“Once you make a decision, the universe conspires to make it happen”
-Ralph Waldo Emerson
Working for a large corporation, I liked my job and I thought the work I was doing was a good representation of myself. I had a staff and we had staff meetings. I had a boss and he had staff meetings. I had colleagues who I liked and some whom I didn’t like. I was very well respected in my field and I had a very good reputation. I believed I was paid well for my services and I worked very hard to be the best at what I did. I worked for years for the same company in the same industry and I still had a passion for what I did. I was skilled and I taught people those skills. I traveled a lot and enjoyed the places I went to and the people I met. Then, one day, my boss called me up and told me I was going to be laid off.
It’s a familiar story and it’s happened to millions of people, but never to me. It was horrifying. One minute my life was humming along in a particular direction, the next, everything changed. That’s life. I spent the next month looking for a job, crying, yelling, and generally flopping around wondering what was going to happen to me. It was kind of messy and humbling and all the other things that go along with the feeling that you’ve been thrown away for no good reason. And that was it, there really was no good reason. I was doing a good job, people liked me, and my work product was good. The company was just going in a different direction. After the requisite stages of denial anger, etc… I made it to acceptance.
One night, while I was out yelling at the Mets for something they were or weren’t doing, it occurred to me…Why not start my own business? I had friends who had done it. I was smart and accomplished and I had some valuable skill sets I could bring to the table. Of course! This is what I’d do.
I proceeded to research everything I could on starting up a business in New York. It looked expensive but I kept at it. Years ago, someone dear to me had an idea that seemed to make sense for the market I was in. They suggested the idea that I should start a Laser Tag business. There weren’t any around and the market was ripe for recreation-based businesses. As a child of the eighties, I remembered how cool Laser Tag looked when I was a kid. I knew it must be way different and so much cooler now. Back in around 1985, I got a Laser Tag set. These black space-age guns with red lasers on the sides were fascinating to my sister and I when we were kids. That was going to be a great Christmas. The best! Though, I don’t recall ever really playing the game after the first day. Anyway, Laser tag is awesome, right? I was set.
I had the business idea and everything I read, said I should write a business plan and start readying my pitch to go out and get the $130k in start-up funds for the equipment and the $100k in commercial real estate space I was definitely going to need… I continued researching and talking to Laser Tag equipment companies and property owners, still having no idea how I was going to fund (or run) my business. Then…that jerk shot all those people in an Orlando nightclub. Yep, you guessed it, my whole perspective changed on the idea of promoting my business. I wasn’t going to be able to stomach it. For me, the main theme of the business lost its appeal. Poof, I was out of business before I began. Or was I?
I thought about the conversations I had with many of the real estate investors with whom I’d discussed the commercial property with. While I had no real interest in that particular area of real estate, I did have a single-family residence (SFR) that I’d been renting for a couple of years. I wondered if that income stream was one I could expand on. My SFR was several years into a 15-year loan and most of my rental income was going toward equity and cash flow. Seemed like an opportunity, albeit a slower moving one than I originally had in mind.
I began searching real estate sites — just for fun. I didn’t have much cash, so I figured there wasn’t much I was going to be able to do right away. After a while, looking through the local multiple listing service (MLS) I started to get a feel for which properties were priced attractively and which ones were overpriced. Having had some success with my SFR, I was looking at cheaper versions of the 4 Br, 2 Ba Cape in similar areas. I knew a few people who were real estate investors but for whatever reason, it seemed like they always complained about it. They said things like, “It’s a hard road to travel,” and “Get ready for dirtbag tenants to clog your pipes and ruin your houses.” Some of them looked like they’d lived hard lives and seemed awfully jaded. You know, like maybe at one time they were happy and then got the idea to be landlords and that ruined their lives. Anyway, I’d already been through some disaster property management stuff, so I pressed on. The next day, I found a little house I liked and walked into the Real Estate Office to talk about it with the listing agent. Then, my entire perspective changed…Again.
Turned out, the agent had been conducting real estate business in the local market for thirty years. This man showed me all sorts of spreadsheets and calculations having to do with rental property. I’d been learning, but there was a lot here to absorb. After he brought me through a crash course on appreciation, depreciation, cash flow, after repair value, and buy-and-hold strategies, he told me the house I was interested in was under contract already. Really? Then he said I would need to save up at least $20k more than I had, just to get started. Really? I was a bit overwhelmed but as soon as I saw the numbers side of the business, I was hooked. Remember that day job I mentioned earlier? Yep…one of my specialties was data. I also happen to be an Excel junky and I’m always up for sifting through analysis.
I spent the next day building a quick but effective real estate rental property calculator. I found some pictures with correct numbers and reverse-engineered my own. (If you’re interested, you can contact me directly and I’ll be happy to share it with you. I still use it today to calculate analyze every deal that comes across my desk.) After I had my calculator set up and I knew what I was looking for, I started analyzing deals. Lots of them. Like hundreds. For weeks.
After my analysis left me more comfortable with the deals I was considering, duplexes and triplexes seemed to have the best Cash on Cash ratios, so I stuck with them. “Analysis Paralysis”, where we get stuck running the numbers and never get out from in front of the desk is a real thing. I knew it and I could not let myself be stuck. I went back to the agent and started giving him lists of property I wanted to see. I still didn’t know how I was going to pay for said properties, but I knew there were ways…seemingly mysterious, secret ways, that only rich people knew about…but I was determined. It didn’t hold me up. I just wanted to get a feel for the market…and I did. Know what it felt like? Not good. Presently, I would not have chosen to live in any of the houses I saw during that first group of showings. Mostly, the properties reminded me of where I lived in my college fraternity days at SUNY Cortland, in a house with a four-inch deep perpetual puddle on the kitchen floor. I wasn’t impressed but I knew I was at the juncture of an important strategic decision. Was I able to stomach the market I thought I wanted to get into? Maybe.
After a while, I started to see the properties through a new lens. Yep, you guessed it, another perspective change was happening. Instead of thinking the stench of the places was repulsive, I started to think that they smelled like opportunity. Holes in walls weren’t bad things. My ability to fix them made them good. Wrecked carpets were a chance to replace and give some first-time renter a comfortable living room. I had been up and down my first primary residence and redone everything, so at this point, I was comfortable with most minor updates. Plus, I was starting to establish a network of colleagues, contractors, fellow investors, and groups of folks who were willing to help. I started attending a local REI meetup and began to source different financing options. This was really going to happen. Before I knew it, the answer to my first strategic question (could I stomach this market?) was, yes! Yes, not only could I stomach the market I was getting into, but I was going to leverage and harness its disadvantages in order to provide great housing to great people. That’s when I knew I was going to get into action!
Analyzing deals on paper by night and looking at tons of houses by day was my job for a while. I began to research Home Equity Lines of Credit (HELOC). This was my solution to the start-up problem. I wasn’t going to get an FHA loan or owner-occupy, and I didn’t have time (or the promise of a job) to sit around and save. Through good fortune had shone on me and I got another job, I kept at it. I didn’t give up. My goal was to become financially independent and I finally took the next step and made the decision to get there.
From there on out, it’s been all action! I was able to get the HELOC and it wasn’t long after that, I started making real offers, and one was accepted. I negotiated a good deal and once again, perspective struck. How was I going to manage these tenants I was about to be responsible for? Until next time…
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