It is so good to have your rehab project in the hands of a skilled and knowledgeable contractor! I loathe having to replace a contractor for low quality or for failure to perform, but sometimes you just have no choice. No matter how good you do your homework (due diligence) you can still get burned and you need to be prepared to respond quickly when that happens to you and salvage your deal.
That's the case for my project on Grand Avenue in Mount Clemens. After taking sufficient time to walk through the property with Allan and specifying exactly what needed to be done to get the property to the level needed to satisfy the city inspectors, we discussed the entire scope of work, timing, price, and signed a contract and got to work. Things are already starting to take shape and I expect all the major items (Heating Ventilation and Cooling (HVAC), Electrical, Plumbing, and attic insulation) to be completed by the end of the week and then a laundry list of other items (let's call it final trim work) will be completed by the end of next week.
I expect this home will be quite nice when Allan gets through with it. He's done many properties for himself and he's a very conscientious person. I have no doubt that my next tenant will be very pleased with the results and very comfortable for some time to come.
Wednesday, October 29, 2008
Monday, October 27, 2008
Lessons Learned - Top Three Warning Signs Your Contractor Isn't Performing
I have experienced a delay in my rehab project for my property in Mt. Clemens. I have been stacking up tenant applicants and missing out on opportunities to generate cash flow because of the delay. But, this is what happens when you mess up like I did. Don't worry though, I have dismissed my contractor and have hired someone I trust to get things done properly and quickly. I'll be back on track in a couple weeks.
But what did I do wrong? I paid my contractor too much money before completing an appropriate amount of work. That’s right! I did everything else right, but paying too much money before enough work is completed is the “kiss of death” to any rehab project. Even though I used this contractor in the past and I knew what to expect, and even though we had a very detailed scope of work written out, and even though I had an iron-clad contract signed, I still guaranteed failure by paying too much, too early.
What are the top three warning signs your contractor is going to be a problem? Here is what I have observed over time:
The first sign of trouble that your contractor is going to be a problem is that he or she starts letting your phone calls go to voice mail. Now, don’t be paranoid here. Just be in tuned for a significant change in the pattern of communication. If you normally get right through to your contractor over the phone and discuss the plans for the day or for the following day and all of a sudden you start getting voice mail and it takes a couple of attempts before you receive a call back, that’s something to be concerned about. The first time it happens may be nothing - we all get busy. But if you start to get that “feeling” that you’re being avoided, something may be wrong.
The next thing you want to watch out for is a sudden change in scheduled hours. If your contractor is usually on site at 8-am and stays hard at work till around 4-pm on a daily basis, but suddenly seems not to be on site till around 10- or 11-am, you should ask questions. Also, you should be inspecting the work on a daily basis to check their progress. Until you develop a strong relationship with a contractor and really can trust them to do what they say they’re going to do, you must inspect their work regularly. This will help you detect warning signs early.
Finally, when you start noticing delays in your project due to “unexpected” problems, you need to be concerned with the capability of your contractor. Sure, you may encounter the occasional “surprise” during the rehab, but I have learned that there is nothing that cannot be corrected pretty quickly. Any more than a day or two delay for anything except for maybe the most serious things like structural problems not identified during the initial inspection should have you seriously concerned with your contractor’s ability to complete the job.
So there you have it. My “lessons learned” as I continue down the path of real estate investing in south-east Michigan. Hopefully you will not make these mistakes if you are starting out. Learn from those of us who have learned the hard way.
I’m enjoying the process. I’m looking forward to continued successes. I’m excited about the ongoing opportunities to invest here in Michigan. It’s a tremendous opportunity outside of the typical IRA, 401(k), KEOGH, or other investment vehicles. After all, I have lost over 46% of the value in my 401(k) I have at work. I will not rely on that alone for my future retirement years.
If you have pulled your money out of the stock market or mutual funds and are interested in putting it somewhere more secure over the next 2-5 years, send me a note. I would like to talk with you about how you can partner up with me and make a positive and almost guaranteed return on your investment!
