Build a real estate company in a D area

[SteveO]

I have owned properties in D locations before. Not again. Your life will always be in churn mode with these. 5 deaths on property. 4 from guns and one from hanging (suicide). In one case the Ice Cream Truck was selling drugs. He was shot dead in the parking lot.

I heard shots while in the office one day and came out to find that the blue shirts had just driven by and fired at the red shirts. One teenage kid was showing off the bullet scrape on his bike.

The cousin of a tenant hammered the manager upside the head with a fire extinguisher which knocked him out cold. We had a large payout from that one.

Collecting rent was always tense and filled with conflict. Too many evictions and tough pool of candidates to choose from.

The police once informed me that there were known "cop killers" in one apartment building.

It took a while but the trend for great locations finally sunk in. Crap building that I could work on in a location that everyone wanted to be. Yes... that is the ticket...

 

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[JohnD Realestate]

This was a much better week. I got a few vacant apartments/rooms rented. Evicted the last hooker from my 14 room boarding house. I also brought a partner in on two houses that needed some work. He’s going to put some cash up and manage the Reno. That will help. The larger portfolio will stay intact....for now. Got some bills paid.

Best was that somehow managed to go in the black this month. First time in 6 months. Combination of filling vacancies mid month and getting some back rent in. Two tenants that were being evicted came up with 4/5 months rent each. I would have gone for eviction normally but the money was so needed. Kicking that can down the road.

I used the todo list on the inside that @MJ DeMarco put together. Highly recommend it.

 

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[JohnD Realestate]

This will be my progress thread. I’m getting my head kicked in right now. Feel like I jumped off the boat with cement floaties. I have been meaning to start writing for a while but with things getting worse every day I found it hard to get out of bed. Let alone document my weakness and failures. It’s definitely my problem. I have made a lot of mistakes.

I’ve been a real estate as hobby investor for 12 years. Done mostly live in flips. I’ve bought and sold 4 houses and currently own 12. Started out with one three family in 06. I sold that last year and did a 1031.

In the 1031 I purchased a package of buildings from a slumlord. It’s comprised of 37 stores, apartments and rented rooms. They need a ton of work.

I bought these houses knowing that they were in a depressed area of NYS. I knew the city had a reputation as the “murder capital of New York State. I looked for the worst part of the city. There I found a building that seemed worse than those around it. Luckily for me the owner was easily convinced it was time to sell.

Edit: If this sounds like a complaint that’s not how I mean it. All of my complaints right now would not exist if I had not handled executed better.

 

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[JohnD Realestate]

You sound overwhelmed. Is it the 1031 properties that you're working on? That's a lot to take on, both in energy and investment dollars. Been there, done that... in the ghettos and barrios of Los Angeles. It a tough world out there in that type of neighborhood...

Yes overwhelmed is a good word, yes also it is 1031.

Thats was as much as I could put down before getting the kids to bed and spend a bit of time with my wife. I think the situation would be much different up there if a few things were different.

One is money. I went in with a 6 month reserve and 100k or so for Reno work. I hadn’t planned on doing much reno going in on the residential units. That was going to happen after a cash out refi at 12 months. But I went in with a lot of equity. I’m about 55/45 on the loan. Purchase was 1.55m I put down 729k.

The second thing I’m short on is time. I’m still working, I’ve been at my job 12 years. We need the money to pay bills. My job is a good job for this type of thing bc the schedule is flexible. I work 4 days a week and can take vacation days when I need to. If I spent 5 days a week up there things would be very different.

I have a management company. They collect rent pay bills and do books...only on the rentals tho not my reno biz. Plus they don’t deal with my bad Building. It’s too scary for them.

I have an on-site manager there and a super.
The guys I have working up there are kind of like the three stooges. But it’s tough to find good help in the ghetto, I could but I would have to pay big. Right now I think what I’m doing is good enough. They live on site and they don’t mind chasing hookers, and addcits out of the hallways.

Most of the residential properties had tenants. There are 7 commercial spaces and five were vacant. Most of the buildings have apartments above the commercial. The commercial is were I planned to spend the 100k. What happened was a little different. I had to vacate some tenants going in. There was an illegal SRO that should be two apts. One mistake I made was spending too much time negotiating with tenants. A few seemed like they wanted a quick buyout. The city also told me they might vacate for me based on safety. After a few weeks that didn’t happen. I was busy with other projects so it took about a month before I began to evict. Big mistake. I knew that one already but had to relearn. I also had three tenants move out within weeks of taking over. The apts were shot. Long term I wanted those apts empty to renovate and get better tenants but short term...I didn’t want them empty. So I had to use some cash to get those ready.

I was able to rent 4 commercial spaces pretty quickly. I made some improvements and things went well on the commercial side. But two tenants were unhappy with conditions after a few months....one was just trying to get out of paying rent. I let him go.

The second tenant and I had an agreement that I would install heat and a bathroom in his space. I made the deal quickly and later learned the city wouldn’t approve my plans. It took the city a month to tell me this. They wanted a handicap accessible bathroom in the space. The issue with that was that the bathroom was very far from the sewer line. To get proper pitch on the plumbing I would need a 20’ ramp....eating up the tenants space. I also had loads of problems getting gas to the space for heat. Plumbers in that city are in limited supply. End up was I failed at my side and the tenant walked. Space is still empty.

