Sep 21

If they are being honest, every landlord will tell you they have had days of despair.

However, if you run it like a business you can do well.

If you don’t run it as a business; don’t enforce your rules; don’t know the laws; let problems affect you personally instead of approaching them logically; or don’t calculate for expected costs, you will fail.

The best way to find the path to success is to actively participate in local landlord groups.

Dec 23

Joe and I have stayed in touch occasionally in the couple of years since he left the AASEW for Princeton. In fact he gave me a really cool Princeton tee shirt for encouraging him to take the leap from Milwaukee landlord to attending one of the top academic schools in the world.  Wearing it is the closest I’ll ever get to an Ivy League School. 😉

 
I was talking to Joe yesterday.  He was describing his new position as Director of Lafayette univerisity’s IDEAL Center for Innovation and Entrepreneurship.  What a great opportunity for him to be at the forefront of innovation and entrepreneurship at a nearly 200 year old college.
 
I asked if he was still in a hurry to rejoin the ranks of Milwaukee rental housing providers.  The answer was ’No’ of course…
 
Then Joe went on to mention that he gave a TED Talk, while at Princeton.  So if you want to learn Joe’s story… It is inspirational.
 
 
Jul 19

Perhaps excluding the likes of Amazon, Google, and Tesla, most well run, and effective businesses can achieve 10, 15, 20% or more sustainable improvement every couple of years by applying “Fresh Eyes” to their procedures and processes.

Your business is doing well, at least you think so. But you know it would do better if only you could just … [put your challenges and opportunities here] You say ‘I’ll jump on doing that next week, or after the vacation, or after Labor Day or by the end of the year.’ Sorry, buddy. Ain’t happenin’. You said the same last year and the year before and…

Let’s be honest you can’t see the opportunities and obstacles, and if you do, you cannot act on them. The excuses your staff and you have created to avoid doing what must be done have been internalized and are no longer even noticed. Processes that were in place and working have fallen by the wayside. You step over great opportunities sitting on your front step every morning, without even noticing them anymore or worse, curse them for being in your way.

We are blind to missed opportunities and obstacles because we are too close. In the past twenty-five years, I went from 175 to 200 pounds. I did not see even one of those pounds sneak up on me, but they are here today. Your business is the same, slowly getting fat, but not noticed.

‘Well, I’ll just have my staff take a look and make changes.’ Sorry, they have worse baggage than you.

What we’ve done at my company for many years now is to hire a temporary set of “Fresh Eyes.” This person must be a potential superstar, who is available to work for a couple of, or a few months. They are never hired to fill a current role.

Rather the “Fresh Eyes” position is to question everything we do. You know how it is easier to tell someone how they should run their business or their life than to do the same yourself. That is what we are looking for in a “Fresh Eyes” person.

Typically we hire people outside of the rental industry, so they have a different perspective than us. We’ve had a former Health Department inspector, a former Alderman, a couple of former community leaders, a former manager of a temp service. I lean towards people different than us, but who have proven themselves as leaders and producers.

The goal is to hit a sustainable 15% improvement with a two to four-month commitment to work with the “Fresh Eyes” employee.

To get value full value from this experience, you must remember that “Ego is the Enemy”* and do not allow yourself to feel insulted or defensive of your soon to be former bad ways.
——
*Ego is the Enemy is the title of a book on Stoicism by Ryan Holiday – It is worth the read. Find it on Amazon.

“MY OPPONENT IS MY TEACHER. MY EGO IS MY ENEMY.”
— RENZO GRACIE

Aug 23

We spent much of week two of our three weeks out west in the warehouse district of Los Angeles. I was shocked at how large LA’s homeless population is. I was also a bit shocked as how bad the area smelled – stale urine, extreme heat and no rain to wash it away is not very pleasant.

It is really a sad scene given the overall wealth of our country and of SoCal in particular.

An interesting real estate related concept in LA was the number of what appears to be privately owned SRO (Single Room Occupancy or rooming houses) Nice, modern buildings.

So even in this most economically, and probably socially, challenging housing environments, rental owners are able to find workable solutions by providing housing uniquely suited for a specific population.

The third thing I learned while out west for much of July is the most interesting. It has kept me busy for the past three weeks. … More to come 😉

Aug 05

Every year we spend about three weeks in the southwest. Typically it starts with four days at a database developer conference, this year and last were in Vegas. While I was honing my computer skills, my wife offered some classes and coaching for her Vegas area students of the Event Decorating Academy. We then rented a car and headed to Los Angeles to reconnect with vendors that supply the Event Decor Mart.

Carmen put on a couple of more classes and coaching sessions while in LA.  The trip ends in Vegas for the ASD trade show.  In general, I do not like Vegas. It is expensive, and we are not gamblers or night people. Although one night I did stay up to 11 PM;-) It is also triple digit hot every day.

