One of the last things you want to do is to get scammed as a real estate investor. It will happen if you are not prepared and do not have systems and processes in place to keep you from getting scammed.
Story Time
When we decided to turn my in-laws house into a rental, we started to look for contractors to do the rehab on it because I was too busy with work to do it myself (and I wasn’t that great at what was needed anyway).
We asked around on Facebook, but didn’t get a whole lot of suggestions. A friend of a relative could do some of it, but we wanted to get someone to do all of the work.
My wife heard an advertisement on a local radio station for a home improvement contractor, so we called him to get a bid. He gave us a fairly cheap bid and said he could start working immediately. We decided to use him. (Mistaken Thinking #1: Since he was advertising on the radio, he must have been a legitimate contractor.) He told us he was licensed and insured, so we believed him (See mistaken Thinking #1). He then asked for a 30% down payment to be able to purchase materials, so we paid him the down payment. (Mistaken Thinking #2: It’s OK to pay a down payment before work starts.) After six weeks of no work being done except removing the one piece of baseboard and shoe molding in the picture above, in addition to him coming to us for additional material draws (that we paid), we finally realized that he wasn’t going to do the work.
We suspected something was up after four weeks, but didn’t want to believe it. Thankfully our state has a contractor Fraud law and between our complaints and complaints of other victims from surrounding area, there was enough to arrest him. He made a plea deal and has paid back almost half of the money he owes us.
Tips for dealing with contractors:
ALWAYS VERIFY their state-issued contractor’s license! Your state’s Contractor Licensing Board or a similar entity should have a way for you to verify that the contractor’s license is still active via a website.
ALWAYS VERIFY their Insurance Certificate! Call the insurance company and/or agent to verify. These days, anyone can create counterfeit insurance certificates online. Their insurance protects you if one of their employees gets hurt on the job.
Check references. You usually will be referred to contractors by other friends or investors who have used them before and can vouch for their work.
Sign a contract that details the following: (Disclaimer-I am not a lawyer & I don’t play one on the internet…always check with your own attorney!)
Scope of work to be performed
When the work will start
How long the work is expected to take
What milestones need to be achieved, satisfactorily, to qualify for a draw
Check on the contractor’s work frequently to ensure timely completion
We eventually found a really good contractor who came in and rehabbed everything in the house for us in about a month for a really good price. And we have been renting out the property ever since.
Let me know what you think in the comments. Ask questions, tell your story.
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A couple of weeks ago, I was looking into tools to help automate workflows, preferably online tools. My initial premise was that I wanted to be able to track steps, tasks, and procedures in our real estate investing.
Some of the tasks can be accomplished by the popular IFTTT service. But what I have figured out is that the majority of what you are able to do with IFTTT is geared towards personal convenience and not business processes.
Initially, I was looking at Microsoft Flow, an online workflow automation tool, but while investigating some the connectors for it, I found some built-in integration capabilities already exist in services like Trello and Slack. So, deeper down the rabbit hole I went.
I was able to set up a Slack workspace and that in itself is a pretty cool tool for facilitating and capturing communications, documents, and other business-related information,in addition to being able to tie in to my G-suite Docs.
I mentioned Trello above. I had looked at them in the past, but had not really found it useful for what I was wanting to do, at initial glance. I also remembered that the manufacturing business we invested in uses it to track orders and everything related to the orders. I contacted the investment partner who had set it up and asked him to explain how they were using it.
It is set up like a Kanban board and as each task or set of tasks is accomplished, it is moved to the next stage in the order process. What I don’t like is that it is not automated. Each “card” (where the order information and communications are captured) is moved manually from one column to the next when someone accomplishes a milestone in the process.
A similar service called Pipefy appears to provide the same Kanban-style setup, but it looks like you can set triggers for the cards to automatically advance from one column to the other. Since I just found it as I am writing this post, I don’t have time to investigate yet, but it looks pretty powerful. I think it has the potential to claim a spot in my workflow automation toolbox.
Anyway, I can visualize building out steps the process across the columns and have each card contain the tasks needing to be completed before it moves to the next column.
The more I thought about this, I realized that by combining Slack with something like Trello for the manufacturing business, we could achieve a few long-term goals. Trello actions could be reported into a Slack channel, giving us, (investment partners), a simulacrum of a real time dashboard of what is going on with orders in the manufacturing business. A similar setup could be made for product quotes. Slack channels could be used for communication between employees, management, and investors, respectively. Other channels could be used for Knowledge Management (KM)…a living archive of answers, best practices,documents, etc. I think I will call that channel #stunt_brain!