In the meantime I had spent my 100k. I waited for rents to come in and do renos but collecting rents was going badly. I’m supposed to collect 30k on a good month. I need 23k to break even and pay the 12% loan. Some months I collected 14,16,18. Went to my wife to borrow and she agreed but had some terms. I suck at keeping records, reciepts and tracking expenses. She wanted a full accounting. For one.

She also wanted: I have numerous projects in the works. She wants me to sell a few. She has always wanted me to sell. She hates real estate. Even when I make ten years salary on one deal she still hates it. So I’m trying to hold off on borrowing from her. I brought in a partner on three residential properties. Hated to do it but I don’t have many choices. My wife would give me the cash but I’d have to sell something first.

I still have 3-4 commercial spaces for rent. But now cash is tight so I working on getting them rented to artists or tradesmen as a workshop.

I also have the bad Building to deal with. When I first saw the place I underestimated how bad it was. I’ve dealt with things like this before so I thought I could see how to fix it. It’s a drug den. 2-3 tenants are long term drug dealers. They sell heroin and cocaine Day and night. I put cameras in the hallways and they screw around with the cameras. I started to evict the tenants. I would move someone out and find a tenant that looked ok on paper. A few days later they would be all cracked out. I’m still not sure if this was because the dealers told them to apply or they just moved in and discovered they had a drug problem.

So now I’m evicting more people. The dealers got busted in a drug raid. Tanks, helicopters, swat team. The came in with combat gear and swept the place clean. That night after the cops left neighborhood folks busted my front door broke in to the dealers apt and stole all his stuff and trashed the place. Next day I found two people barricaded in a junk filled room with a refrigerator wedged up against the door.

I’ve had many many calls to the cops and they come out and arrest trespassers but they just keep on coming. Hard to get good people in bc the building has a reputation. The cops say it’s the worst building in the city. I knew that going in tho. I had months of 50% or less occupancy. Right now I’m at 90% but it took a lot of time and I had to offer specials.

I need to work harder, that’s my solution. Between my work schedule and my family it’s hard to squeeze in 2 days a week. I used to get up at 4 or 5 and do work. But lately I just sit in bed and my brain is like a washing machine filled with what-ifs. What if the dealers come to my house. Maintenance stuff things I forgot to do. Etc.

 

[WJK]

Yes overwhelmed is a good word, yes also it is 1031.

Thats was as much as I could put down before getting the kids to bed and spend a bit of time with my wife. I think the situation would be much different up there if a few things were different.

One is money. I went in with a 6 month reserve and 100k or so for Reno work. I hadn’t planned on doing much reno going in on the residential units. That was going to happen after a cash out refi at 12 months. But I went in with a lot of equity. I’m about 55/45 on the loan. Purchase was 1.55m I put down 729k.

The second thing I’m short on is time. I’m still working, I’ve been at my job 12 years. We need the money to pay bills. My job is a good job for this type of thing bc the schedule is flexible. I work 4 days a week and can take vacation days when I need to. If I spent 5 days a week up there things would be very different.

I have a management company. They collect rent pay bills and do books...only on the rentals tho not my reno biz. Plus they don’t deal with my bad Building. It’s too scary for them.

I have an on-site manager there and a super.
The guys I have working up there are kind of like the three stooges. But it’s tough to find good help in the ghetto, I could but I would have to pay big. Right now I think what I’m doing is good enough. They live on site and they don’t mind chasing hookers, and addcits out of the hallways.

Most of the residential properties had tenants. There are 7 commercial spaces and five were vacant. Most of the buildings have apartments above the commercial. The commercial is were I planned to spend the 100k. What happened was a little different. I had to vacate some tenants going in. There was an illegal SRO that should be two apts. One mistake I made was spending too much time negotiating with tenants. A few seemed like they wanted a quick buyout. The city also told me they might vacate for me based on safety. After a few weeks that didn’t happen. I was busy with other projects so it took about a month before I began to evict. Big mistake. I knew that one already but had to relearn. I also had three tenants move out within weeks of taking over. The apts were shot. Long term I wanted those apts empty to renovate and get better tenants but short term...I didn’t want them empty. So I had to use some cash to get those ready.

I was able to rent 4 commercial spaces pretty quickly. I made some improvements and things went well on the commercial side. But two tenants were unhappy with conditions after a few months....one was just trying to get out of paying rent. I let him go.

The second tenant and I had an agreement that I would install heat and a bathroom in his space. I made the deal quickly and later learned the city wouldn’t approve my plans. It took the city a month to tell me this. They wanted a handicap accessible bathroom in the space. The issue with that was that the bathroom was very far from the sewer line. To get proper pitch on the plumbing I would need a 20’ ramp....eating up the tenants space. I also had loads of problems getting gas to the space for heat. Plumbers in that city are in limited supply. End up was I failed at my side and the tenant walked. Space is still empty.

In the meantime I had spent my 100k. I waited for rents to come in and do renos but collecting rents was going badly. I’m supposed to collect 30k on a good month. I need 23k to break even and pay the 12% loan. Some months I collected 14,16,18. Went to my wife to borrow and she agreed but had some terms. I suck at keeping records, reciepts and tracking expenses. She wanted a full accounting. For one.

She also wanted: I have numerous projects in the works. She wants me to sell a few. She has always wanted me to sell. She hates real estate. Even when I make ten years salary on one deal she still hates it. So I’m trying to hold off on borrowing from her. I brought in a partner on three residential properties. Hated to do it but I don’t have many choices. My wife would give me the cash but I’d have to sell something first.

