistently, who I wouldn't mind taking on as employees should we ever be able to afford it. We need a few more if we're going to be doing all this work! It's a long tedious process of cycling through people to find the right ones for us. You can't tell from a resume or reference sheet – you actually have to work with a person before you know. Wrote a whole blog post about this frustration last week: http://thisgingerjustsnapped.weebly.com/blog/whats-your-insanity
We met with an attorney this week, one who has done quite a bit of work with the CPA we use. Hopefully, he will help us restructure our business with the correct entities to minimize liability and maximize tax savings, allowing for our inevitable expansion. Right now we have 9 LLCs, 7 of which own property and should be nothing more than holding companies. Our CPA suggests we turn one or both of the others into S-corporation partnerships to avoid self-employment taxes. She also thinks we should keep the rental management separate from the construction business, which is probably smart. So right now it looks like we're going to end up with two very distinct companies. But I want one BRAND for marketing, and that will be Good People Good Homes. I came up with that name on my living room couch in 2007 before we even had our first property. We were just going to be rentals then, maybe rent-to-own. But I think it's a good name for marketing properties for sale that we flipped.
I know more about marketing and spin than I do actually running a business. So I will get good advice on this before we proceed. And I will continue to bone up on how to actually run a business!
Some near-term goals:
1- Once this structure is in place, have the attorney draw up all the papers and make sure we stay up on all the reporting requirements. We have to be in compliance with all the rules regarding corporations if we want to maintain that liability protection!
2- Have our CPA customize Quickbooks for our many streams of income (and many expenses!) No more Spreadsheet from Hell at tax time!
3- Draw up a real, honest-to-goodness business plan with timed goals and targets for growth. We'll probably work with a SCORE mentor on this. I also plan to check out our local Small Business Development Corporation.
4- Figure out the best way to manage cash flow for the business. Racking up large amounts of unsecured debt is a bad idea. What's a better plan? Building up a prudent reserve, of course. But until that happens... A loan from a self-directed 401(k)? Refinancing the portfolio of rentals? A low interest government loan from the SBDC?
So many possibilities as we head into summer 2017. I'm actually too excited to be scared!
What about the Real Estate Guru programs?
Of course you can buy into one of those real estate investment guru programs and become part of a community that way. We did, and it made for an interesting story in two parts!
http://thisgingerjustsnapped.weebly.com/blog/how-it-all-began-part-5-taking-on-the-real-estate-gurus
http://thisgingerjustsnapped.weebly.com/blog/how-it-all-began-part-6-when-we-bought-the-gurus-program
If I had the chance to do it again I'm not sure I would. There are so many resources available at a much lower cost, or even free! On the other hand, we work with quite a few people who swear their guru program was their springboard. The Fortunebuilders people seem especially pleased with their results. Our experience with Dean Graziosi's program was a springboard of sorts – it got us thinking of possibilities other than rentals, and taking action toward those possibilities. Now our business has multiple streams of income.
Probably the best thing that came out of that guru program was a 3-day one-on-one with a mentor who flew out to Wilkes-Barre to impart his knowledge on us, specific to our business. He advised us to:
1- Keep the rentals, manage them ourselves with a management company of our own making.
2- Start a line of business finding properties for other investors (wholesaling) – but take it further.
3- REHAB the properties for those other investors! We already have experience rehabbing our own rental properties, so why not?
4- Manage the rental properties of those other investors alongside our own with our management company. (Well, turns out this is a legal gray area in Pennsylvania, plus it's a big pain in the ass dealing with other peoples' tenants. However, there is a huge hole in this market for good rental management companies, so I do plan to address this again at a later date. For now, we just manage our own.)
5- Flip houses. Specifically: Every month, have two under contract, two under construction, two on the market, and two on the closing table.
So this is what we have been, and are, working toward. That is A LOT for just two people to handle, so it's been going slow. Actually, it was only one and a half people before I finally quit the world of W2 employment! Now it's two. And slowly, we are building our “A Team.”
The “A” Team – Contractors, Lawyers, CPAs, oh my!
We have a very short list of independent contractors who work with us consistently, who I wouldn't mind taking on as employees should we ever be able to afford it. We need a few more if we're going to be doing all this work! It's a long tedious process of cycling through people to find the right ones for us. You can't tell from a resume or reference sheet – you actually have to work with a person before you know. Wrote a whole blog post about this frustration last week: http://thisgingerjustsnapped.weebly.com/blog/whats-your-insanity
We met with an attorney this week, one who has done quite a bit of work with the CPA we use. Hopefully, he will help us restructure our business with the correct entities to minimize liability and maximize tax savings, allowing for our inevitable expansion. Right now we have 9 LLCs, 7 of which own property and should be nothing more than holding companies. Our CPA suggests we turn one or both of the others into S-corporation partnerships to avoid self-employment taxes. She also thinks we should keep the rental management separate from the construction business, which is probably smart. So right now it looks like we're going to end up with two very distinct companies. But I want one BRAND for marketing, and that will be Good People Good Homes. I came up with that name on my living room couch in 2007 before we even had our first property. We were just going to be rentals then, maybe rent-to-own. But I think it's a good name for marketing properties for sale that we flipped.
I know more about marketing and spin than I do actually running a business. So I will get good advice on this before we proceed. And I will continue to bone up on how to actually run a business!
Some near-term goals:
1- Once this structure is in place, have the attorney draw up all the papers and make sure we stay up on all the reporting requirements. We have to be in compliance with all the rules regarding corporations if we want to maintain that liability protection!
2- Have our CPA customize Quickbooks for our many streams of income (and many expenses!) No more Spreadsheet from Hell at tax time!
3- Draw up a real, honest-to-goodness business plan with timed goals and targets for growth. We'll probably work with a SCORE mentor on this. I also plan to check out our local Small Business Development Corporation.
4- Figure out the best way to manage cash flow for the business. Racking up large amounts of unsecured debt is a bad idea. What's a better plan? Building up a prudent reserve, of course. But until that happens... A loan from a self-directed 401(k)? Refinancing the portfolio of rentals? A low interest government loan from the SBDC?
So many possibilities as we head into summer 2017. I'm actually too excited to be scared!