Brutal Day!

The rental property business can be a tough business. As you probably know, the vast majority of new landlords fail in a short period of time due to cash flow issues. Additionally, dealing with tenants can be very difficult and some people literally become sick due to the stress.

I consider myself to be a strong person. However, I had a very long day Thursday that pushed me to the very limit of my patience and endurance. The problem Thursday wan't dealing with a violent drug addict or getting one of my rentals back completely trashed. No, it was much worse than that! I had to go car shopping with my wife to replace her car that was totaled in a recent accident!

There are a bunch of car dealers in Columbus and we started our search at about noon. My wife and I like to drive nice cars and we also like to pay cash for all non-appreciating "assets". Therefore, our goal was to find a used Mercedes or Jaguar (S-type) in excellent condition for about $15,000. Needless to say, that can be a significant challenge, especially in one day. The evening before our car hunting trip, we did some research on the internet and found some interesting possibilities. Our first stop was to an Acura dealer that had a good selection of used Jaguars. They had a couple of very nice S-type Jaguars, but they were about $5K more than we wanted to spend. One was very well equipped and looked new inside, but had a significant scratch on the bumper and did not have heated seats, which my wife wanted.

Next, we went to look at a 2002 Mercedes C240 that was fully loaded. It had low miles and was only $13,900. The moment we saw it, we knew this was our car. It was absolutely spotless and had just about every possible amenity. We decided to take it for a test drive before we bought it. Unfortunately, something was BADLY wrong with the engine. I have owned several Mercedes and I have never heard a Mercedes make a noise like that! The dealer insisted that the noise was only the 2 stage fan, but the car also had a vibration bad enough that you could feel it. We don't need a nice looking car with significant mechanical problems, so we said "no thanks" and moved on.

Next, we went to another large import lot, only to discover that they didn't have even a single car we were interested in.

From there, we went to a large Mercedes dealership. They had a 2001, one-owner, E-class with all the bells and whistles that was in immaculate shape. We drove it and it appeared to be perfect. The only catch - it had 123,000 miles. Mercedes has a reputation of producing excellent vehicles that last a LONG time, but I was still concerned about the miles. The dealer was asking $17,500 for the car, which was about the blue book value. I asked them if they would take $15,000 out-the-door (tax included) for the car, which would bring the pre-tax price down to about $13,500. They played the good cop, bad cop game with the manager coming in to explain to us that they had a lot in the car and their bottom line was $15,500 "out the door". While I might have bought it at $15,000, that was my absolute maximum and we decided to move on.

Next, we went to a CarMax dealership. They had a couple of nice Mercedes, but they were priced about $10,000 above our target price.

By this time, it was after 5pm and we decided to stop for dinner. Almost as soon as we sat down, the salesman from the Acura dealership called to say that they would be willing to come down on the price of the S-type Jaguar AND install seat heaters AND repaint the entire bumper to take care of the scratch. I asked the salesman if they would take $18,000 out the door (which would make the purchase price about $16,500). He said he would call me back. A couple of minutes later he called back and agreed to the price. I told him we would consider his offer.

Not 5 minutes later, another salesman called to say that they would accept $15,000 for the beautiful Mercedes that had $123,000 miles. I told him we would consider it.

A couple of minutes later, the Jaguar salesman called back to say that they would paint the bumper the next day and asked what he could do to put this deal together. I asked him if he could do better on the price and he said that he could probably knock another couple of hundred dollars off if we came back to the dealership. With that, I agreed and after dinner, we drove back to finally buy a car.

When we arrived at the dealership, we asked to test drive the car. It drove well, except for a slight vibration in the steering wheel. I believe that the vibration is a tire problem. The salesman promised to fix this issue. When we arrived back at the dealership, we carefully inspected the car and discovered that it didn't have a CD changer as was identified on the window sticker. By this time, the used car manager was at the car and I asked him if they were going to install the CD Changer. He began to quibble and I told him that this was not negotiable. The sticker said there was a CD Changer and we were not buying it without one. He reluctantly agreed. With all the issues settled, we went inside to sign the paperwork.

When the salesman returned with the paperwork, the out the door price was now about $18,200. I reminded him that we had agreed on $18,000 less a "couple hundred dollars if we came back to the dealership". By my math, that is $17,800. The salesman went back to talk to his manager and I was not happy that they had tried to add about $400 to the agree upon price. When the salesman came back, he had a new price on the form, $18,000. At this point, I was getting quite angry. Being diplomatic is not my strong point and I told him that we agreed upon a price and if he couldn't abide by our agreement, we were leaving. He said "just a minute, I've got to tell my manager that you're leaving". I was furious that they were still playing good cop/bad cop with me and my Christian values weren't quite enough to keep me from saying a few choice words to the salesman.

As we reached our car, the manager was right behind us. He apologized for the confusion and took full responsibility for the problem. He promised to personally make sure that everything else worked out correctly from that point forward. I agreed to go ahead with the purchase and we went back inside to complete the paperwork. By the time everything was finally done, it was after 9 pm. All in all, it was a VERY FRUSTRATING DAY. Dealing with these car salesmen is far worse than dealing with any deadbeat tenant or drug addict! I despise the entire car buying exercise and I put car salesmen next to last on my list of the worst people in society - just one spot ahead of the low-life scumbag contingency lawyers!

Too Busy to Work!

Today reminded me of trying to get a drink through a fire hose. I had so much stuff going on that it was difficult to get much done! The day started with organizing and paying some of the bills that arrived while I was on vacation. Next, I had some paperwork to type and send to Section 8. I then had to sign and send out the tax returns for all my companies (which had been on extension). The reason for having several companies is that it's important to divide your rental properties into different companies (LLCs) so that one lawsuit can't threaten your entire portfolio.

