All Forum Posts by: Michael E.

Hi Mike thanks for the reply.

I feel now is the time I should point out that I never asked for "perspective". I was simply posting what I was doing, with the hope that it might inspire someone else. 

However, not a single person has asked if I am or was already involved in the skilled trades, or if I have any handyman type experience. In Michigan you don't need to have a contractor's license, to work for a contractor. Those $15-25/hr helpers do not have a license, but they are working for a licensed contractor which makes it legal, according to the state, as long as you are not paying them under the table.

I had a summer job working for a contractor as a teenage (20+ years ago). I did not have a license and had zero experience but that guy told me I was the best worker he had, because as he put it "you make D sure that you don't F anything up, I like that." It was hard work and I didn't like it, but a teenager that doesn't like hard work shouldn't be a shock to anyone. 

Just to be clear, I don't think a summer of work experience 20 years ago makes me an expert at anything. Or that just passing the class/test and getting the license will make me a superstar builder, but I never said it would or that I expected it to. However, even if you are a superstar and have been in the industry for 20 years, if you don't have a license (in the state of Michigan) the only way to get it, is to take the class and pass the test.

I would also like to point out that no where in my original post are the words "fast" or "easy".

I hope this analogy does not make this more complicated or confusing for people, but if I was a used cars salesmen and said I wanted to become a certified mechanic, would you tell me "don't bother wasting your time because you will never be on a Nascar pit crew"? 

It kind of feels like people are telling me to go watch dancing with the stars.

For anyone struggling to get started for whatever reason, I hope this has inspired you to....

"Now, go do something impossible." -Jason Drees

I don't think I had analysis paralysis but I would say the one single thing that got me to the finish line on my first deal was my rock star agent @Nick Harris. I know if it had not been for him I would have backed out and so far (fingers crossed) I'm really glad I didn't. As soon as I'm ready to take down my next deal I know exactly where to go.

 Well, you may be right. I might end up looking back at this and agreeing with you. But if I had folded ever time life dealt me a bad hand I wouldn't be standing here today. I honestly believe that my success comes because of the difficulties have faced, not in spite of them. If I would have sold the day/week/month after the flood, I would have never joined Bigger Pockets. Or using the gambling metaphor, I never would have sat down to begin with.

I already know how to cut and run. Now I'm going to learn how to fix a problem. As someone that has student loans, I know education can be expensive. Where you choose to get that education and what you choose to learn can make that expensive education, a blessing or a curse. An art degree from Harvard, or a cyber security degree from the state university. One of those educations costs a lot more then the other. One of those educations can be used to make a lot more money then the other. I will have to work hard to make sure that this education doesn't turn into an art degree from Harvard, but I believe it can be done.

"Now, go do something impossible." -Jason Drees

 Hi Joe,

I'm enjoying this conversation, thank you for the responses. No offense, but I think you may need to take a closer look at my reply. Some of your comments seem to indicate you misunderstood my reply.

1. The best offer I had was $10,000. Making my loss $30,000. Unless you were just using $25,000 as an example number.

2. There were only 2 option that involved spending money. Paying someone to do it or paying for materials and doing it myself. I did the math with real numbers and only put percentages in the post to avoid using real numbers. I will not make that mistake when posting in the future.

3. I didn't say it in that way, but that is what I said. Lose $30,000 selling as-is based on the best offer. Or lose $55,000 after paying for someone else to do the reno and selling for $85,000. 40k+100k reno = 140k. 140k-85k = 55k loss

4 and 5. You are absolutely right! Which is why I'm doing it myself and I wouldn't be paying someone to do it even if I did have $100,000. (If I really did have $100,000 just sitting around that I could throw at this problem, I would just eat the loss, learn from it and move on.)

6. Wouldn't selling as-is be walking away from the table? By doing the reno (spending the money whether I do it myself or not), I'm putting more chips on the table and at risk of end up in someone else's pile, in order to try and win back some chips. By doing the reno work myself, I'm putting less chips on the table but still trying to use those chips to win back more. There are still cards to be dealt, would you fold before seeing the flop? (P.S. I've already seen the river. Sorry, bad flood joke.)

I can sit at the table all day long but I 'm not going to be dealt a hand if I don't have any chips on the table.

 Hi Nick,

Thanks for the tip! That's a good point and I've added it to my follow-up list.

 If you really want to know more about the situation I'm happy to give more details. The story with "the flood house" is a long and complicated one that involves family but the key point (I think) is that it was not purchased as an investment when I started. Purchase price was $28,000. I had the roof and electrical panel replaced bringing my all-in to $40,000.

Then, one week after the roof was done, it was hit by the Sanford/Edenville dam failure (2020). I started calling people to get quotes before the water had gone down. However, with the large number of people in the area needing the same work, only 2 people ever called me back. The first person told me that people didn't care how much it was. They were telling him "you show up and I'll write the check". The second person quoted $25,000 and they wouldn't start for 3 weeks. Now I'm left with, how do I turn this situation around? The answer was, to do it myself. So I did the "flood damage mitigation" work myself. For anyone that doesn't know, all that means, is ripping out the wet stuff and letting the structure dry. At this point in the story, the thought of real estate investing had not happened yet.

