Happy Anniversary to ME - Reflections on my 1st full time year in REI

Originally posted on 2/19/20:

I still have a hard time believing it but it has now officially been a full year since I’ve been a full time real estate entrepreneur and investor. To mark this milestone, I thought I’d share a little about what my life is like now that I’ve been away from the J-O-B for 12 whole months. This post will be a little different from others as there will be no charts, graphs or numbers and will focus on attempting to paint the picture of the ups and downs of my current livelihood.

Quick note: I’m totally going to quote some Dr. Seuss in this post. My absolute favorite book to read to my two boys is “Oh, the Places you’ll Go!” The more I read this book, the more I’m convinced it was written for entrepreneurs. I’m only half-kidding. The book does a fantastic job of outlining the ups and downs of a small business owner.

HOW THIS GOT STARTED 12 MONTHS AGO

I don’t have a dramatic story about getting fired or a grand announcement to my employer to “take this job and shove it”. My transition to full time REI was more calculated and gradual. I was working as a independent contractor for a consulting company with which I have a long history. I slowly began getting more and more picky about which projects I would take on. They were keeping me busy with local and remote work for a while, but that dried up at the end of January 2019. My plan was always to go into REI full time once the consulting work dried up, so that’s what I did.

Things were really slow at first. At that point I already had 9 rental properties, but I had a very small marketing budget and had nearly zero new deal flow. MLS deals were extremely hard to find (as they still are today) and I frankly didn’t know what to do with myself for the first few weeks. Things were so slow I even started working on a furniture project in my basement to fill my time.

I was down in the basement working on furniture when I received a text that my offer was accepted on a 3 unit MAJOR fixer upper for $85,000. I put my furniture project on hold and immediately got to work lining up financing and contractors. I didn’t touch my furniture project for at least 6 months after that. I was off to the races! That 3 unit was followed up by 2 flips, a new partnership, then 3 more BRRRR’s to conclude 2019.

MORE ENTREPRENEUR THAN INVESTOR

I really believe that when you go full time into active real estate, you’re more of an entrepreneur than an investor. You’re scratching, clawing, and scrapping to grow your business, compete and improve. “Investor” implies a certain level of passivity and I just haven’t reached that point. Once properties are rehabbed, rented and refinanced then I am largely hands off - with those properties - but now I am constantly under contract on another property, hunting for new deals, or managing a rehab/refinance (usually all at once).

One of the best and worst things about being an entrepreneur is that you don’t have anyone telling you what to do. I love freedom and feel like I was always a somewhat rebellious employee. I hated being told what to do. But as a business person with limitless options, I am constantly wondering if I’m doing the right things with my time and money.

“You will come to a place where the streets are not marked. Some windows are lighted. But mostly they’re darked. A place you could sprain both your elbow and chin! Do you dare to stay out? Do you dare to go in? How much can you lose? How much can you win? And IF you go in, should you turn left or right…or right-and-three-quarters? Or, maybe, not quite? Or go around back and sneak in from behind? Simple it’s not, I’m afraid you will find, for a mind-maker-upper to make up his mind.” - Dr. Seuss, “Oh the Places You’ll Go”

Most of the time, I’m gonna just guess at least 90% of the time, I’m dealing with rejection or failure. Maybe I spent $500 and 10 hours to send out a mailing campaign, and I get zero response. Or a contractor fails to show up repeatedly putting a project behind schedule and/or over budget. Or a trusted mortgage lender stops lending to LLC’s with zero notice. Or I get ten calls in a row from irate owners sick of receiving my direct mail, calling me a bottom feeder, piece of trash, or worse. Or maybe I spent all day driving back and forth, looking at properties, and submitting offers only to get outbid by $50,000+ on each one. By the way, these are all true stories.

Once in a while, things go really well and then I feel like a genius.

As an employee, if you do something wrong your boss will (should) correct you. If you do something well, someone will (should) recognize that. When I was working, especially in my “later” years, more often than not I had colleagues and clients telling me what a rock star I was. My ego was constantly being stroked by others. That all changed when I became an entrepreneur. Now I was all my myself - feeling like a jerk sending out postcards to a few people, or an idiot trying to swing a hammer.

“All Alone! Whether you like it or not, Alone will be something you’ll be quite a lot. And when you’re alone, there’s a very good chance you’ll meet things that scare you right out of your pants. There are some, down the road between hither and yon, that can scare you so much you won’t want to go on.” - Dr. Seuss, “Oh the Places You’ll Go”

The point I’m trying to stress is the level of mental toughness required to build and run your own business. To be able to grit your teeth through all the failures, and have faith that the success will come. It’s really difficult, and I think a very small percentage of people can handle it (I’m not great at it myself, but getting better).