I always return with a lot of new database techniques and skills.  More importantly to this conversation, I am a constant student of the housing industry, taking every opportunity to learn something while away from home.

 

First takeaway from this year’s trip: Short Term Rentals

 

We rented furnished apartments in both Vegas and LA through Hotels.com. These are units that the property management has set aside just for this purpose. If you have mid to upscale rentals, this might be an opportunity to increase your occupancy. It appears the going rate per week is around the half the monthly rent, plus a $100-150 fee per rental for cleaning.

Renting an apartment for extended work trips is a heck of a bargain for the consumer. The cost is half that of renting a hotel room in the same area. Plus you get a full kitchen to make your meals, which is important given Carmen’s extreme food allergies, and a washer as you are not going to make it three weeks without doing laundry.

In LA we stayed in a one bedroom at the Apex, just a block or so from the Staple Center. The Apex is a modern glass high-rise with a good sized living room, which Carmen needed for her coaching sessions.  In Vegas, we found a place half a block from the Convention Center – two bedroom, two baths, kitchen and laundry with a large living room for far less than the cost of a Vegas hotel.

From an owner’s perspective,  weekly furnished business rentals could help owners of mid to upper-end apartments in high demand areas increase their collected rent. I’m sure AirBnB also fits in here.

Municipalities often oppose things like weekly rentals and AirBnB because they cut into the hotel tax revenue. So if you are going to give this a go I would check local ordinances as well as with your city’s taxing authority to make sure you stay on this side of the law.

Apr 25

To be successful at landlording you must approach it as a business.  No better way to be innovative than to liberally steal ideas,  grabbing the best from other industries and repurposing them for ours.  I also have been thinking a lot about starting an incubator for physical businesses in Milwaukee that employee people that have a hard time finding good jobs.

Good artists copy, great artists steal. — Pablo Picasso

This past Saturday John Lee Dumas, who does the podcast “Entrepreneur on Fire” was speaking at the inaugural  Young Entrepreneur Convention in Des Moines.  If you have heard his podcast you know how great they are.  If you haven’t, go take a listen.  His format is doing an interview a day with a different entrepreneur, seven days a week.  He is an ex-tank commander in the Middle Eastern wars, turned successful podcaster and author.

I find such valuable insights in his stuff that I decided to go to Iowa to see him in person. I did not even look at who the other speakers were. After hearing him speak, if the Young Entrepreneur Convention been JLD alone, the trip would have been worth it.

I was pleasantly surprised at the quality of every one of the presenters.

 

Kevin Harrington and Carmen Ballering at the Young Entrepreneur Convention

Kevin Harrington and Carmen Ballering at the Young Entrepreneur Convention

Probably the best known was Kevin Harrington, one of the original Sharks from Shark Tank.

 

His interesting story:  He got his start after seeing a knife pitchman at a county fair and noticing that the Discovery Channel was dark six hours a day in the early days of cable. This was the beginning of “As Seen On TV” and the entire infomercial craze.

Carmen spoke to Kevin Harrington off stage about doing a promo for the Event Decorating Academy. I think what he offered is a valid idea to try.

 

The other surprising presenter was Jeff Hoffman,  founder of PriceLine.com, the company that brought low-cost easy travel to the masses as well as the creator of the airport ticketing kiosk. There was some irony in seeing him Saturday and then having a terrible experience with American Airlines on the way home the next day.  His interesting story: He got kicked out of Yale for not having the complete tuition.  He solved it by creating a B2B software company even though he could not program himself at the time.

Jeff Hoffman, founder of Priceline, with Carmen Ballering

Jeff Hoffman, founder of Priceline, with Carmen Ballering

Two big take aways from Jeff Hoffman:  Create BIG goals, envision that you have achieved them and then work backward each step until you are where you are today.  That is how he arrived at doing concerts with Elton John, Britney Spears, and NSYNC.  He also has produced a profitable indie movie.

The other, which is a to our businesses, is to look at what is occurring outside of your industry and see what opportunities presents themselves.  PriceLine.com was based on his reading articles on perishable goods, distressed inventory, and spot pricing.

 

As I wrote earlier, every presenter was great.

The guy that put the event together was Brandon T Adams.  He had created the (3rd?) largest Kickstarter campaigns and is a 2012 Iowa State University grad.

Two of the presenters are from Madison.  Megan Watt ,who just released her first book, is a leadership trainer at her company, Dream Catalyst Labs. I paged through the book after hearing her presentation and bought it. The other is Jenna Atkinson, who gave a great presentation on marketing and social media.

Ken Shamrock, "The most dangerous man in the world", Carmen Ballering Tim Ballering

Center, Ken Shamrock, “The most dangerous man in the world”, Carmen Ballering, who may just be the most dangerous woman in the world, and Tim Ballering

Cactus Jack Barringer is a very entertaining marketer. Guy holds a dozen patents.

