Feeling discouraged...

[Joshua Feit]

Hello BP!

Here's a quick post just to say that I'm feeling discouraged. This is probably very common, which is why I want to hear from you! Let me know if/when you feel discouraged, how do you push through?

This past year, after a ton of research and BP podcast listening, I bought a triplex, and two single family homes. Everything has been going pretty well, but a few realities have started to set it:

1) The calculators aren't always right: The numbers on my places looked great -- should have a net cash flow of about $1800 on all five units. (Used the BP calculators, and I'm pretty sure I didn't leave anything out...)  Well, I don't. I've just about broken even on these properties. I haven't lost any money, but I haven't made any either. Obviously, I'm doing something wrong, but I can't tell where I went wrong.

2) Finding reliable contractors has been ridiculous: I just got through with a rehab on the latest property, and the contractor screwed EVERYTHING up. I had to come back behind him and do all the work myself. Yikes. And now that a tenant is in there, we realized he totally screwed up the wiring. Tenant is without power, and we're scrambling to rework the mistakes.

3) Vacancies are expensive: On one of my units, I had the tenant vacate two months ago. I decided to fix up the place -- new carpet, new kitchen, new paint, and try to raise the rent. Now that I've sunk around $3500 into the unit, I can't seem to attract a tenant at the new rental rate (only $50 more than the old rate, which hasn't been raised in 10 years).

I realize there are so many variables, and that investing is for the long haul. I guess I got started with a lot of excitement, and now I am left wondering how anyone turns a profit in this business.

Rant over. Thanks for listening. And I'd love any advice you want to send my way!

[Brian G.]

@Joshua Feit man I feel your pain but please lets get back on our feet. We all been there. I own rentals in four Florida counties and Puerto Rico. Looking at your scenario and I am confused with your statement "I haven't lost any money, but I haven't made any either"...

Without the details, it will be hard to point the areas of concern but here are my observations:

1. The calculators aren't always right...  Hmmm. My question will be what was entered into the calculator. Because if I am feeding actual figures into it, I should be getting actual (or close to reality) estimates. Remember garbage-in = garbage-out. So from rent levels, to property prices, to repair expenses, to debt service, to what competitors are offering, to tenant underwriting, everything has to be 1. verifiable and 2. from credible sources, tax records, inspections and/or professional opinions. Any slight deviation from this and your calculator will be worthless.

2. Finding reliable contractors has been ridiculous.  Well, this could be a tricky one. I also had my disappointments but this is what I know. I am the inquisitive type so I always ask a ton of questions. Sometimes I know the answers sometimes I don't. But this face-to-face interaction enables me to detect if the individual is full of #$%t!. And from your post it seems that you knew how to do the job yourself. Did you put him on the spot with some keen tough questions specific to each job? Did you show up at the job site to evaluate his progress twice a day? Once a day? If not, oops sorry but this reflects more on you rather than your contractor. Shame, shame...

3. Vacancies are expensive...  Hmmm again. Vacancies are expensive if I allow it.  There will always be vacancies but for no more than one month. Sometimes I can drive this down to just a weekend. This is what I know. When a tenant decides not to extent their lease, this triggers a mandatory inspection. I go in there and in 15 minutes I have a good idea of possible repairs. I keep my tenant engage and talk to them every week until vacate date. For them is clear how they could be impacted if the place is not returned the same way they found it. 3-days before their move out date I show up with my checkbook ready to return their deposit. 9-10 times they leave the place in good shape. I write them a check and return their deposit on the spot! You must stay on top of it. I always show my units before the place is vacant. In regards, to renovations I am not touching a counter unless my competitors dictates it. I open and evaluate all active rentals that are competing with me. They don't renovate. I don't renovate. Why should I? Unless, of course, I can see where increasing my rent will compensate my cash flow position. That's a different story and it must be verifiable.    

So, sometimes things doesn't go our way. For the sake of our pledge to financial freedom please be relentless. Without struggle there is absolutely no progress. Don't ever feel discouraged. Don't do this to me now! 😄 And to your calculator, continue adding your paper losses (depreciation, etc.) and the aggregate equity your tenants are funding with their monthly payments.   

All the best...