All Forum Posts by: Jim K.

@Renee Stark

Sometimes you just have to throw all the advice to the contrary in the backseat and just do something. I'm very glad you decided this wasn't the time. Good job. Since you do plan to go ahead investing elsewhere, the best piece of advice I have for you on that is to make sure you have people in the ground whom you can trust absolutely to do what they say they will do. I have rarely seen long-distance renovation outfits make it here in Pittsburgh, for instance, without a brother or cousin or lifelong family friend as the onsite property manager or overall reno GC of the investor. And just because the investor and the lead person onsite are related is no guarantee of success by itself -- the lead person also has to be thoroughly competent.

@Renee Stark

Your first investment is going to be a BRRRR property about eight states away from you. As far as a reliable team in place goes, you have a realtor, you're working on a contractor (but you plan on getting several bids), and you suspect you want to hire a property manager in Georgia. I can immediately think of four problems with the plan.

1. You mention nothing about your personal understanding of the renovation process.
2. You offer no details of the property itself.
3. Your renovation budget is maybe around $90K of your your retirement savings. What you're basing this figure on is unclear.
4. You make no mention of perhaps the most important problem with your plan from a contracting standpoint...today is August 7.

I'm sorry, Renee, it really looks like you're about to get screwed. If you don't, it will be close to a miracle, and then you'll just take the wrong things you will have mislearned from an abnormal result to your next project and get screwed there.

Long-distance renovation-for-profit is very hard. Doing it hands-off and entrusting the management to a general contractor with additional oversight by a property manager is even more difficult, especially when you don't have a long-term relationship with any of the people doing the work, with years of built-up trust and respect between you. A lot of that trust and respect comes from whether or not you actually know something about these people and what they do. I have to say that given what you've written, it really seems likely that you don't, especially given the very big detail that you're overlooking in this whole discussion.

It's August 7th, and the property is in Georgia. The best people for this work have been booked solid since the middle of March. Any local GC who has time to spare to pick up a major project like this right now will be at best highly questionable. Any subs the GC finds with enough free time to handle the work will be even more questionable. Could it go right? Oh, sure. But that's a low-low-probability outcome.

Yes, I understand that you have to learn somewhere. And you will probably lose money going through the learning curve (as an investor, I was no exception whatsoever to this). But starting out as investors in residential renovation this way, with the stakes this high and so many chances for things to go wrong, it just can't be your best option. I think there are better ways.

Whatever you choose to do, good luck to you.

Self-employed types always represent a major problem when it comes to verifying their income. But the reality is that the majority of stable, SUCCESSFULLY self-employed entrepreneurs will do pretty much anything to own their own house, and the ones that aren't financially capable of doing so yet will understand the income-verification problem quickly. These people also tend to be married and their spouses tend to have verifiable sources of income. They will often voluntarily come up with increased security deposits, easily accept month-to-month rental contracts, and find other ways to work with you. Lastly, they will most often be searching for living situations that are far, far below their stated means.

I'm a great example of this. My wife and I live in a duplex I paid $45,000 cash for back in January 2017. We moved here from a $200K townhouse condo next to Pittsburgh's most exclusive mall. The townhouse had an HOA fee, a clubhouse, a pool, and tennis courts. We still own the condo, we just have tenants in there who are willing to pay the HOA fee and the increased taxes in order to access the slightly better school system up there.

Bottom line, someone who just shows up alone and out of the blue, says they make 3x your rent, offer you nothing else when you explain the income verification problem, and object to a month-to-month rental contract or an increased security deposit, well, they're probably lying about how much money they make.

Well, where do you live? Here in PA, the local website we use to check evictions is https://ujsportal.pacourts.us/CaseSearch

Our Allegheny County Department of Court Records website is: https://dcr.alleghenycounty.us/

If you live somewhere else, it's something else. But what you're trying to do is get some online service to put in the kind of local legwork a private detective will charge you about $500 for. It's just not going to happen reliably.

I think it's getting worse, too. I understand how get-rich-quick types gravitate to real estate. But nowadays, it often seems that's all there is in the way of new blood in the field. Well, maybe that's not fair. These people are not looking to buy a Lambo next year. But for many of them, the mantra always goes: "Let me get rich (but we won't call it that) and let me quit my job (as soon as possible) so I can be happy."

When you tell these people that it often takes more than a decade before the investing makes things like that possible, they go looking elsewhere for advice, until they find someone who's willing to sell them what they want to hear.

Building relationships, improving your lifestyle, relieving chronic anxiety, creating strong friendships, building bonds with family, work-life balance, delayed gratification, risk-reward management, lifelong financial freedom, all the really good things about REI are often suffocated under the overwhelming need to GENERATE INCOME TO QUIT MY HATEFUL JOB.

What's the best thing about investing for me? My wife and I have not had anything close to an argument about money for the last twelve years. That always meant a lot more to us than quitting our jobs, even though we both eventually managed to.

 Sorry, James and Steve, Hermitage is another one of those "own little world" kind of places in Mercer County, PA. I know less than nothing about new construction loans for duplexes, let alone how to operate up there, in what is essentially a Pennsylvania suburb of Youngstown, Ohio. Good luck to you, James, because it does sound interesting, and I hope to learn from you in the future.

Best of luck to you.

This is way too hypothetical with massively important variables missing.

1. The most important one, as @Tim Ryan points out, is the question of whether the investor is single or married. I am living proof that there's absolutely nothing more important than answering this first question first. My wife is fully involved in our business. She brought us our first deal. She handles many of our tenants these days.

We wouldn't have gotten off the ground if my wife was not right in this with me.

2. What's the stable blue collar job? Blue collar jobs is that they are usually linked into larger networks within communities. Here's a great example: C.S. has been my dumpster-rental guy for the last five years. He came to me by way of my mason, who also uses him.

C.S. is really damned good at what he does, and a big part of this is that he's a great communicator. Of course people talk to him, so he knows EVERYONE in the single-family renovation game in Pittsburgh. And he knows who's working regularly, who's only off-and-on, who's going through troubles, who needs extra work. C.S. is one of my first calls when I need somebody good at something specific. Ironically, C.S. isn't in the real estate game himself because his wife isn't up for the life.

3. How tight is your money game? Especially starting out, you're never going to get anywhere if you don't manage to get full and complete control if you don't have an absolute grasp on all your personal finances, if you don't know about lifestyle creep and the hedonic treadmill, if you or the person handling your money can't pinch a penny until the shield dents.

4. This business is never linear. Once you get to ten years in, your life is going to look very, very different than what it does today. I recently hit a buffet far away from our normal one down the street, and there were two guys in T-shirts and jeans in there talking at the top of their voices about how they were "$125K into this deal" and were working on "getting $50K out of this flip." That was me six years ago. Now I have other concerns.

Sure, I've been self-employed in the business now for two years and my wife just quit her main job, but we're not slowing down now. If you end up being the same way, your ten years may end up looking more like fifteen -- it might just be a better deal. Are you willing to accept that?

That's the real world of investing, instead of pie-in-the-sky strategizing at the buffet.

@Steve K.

As a matter of fact, I recently discovered $2.2 million dollars, found it in stuffed into Ziploc bags under the attic floorboards of a tear-down I bought at the sheriff's sale. I wonder, should I invest it in Ohio? I really need help deciding.