There were a bunch other presenters during break out sessions that I did not get to see.  You can see the  YEC 2016 speaker list here.

One that we did see that I did not see a tie into our businesses but was cool to meet as our son-in-law and his brother are both MMA fighters, in fact, Monday of last week the brother, Kevin Vazquez, had his first major UFC fight was Ken Shamrock  “The World’s Most Dangerous Man”.  Shamrock and his partner were pitching a project to team retiring celebrities with young entrepreneurs.

The event was so great I can’t wait for next year’s conference.

#YECDM

Oct 24

I recently read a book “The One Thing: The Surprisingly Simple Truth Behind Extraordinary Results” by Gary Keller.  The author is a real estate professional, but the book is not about real estate per se.  The entire premises of the book is:

What’s the ONE Thing you can do such that by doing it everything else will be easier or unnecessary?

While simple, it is a great question.  Perhaps making an entire book out of it is a small stretch, but none the less a great question.

So let’s apply it to our industry.  What is the one thing that would change everything for us?

A few ideas that come to mind:

  • Enforceable tenant responsibility
  • A cooperative rather than confrontational relationship with local governments
  • Superior screening tools
  • Access to labor
  • Reduced cost supplies
  • Software
  • Financing

What is your ONE thing that would change everything – lets decided and then decide to make it happen,  Post your ideas in the comments or over at the ApartmentAssoc Yahoo Group

 

 

Mar 24

In the past few months I have had nearly a dozen of conversations with other rental property owners that have turned to some variation on the question ‘What do you attribute your success to’ My story is simply not that interesting.

It is a story of working hard at generally boring things. Yes, I have lived well off landlording for three decades. Yes, I now have time to walk  thirty-five to fifty miles a week, often barefoot on wet sand. Yes, I have the time to travel around the country to help my wife with her business.  I still work remotely when I am away form the office, just not the insane hours I did as a kid.

But the truth is mine is just not an exciting story.  Seems most people want to know how to be independent and wealthy by July.  They do not want to hear about the multi year, multi decade journey it took me.

I used to say ‘Everyone says they want to be me, but none of them are willing to do what it takes.’ That was too egotistical sounding and I only used it in private conversations with folks who pushed me to tell them “the secret.”

A couple of years ago I read a quote by Hugh MacLoed which I like better.  In fact I liked it so much I bought a numbered MacLoed print for my office wall.  At least it was there before my staff redecorated the offices … I haven’t checked in a while.

“What people say they want and what they’re willing to work their ass off to get are two different things. ” – Hugh MacLeod

I simply focused on one thing most of my life,  pursued boring fundamentals with dogged persistence and took the time to learn the laws that affect my business.  For me this worked well.

Focus. Today the buzzword in business start ups is ‘pivot’ and the mantra is ‘pivot early and pivot often’, meaning a complete change in direction when things get tough.  Tough seems to mean in their terms that you aren’t ready for a one hundred million  dollar IPO and it’s already been six months so it must be time to do something else. I wonder how many of these young entrepreneurs  give up just before success.

As I criticize the pivot I must admit I too had a major pivot in the very early days. When I was in my early twenties I wanted to own a state of the art contract computerized manufacturing (CNC/CAD) company.  My background was in manufacturing and CNC machining. I loved the challenges and logic of making things.  I started buying rentals with the goal of using them to finance the machine shop.  That dream hit a bump in the road.  My potential business partner had some legal problems that I was unaware of until we went for financing.  I stayed with the rentals and grew that business.  So on some level this was a pivot, but not in the sense it is used today.

Instead of the pivot I went for incremental improvement.  For thirty years I did little else for income that did not involve rental housing. Every day I try to do this better than we did yesterday.

It was only in the last few years that I diversified a bit from Milwaukee rentals by helping my wife with her business and began exploring Southeastern Florida real estate as well as some angel funding stuff. You will not create the next PayPal, eBay or Google through incremental improvement, but it is a path to a decent sustainable lifestyle.  I see it as a fault of mine that my dreams were not larger, but I am fairly content where I’m at.

Persistence is still being there when everyone else gets tired and goes home.  Persistence is when you still show up and giving it your all even though you’ve had  three bad months in a row. Persistence is eating Kraft instant macaroni four times a week for months on end to finance a rehab. Persistence is leaving for work at 6 AM and not arriving home until 10 PM every day for weeks on end.  (See my follow up post on ten things I should have done differently) Persistence is staying the course when everyone around you says it is a no win game.

Despite how it is spelled, there is no fun in the fundamentals. Once the adrenaline rush of buying a building wears off so does the enthusiasm of many.  Rental real estate is a tough business.  When my son said he wanted to follow me into the business I told him to find something better to do with his life.  And landlording is a business, not an investment, at least not at the levels we are dealing with.