I still have 3-4 commercial spaces for rent. But now cash is tight so I working on getting them rented to artists or tradesmen as a workshop.

I also have the bad Building to deal with. When I first saw the place I underestimated how bad it was. I’ve dealt with things like this before so I thought I could see how to fix it. It’s a drug den. 2-3 tenants are long term drug dealers. They sell heroin and cocaine Day and night. I put cameras in the hallways and they screw around with the cameras. I started to evict the tenants. I would move someone out and find a tenant that looked ok on paper. A few days later they would be all cracked out. I’m still not sure if this was because the dealers told them to apply or they just moved in and discovered they had a drug problem.

So now I’m evicting more people. The dealers got busted in a drug raid. Tanks, helicopters, swat team. The came in with combat gear and swept the place clean. That night after the cops left neighborhood folks busted my front door broke in to the dealers apt and stole all his stuff and trashed the place. Next day I found two people barricaded in a junk filled room with a refrigerator wedged up against the door.

I’ve had many many calls to the cops and they come out and arrest trespassers but they just keep on coming. Hard to get good people in bc the building has a reputation. The cops say it’s the worst building in the city. I knew that going in tho. I had months of 50% or less occupancy. Right now I’m at 90% but it took a lot of time and I had to offer specials.

I need to work harder, that’s my solution. Between my work schedule and my family it’s hard to squeeze in 2 days a week. I used to get up at 4 or 5 and do work. But lately I just sit in bed and my brain is like a washing machine filled with what-ifs. What if the dealers come to my house. Maintenance stuff things I forgot to do. Etc.

Yes overwhelmed is a good word, yes also it is 1031.

Thats was as much as I could put down before getting the kids to bed and spend a bit of time with my wife. I think the situation would be much different up there if a few things were different.

One is money. I went in with a 6 month reserve and 100k or so for Reno work. I hadn’t planned on doing much reno going in on the residential units. That was going to happen after a cash out refi at 12 months. But I went in with a lot of equity. I’m about 55/45 on the loan. Purchase was 1.55m I put down 729k.

The second thing I’m short on is time. I’m still working, I’ve been at my job 12 years. We need the money to pay bills. My job is a good job for this type of thing bc the schedule is flexible. I work 4 days a week and can take vacation days when I need to. If I spent 5 days a week up there things would be very different.

I have a management company. They collect rent pay bills and do books...only on the rentals tho not my reno biz. Plus they don’t deal with my bad Building. It’s too scary for them.

I have an on-site manager there and a super.
The guys I have working up there are kind of like the three stooges. But it’s tough to find good help in the ghetto, I could but I would have to pay big. Right now I think what I’m doing is good enough. They live on site and they don’t mind chasing hookers, and addcits out of the hallways.

Most of the residential properties had tenants. There are 7 commercial spaces and five were vacant. Most of the buildings have apartments above the commercial. The commercial is were I planned to spend the 100k. What happened was a little different. I had to vacate some tenants going in. There was an illegal SRO that should be two apts. One mistake I made was spending too much time negotiating with tenants. A few seemed like they wanted a quick buyout. The city also told me they might vacate for me based on safety. After a few weeks that didn’t happen. I was busy with other projects so it took about a month before I began to evict. Big mistake. I knew that one already but had to relearn. I also had three tenants move out within weeks of taking over. The apts were shot. Long term I wanted those apts empty to renovate and get better tenants but short term...I didn’t want them empty. So I had to use some cash to get those ready.

I was able to rent 4 commercial spaces pretty quickly. I made some improvements and things went well on the commercial side. But two tenants were unhappy with conditions after a few months....one was just trying to get out of paying rent. I let him go.

The second tenant and I had an agreement that I would install heat and a bathroom in his space. I made the deal quickly and later learned the city wouldn’t approve my plans. It took the city a month to tell me this. They wanted a handicap accessible bathroom in the space. The issue with that was that the bathroom was very far from the sewer line. To get proper pitch on the plumbing I would need a 20’ ramp....eating up the tenants space. I also had loads of problems getting gas to the space for heat. Plumbers in that city are in limited supply. End up was I failed at my side and the tenant walked. Space is still empty.

In the meantime I had spent my 100k. I waited for rents to come in and do renos but collecting rents was going badly. I’m supposed to collect 30k on a good month. I need 23k to break even and pay the 12% loan. Some months I collected 14,16,18. Went to my wife to borrow and she agreed but had some terms. I suck at keeping records, reciepts and tracking expenses. She wanted a full accounting. For one.

She also wanted: I have numerous projects in the works. She wants me to sell a few. She has always wanted me to sell. She hates real estate. Even when I make ten years salary on one deal she still hates it. So I’m trying to hold off on borrowing from her. I brought in a partner on three residential properties. Hated to do it but I don’t have many choices. My wife would give me the cash but I’d have to sell something first.

I still have 3-4 commercial spaces for rent. But now cash is tight so I working on getting them rented to artists or tradesmen as a workshop.

I also have the bad Building to deal with. When I first saw the place I underestimated how bad it was. I’ve dealt with things like this before so I thought I could see how to fix it. It’s a drug den. 2-3 tenants are long term drug dealers. They sell heroin and cocaine Day and night. I put cameras in the hallways and they screw around with the cameras. I started to evict the tenants. I would move someone out and find a tenant that looked ok on paper. A few days later they would be all cracked out. I’m still not sure if this was because the dealers told them to apply or they just moved in and discovered they had a drug problem.