So, now I'm spending massive amounts of brain power on how to turn this negative into a positive. I came up with a 2 part plan. The first was a no-brainer, join a lawsuit. Payday on that, if any, is 10 years away. The second was again, do it myself. I then started learning everything I could about DIY home repair. After calling my local building office to talk about permits, I realized they were not going to make it easy for me unless a licensed contractor was involved. At the time, because I didn't even look into it, I thought getting licensed was not feasible, so I just put that issue on the back burner and kept learning.

Over the phone quotes based on pictures ranged from $40,000 to $60,000 for just labor, in the Spring of 2021. I couldn't get anyone to give me a quote on materials because of the "supply chain crisis". That's what they told me anyway. I did it myself based on Home Depot prices and came up with about $40,000. That covers subfloor, finish floor, drywall, insulation, kitchen cabinets, the whole bathroom, plumbing, water heater, interior paint, exterior sheathing, siding repair, and a back deck to replace the one that floated away. That price does not include replacing the furnace or ductwork. A good comparable on the same road sold in the summer of 2021 for $95,000. The pictures looked great and the listing mentioned stone countertops, tile floors and new mechanicals. The best offer I got was from someone who sent me a "yellow letter". After talking to them they were will to give me $10,000. 25% of my cost. If the reno cost is $100,000 making my all-in $140,000 and I sold for $95,000 minus fees and commission, I would get about 60% of my cost. Yes, instead of losing $30,000 I would be losing $55,000, which is why I'm not doing that. If, by doing the work myself, I can get the reno done for around $40,000-$50,000 making my all-in $80,000-$90,000, I might just turn this into a win. At this point real estate investing still had not entered my mind. I was simply thinking, how do I not lose money on this house?

Skipping ahead a lot because this post is already way too long, I started to see videos in the vain of "maximize your returns with these DIY projects". This led me to seeing a video with David Greene and then to Bigger Pockets. Bigger Pockets planted the seed and I watered it by diving into BP the way I did with DIY.

Skipping ahead again, I realized that having those rehab skills and a license could make me a great partner for someone. Now if you already have 1000 doors then no, I'm not going to be of great value to you. If, on the other hand, you are someone like me, just getting started in real estate, finding someone with the skills/resources that you lack and partnering with them, can drastically change the trajectory of your investing. I'm not looking for a money partner, I'm hoping to find a business partner.

With 11,000 post to your name, it would seem you have been in this game for awhile, so from your prospective I'm sure none of this makes sense. So, if you have a list of easy ways to get started in real estate with little to no knowledge, experience, skills, or connections, that will hopefully fit my personal situation, then I'm all ears. Tone doesn't always come through the way we think it will in text so I want to say I'm not being sarcastic. If you have a list I would really love to hear it.

Hi Jim!

Added to my book list.

Thanks!

Hi Joe, thanks for the reply.

 1. The more (real estate related) skills I have, the better. If you have little to no knowledge, or experience, or skills, or capital, it is hard to get started in real estate.

2. I already own "the flood house". It was bought before the flood. Selling as-is, I might get 25 cents on the dollar, paying market cost for the reno, I might get 50 cents on the dollar. Doing the work myself (and using tips and trick to get high quality materials at a discount) should let me brake even. Or at least limit the loss and let me sell for 90 cents on the dollar. Selling at a loss is never a good situation but doing what I can to limit that loss make sense for me because I have the time to do it. If I had more money than time it would be a different story.

3. Self-promotion that will hopefully attract potential partners. Doing stuff like that is a BP recommendation.

4. The ideal here is to turn the property into usable capital. The point of fixing it up, is to get as much capital (back) as possible.

Hope that helps to clarify things and thanks again for the reply.

Hello BP!

I just wanted to share my plan for creating an unfair advantage for myself. Another title for this post could be "From adversity to advantage"

1. Become a licensed contractor. In Michigan all I have to do is take a 3 week class, pass a test and pay some money. Class start tomorrow.

2. Use the "flood house" I have to practice my rehab skills and get real experience as a contractor. Doing the work myself is the only way to turn it into a win so this is a two for one.

3. Document everything and take lots of pictures and videos. Then post/talk about the progress to my social groups and networking circles. Showcase the kind of work I do well.

4. After it is finished, sell, re-fi or use as collateral for a personal note. Whichever option makes the most sense at the time.

If everything goes well I will have turned a terrible situation into an asset and created an unfair advantage for myself because I will be able to remodel or flip an investment property by myself. Also, making me a very attractive partner.

It's scary how fast things have moved for me and terrifying to think how fast things could move but as I heard somewhere on BP "Success always lays on the other side of fear".

"Now, go do something impossible." -Jason Drees

7 Steps to Hit an Impossible Target in 2022

These are the systems I plan to put in place this year. No particular order.

1. Create a step-by-step system to find and analyze on market deals. Then train my new deal finder (my wife) to do it.

2. Pick and start using a CRM for a networking and cash provider database.

3. Create a weekly routine to manage/govern my investing activities/tasks. Less time on stocks and more time on real estate.

4. Start a BP focused meetup in my area, as a system for networking. "Local" REIA meetings are a 1-2 hour drive.

5. Document the process of onboarding a property with my PM. Know what documents they need and have them ahead of time.

Thanks @Alicia Marks for the great QOTW. I'm sure there will be a lot of great info posted!