There are other options for automation and integrating various online applications like Podio, Zapier, and Zoho CRM. I haven’t played with them much, so I can’t really say a whole lot about them other than they exist.
Hopefully this has given you some insight into what I thought to be cool tools to bring efficiency to your workflow.
Let me know what you think in the comments. Ask questions, tell your story.
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This week, I am going to take a swipe at answering the questions from Tim Ferriss’ book, Tribe of Mentors. These are questions distilled and honed from his interviewing many peak performers on his podcast. AND, just to be clear, Tim Ferriss did not ask me these questions. I thought they were interesting in and of themselves and decided to dedicate a post to them.
What is the book (or books) you’ve given most as a gift, and why? Or what are one to three books that have greatly influenced your life?
I haven’t really gifted many books. But I’m trying to change that. As far as books that have greatly influenced me, I have three. Rich Dad,Poor Dad by Robert Kiyosaki is a really good book for helping you to realize that what you weren’t taught in school about money can hurt you, or at the minimum, make you struggle to achieve your dreams and goals. Depending on your personality, it may rub you the wrong way, but it speaks volumes of truth about making money. The E-Myth Revisited by Michael Gerber provides excellent advice on how to systematize a business so it can run smoothly and grow. And, finally, The 4 Hour Workweek by Tim Ferriss. I really like because it provides you with principles to lead your life by. Mainly, set up a low-input business to pay for your needs, don’t kill yourself working as a trade-off for retiring at a later age, when there is a good chance that you will be too old or sickly to enjoy it. It fosters the idea of continuous “mini-retirements” throughout your life. And most importantly, with all the free time you create, do something important, do something you care about, do something to impact the world in a good way.
What purchase of $100 or less has most positively impacted your life in the last six months (or in recent memory)? My readers love specifics like brand and model, where you found it, etc.
A couple of things I’ve bought have made a positive impact…one is a set of wireless earbuds. I generally have issues with wired earbuds catching on stuff as I walk around or do work, so these are pretty neat in that they do not hang down very far past my neck. The other is a battery pack to charge my phone throughout the day. Depending on what I am doing, sometimes my phone will run down quicker than others. Having the battery pack available to boost it up is nice. Plus,it has enough power to charge the phone twice.
How has a failure, or apparent failure, set you up for later success? Do you have a “favorite failure” of yours?
I don’t really have a favorite failure,because there are too many to choose from! I have many failures, that if they would not have happened,I would not be where I am today. So I guess all of my failures are my favorites? Or better yet,the only real failure is the ones you do not learn from.
If you could have a gigantic billboard anywhere with anything on it — metaphorically speaking, getting a message out to millions or billions — what would it say and why? It could be a few words or a paragraph. (If helpful, it can be someone else’s quote: Are there any quotes you think of often or live your life by?)
If you don’t like something in your life, then do something to change it! If you can’t change it, then don’t waste time worrying about it.
What is one of the best or most worthwhile investments you’ve ever made? (Could be an investment of money, time, energy, etc.)
So far, I would have to say that the most worthwhile investment I have made is buying a door manufacturing company with some friends. To date, it has been a trying experience and has strained some of the friendships,but i have learned more about operating a business in the past 14 months than I have in most of my career working in the Oil and Gas industry.
What is an unusual habit or an absurd thing that you love?
I tend to approach ideas/tasks/goals with lots of technical detail. For example, as a group, my partners and I decided to build a tool for tracking product shipments and invoicing on a per-order basis to allow forecasting estimated revenue. I visualized a quasi-CRM system with lots of inputs that would return lots of information, but what we really needed was just a spreadsheet similar to a Gantt chart to track the information. We will eventually implement a more detailed CRM system, but I over-engineered it in my mind.
In the last five years, what new belief, behavior, or habit has most improved your life?
Two things…realizing that a lot of the decisions I made in my past were most likely influenced by my being infected by the toxoplasmosis gondii parasite, thus helping me to further screen my decisions for risk, and understanding that my outlook / philosophy on life is actually based on stoicism. I don’t know how I arrived at that outlook, but it just made sense to me. Learning more about it has definitely improved how I view the world.
What advice would you give to a smart, driven college student about to enter the “real world”? What advice should they ignore?
Don’t fall into the mindset trap of working most of your life, toiling away to reach retirement. Work for yourself. Resolve to mostly buy “assets”, things that will provide you with cash flow.
What are bad recommendations you hear in your profession or area of expertise?