So now I’m evicting more people. The dealers got busted in a drug raid. Tanks, helicopters, swat team. The came in with combat gear and swept the place clean. That night after the cops left neighborhood folks busted my front door broke in to the dealers apt and stole all his stuff and trashed the place. Next day I found two people barricaded in a junk filled room with a refrigerator wedged up against the door.

I’ve had many many calls to the cops and they come out and arrest trespassers but they just keep on coming. Hard to get good people in bc the building has a reputation. The cops say it’s the worst building in the city. I knew that going in tho. I had months of 50% or less occupancy. Right now I’m at 90% but it took a lot of time and I had to offer specials.

I need to work harder, that’s my solution. Between my work schedule and my family it’s hard to squeeze in 2 days a week. I used to get up at 4 or 5 and do work. But lately I just sit in bed and my brain is like a washing machine filled with what-ifs. What if the dealers come to my house. Maintenance stuff things I forgot to do. Etc.

Wow! Like I said, been there, done that... I did it in the ghetto in Los Angeles for years -- but my biggest challenge was right here in Alaska -- the mobile home park that I'm still operating. Only it was $250K that I breezed through in 6 months... I had every bad guy in the area right here. I owned the "ghetto" in this small community. My mother, my partner, was addled and dying. She was bringing in MORE bad guys as fast as I could get rid of them. My parents had sold the property in their divorce and Dad demanded the face amount of his half of the note, which equaled the total market value of the trashed property -- or he's was going to plant himself in the middle of the whole mess. I was totally financially supporting my mother, and she cried the whole time. I had a high powered RE career in LA and I lived 5,000 miles away. And my financial world was crashing...

I survived. So will you.

First of all -- take a day off and enjoy your family. You've lost your perspective. Tell you wife that you love her. Take her out to dinner. That's your real base.

Second, if you have to sell something to make this all work, you need to take a hard look at your situation. Yes, you need a way out of your hell. BUT, you need to ask what is the best thing to do here -- not the cheapest or fastest. Take a step back and crunch the numbers again. Then sleep on it before you do anything.

Third, take a deep breath. You're doing all the right stuff. You don't need to work harder -- just smarter...

Let me know what you decide to do. Wishing you a good night's sleep.

 

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[WJK]

Yes that sounds like a handful! All that family stuff just makes it harder.
Working on the numbers now. I was thinking on which properties I would sell. I’m trying to hold off right now because it’s spring. With all my vacant units this time of year is not the right to lease up. Once or two months could make a big difference.

I appreciate the input. Just told the wife we should go out tmr.

Sleep is tough right now. But I’ve been moving a bit more and some things have already gotten better. Juts writing that helped. Up till now I was mostly pretending to all that everything was A-Ok. I spent a few days working on the commercial stuff cold calling and canvassing for tenants on foot. Didn’t get anyone but it made me remember everything is my reaction...not the situation. So now I need to like you said work smarter.


Drug bust photo below. At the time made me nervous. Week or two out feeling a bit better.

I have owned properties in D locations before. Not again. Your life will always be in churn mode with these. 5 deaths on property. 4 from guns and one from hanging (suicide). In one case the Ice Cream Truck was selling drugs. He was shot dead in the parking lot.

I heard shots while in the office one day and came out to find that the blue shirts had just driven by and fired at the red shirts. One teenage kid was showing off the bullet scrape on his bike.

The cousin of a tenant hammered the manager upside the head with a fire extinguisher which knocked him out cold. We had a large payout from that one.

Collecting rent was always tense and filled with conflict. Too many evictions and tough pool of candidates to choose from.

The police once informed me that there were known "cop killers" in one apartment building.

It took a while but the trend for great locations finally sunk in. Crap building that I could work on in a location that everyone wanted to be. Yes... that is the ticket...

John, you know the rule -- location, location, location... and I think you've learned something about your boundaries and limits. You'll make better decisions in the future about what you will and won't do. You're to the point where you won't want to take the same risks that you took earlier in your RE career. Can you shine up your bad building and sell it? You don't want to be around all that mess!

Drugs are pervasive here too. I try to keep them out as much as possible -- but, they sneak in sometimes. I know exactly who the red and blue shirts are. They are bad guys! They don't care if they live or die. My guys here think that they are bad guys too, but they're just wannabees compared to your ghetto rats.

And yes, we got raided for a "grow operation" the day after Mom and I repossessed the property. No, all they found was an empty storage building and few leaves. We hadn't even had time to open and inspect that building when the black clad Troopers showed up with their big guns. All these years later it's almost funny. It sure wasn't funny then.

I'm stuck here for the time being. This property is now a cash cow -- the rental income is 6 times where I started. Plus I've created some other income streams. It's still a PITA to manage. I made the BIG mistake of not understanding the resale market. It's way to shallow for me to get my money back right now -- and I have to be cashed out due to the nature of the property. I sure don't want to start over again with another repossession.

Mom died 14 years ago, my first full-time winter in Alaska, and I'm still here. After paying off Dad, I didn't talk to him for over 8 years, but I've finally made my peace with him. He's turning 86 this month...

BUT, good news concerning the property. They are supposed to build a huge LNG facility 3 1/2 miles up the road from me. It a pipeline project that will connect us with the North Slope natural gas supplies. They'll do the deep water shipping to Asia from here. They should be breaking ground in 2020, and it fast tracked by Trump. The day they put the spade in the ground to start, it will double the market value of my property. I have the only group of affordable housing in our community. They're talking about bringing 5,000 workers into a community of 6,000. It will be like N. Dakota all over again.

