All Forum Posts by: Adam P

It is easier to build wealth in a lower cost of living area.   If you work in tech in SF and make $400k a year, the bay area is a wonderful place to live.  However, if you are part of the other 98%, you are either compromising on how you live, or spending more than you are saving.

My experience has been that salaries just don't vary by as much as cost of living does throughout the US.  Friends that live in high cost of living cities (LA, NY, San Fran), end up with more wealth trapped in their own home, but never get off the ground truly investing.  You always have the option of turnkey, but that will rarely match the returns of finding your own deals locally.

High cost of living areas can be great fun to live in, just as driving a Ferrari can be great fun.  However they are really a luxury item, if you want to build wealth, it can be easier having more disposable income to start investing with.

Real estate on average does suck.  Being a landlord of an average property is too much work for how much money you make.  I look at the average 3 or 4 flat for sale in Chicago, and there is a huge chance of never making a penny out of those investments, unless the market rises significantly.

However; you are on biggerpockets.  You can educate yourself on the true costs of being a landlord.  The real numbers when flipping.  You can become an educated real estate investor.  I discovered biggerpockets 5 years and $1 million dollars ago.  Real estate is fantastic in that the average person can exploit the arbitrage.  

Most other investment classes are full of the smartest guy in the room owning the market, and you are left to either pay them to invest for you, or to try and compete.  Real estate gives everyone a shot with a little self education and hard work.

You are unlikely the only person he owes money to, so be very careful on being too nice.  It is most likely those with the smallest stick will be the last paid (if ever).

I would start legal action, and any utilize any other ways in your state to get reimbursed.  You won't get anything back for the time he has wasted, but may be able to at least recover the money you paid.

Unfortunately, you are unlikely to get this contractor to finish the job, or provide you any of your money back.  I would treat it as a lesson learned, one that most investors go through early in their real estate career.

Construction attracts many deadbeats, since the barrier of entry to many trades can be so low (ie painting).  There are also many amazing contractors, who are wonderful to work with.   It can just take some time and mistakes to find the great ones.  I lost a few thousand dollars at first on contractors, before I found my current team who are fantastic.

I always pay for all materials.  I provide home depot gift cards, within $100 over estimated costs.  That way no contractor can complain they are out of pocket.  I then pay only after work is completed.   No half up front, or on last project the painters had completed 2 rooms out of 8, and claimed they were half finished.  

When contractors start complaining that they need money up front, I tell them they can take the job, or leave it.  They provide a name and a license, I provide a building.  I have far more to lose by being shady than they do.  On a larger job, we will break out cost by task, and pay when each task is complete.  This can get you a better price too, as the contractor is then not building in contingency for unknowns.

I got inspections on my first couple of buildings, but now don't bother.  Unfortunately from an investor perspective, inspection reports are filled with items like outlet covers, appliance issues, dents in walls.  A lot of items that come up day to day being a landlord, so even if they are all perfect on purchase, they may not be 6 months later.  I also always found any issues that an inspector found, they recommended you get in a real expert, ie get plumber to review sewer lines, or get electrician to inspect old electric system.  These reports cost me $800-$900 on a 4-flat.

I now get my contractor through, along with any experts (ie structural engineer, electrician, plumber, roofer, HVAC).  It saves me money, and gets the experts to give their opinions without a middle man.  Inspectors are more for retail purchasers, for whom a water heater near end of life matters.  If your deal could be blown by having to replace a $400 water heater, then you are going to be shocked what being a landlord can cost.

We just installed exposed ductwork in an apartment.  The spiral round duct cost double the cost of in-wall duct, but that is more than made up for in savings for creating soffits to house regular duct.  I did see huge variations in cost from different vendors around town.  They all seemed to custom make the ductwork, so get a few quotes.  My contractor is happy to shop around for me, make sure yours is too.

Reactions from renters has been mixed.  I live downtown, so exposed duct is very common, and I figured the modern look would increase value (I am splitting the heat, so the main driver is cost savings).  

This apartment is in a neighborhood, and some middle age working class potential renters did not like it at all.  Comments like "what is this?"   "Will this be covered", etc.  They probably never spend time in newer downtown lofts, etc, so it looks cheap to them rather than trendy.  Younger potential renters have loved it.  Research your market before installing, I never realized it could turn some people off.

Sounds like you are looking at average deals on the MLS and Loopnet. You can find good investments on the MLS, but they don't hang around for long (usually less than a week). In these days of low interest rates, there are a lot of stupid investors out there paying crazy money for properties which will never make money.

If the property won't make money with property management, don't buy it.  The point of a business is to be able to scale, to the point where you eventually retire.  Without the ability to outsource everything, you aren't building a business, you are building a job.

I have been finding the best deals lately are primarily due to poorly maintained buildings, buildings with tenant issues, and being sold by utterly incompetent agents who make seeing the building and making an offer a nightmare.  You need to search out buildings with these types of "issues" which can cheaply and easily be overcome, generating great cash flow.

I would not lie about working in real estate, but definitely not a great idea to raise it with co-workers.  It is not too difficult to build a million dollar net worth in real estate within 10 years.  This makes people jealous.  If the person sitting next to you is late 30's, looking at another 25 years of daily grind, and sees you are 5 years from retirement at the same age, they will get jealous.

I am with others who keep real estate business hours communications to texts and emails, and take calls at lunch / before /after work.  If you work with someone who has a entrepreneurial personality, then by all means share your knowledge.  But this is the minority.  Most people want a boss, 401k, and benefits.   I want my colleagues to continue to feel they are doing really well with their lives.

I self manage most of my portfolio, but have a property manager for an out of country condo.  I know as my portfolio grows (I am at 12 doors), I will need to hire a property manager, but the costs don't seem to make sense.  My property which has a manager kills me on maintenance fees in comparison to the others.  ie, I got charged $75 to copy a key.

Market rates for contractor services vary by such wide margins (Sometimes 1000%), I think the true value-add proposition for a manager is to offer those services for set affordable rates.  The 10% base fee is too high.  I can setup a bank account for each door, and have tenants deposit the funds into that account each month for free.  Most of my tenants just electronically transfer rents anyway.  

Set up a property management firm that charges me for work by the hour (no % of rents), and has good affordable maintenance staff, and I would hand over all my doors.  To get to this level, I feel I need to grow to hire my own employee to be property manager, as I haven't yet met a PM firm who would get close.

If you are using the MLS to find opportunities, begin using the seller's agent on each property you are interested in. I have had a couple of deals where I pushed on the price, and the sellers agent lowered their commission (since they are getting double), and worked with the seller to close the deal. I have also found many seller's agents very forthcoming with information about the seller, working with me to try and get a deal done.

There are many fine upstanding, honest agents who work 100% in their client's interests.  There are a number of agents who will work as hard as possible to close a sale, to get their commission.  As a buyer, I have been lucky enough to find seller's agents who were motivated to get the deal done.