Bookkeeping, taxes, employees/HR, purchasing, collections, filling vacancies, evictions, customer service and dealing with bureaucrats are all part of the unfun fundamentals.

To succeed at landlording you have to focus on these fundamentals and pay attention to a myriad of laws and rules that affect us. I’m pretty sure that must every business out there is similar in this regard.

I’ve done all of those, others who are successful today have shared similar stories.  Then there are those who seemed to hold such promise at the beginning but suddenly were washed out.  Most of them looked for a shortcut, ignoring the fundamentals and then gave up when it got a wee bit hard.

May 15

Sewer, water and municipal service fees have become a major operating expense.  I’m sure these runaway fees have lead to the failure of many newer, under capitalized owners.

Last month the law changed on municipal utility charges, making it more practical to have tenants be responsible for these charges.  We owe a lot of thanks to the work done by Gary Goyke in making this law a reality, as well as the support of the members of the Wisconsin Apartment Association, the Apartment Associations of South Central WI and of course the members of the Apartment Association of Southeastern WI

In addition to the potential financial benefit to owners, there is a societal and environmental benefit as this will certainly result in conservation.  No more walking into a unit, only to see the tenant thawing dinner by running cold water over frozen meat for half an hour.  Remember when you paid for heat and would find windows open on sub freezing days or when you paid for hot water and found your basements being used as a laundromat for friends and family.

The most important aspects of the law effect the 2015 billings.  However there are some things we as owners need to do now to ramp up.

First, you cannot bill tenants directly for utilities that are not separately metered.  This means for multiple unit properties the water needs to be separated and an additional meter added.  In older Milwaukee duplexes this is not going to be a major job.  The two plumbing contractors I spoke to felt it would be a $600-1000 per duplex  to separate the water and install a second meter horn.  Remember that in this style building you only need to separate the cold water to the lower unit faucets and toilet as well as the feed to the lower water heater and possibly laundry facilities.

Older side by sides and four families will take more work, read $, as they typically have a single cold feed to the upper units.

Second, for the benefit of tenants, owner occupants and the city’s ability to collect their utility bills; we must urge the city to go to monthly billings

Attorney Tristan Pettit shared the attached doc from the League of Wisconsin Municipalities that should be the first step in the road map to making the change.

Jan 02

A year ago I wrote of my five top ideas for real estate for 2013.

Of those ideas I have implemented .. not much.   Shortly after the first of the year 2013 we found that my wife’s ongoing back pain was being caused by a large benign tumor. She had it surgically removed on Valentine’s day and is fine today, but it upended things for a while

Today as I reflect on the past year and think about this coming year I reread the ideas posted last year. A year later they all hold value.

Two have been implemented as part of an effort to increase the value of membership by the Apartment Association of Southeastern WI’s  board of directors under the leadership of Joe Dahl.

The Association now has quarterly small group meetings as part of the Professional Membership. These meetings are an important element of #3 on the list, improving  how we share our collective knowledge

In a big step towards #1 on the list, reducing maintenance supply costs, the Association has teamed up with Home Depot, Pittsburg Paint, Sherwin Williams, and a number of other organizations to provide discounts to our members.

Home Depot offers a whopping 20% discount on paint and 2% cash back rebate on most purchases to our members. Sherwin Williams offers members discounts on paint equal to the discounts that major contractors receive. Pittsburg has similar discounts.

I would add a sixth and seventh opportunity for 2014, Crowdsourcing/Crowd funding for real estate.  I’ll post my thoughts on these in the next couple of days

The five most important Real Estate Ideas for 2014 remain:

(Clicking on the topic’s title takes you to the full article)

  1. Reducing Maintenance Supplies costs
    Pre 1950 buildings in lower income neighborhoods require around $100 per month per unit for repairs, replacement reserves and improvements. Newer buildings in more affluent neighborhoods perhaps $50 – $65. This is all maintenance from leaky faucets and unit turnovers to new cabinets, new roofs, electrical upgrades, replacing parking lots ect. (more)
  2. More Effective Maintenance Labor/Contractors
    Maintenance, replacements and improvements to rental housing represents nearly $100 million per year in the city of Milwaukee alone. A savings of even 1% is a lot of money. (more)
  3. Become better at sharing our collective knowledge
    The ApartmentAssoc@YahooGroups.com is good beginning. However it does not work real well as a reference tool as the posts are not organized by topics nor apparently easily searchable for many users. (more)
  4. Group purchase of a distressed block or two
    There has been this wild idea floating around in my head for years, acquiring a distressed block with a group of active owners and turn it around for fun and profit. (more)
  5. Tech Meets Real Estate
    There certainly are huge opportunities for software/web solutions for things that cause frustrations for owners and perhaps tenants. (more)
  6. Crowdsourcing for real estate, posting later in the week.
  7. Crowdfunding for real estate, posting later in the week.

 

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