MY CHANGING ROLE IN MY BUSINESS

When I got started full time a year ago, I was attempting to do everything (except property management - that was already outsourced). After all, I was FULL TIME. I had all the time in the world right? (hint: sarcasm)

Here’s just a sampling of what I was doing:

• Pulling mailing lists (lots of time in courthouses and messing around in Excel)
• Hand writing, stamping, and sending hundreds of envelopes each month
• Processing all returned mail from mailers
• Taking calls from sellers, then looking at every single property and submitting an offer
• Closing on properties once offers are accepted
• Doing a lot of the rehab work, plus trying to be the GC on larger projects
• Raising private capital for short term funding
• Working with lenders for long term funding (cash out refinances)
• Lining up insurance and utilities
• Organizing all the paperwork for each property, and keeping up with all bills/invoices
• Tracking all income and expenses

All this while trying to be a good husband and father to two young kids.

I have slowly been finding ways to delegate many of these tasks so that I can focus on higher value tasks. Now, I have a business partner that takes care of everything relating to rehab, maintenance, and property management. I’m now at the point where I’ll check on a rehab only two or three times a month. My focus for the last 6 months or so has been on creating a marketing system and lead flow to keep the deals coming in. I’m currently training someone to take over a lot of the marketing so that I can focus on speaking with sellers, viewing the properties, making offers, and closing deals.

A DAY IN THE LIFE OF A REAL ESTATE INVESTOR

I feel like it’s a huge cop out when people say they can’t describe their average day. But, it truly does vary for me. I’ll give it my best shot.

After our early morning workout and helping my wife and kids get out the door, I make myself a gigantic pot of coffee. My desk is covered with business cards, tax, insurance and utility documents, and I try to nibble away at the most urgent items at the beginning of the day. I’ve put a schedule together for marketing, so I usually pull it up to check if I am due to send out a new mailing campaign. If so, then I’ll spend the time to refine the list, and upload it into my preferred mailing provider, then initiate the order. My current goal is to send 625 mailers per week.

I get 10-15 calls/inquiries per week from my marketing efforts. I screen the calls and call the owners back immediately if they really want to sell (over 50% of them tell me to take them off the list, or they’re tire kickers). After speaking with the owners, if I determine they’re motivated to sell, then I’ll arrange a showing.

I do still look at MLS properties online, but I only arrange a showing if they’re in really bad shape and/or the price is good and/or they’ve been listed for 90+ days. There’s still deals on the MLS, but I’ve been careful not to get to sucked in because it can become a waste of time looking at properties that you’re never going to get.

I physically go to 3-5 properties per week, and I meet other investors/lenders/agents/etc. for lunch 1-2 times per week. I spend a significant amount of time networking on the phone or in person.

After looking at properties and submitting offers, I set myself a reminder to follow up. Low offers are rarely accepted right away. It took me a while, but now I have a follow-up pipeline set up where I receive emails every day telling me who to follow up with, complete with notes outlining where the conversation left off. There’s also a number of sellers who aren’t ready to entertain an offer for a variety of reasons, and I follow up with them regularly as well. At any given time, I have about 10-15 ongoing relationships being built with potential sellers.

When offers do get accepted, that’s when things get really busy as I’ll then need to arrange financing, insurance, and sometimes follow-up inspections if needed. Plus, I’m in constant contact with my title company to ensure everything is arranged for a smooth and on-time closing.

I spend a significant amount of time speaking with my partner each day. We typically discuss current projects as well as any property management issues that are coming up. We’re still growing, and we each have several mini-projects that we’re working on to develop better systems as we’re learning from mistakes. For example, I’m working on developing a custom purchase agreement contract that will better serve our needs than the generic one we downloaded from the internet.

In general, I’m working from the home office 50% of the time, and driving around between properties/meetings 50% of the time.

THE REASON I’M DOING THIS IN THE FIRST PLACE

Finally, I’m totally taking advantage of the freedom and flexibility associated with being my own boss. One of my main personal reasons for wanting to be an entrepreneur (and eventually, a more passive investor) is to be able to spend time with family and generally just doing what I want to do. Our boys are with me every Friday. Our kids go to my parents two days a week, and I make it a point to take the kids there, hang out for 30-45 minutes, eat breakfast and visit with my parents. If our kids have a doctor’s appointment in the middle of the day (or really anytime), I’m there. If one or both of the boys are sick and need to stay home, they’re staying with Daddy.

I have unlimited vacation time - so I continue to go on fun vacations with my wife. Last year we went to Yosemite National Park for a week and hiked 15 miles each day. We also went to Scotland and England for over a week.

Yosemite National Park 2019

FINAL THOUGHTS

As I hope you can tell, being an entrepreneur and real estate investor is not a walk in the park. It takes a lot of sacrifice, hard work, trial and error, and guts. That being said, I know myself and that I’m hard wired to own my own business and call my own shots, so I wouldn’t have it any other way.

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again; who spends himself in a worthy cause; who at best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory or defeat.” - Theodore Roosevelt, The Man in the Arena