The guy is a pro. He stayed on the job and will finish it. And it will be awesome. I hope to have more pictures this week when I go to meet his landscaping guy about reshaping the back yard.
Until then, here are some before and afters to show you the work in progress.
Hopefully you can tell, but left is before the process started, right is where we are now:
We’re splitting the profits with an investor partner, so what we take home from this sale won’t change our lives. But it will help in the necessary restructuring of our business. This old house on Grove St. in Avoca isn’t the only thing that needs extensive renovations!
Restructuring Our Business – Because We Grew Too Fast
Our business structure is a lot like the nation’s health care system. Hodge-podge and Mish-mash are two technical terms that come to mind. We have various and sundry LLCs holding the rental properties. We have an LLC to manage the properties and keep the cash flowing in and out of one account. That was my original vision. But then we decided to expand beyond rentals and my husband formed another LLC to find and wholesale properties to other investors. Then we ended up helping those investors with renovations. Then we ended up flipping houses for resale. Only some of them didn’t sell, so now this LLC owns property for our rent-to-own operation. And since it’s a liability issue to do active business with an entity that owns property, more LLCs were formed. Confused yet? Try organizing the tax records for this! That’s what I’ve been trying to do for the last two months!
Something has to be done, and our accountant agrees. The plan is to sit down with her and a lawyer and design a stream-lined structure that works. Then I’m going to get our accountant to set up the new structure in Quickbooks and show me how to use the system for simple and accurate record keeping.
Picking a direction to grow in.
We need to rewrite our business plan. In the beginning, the plan was to buy rental units, fix them up for functionality, rent them for positive cash flow, and add more and more units until they are self-supporting and eventually corporation-supporting. The problem with that plan was there came a point when we had too many units to do the work ourselves yet not enough units to be able to afford hired help. So we expanded into a new business model of working with other investors, helping them buy property for rentals and retail flips. Helping them with renovations. Getting into flipping houses ourselves. Getting into the business of rent-to-owns. And thus the hodge-podge and the mish-mash.
The question is, where do we want to focus our efforts?
Steve wants to flip four or five houses per year with other investors. I think that’s a good place to start.
The mentor for the $45,000 real estate guru program said we could be doing 8 flips at one time: 2 in the process of buying, 2 being flipped, 2 showing for sale, and 2 under contract for closing. The biggest thing holding us back from that is the availability of reliable crew. We have a GREAT General Contractor in Mike, and I’m positive he could handle managing two simultaneous flips, if only he could find guys who would consistently show up for work. This is an ongoing problem in Northeast PA, and apparently in New Jersey, too, where Steve had some issues working on a flip with an investor. So one of the directions we may go in is building our own maintenance company. We’ll hire guys to work on our rental units, and offer our services to other landlords. We’ll be able to, hopefully, cultivate a good crew of guys (and gals) we can put on our flips as well.
Rebuilding our Rentals
In the past couple of years, we turned away from our rentals. We started our business as a rental business, and I still refer to it as a “rental real estate business” when I explain to people what we do. But in 2013 we hit a wall – we had too many units for two people to physically handle. Especially with the responsibilities of raising a young daughter. And the units did not throw off enough income to support two people working full-time on them. So I’ve been working a “B” Job all along while Steve has done the best he can full-time by himself. It was wearing us down and we weren’t seeing much reward. So we went off on all these different directions, which was great – it expanded our vision and opened up multiple streams of income. But that left us even less time to deal with the rentals. So we farmed that task out to property managers, none of whom did what we imagined they would do for us. So in May, when we decided to remain based in Northeast PA, we decided we didn’t really need a property manager anymore. Unfortunately, that’s kind of left us back where we were in 2013.
I say “kind of” - because things have improved for us since then. We have these other streams of income, which is helpful. I am no longer working full-time, only part-time at a “B” job, and it’s almost like a freelance situation where I make my own schedule. Steve knows a lot more about the real estate industry as a licesensed realtor and an insider now. And I’ve learned a lot about proper business structure and the accounting side of things. I’ve become expert at managing cash and credit to achieve our short-term survival goals. I feel up to the challenge of using those new skills to meet our long term mission. But the rentals are a mess right now.
We are literally going to have to rebuild our rental business, which was the core of this whole monstrocity. It somehow got away from us. The rental market has changed – the uptick in non-paying, destructive tenants is not just something that’s hit us – every landlord in Luzerne County and beyond has a story. At the moment, we have five empty units. Floors and walls have been destroyed. Appliances can’t be salvaged. I feel like we’re propping up the economy of the junk-hauling industry with all the debris and garbage these human rats have left behind, inside and outside of our buildings. One of our fellow landlords, after seeing a unit recently vacated by a Section 8 tenant, advised me to “light a match.”
NO! I will not “light a match.” Are you fucking kidding me? I’m going to let some government teat-sucking piece of human garbage destroy MY dream of financial freedom? HELL NO! I am going to have the debris hauled away, including the appliances. I am going to clean and scour and remediate any sanitary issues. I am going to repair and repaint the walls. I am going to find a practical, durable, and attractive solution to the flooring. If the building looks a little rough on the outside I will spruce up the curb appeal. Steve and I are taking these units back, and we will re-rent them to decent, hard-working people at a fair market rate. And we will do quarterly inspections to nip any maintenance issues in the bud, that will be in the lease. Any tenant who won’t “roll with our program” will be quickly shown the door. And once we find a system that works for the proper management of our rentals, we will hire and train people to work that system for us. No more farming it out. This is our business.
I read Napoleon Hill’s Think And Grow Rich Every Day as part of my morning routine. Here is the entry for September 24:
You have failed many times? How fortunate! You ought to know by now some of the things NOT to do.