From the oil and gas industry: “Drill the well faster so we can finish faster!” In most cases, you can drill faster than you are able to transport the drilled cuttings out of the hole. It is better to drill at a sustainable rate and have no trouble pulling out of the hole or running casing, thus decreasing overall time spent on the section.
In the last five years, what have you become better at saying no to (distractions, invitations, etc.)? What new realizations and/or approaches helped? Any other tips?
I manage automated equipment and services operations and have done so for the last six years or so. Initially, whenever there were problems, I would access things remotely and resolve the issues, many times at all hours of the day or night. Then the next issue came along,and I would have to solve it also. I realized that if I stopped swooping in to save the day, the employees would be more inclined to solve the issue themselves. This has helped me to keep from feeling overwhelmed. I sleep a lot better now.
When you feel overwhelmed or unfocused, or have lost your focus temporarily, what do you do? (If helpful: What questions do you ask yourself?)
First, I have learned to say “no” to things. Second, I found that if I use Noisli, I am more relaxed and can focus on the task at hand. Plus it helps to block out unwanted noises and distractions.
I hope you like my “Tribe of Mentors” Q&A responses!
Let me know what you think in the comments. Ask questions, tell your story.
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The bottom, so far, is still higher than where we were in November.
There was a significant drop-off last week through yesterday in the US stock market. The possible good news is that after a few straight days of dropping, today it looks to be climbing again. And the markets seem to have only dropped to early December levels. It’s the market, that’s what it does.
The purpose of this post is to document an observation. My inbox is starting to fill up with email from various advisory services, both automated web-based and actual human-led “capital management” firms to plug their services in these “times of uncertainty”.
I get it. They are taking advantage of a marketing opportunity when a certain segment of the population in the US will get worried that their retirement or investment dollars could be at risk. It just seems a little icky.
Like the game Monopoly, you can grow your money with Real Estate.
This week, we are going to talk about how we started investing in real estate. It wasn’t an overnight decision, or result, for that matter.
My first foray into real estate investing (REI) was to partner with one my uncles and my cousin (his son) to develop an RV park in the Port Fourchon area. It seemed like a great idea…lots of potential for revenue and extended development. And I knew nothing about evaluating the deal to see if it was going to be a money maker or not. I put up the money to initiate the lease of the land ($20,000) and we proceeded to get a loan from a local bank to develop the park. We had to get permits, evaluations, inspections, etc. The total amount from the bank came to $150,000. Just as the park was about to open, the BP Macondo/Deepwater Horizon oil spill happened and shut down the oil & gas industry in the Gulf of Mexico. The space was leased to a catering company as a staging area for feeding spill cleanup workers and to facilitate a training space.
We eventually opened up the park and began operating. My cousin and his wife managed the operations.
I began traveling around the world a good bit for work and realized that I could not be deeply involved in the deal in addition to my wife not being happy with me involving us in it in the first place. My cousin offered to buy us out for $30,000, paid over time. This worked for us as it got our money back, along with about a 17% total ROI.
While the deal made us money, the stress and aggravation of not being in control left us with a bad taste in our mouths.
Fast forward a couple of years and we decided to remodel my in-laws’ home to set up as a rental. My father-in-law passed away the preceding year, leaving the home to my wife. We got it remodeled after a few false starts and bumps in the road. And started renting it out.
I mostly stayed hands-off of the operations and mainly just helped handle repairs & stuff, since it was my wife’s house (via inheritance).
Towards the end of 2015, I started to get aggravated with my job, (for the nth time), and started a more serious search for something else that I could rely on for income. In January of 2016, I found Bigger Pockets, an online forum/educational platform for real estate investors. It was then that I realized that REI was something that I could do. In fact, in a way, we were already doing it. The thing that appealed to me about it was that successful investors rely on systems and processes to make their businesses run well. WOW! I am a “Systems & Processes” type of guy! It was an epiphany, of sorts.
I started listening to podcasts, devouring forum posts related to my topics of interest, attending real estate investor association meetings, and reading books to learn about how to reach my financial goals through REI. I put together a 30,000 foot overview of what I would like to do and how I could do it. When I discussed my idea with my wife, she was initially skeptical because I repeatedly come up with plans to make money and either never initiate them or follow through on them.
I continued to learn about buying and managing rental properties, along with operating a business. I became more involved in the operation of the existing rental, more or less making it my responsibility.
So, that is how we got started in REI.
Let me know what you think in the comments. Ask questions, tell your story.
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