Staring a new business seems like a risky flying leap into the unknown, but I have since learned that risk is greatly diminished because the moment one definitely commits oneself, Providence moves too (as Johann Wolfgang von Goethe said).
One big mistake I made in my first fixer-upper house was assuming that I had to do everything ourselves. The house had a huge back yard which was the elephant graveyard of dog poop. For reasons that aren’t clear to me, I spent almost 3 days, off and on, cleaning up that poop. Now, I know the value of teenage labor, which is dirt cheap. These days, I just hire money-hungry teenagers to do “grunt” work for those types of jobs.
What I have learned so far:
1. Delegate and put things on auto-pilot whenever possible. Hire a handyman to make repair calls, and pay bills automatically. I used to respond to tenants calls to make house repairs, but that got to be too demanding. Now, I have a handyman that handles that.
If you operate the business while keeping your 8:00 to 5:00 job, like I do, the only way to maintain your sanity is by taking short cuts.
2. Don’t make snap decisions. If someone wants you to do something that affects your business, tell them you that you will have to talk it over with some higher authority. The higher authority could be your wife, your accountant, or your made-up advisor. When I was just getting started, and green as a gourd, I was discussing a lease-purchase with a potential buyer. I wound up saying that I would give the buyer everything she wanted.
You can make a much more rational decision by not making snap decisions, and saying, “I’ll have to get back to you on that.”
3. Play the cycles. Buy low, sell high. Admittedly, when I first started, I didn’t 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 becomes available, at a good price.
I have a house that I want sell a house which doesn’t produce well. However, I won’t sell when there are many seller, and few buyers. I’ll wait until the market turns up again, and I’ll make enough money to pay off the mortgage on one or two other rental properties.
4. Turn tenant problems into your profits. I used to try to avoid renting to people with pets.But, there are a huge number of tenants out there who have pets, and will only rent a place that can accommodate pets. And, they are willing to pay extra to keep their pet. Now, I just charge an extra $25 for each pet. It’s a win-win situation.
5. Don’t just find houses that meet your criteria, find the house that meets your criteria in locations where people like to rent. There are nice areas in my town and there are not- so-nice areas in my town. However, neither of those two areas is where most people like to rent properties.
There is an “opportunity” zone between the nice and not-so-nice areas where people are eager to rent, and where house values are relatively lower, but where you can charge a moderately high rent. There are both good and bad houses in these zones, but usually there are supermarkets and stores within close distance, often close enough to walk to.
6. Work hard at the beginning and then coast the rest of the way. The first fixer-upper house that my wife and I purchased 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 much repair work. We were exhausted, but we were also elated to have someone give us monthly checks to live in our house.
Nine years later, our business is in “orbit” mode rather than “take off” mode, and it is much easier to operate now, because we had gone through the difficult learning process in the beginning.
Had I known at the beginning what I know now things would have gone much more smoothly. But, experience and knowledge is not free, you usually have to pay for it. At least you can get ahead much faster by learning from my experiences.
Terry Sprouse is author of the award-winning book “Fix ‘em Up, Rent ‘em Out: How to Start Your Own House Fix-Up and Rental Business in Your Spare Time.”
Terry’s blog & webpage:
http://www.fixemup.org
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