But what did I do wrong? I paid my contractor too much money before completing an appropriate amount of work. That’s right! I did everything else right, but paying too much money before enough work is completed is the “kiss of death” to any rehab project. Even though I used this contractor in the past and I knew what to expect, and even though we had a very detailed scope of work written out, and even though I had an iron-clad contract signed, I still guaranteed failure by paying too much, too early.
What are the top three warning signs your contractor is going to be a problem? Here is what I have observed over time:
The first sign of trouble that your contractor is going to be a problem is that he or she starts letting your phone calls go to voice mail. Now, don’t be paranoid here. Just be in tuned for a significant change in the pattern of communication. If you normally get right through to your contractor over the phone and discuss the plans for the day or for the following day and all of a sudden you start getting voice mail and it takes a couple of attempts before you receive a call back, that’s something to be concerned about. The first time it happens may be nothing - we all get busy. But if you start to get that “feeling” that you’re being avoided, something may be wrong.
The next thing you want to watch out for is a sudden change in scheduled hours. If your contractor is usually on site at 8-am and stays hard at work till around 4-pm on a daily basis, but suddenly seems not to be on site till around 10- or 11-am, you should ask questions. Also, you should be inspecting the work on a daily basis to check their progress. Until you develop a strong relationship with a contractor and really can trust them to do what they say they’re going to do, you must inspect their work regularly. This will help you detect warning signs early.
Finally, when you start noticing delays in your project due to “unexpected” problems, you need to be concerned with the capability of your contractor. Sure, you may encounter the occasional “surprise” during the rehab, but I have learned that there is nothing that cannot be corrected pretty quickly. Any more than a day or two delay for anything except for maybe the most serious things like structural problems not identified during the initial inspection should have you seriously concerned with your contractor’s ability to complete the job.
So there you have it. My “lessons learned” as I continue down the path of real estate investing in south-east Michigan. Hopefully you will not make these mistakes if you are starting out. Learn from those of us who have learned the hard way.
I’m enjoying the process. I’m looking forward to continued successes. I’m excited about the ongoing opportunities to invest here in Michigan. It’s a tremendous opportunity outside of the typical IRA, 401(k), KEOGH, or other investment vehicles. After all, I have lost over 46% of the value in my 401(k) I have at work. I will not rely on that alone for my future retirement years.
If you have pulled your money out of the stock market or mutual funds and are interested in putting it somewhere more secure over the next 2-5 years, send me a note. I would like to talk with you about how you can partner up with me and make a positive and almost guaranteed return on your investment!
Tuesday, October 21, 2008
The Sky Is NOT Falling!
With all the hoopla about the economy, environment, politics and global unrest in general, it might be easy to get depressed. In fact, recent talks about GM considering a merger with Chrysler resulting in a number of plant closings and over 30,000 jobs lost – one might conclude that Armageddon and the end of the world must be just around the corner.
In fact, many people are pulling their money out of stocks, money markets, and even banks and putting their cash under their mattresses. Not a good idea! In fact, if you’re in the stock market and the value of your account seems to be down about 40% you should probably be doing two things. First, leave your money where it is!! It will come back. The number of shares you purchased is still the same and when the market rebounds, your balance will increase. Second, now is the time to be buying more shares and adding to your portfolio. Look at Warren Buffett, for example.
My friend Dennis, however, has been completely out of the stock market for the past three years. He cannot stomach the roller-coaster ride of the market. Can’t say that I blame him! He’s doing something else. And that’s OK! We all have our own approach to things in life. Be a leader, not a follower. Make your own rules rather than follow everyone else’s.
What is Dennis doing? He’s doing what many of us have chosen to do – invest in real estate! That’s right. Many of us have decided to put our money into something we can see and touch. Something we can analyze in terms we can understand. Everyone needs to live somewhere. Many people like the benefits of home ownership without the long-term commitment to a mortgage. So, these people are perfect candidates to rent a house.
