Build a real estate company in a D area

[WJK]

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.

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...

 

[JohnD Realestate]

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 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.

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.

 

[WJK]

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

Sure, drug dealers aren't very creative with their free location ads. They've been using the old shoes draped over the power lines for the last 30 years!

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[WJK]

.... and it always amazes me that everyone does not know this... But, here it is in this picture in front of God and everyone. And, they are getting busted.

Drug dealers are sometimes sly about their business, but I wouldn't call them particularly bright or far thinking. If you do the wrong thing often enough, you will get caught. I guess they missed that lesson.

 

[JohnD Realestate]

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.

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.

 

[JohnD Realestate]

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

I’ve heard that before, and it def cold be true here.

 

[JohnD Realestate]

Drug dealers are sometimes sly about their business, but I wouldn't call them particularly bright or far thinking. If you do the wrong thing often enough, you will get caught. I guess they missed that lesson.

When I put cameras in the hallways I went to the dealers and showed them the cameras on my phone. I told them I was going to give access to the cops. I showed them that the cameras had microphones. I was working on evicting them but the process is a few months and they always paid rent on time.

They were just too stupid. I told the cops that o told them too. When I brought the camera to the attention of the PD they said thanks well take a look.

 

[JohnD Realestate]

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!

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.

 

[WJK]

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.

Good job! You're a winner!

 

[JohnD Realestate]

@WJK thanks!

Building Dept hit me with 10 violations after the fire. Mostly related to the fire...a few because the fire called attention to me. Cost me some much needed cash but the cost of doing biz.

Got about 5 evictions in progress. Continuing to cull the bottom 10% of my tenants and then spruce up with paint LVP flooring and Rent to a better tenant. Looks like the store below the fire will be rented.

Was reading a news article last night complaining of gentrification in Newburgh. That is good news. When folks are complaining about gentrification I’m a happy guy. Last time this happened my rents quadruped in 10 years. Kind of crazy how quickly things are changing. Every week I go up I meet new investors

The City contacted me about my meetup....they asked if they could attend. They want to know if we can work together on some things.....no public comment.

One of my tenants never put his utility in his name. Got a bill for 1000 or so this week. 5 months. Argh. They were mailing it to the address of the building and I don’t have a box there. I called him up he’s like I’ll pay when you fix my apt up. My fault bad tenant should have evicted sooner. He’s been there for years place is trashed. Looking forward to him leaving me fixing it up. He tried to break into another tenants place the next day. See ya.

 

[WJK]

@WJK thanks!

Building Dept hit me with 10 violations after the fire. Mostly related to the fire...a few because the fire called attention to me. Cost me some much needed cash but the cost of doing biz.

Got about 5 evictions in progress. Continuing to cull the bottom 10% of my tenants and then spruce up with paint LVP flooring and Rent to a better tenant. Looks like the store below the fire will be rented.

Was reading a news article last night complaining of gentrification in Newburgh. That is good news. When folks are complaining about gentrification I’m a happy guy. Last time this happened my rents quadruped in 10 years. Kind of crazy how quickly things are changing. Every week I go up I meet new investors

The City contacted me about my meetup....they asked if they could attend. They want to know if we can work together on some things.....no public comment.

One of my tenants never put his utility in his name. Got a bill for 1000 or so this week. 5 months. Argh. They were mailing it to the address of the building and I don’t have a box there. I called him up he’s like I’ll pay when you fix my apt up. My fault bad tenant should have evicted sooner. He’s been there for years place is trashed. Looking forward to him leaving me fixing it up. He tried to break into another tenants place the next day. See ya.

You just keep swing! Good fI or you.
That bill for guy's electrical service just means that you need to check on that issue next time with the electric company. Maybe a check list for each tenant. I know, I know -- you've been up to your a$$ in alligators...
Did you get the shoes off of the wires in front of your building?
You're doing great. You still have you head above water.
I just wrote a blog about a mobile home that was so bad, we had to tear it down. If you get time, read it. I attached it to the "read it" in red. It's funny now -- it wasn't then. I sure know how you feel. Hang tough!

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[WJK]

@WJK yes I know what you mean. I’ll read it I skimmed it and realize your right.


Short story. Years ago it was a very cold winter days of -4 or -6 f. That’s really cold. My water pipe froze up in nyc. My heating was steam. So no water no heat. There is a subway stop in front of my house. The tenants had left for hotels. Bc the subway it would cost 20k or more to repair. I was broke. Through some research and a bunch of 12 hour days I fixed the problem for 1500. Or so. I was cold and wet for days. We had a 3 year old a 1 year old and my wife was pregant.

No we look back and not yet laugh but one day we will.

Thanks for the knowledge and feedback.

No sneakers are still up. But this is the room the drug dealers were in. Before and after.

I'd much rather have a vacancy rather than a bad tenant. Love your picture of the bare floor. Keep them out. I know it's impossible to know anyone until you marry them or rent to them! Peace and happiness to you!

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[WJK]

That guy broke into the room the night after the drug bust.

Things have changed in that building. It wasn’t easy.

It's never easy. That's why everyone doesn't do it! Real estate is NOT for wimps.