Also the closed-down fertilizer plant up the road is supposed to reopen 2 of their 3 units, with a 24 to 28 month turn-around (fix-up to restart). That too will bring in a bunch of workers. It's a Trump tax-cut-blessing.

Maybe being stuck here for all these years is going to be a back-handed blessing. I'm scared that I won't make the right decisions and really make these blessings work for me. I too old and used-up to go out and make it all happen again.

 

[SteveO]

View attachment 18467

I'm assuming that you know what the shoes draped from the power lines means.

 

[SteveO]

There is a crime-free addendum that the tenants sign in Arizona. This addendum allows for a 24 hour eviction for crimes. It can actually take 3 days to get them locked out if they refuse to leave. Do they have anything like this where you live? I used it many times.

Drug dealers are not easy to work with. They usually have a loyal following of people that would be happy to hurt you or your property. I found that a professional approach worked best. Calm words and straight facts of observation. I would usually tell them that the easy way for all of us would be for them to move. It would be less attention all the way around.

My experience has been that evictions, payment problems, trashed units, and other problems associated with D locations would eat through the cashflow. Numbers would look good on paper but real life showed a different story. This sounds like what you are experiencing as well.

 

[JohnD Realestate]

There is a crime-free addendum that the tenants sign in Arizona. This addendum allows for a 24 hour eviction for crimes. It can actually take 3 days to get them locked out if they refuse to leave. Do they have anything like this where you live? I used it many times.

Thanks for the ideas, thats a good idea for this area. But we don’t have that. I would love to have that.

Drug dealers are not easy to work with. They usually have a loyal following of people that would be happy to hurt you or your property. I found that a professional approach worked best. Calm words and straight facts of observation. I would usually tell them that the easy way for all of us would be for them to move. It would be less attention all the way around.

Oh yeah. Calmer heads prevail. I always regret losing my temper.


My experience has been that evictions, payment problems, trashed units, and other problems associated with D locations would eat through the cashflow. Numbers would look good on paper but real life showed a different story. This sounds like what you are experiencing as well.

Yes that’s very true. Definitely losing out on cash flow right now. I expected it to be a problem but not to the degree that it is. Part of it is that I stretched myself to get this deal done.

I have a lot of confidence in the market long term. I also know that long term my strategy works in this arena.

The city and the area I am in is rough, my buildings are the worst in that area. In two buildings...the worst I have I had 25 tenants. I’ve evicted 20 of those. The replacements in the beginning were no better than what I had evicted. I adjusted that and lately have had much better success. Based on that I’ve accomplished one of my major goals. Cleaning out two of the worst buildings in the city. I can’t take advantage of it yet but down the road that will drive up the values.

When I bought the house above there was always 5-6 guys hanging out in front of the gates. Now they moved about 50’ to the opposite corner. Just that little move was hard won.


I’m not alone up there. I went up with a small group of investors. And once I got involved I found others that have used the same strategy in the past. We mostly came from Brooklyn and Queens. Between us we bought over 125 buildings. A few from other cities upstate. Most of them agree I took a huge risk. I do as well. We meet up once a month to exchange info and they are rooting for me, but also hoping that I make it. My area is so bad if me and the 5 landlords trying to fix my blocks succeed it will help the whole city. Vacancy is low up here but security is a huge issue. Provide security and you can raise rents...thereby raising values. That’s one of my other goals. Provide security.

 

[WJK]

Thanks that success story helps.
6 times rent? That’s awesome. I might move on from D properties one day, but not yet.

I worked for my cousin when I dropped out of high school on a similar project. He had about 30 units in Queens NY in the late 80’s. I learned a lot of what I still do from him. He would buy stuff no one wanted to touch and work at cleaning it up. He focused on a few blocks. Today he still owns the property.

I later worked for a real estate company doing similar stuff in front neighborhoods in lower Manhattan. I still plan to do this type of investing. Trying to learn from my errors. Working on fixes now. I know a lot of it is how I reacted.

Well, I totally understand. I'm still operating my mobile home park after all these years. Cash cows are nice assets.
To start, just get rid of the shoes strung over the power lines. And make sure your dealers don't hang out their shingle again.
Another thing, hand write your wife a love letter. It doesn't have to fancy or long -- just from your heart & gut. If you can get her on board with you, you'll have a much easier path.

I married my husband after Mom died (I was 50+) and he's my best friend. He wrote me one of those wonderful letters a year or so ago. I have it folded up in my computer bag. I smile everyday when I see it in there. When my husband notices that I still have his love letter, he always assures me that he means every word of it...

Anyway, tell you wife why you love her and why she's so important to you. It will mean the world to her. Having her moral support will mean the world to you!

 

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[JohnD Realestate]

Took a vacation from my 9-5 this week. Used every minute to get ny stuff in newburgh in shape.

First day I loaded up my truck with sticks from my yard and went to dump. Then I got to newburgh and worked out a discount for volume pricing on LVP with Home Depot. Quote wasn’t so low so o called andoth HD and it was about 30% less. Noted. Call multiple Home Depot for bid room. Saved about 1250. But it means we can afford to do better quality materials in more apts.

6 druggies broke into one of my vacants this week. Kicked a door in on two of them. Three them out. One said take it easy i lost my temper. Shook him up a bit. I almost bit his face. Broke into my building and tells me to take it easy. My bad tho. Not his fault. Need to secure my properties better. And stay calm. Been doing better with anger mostly.

