My husband and I started Good People Good Homes back in 2008 as a rental business. We have grown that business into a nice portfolio of rental properties. We have also expanded into the arenas of rent-to-own, wholesaling and rehabbing for profit, also known as flipping houses. If you’re curious, go back and read the archives of this blog, starting with http://thisgingerjustsnapped.weebly.com/blog/how-it-all-began-part-1
We must have made a few good moves, because we’re still in business after 8 years, current with our obligations, and hopeful for the future. But we have made some doozey mistakes! The biggest mistakes we made were based on fear.
Beware Business Decisions Based On Fear
It was fear that caused us to question whether we were fit to even manage our own rental properties.
I was freaked out when my friend’s apartment was shut down by Wilkes-Barre’s unconstitutional One Strike Ordinance over the actions of his tenant. The city was also cracking down on who could legally manage rental properties – only PA licensed real estate brokers are allowed. I checked – there is nothing preventing me from managing my own properties, license or no, but I started second guessing my ability to do so. And since all the real estate gurus, including my beloved Robert Kiyosaki, advised using professional property management, my husband and I decided to do just that. That decision was made almost exactly one year ago.
This turned out to be the wrong decision for us. In October we switched management companies, from a well-known real estate brand name to a local landlord who was also a licensed real estate professional.
Then we made another, somewhat fear-based decision – list all the rental properties for sale. http://thisgingerjustsnapped.weebly.com/blog/everything-is-for-sale
This was only somewhat fear-based. The market was going up, and I was curious to see what kind of offers we could get if we sold out. Plus my husband is now a realtor and gets a certain amount of “points” for his listings, even if they are his own properties. But deep down I was harboring a rescue fantasy – we’d sell the properties, pay off all this scary debt, take the rest of the money and run – far, far away from Northeast PA back to New England where at least the people are the kind of crazy I recognize.
Then I came to my senses. We’re not going to move. We’re business owners, and we’ve built a lot of business equity right here in Northeast PA over the last 8 years. We’d literally be starting over from scratch, and rentals would not cash flow in New England the way they do here. And our daughter Savannah is growing fast. She just turned six this month. A year of kindergarten and she’s already got a little posse of girls she runs with. My parents moved from place to place so I never had that growing up. I want that for her. We may not be NEPA locals, but our daughter is. Born and raised.
Taking Control – Minding Our Business
We took back management of our rental properties in mid-May. June rent collections were decent. I have a few slow-pays to deal with. We also had seven empty apartments, due to a combination of normal lease endings and evictions. My husband was able to rent three of them in the last couple of weeks and possibly a fourth if Section 8 approves. That leaves just 3 to go, assuming the slow-pays come through and we don’t have any more evictions.
We have offers on two of our properties we listed for sale. Now we just need to decide whether it’s worth it for us to do the renovations the buyer is requesting. I prefer to sell our properties as-is, but that is not the offer we received. So now it’s decision time.
Selling these two double-blocks would bring our debt load down to a more manageable level. We made the mistake of over-leveraging our rentals to build our portfolio of properties. That’s a common rookie mistake that can sink a business, but I think we caught it in time. Selling these properties will leave me with four less tenants to manage. That will be helpful as we build our systems for managing rental properties. At that point, when finances allow, we can acquire more properties and increase our portfolio the right way. I’ll miss those four rents, but I think things will balance out in the end – if the renovations the buyer is requesting still net us enough profit to make selling the buildings worth our while.
I am determined not to make this decision based on fear. We do not need to sell! We only sell if it is in our best financial interest to do so.
It is very important for me to move forward with courage rather than fear. I think I’ve reached a critical stage in my development. Blogging is such therapy!
Small business: Firefighting vs Focus
The biggest problem my husband and I are dealing with right now is not knowing where to focus our energy. It seems like everything is urgent and has to happen NOW, but that just isn’t possible.
First of all, it seems as if my poor husband’s head is about to explode. A lot of what we have to do falls on him. I’m working as many hours as they’ll give me at my part-time job outside the business and must continue to look for full-time work until my unemployment runs out. I have stopped searching for work out of state and focused my job search locally. We’re not moving. I’ll be pleasantly surprised if I do find a full-time job locally – it will eliminate one of our biggest expenses, health insurance. I am diligently filling out applications every week – some of them take over an hour to complete, with online personality tests and other such nonsense. I even had one employer ask about blogging and other social media activity. They wanted a link, so I gave them this one for Ginger Snapped. Big surprise I haven’t heard back for an interview!
Once those unemployment benefits run out, I can officially declare myself to be self-employed and take advantage of programs offered by the Small Business Development Corporation. It would be nice if Pennsylvania would allow me to do this while collecting unemployment, but I’m sure they have their reasons for wanting me to seek work as an employee instead (get back in the mines!) I’m a law abiding citizen and will play by their rules. Unfortunately, that leaves my husband quite overwhelmed.
Yesterday when I got off work I met him at a local Irish bar – Crisnics, which used to be the Barney Inn, catty-corner to the building we own on Barney St.
We talked about the state of our business as I proceeded to down a quart of beer.
My biggest duty has been finances – keeping the bank accounts in balance, managing the debt, making sure all our accounts are paid and in good standing. In my humble opinion, my work here is how we are still in business!
Steve is worried about income – he closed two wholesale deals this week, netting about $23,000 which we have to split with our partners, but it’s still awesome. I would like him to keep doing that.
We also have a house to flip – supposedly we’ll be closing on that property next week and can finally begin the renovations.
We have four apartments to prepare for July1st move-ins.
We have three other empty apartments to rent – and are being inundated with phone calls Steve can’t possibly return. Solution – we’re paying one of Steve’s wholesaling partners a nominal fee to call these people back and set up appointments for showings.
We have some curb-appeal issues which must be dealt with in order to attract the kind of tenants we want for our available rentals.
We have a few delinquent tenants to deal with that may or may not turn into evictions, and if they do we’ll have even more empty units to fix up and rent.
We have a short list of existing tenants with maintenance requests. They are not emergencies, but they’ve been waiting a long time for service, so I want to get to these items sooner rather than later.
We have two of our rental properties under contract with a buyer who wants renovations – and we have to decide whether doing the renovations is worth it to us to get the sale.
Somehow seeing this all typed out on a computer screen makes it easier to deal with. In my head these tasks all jumble together and all I can hear are my own screams.
Blogging is great therapy.
So is listening to a ‘90s house music playlist on Pandora.