I have been buying houses, fixing them up, and putting renters in them while I hold on and let the housing market recover. My tenants get the benefits of home ownership while I get the benefits of increasing home value (in terms of equity as the mortgage is paid down), tax deductions from my income (interest on the mortgage is tax deductible as well as all the maintenance costs, etc.), monthly income from rents that exceed all my expenses, … you get the idea. Ten years or more down the road, I will be sitting on tons of equity in the properties.
The problem all of us investors run into is the issue of money. There just is not enough of our own personal money to go around and buy up all the properties that are out there. Additionally, there is a limit to how many mortgages (currently it’s 4) any one person can have in their own name. So, the next level investors turn to is private money sources. There are some people out there who choose to invest their money in real estate rather than stocks but they have neither the time or desire to find, buy, fix, and manage properties for themselves. So what do they do? ……
These investors with money and no time or no desire to do the nitty-gritty, use people like me to help them with their investment goals. They basically serve as the bank and fund the investments with their own money while holding a first lien position. This is about as secure an investment there is!
If this sounds like something you would like to be involved in, contact me! I would love to work with you. The opportunities right now are almost unlimited!
The point is this. The sky is not falling. For some, times may seem unbearable difficult. But that is only because this change in circumstances has caught them unprepared! Don’t let this happen to you. Keep learning new skills, keep improving on your communication skills, keep building your network of friends and professional contacts. You never know when you will find yourself making a change. Be prepared. That is the lesson to be learned from today’s newspaper headlines.
Do not be afraid, just be prepared.
In fact, many people are pulling their money out of stocks, money markets, and even banks and putting their cash under their mattresses. Not a good idea! In fact, if you’re in the stock market and the value of your account seems to be down about 40% you should probably be doing two things. First, leave your money where it is!! It will come back. The number of shares you purchased is still the same and when the market rebounds, your balance will increase. Second, now is the time to be buying more shares and adding to your portfolio. Look at Warren Buffett, for example.
My friend Dennis, however, has been completely out of the stock market for the past three years. He cannot stomach the roller-coaster ride of the market. Can’t say that I blame him! He’s doing something else. And that’s OK! We all have our own approach to things in life. Be a leader, not a follower. Make your own rules rather than follow everyone else’s.
What is Dennis doing? He’s doing what many of us have chosen to do – invest in real estate! That’s right. Many of us have decided to put our money into something we can see and touch. Something we can analyze in terms we can understand. Everyone needs to live somewhere. Many people like the benefits of home ownership without the long-term commitment to a mortgage. So, these people are perfect candidates to rent a house.
I have been buying houses, fixing them up, and putting renters in them while I hold on and let the housing market recover. My tenants get the benefits of home ownership while I get the benefits of increasing home value (in terms of equity as the mortgage is paid down), tax deductions from my income (interest on the mortgage is tax deductible as well as all the maintenance costs, etc.), monthly income from rents that exceed all my expenses, … you get the idea. Ten years or more down the road, I will be sitting on tons of equity in the properties.
The problem all of us investors run into is the issue of money. There just is not enough of our own personal money to go around and buy up all the properties that are out there. Additionally, there is a limit to how many mortgages (currently it’s 4) any one person can have in their own name. So, the next level investors turn to is private money sources. There are some people out there who choose to invest their money in real estate rather than stocks but they have neither the time or desire to find, buy, fix, and manage properties for themselves. So what do they do? ……
These investors with money and no time or no desire to do the nitty-gritty, use people like me to help them with their investment goals. They basically serve as the bank and fund the investments with their own money while holding a first lien position. This is about as secure an investment there is!
If this sounds like something you would like to be involved in, contact me! I would love to work with you. The opportunities right now are almost unlimited!
The point is this. The sky is not falling. For some, times may seem unbearable difficult. But that is only because this change in circumstances has caught them unprepared! Don’t let this happen to you. Keep learning new skills, keep improving on your communication skills, keep building your network of friends and professional contacts. You never know when you will find yourself making a change. Be prepared. That is the lesson to be learned from today’s newspaper headlines.
Do not be afraid, just be prepared.
Subscribe to:
Posts (Atom)
.jpg)