Got new elec service in a long vacant 150 year old brick building, elec gave me a really good price. Things are looking up.

took out 10,000lb of debris from one floor same house. By hand of course. Loaded up a 20’ trailer twice. Got two flat tires on the way to dump with 5k in the bed. Jacked it up and changed the tire 500’ later spare blew out. Went the rest of the way on 3 wheels. Got it to the dump and once it was empty was a breeze. Except that I can’t back up a trailer very well in snowy hills with cars blocking my driveway. People watching calling me an idiot. Who cares got it done. Laughing, sore glad to have carefree time with the kids now that things are on track.

Someone crashed into the trailer in a snowstorm. No biggie. Not too much damage My bad for Parkin it there. Couple of 14-15 hour days. Wife was very helpful.

Blew in insulation in another gut renos we’re doing. Tried out a few new guys this week. Every day I had at least 10 guys working between subs and my guys. Two of the new guys are fantastic. Good people make things way easier.

 

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[JohnD Realestate]

Bam. Rented a commercial space that’s been vacant for 10 years. 5/1 occupancy. 18k a year hipster Furniture.


Closing on a refi Friday, commercial
Loan 7.3% fixed for 10 years adjustable every 2 years after that. 30y amortization.

140k that’s been at 12%. Bought the house for 168. Put in about 40k appraised for 200k. I don’t agree with the appraisal think it’s more like 240k but NP. I can live with it. Saves me a few hundred a month. Most importantly tho it gets the loan balance for 2 last properties down to 315k. Bought them for 360 but they are in the area where the market is got so they will appraise much higher. Prob 250k for the 3 unit and 650k for the 8 unit.


Looks like I did it. Turned a slumlord portfolio into a real business. Will be in the black in a month or two. No time to stop now but I’m feeling good.

 

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[SteveO]

When I brought the camera to the attention of the PD they said thanks well take a look.

I never found the police to be very helpful.

 

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[JohnD Realestate]

 

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[JohnD Realestate]

 

[JohnD Realestate]

@WJK @ZCP thank you. Thanks for following this.
Made some mistakes. I rented to a bad tenant a few months ago. Apt came back to me from a long term inherited tenant. The apt needed lots of work but I was broke. I had a known bad tenant come in with cash, I showed it they would take as is. Filled with garbage and they would clean it out. I had 10 vacants apts at the time. Dumb but, I rented to them.

So had a fire in that building today. The bad Tenant threw a cigarette in the garbage. In the bathroom. So had my first bathroom fire ever. Ive has dead tenants in the bathroom but never a bathroom fire. I have a rule. If the cops or FD come to my house i usually evict that tenant. This time is no different. FD gave me a stop work order on my store below bc they came to the house.

Got another tenant headed for eviction too. He called the health Dept instead of telling me he had bed bugs. Argh. I have an Extermintor. Tenants don’t call me they call health Dept. Then HD calls me give summons. Then I call Exterminator. Them HD comes to inspect problem solved. But first I call lawyer to evict that idiot tenant. Sorry venting.

This idiot tenant was no good either and I rented to them also. I knew I shouldn’t. I could tell he was that type. Always trust your instinct. But I was broke and I was weak.


Good news. I passed a City inspection today for a unit that was condemned and illegal when I bought it. Got it really cheap bc it was a disaster. It was renting for 560$ to current tenant. One women. Apt was in shambles City did and inspection and failed it right after I bought it.

I Kept the tenant in place did repairs and the tenant had gotten a S8 voucher. Rent goes up to 1100. Tenant called to say they love the new floors, paint and apliances and thanks. That’s good for now. We’ll see.

Better news. Had a legal rooming house the city had condemned it neeed repairs. I did some repairs. Now it’s not easy but they could take me to court revoke my CO then I would have to gut and redo whole building. Return to single family. I asked them to help me out and reissue CO. The city hates rooming houses. I don’t like them either ...but my mom was a drug addict. My Dad was in prison. So I’ve lived in some rooming houses. I know what to do with them. Fear and RULES. Make them afraid to break the rules and they will abide. Be a dictator about the rules. Cleanliness. Garbage where it’s supposed to be. No visitors. No BS or you get evicted. I could write a book on rooming houses but I think someone did. If your game it’s $$$$$

Anyway It’s 4 rooms. I can rent the rooms 500-625 each. So all 4 for 2000-2500(tops but I can dream).....as an apt it’s a 4 bedroom it’s 1250 a month tops in that area. It’s ghetto. The Inspector said OK. That’s huge.

So next month I’ll probably do 25k. That’s black. Way in the black. Thanks for the support. Just getting feedback here has helped me. Thanks.

One more thing. I’m on BP. Been there for a few years. Great site for RE knowledge. Not so much for get it done as how to. So I joined a meetup last year of 4-5 people. They faded away....I kept it up. Once a month. This month I had 40 attendees. Banks, hard money guys, RE agents, insurance guys and other investors.

I mentor a few guys they show up it’s a fun thing. Coffee and BS. Some of my guys own a few houses. A few own 3-4. So it’s done something already. We do it at 8am. Today people said that I’m helping change the city......that’s big. I’m not finished yet but that’s my goal. I want to turn newburgh around. I’m pretty sure I never mentioned that before but that’s what started the whole thing.