 

[JohnD Realestate]

Money is tight...bc I Bought another house...and another next Friday. Crazy but they were both good deals. I found them and brought in two other investors. I put up 25% on each. First one is a one family in a 3 family zone. 4 stories. Orange permit in the Window. We put in for a variance for 3 family. It needs a ton of work but the block is awesome. View of the hudson close to cool coffee shops all that. Paid 45k needs 150 worth about 275 arv....I hope. Second one paid 69k needs 50-70k worth 250k. Might try to fix up the first one a bit then sell. It’s a big project.

Putting a few up for sale in the next week or two...putting finishing touches on. The green one. And the nice pics inside.

Refi is moving along. Waiting to hear back. Hard money loan is killing me. 12k a month right now. Almost over, can’t wait.

 

[WJK]

Got the variance. Building is worth way more tonight then it was this morning. What a relief. I was banking it would happen but it could have gotten voted down.

That was a huge gamble. If it hadn’t been approved I didn’t really have a way out except to flip it but that’s more cash in then I had. Lucky again.

Congratulations! Now you JUST have to make it work. You know how to do it. Go for it.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[WJK]

Might see if we can change this posting title to watch this guy get a haircut.

This is ugly. The six months on the sheet below are the better 6 of 10 months. There is none of the Reno money I brought to the deal or money that borrowed lately on this sheet. to keep things moving along. When you factor in that money It’s creeping up on a 230k loss for 10 months. I owe about 1.5 m on loans on 2.7 in property right now. I also owe about 150k in Personal or cc. Mostly biz stuff. If I was a professional RE guy this would be a hiccup. But my 9-5 i take home about 750 a weak.

Closing on a sale next week fingers crossed. That one will be a small profit for me. I had partners. Percentage wise it’s sick deal but small so it doesn’t matter too much.

I had 4 properties on the market. But the market is getting soft right now. My broker called me last week. Good News! I had a cash offer 500k. no contingency on the rooming house. I would have lost about 50k (I paid 464k and did some Reno) selling at that price. I’m selling for 3 reasons. It’s a major PIA. I couldn’t refi the SRO, and it’s (62% occupancy) losing money every month bc I’m strict with new tenants. Heavy duty background checks no Sex offenders, no social service tenants. Only tenants with verifiable income. If I wasn’t strict I’d have 100% occupancy.

When I got the offer they were putting down 10% with a financing and inspection contingency. So i told them to get the cash they said they had together. I had major trouble doing a refi with the sro. That’s why I put it on the market.

So I’m taking a beating financially. I’be been a bit depressed and anxious again hard to sleep. Have to take deep breaths and calm myself sometimes. Getting anxiety a bit.

So I stopped to take a look at what I’m doing wrong. Of course this is all my fault. I made the wrong choices to get myself here.


Working on a way back to success. Been on a diet. Low sugar, low alcohol( I was drinking a ridiculous anount a day for a few months) getting a bit of focus lately.

My retreat plan had been to sell about half what I hold in portfolio. Then pay bills, taxes etc.


The soft market killed that plan. There are son many properties on the market mine are not even getting many showings.

Working on the new plan.

I left about about two millennia of stuff.

I was showing an agent one of my properties a few weeks ago. For months we had a lot of flies in the building. Normally I’m a little more proactive but this building only has sh*t tenants. So I wrote it off. Turns out there was a hole in the main sewer. There was 2 feet of raw sewage in the Crawl space. Finally got the idea when none of the plumbing was working. I’m under the floor cleaning out the crap with an inadequate pair of rubber gloves when the agent shows. I hop out and start my car salesman act when I Street guy gets the idea to hit me up for cash. I see him a lot. Usually duck him. But this time he’s got me back against the wall. In a corner. Him and the agent leaving me exit. Starts telling me he’s a killer. Tough guy. Well I’m pretty frustrated at this point. I feel like mike Douglas in falling down. 30 seconds later my thumbs are buried in his eyes and the agent is running for the car. Finances might be kicking my a$$. But no one is going to kick me a$$ while my back is against my own property.


I have 5 vacant apartments right now, 2 vacant commercial. Two evictions in process. And I’m still spending every dollar I can to drag my properties out of rhe filth and make them attractive, secure and affordable. Not giving up.

You're upside down on every thing. I know how you feel. Bail out on as much red ink as you can. Is there anything that you can turn around?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Thoelt53]

You're crazy man! Good for you.

I used to work in Newburgh, that city is no joke. Talk about a place you don't want to be when the sun goes down...

Anyhow, I had always wondered when it would turn around. Geographically, the area is gorgeous and has lots to offer. Just a lot of old Bronx/Brooklyn wash up that needs to go first.

You've shown you're able to take repeated hits square on the chin, always getting back up. You will make it.

Stay safe.

 

[WJK]

Good for you. Keeping working on your vacancy rate. It's also a safety issue. Your units are a lot more secure with tenants in them. Overall, are you reducing your LTV (loan to value ratio)? That will be your next challenge.

 

[WJK]

Sold that house. Exactly 40k profit. Not too bad percentage wise but not what I was planning.