Next, I needed to take care of some paperwork relating to my wife's recent accident. The insurance has decided that my wife's car is totaled. I needed to send them the title so that they will send us a check for her car. I took care of that and then headed into town to send it to the insurance via next day air. I then had to go to the police department to pickup a copy of the police report of the accident, which will be needed when we meet with the attorney tomorrow. Next, I went to the city engineering department to get a map of the accident location which will be used in the court proceedings. By the time all of this was completed, it was already after noon.

After a quick lunch, I made my daily trip to Lowes to buy parts for today's work, which was pipe for the septic system. When I finally arrived at the doublewide, I briefly worked on a shower and then planned on working on the septic system. Unfortunately, it started to rain and that was my signal to call it a day!

I'm sincerely hoping to get more accomplished tomorrow than I did today.

Play Time is Over!

We had a great time on vacation, but today it was time to get back to work. I installed a new water heater in the doublewide that I have been working on; fixed a couple of water leaks on the hot water side; called the electric company to see why they haven't installed the electric pole yet (ugh); and called the heating and cooling company to see why they hadn't installed the electric furnace and air conditioning yet (ugh). All in all, a busy day.

I also was reminded of a lesson that every new real estate investor should take to heart. As I was leaving the house to go pickup dinner, the garbage man was stopping at the end of our driveway to pickup our trash. I got out of my truck and went over to thank the garbage man for the many years of good service he had given us. I did this because I recently got an announcement from a larger waste company that they had bought his business and would therefore be taking over his routes. I congratulated him on the sale of his business and was surprised when he said that the sale of his business wasn't enough for him to even break even, but it had kept him from being forced to file bankruptcy! This is a man who provided outstanding service to his customers at a reasonable price, but still didn't make it.

So, how does this situation with the garbage man relate to real estate investors? The answer is that most small businesses fail in a relatively short period of time. Running a business is not only about providing a good product. In fact, beyond everything else, running a business is ALL ABOUT THE NUMBERS. If the numbers don't work, your business will fail. This is particularly true in the rental property business. The vast majority of newbies fail. They fail because they didn't understand a few key principles: operating expenses; cash flow; determining the maximum purchase price; and dealing with tenants.

Running a successful business is not easy and the vast majority don't succeed. Success requires knowledge; hard work; and persistence.

Just Another Day in the Rental Business

Yesterday was just another day in the rental business - sitting on the beach and riding our bikes along the beautiful wooded bike trails of Hilton Head Island. In the afternoon, we had a cookout with some tasty spare ribs and then played cards with some friends. We have also befriended some squirrels, who are obviously very comfortable with people. We've been feeding the squirrels peanuts and they will actually take them right out of your hand. Yes, being a landlord is a tough job, but someone's got to do it.

In reality, I'm still on vacation and am not spending my typical 3-4 hours each day working on my rentals. So far this week, I've only received 2 calls from tenants and neither was important. I took my ad out of the newpaper before we left and therefore haven't been receiving calls from applicants. It's been very peaceful and a nice break!

I'll have my ad re-started next Monday and be ready to get back to work. In the meantime, I've got a few more days of fun!

Back to Business

It's back to business, at least as far as posting to this blog. It has been about 3 weeks since I last posted, so let's catch up.

When I last posted, I was starting on our latest doublewide. I have already gotten it rented for October 1st and therefore need to get it done. To date, I have hooked up all the sewage; contacted the electric company to arrange for a new electric pole; built and installed the panel for the electric meter base and disconnect; wired the meter and disconnect to the house; arranged to have the gas furnace changed to an electric furnace; installed the septic tank (yes, I did this myself); and much more.

Unfortunately, one of the things I had to do was spend two entire days fixing all the broken water lines under the house. They had apparently frozen and were broken in MANY places.

In the last 3 weeks, I have also had one tenant suddenly leave without any notice and I am evicting another for non-payment. Having a tenant suddenly leave was a first for me, although this is a fairly common occurrence in this business. Fortunately, they left the house in good condition and it is basically ready to rent. The tenant I am evicting is a drunk and probably spent the rent on drugs and/or alcohol.

The last big thing that happened was that my wife was in a major automobile accident. Although she was not seriously hurt, the other driver broke her wrist and received 2nd degree burns after spilling her coffee. To make matters worse, my wife was cited by the police, even though the facts do not support that it was her fault. I have already contacted my attorney and we will be aggressively fighting the citation. Although the fine is only $100, we are fighting it for 2 reasons. First, and most importantly, we want to avoid a lawsuit. Landlords are big targets for lawsuits and if my wife caused the accident (she didn't), then we are at higher risk for a lawsuit. Worse yet, my wife was driving her Mercedes, which can also attract attention from scumbag contingency lawyers. Secondly, we don't want to pay higher insurance premiums. Therefore, we will AGGRESSIVELY fight the citation. I'd rather spend a few hundred dollars in insurance premiums to clear up my wife's record than to pay a $100 fine and then higher premiums for years to come.

After all of this, we needed a vacation. Therefore, we are currently spending about ten days at Hilton Head. It is absolutely beautiful in Hilton Head this time of year with nearly perfect weather. We have been spending time at the beach and going for long bike rides. Yesterday, we toured the Island on our bikes and had dinner at the Salty Dog, which is a popular place to eat. Today, we are planning to do some Jet Skiing!

Mike