Almost last. I was in retreat last month. I dug up Grant cardones 10x. I’ve listened to it a bunch of times. Good for rah, rah, rah. Listened to it and realized I was in retreat. I decided to attack instead. I’m coming up with some plans for attack.

Last and WJK will like this. I’m selling one house. I bought it for 47k last year. Inherited a tenant. They were paying 1066 a month they pay all utilities. So I’m December they stop paying. Now this house is a 2 family but one family had both floors. I told them “hey I have another house like that one inremt it for 1250 per floor. Pay your rent. They BS I evict. I asked a realtor today that I trust what do you think it’s worth. As is. She says 125-150. Market is hot. So I’m listing that one. It’s got the plywood on the windows...copper lines throughout and the thieves are still out there.

 

[JohnD Realestate]

Passed on the 19 units. Too fragile financially. All credit cards still maxed. Got the last of my two Refis on the big hard money loan going now. Got about 900k worth of property and the current mortgage is 330k. But 120k of debt in cc, personal loans, loans from family, loans from pension etc.

Going to pay down all the credit cards pay everyone back and get a mortgage for about 60%. That should make life a lot easier.

This ones done. Purchase 70k...120k Reno about 15k over budget. Some of that is my partner likes to finish each apt to his own tastes. But I like his taste too and they will rent a bit higher to better tenants...but man he likes to spend money.

The arv was 250k last year but I think pretty soon that I’ll see comps for 300k....my neighbor sold his beat up house for 207 about the same size not as a good a block.

Main Sewer on another house we’re doing got fixed so we started back up on that one. New GC Partner ended up coming in. Good to have some help. He didn’t touch these but I can’t wait to get his hands on the rest.

 

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[JohnD Realestate]

Sold these three today. Bought in 2017 for 560. Sold today for 895k. More to follow.

 

[WJK]

Thanks, I’m listening to a lot of the above. I read it the other day on the run but didn’t have time to respond.
She is on board with me doing RE. I still have a full time job. It’s just when I have to borrow that it gets sticky. I acknowledge openly that I take big risks with RE, that’s a fact. So when I ask to borrow( and it’s from her savings, retirement and emergency fund) we both know it could be at risk. And not even liquid at that.

I totally understand her feelings and yours.

Matt and I have had some rough times over my properties. He has a love/hate relationship with them. He doesn't have my business head or people skills. He can fix or build anything -- BUT most of the time, he thinks like a workman rather than the owner. He's getting some better over time.

Also, in the past, he became sure that he could run the overall jobs, rather than just being the lead man on the crew. At that time, I couldn't do anything right in his eyes, so I let him try. It was #.$&* disaster. He gave it all back to me 2 years ago. Our current agreement is that I consult with him, but the final decisions are mine, and mine alone. He's become very happy with just getting the work done, most of the time.

I guess that the long answer as to why I understand your situation. Matt and I have re-built our friendship and our marriage over the last couple of years.

Relationships and marriage are a set of ground rules and agreements. It sounds like you need to re-make your agreements with your wife -- up front and spoken out-loud. To get to that point, you're going to have to do a lot of listening. When she feels that you hear and understand her, then you can start to find some middle ground.

I'm sure that your risk taking scares the hell out of her. I'd start by listening to her fears and how they effect her. Once you listen to her, she'll be a lot more willing to listen to you.

You have recently been immobilized by the overwhelming situation you were in, and your fears. We've talked about it. You are coming out of that place in your head. You're getting your RE sea legs back. Time to reach back for your wife's hand and pull her along with you.

 

[SteveO]

If you can right the ship, do it. Sounds like you are doing the right things. Get to the point where you can sell for a profit and move the money to a better location.

 

[JohnD Realestate]

Good job! You're a winner!

Thanks!

Today was a good day. I rented 1 of my three vacant commercial spaces. It’s not a million dollar deal as a matter of fact the rent was $750 a month for three years with two months free, so it’s basically peanuts.

But I was close to break even with this project. And I was paying taxes and santitation, insurance etc for a vacant space. So this goes right to the bottom line. I just rented a store in the worst bulilding in Newburgh NY. Vacant for 10 years. A notorious drug corner. So I’m jumping up and down over here mentally.

After the free rent is up....6/15 it basically puts 8370 a year in the cash register. And up here that’s an 83k equity bump.

I was at the bank today at 8 am working with the loan officer on this and he likes the numbers. The space got rented at 2. it’s a good day.

Killing it with the MJ todo list. Had another investor trying to pry a copy out of my hands when he saw it. He’s like what is that. I told him and he goes do you have a blank copy? NO! But they sell them.....this alone has made my INSIDERS scrip a priceless investment.

 

[JohnD Realestate]

@WJK thanks.

Been a while. Haven’t been back. no good news.

Few updates. Some things went well. Got the house with the boards into contract. Paid 47k last may. put in about 25 plus holding costs. Have two partners. In contact for 159k, so that one should be a good one.

Overall tho I’m still in trouble. Little profit for two months the but then this months with taxes, water, sewer due I’ll lose about 8k this month.

Got 4 vacant apts right now. Money and time are tight and I’m having trouble getting them ready. Doing them 1 at a time. Crews i usually use are busy.

Got 3 other houses on the market right now. Bought one for 75 put in 20k. It’s had a vacant commercial space. I rented that to a deli that’s well known in the area. Very stable tenant. It’s on the market for 150k.