Started up a meetup a while ago to help other investors get going in newburgh.....so I’m not the only crazy guy fighting drug dealers in the ghetto. Had a bit of success with it. Def helped me get leverage with contractors. Anyone trying to do a lot of work long term
Should consider it. It gets me major discounts....

Got two projects that are coming to completion.

Have you looked into the new Opportunity areas created by the Federal Tax changes? They look like an excellent way to go.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Michael Burgess]

This guy stole some copper from me the other day. He was working for me. No biggie. Small setback. Not stopping for a second.

Passed a framing inspection on a 4 family Reno of the big bad building. A few weeks more and I’m in the clear. All down hill on this one now.

Sorry to hear about that guy stealing from you - it's a shame, but good you're just moving on and chuggin' along.

I'm curious about the last two photos in your post - are you basically building a new subfloor on top of the previous material? Just putting some strapping down, plywood on top, and creating a new level and flush surface to work on?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[JohnD Realestate]

Explain

Heh heh. I don’t know exactly what it is. The guy next door to me does architectural salvage....so if your demoing an old building and find stuff like corbels or tin ceilings, lead pan glass windows, pocket doors even whole staircases they buy them for a bit and resell.

His store is doing crazy biz and he wants to expand into furniture. Think it’s all vintage. But I’m not sure.

 

[Merging Left]

Q. I know this sucks but I’m not a tech guy. That’s a cop out of course. Looking to do something a bit more purpose driven. I’d like to be able to send banks here to see what I’ve done. And also send investors for private money. Here is my crappy website. Any advice? Newburgh Renovation Co

Hire one of the guys out of @Fox 's web design course to build you a beautiful website in exchange for building up their portfolio. I think he teaches that you should do 1-2 projects for free to show prospective clients. Win-win?

NewburghReno.com is an available domain as well.

 

[JohnD Realestate]

Hire one of the guys out of @Fox 's web design course to build you a beautiful website in exchange for building up their portfolio. I think he teaches that you should do 1-2 projects for free to show prospective clients. Win-win?

NewburghReno.com is an available domain as well.

That’s a fantastic idea not sure anybody was doing Free but I’m game. I do More business referrals than anyone I know. I’ve learned over the years that one comes back in spades. So I could offer that and a bit of cash or real estate mentoring. I’ve gotten big into the mentoring lately.
Thanks for the tip

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[JohnD Realestate]

16k house coming along.

 

[Michael Burgess]

Beautiful building! I love the black windows and ornate woodwork just beneath the roof.

 

[Merging Left]

How long does it take you to rent these units? I recently purchased a small condo in a seedy part of Cleveland that I've been having trouble getting rented. People who are interested aren't qualified, and people who are qualified aren't interested. It's a narrow intersection of people who would be interested and qualify. It is listed on Section 8's website, but there hasn't been a ton of interest from there.

 

[JohnD Realestate]

How long does it take you to rent these units? I recently purchased a small condo in a seedy part of Cleveland that I've been having trouble getting rented. People who are interested aren't qualified, and people who are qualified aren't interested. It's a narrow intersection of people who would be interested and qualify. It is listed on Section 8's website, but there hasn't been a ton of interest from there.

Usually 2-3 weeks but sometimes longer.


What are your goals with the property. Are you planing to buy more units in the same development? I’m not a big S8 guy. I have a 5 or so but I don’t plan on getting any new ones and when they move out I’ll look for market rate tenants.

Do you live nearby

I don’t pay too attention to how long it takes. I focus more on getting the best tenant for the long term. Ex. Right now I’m trying to convince some of my tenants to.break his lease in one of my buildings and move to my new property. It’ll cost me money to get him to move. I’ll rent it to him for less. But he’s like the Arnold Schwarzenegger of the neighborhood do I don’t mind losing a bit of cash flow.

 

[Dianne Cohen]

How long does it take you to rent these units? I recently purchased a small condo in a seedy part of Cleveland that I've been having trouble getting rented. People who are interested aren't qualified, and people who are qualified aren't interested. It's a narrow intersection of people who would be interested and qualify. It is listed on Section 8's website, but there hasn't been a ton of interest from there.

I don't know your area, but I do rentals in South Florida. Advertise on Zumper. It is free. Make sure to use the words "section 8 welcome". Do it every day or more and change it up a little bit every time. If you need help with it, let me know. I do this without the section 8 part and still, get a ton of section 8 leads every month. Feel free to contact me if you need help with this. Good Luck.

 

[Merging Left]

Do you have a specific goal you're working towards and a timeline to achieve it, or are you just accumulating units as quickly as you can handle them?

 

[JohnD Realestate]

Little to little, little to late. I have to sell more properties then I planned. Good and bad. Get to spend more time with my kids now. I’m still working full time.

if I had gotten this far a few months ago I’d probably stick it out a few more or more then a few years. But it got a little to close to insolvency. Few lawsuits too.

Ill keep posting back as I progress. Try to detail out some of the mistakes I made. Still going to keep some.

Can’t say it was a complete failure. I’m selling one property for good gain. And I did manage to clean up the neighborhood a bit.