6 things I’ve learned from the school of hard knocks
Real EstateStarting a new business seems like a risky leap into the unknown, but I have since learned that risk is greatly reduced because the moment one commits definitively, Providence also moves (as Johann Wolfgang von Goethe said).
A big mistake I made in my first home repair shop was assuming we had to do everything ourselves. The house had a huge backyard that was the dog poo elephant graveyard. For reasons I’m not clear on, I spent almost 3 days, on and off, cleaning up that poop. Now, I know the value of teenage work, which is very cheap. These days, I only hire money-hungry teenagers to do “grunt” jobs for those kinds of jobs.
What I have learned so far:
1. Delegate and put things on autopilot whenever possible. Hire a handyman to make repair calls and pay bills automatically. He used to answer calls from tenants to do repairs on the house, but that became too demanding. Now, I have a handyman who takes care of that.
If you operate the business while keeping your 8:00 to 5:00 job, as I do, the only way to keep your sanity is to cut corners.
2. Don’t make rash decisions. If someone wants you to do something that affects your business, tell them you’ll need to talk to some higher authority. The higher authority could be your wife, your accountant, or your made-up advisor. When I was just starting out, and green as a pumpkin, I was discussing a lease purchase with a potential buyer. I ended by saying that I would give the buyer whatever he wanted.
You can make a much more rational decision if you don’t jump to it and say, “I’ll have to answer you on that.”
3. Play the cycles. Buy low, sell high. It is true that when I started, I did not have the experience to know what cycle the market is in. If you have target areas and are investing for the long term, eventually the house you want will become available at a good price.
I have a house that I want to sell a house that does not produce well. However, I will not sell when there are many sellers and few buyers. I’ll wait until the market goes up again and I’ll make enough money to pay the mortgage on one or two rental properties.
4. Turn tenure problems into your profits. I used to try to avoid renting to people with pets, but there are a lot of renters who have pets and will only rent a place that can accommodate pets. And they are willing to pay more to keep their pet. Now I only charge an extra $25 for each pet. It is a win-win situation.
5. Don’t just find houses that meet your criteria, look for the house that meets your criteria in places where people like to rent. There are nice areas in my city and there are not so nice areas in my city. However, neither of those two areas is where most people like to rent properties.
There is an “opportunity” zone between nice and not-so-nice areas where people are eager to rent and where home values are relatively lower, but moderately high rent can be charged. There are good and bad houses in these areas, but there are usually supermarkets and shops within walking distance, often close enough to walk.
6. Work hard at first and then slide the rest of the way. The first fix-up house my wife and I bought was much more difficult to repair than we imagined. For about eight weeks we spent every evening and every weekend working on that house. Now I realize that we actually did too repair work. We were exhausted, but also happy that someone gave us monthly checks to live in our house.
Nine years later, our business is in “orbit” mode instead of “lift-off” mode, and it is now much easier to operate, because we had gone through the difficult learning process in the beginning.
If I had known at the beginning what I know now, things would have been much better. But, experience and knowledge are not free, you usually have to pay for it. At least you can move forward much faster by learning from my experiences.