Last one is the the rooming house. Paid 465. I evicted almost all the tenants and did lipstick Reno as I went. This one also has a store on the fiat floor. The crime problem in the building is cleaned up. It’s on the market for 659.

Bought another for 45k on the market for 154. Fixed the roof and cleaned it out.

Been a few weeks on the market on two. The oher for a month. I think they are all overpriced....except the one in contract. I had the agents drop the prices already but they are fighting me on dropping more.

My live in onsite agent stole about 2500$ this month in cash. Think he’s gotten involved in drugs. Hit him with a 30 day notice and working on getting him arrested.

Wife’s clothing store is open and doing well so far. At least one of us is doing something that cash flows. She’s not bothering me about working late anymore tho. She’s working late now.

Working on getting focused, but seems every time I do I have another fire or flood. Lists of important things get pushed aside by ceilings collapsing, stores getting robbed etc.

Need to focus.

 

[JohnD Realestate]

Missed a word above. It should have said 50.....percent vacant.

Just got a refi done. It was a mess and I paid more than I wanted but it’s 8.75 instead of 12% so it’s better. It’s about half my loan amount. Working on the rest now.

Going into contract to sell another house now. Paid 75k in it for 90k. It’s been cashfkowing about 450 a month for a year. Selling for 134 I’ll clear about 122 I think, so close to 32 in profit. That money is going straight to paying some debt off.

I cleaned out a retirement account. About 30% of what I have. Been using it for reno work. No choice. Needed the money to do reno work or I would be trying to sell stuff that needed way too much work.

Closing in on finishing two more apts now. Two last month two this month. Down to 9 vacant, But getting ready to start on 4 more so I’ll be right back to 13.
Working on another commercial space. Things are looking good. Still risky, money’s still tight but I only lost about 2k last month and once I rent a few more apts I’ll start to run black soon.

 

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[JohnD Realestate]

@WJK My area is an opportunity zone I have contemplated getting involved with some people to start one up I believe they call it opportunity fund. But right now I’m a little busy maybe down the road

 

[JohnD Realestate]

Got some money and chugging along with renos.

Rented another apt today. Have 4 coming in line in the next month. 2 the month after that. Getting closer.

 

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[JohnD Realestate]

Getting somewhere on this one. Bought it for 16k. So far put in about 100k in Reno. It’s with about 225 or so.

Took a while to get permits plans money in order. Two contractors screwed it up in the beginning but it’s swinging now.

 

[JohnD Realestate]

16k house We are 100k in on Reno. I have held it for close to two years. When I bought it the arv was 150k. .

Took much longer than planned few things went wrong

I couldn’t pass this one up even tho I was fully invested at the time into a big project. Really should have let it pass. But I took on partners and they wanted out almost right away. Second we didn’t have a great plan with this one. It was a drug infested area and I only had one building. I do t like a single property in a bad area. Secret of drug area investing is Control the block.

Six months later I bought half the block...but now I was into a bigger project so money was still tight. The framer screwed up and we had to get new plans and redo that.

Then came a new partner. The plumber pulled a Houdini and I couldn’t get a new plumber to take over. Now all that is passed and we’re getting close to the finish line.

In the meantime the crime in the City and this block went down noticeably. The house prices in the area jumped. Now it’s worth 220k So despite my self it’s a good deal. Maybe more if I find the right owner occupy.

2 X 1500 a unit. 36k. 5k Taxes -2k garbage/water -1600 insurance -2400 vacancy -2400 management 1400 maintenance

 

[JohnD Realestate]

Things are really rolling now. Seems like the wind is at our backs now. That’s good because before it felt like my back was against a broken window and a pice of glass against my neck.
Been looking around for financing for a while. I’m about 45/55 debt to equity right now conservatively. And possibly 50/50.


So I reached out to a company a while ago that basically told us come back when you when 18 months of on time payments....which we now have so they came out to do a Spence meeting and the guy almost fell over when he saw how much work we had gotten done. They are hedge fund that loaning at 8.5 as long as you have alot equity. I’m thinking it’s too good to be true. We’ll see.

 

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[JohnD Realestate]

Finishing another two family this week. Tenants are moving in next week. About 120k invested. Rents 3k a month. Should be a money maker. Having a disagreement with a partner On it. That’s interesting.

Got six vacant apts left. 2 of them are a few weeks from being finished. The other 4 are in gut rehab stage.

Made a decision. Long time coming.

Selling about half the portfolio. Mostly the commercial. Going to keep one mixed use property and all the residential. Think I’ll stick with 14 units. Should be pretty manageable after what I’ve done.


Got an offer for 920k on a building I bought for 560 two years ago. Put about 60 into it. 10 units. 14k a month in rents. When I bought it it was half vacant drug house. Didn’t do too
Much to the building but just clearing out the bad tenants changed the neighborhood.

I’ll Pay the tax man and stick a bit in the bank and chill out For a while.

Got another similar property on the market. Paid 503k for that one. Same deal drugs/hookers/junkies. It’s not a hipster paradise yet but it’s a changed neighborhood.



I managed to turn around the commercial properties to the point that they will sell at a hefty profit. Percentage wise I killed it in less than 2 years.

Def proved my theory of picking gentrifying market and speeding up the process.

Thinking of writing an ebook on it. Mostly simple stuff but it’s hard learned.

 

[JohnD Realestate]

First photo is the big drug bust. Second one is now. The two stores in front of the hot dog stand weren’t open in the pic but they’re operating now. This block is much cleaner today. Still has a few junkies hanging out but much cleaner.