218: Slugging it Out in the Trenches – Indy Update

SHOW NOTES FOR EPISODE 218: SLUGGING IT OUT IN THE TRENCHES – INDY UPDATE

Real estate investing is not all roses!  But that’s no reason to get discouraged or to stop pursuing your goals.  Those who keep moving forward will win. In this episode, Bill candidly shares some messy, down-in-the-dirt landlording stories, what he has learned and how he is overcoming some of these temporary obstacles.

Hey Fellow Old Dawgs!

You know, I asked recently for feedback on the show, what you like, don’t like, etc. and I got a great email from one of our listeners named Adam

QUESTIONS & COMMENTS: Hey Bill, in your last episode you asked for feedback so here it is!  First off, so I’m not an old Dawg but we have something in common in that we both invest in Indianapolis.  No other podcast has a host who talks as personally as you do about your rentals and the challenges in them.  Obviously for someone like me, who also invests in Indianapolis it’s a hugely selfish thing in that I want to hear as much as I can about your personal process investing because I know the neighborhoods that you’re talking about and I can gauge my decisions with yours.  But, I feel like this information is valuable to any investor as usually most podcasts are interviews with some guy who just bought 98 apartment complexes, something that I don’t ever want to get to.  I just want to get enough to not have to work.  So hearing first hand struggles from someone else slogging it out is THE BEST!

So here’s my suggestion:  Can you start all of your Friday podcasts with a personal update of your properties.  Even if its a boring update, like nothing much happened, to me that kind of info is SO MUCH BETTER than what you normally do.  sometimes I feel like you’re just rehashing investment 101 articles on Fridays.  Just make them personal and talk about your own properties and I promise you it will be soooo popular.  You already have the best and most calming podcast voice.  Just make it personal on Fridays.  I’m always SO excited when you do an actual Indianapolis update.  Speaking of which, how are the Airbnb long term rentals doing?  Last time you had 2 people leave and you had just hired a woman to maybe watch up over it more for reduced rent.  Like we all want to know how that turns or is turning out… not “where are the best places to invest”.  Keep it personal and we’ll keep coming back for more 🙂  Thanks Bill, love the podcast!

Alright, Adam.  You asked for it, so here it it is… the Good, the Bad… and the Ugly

But before I get started, I just want to check-in with you.

I hope you’re doing well with your investing…  I realize I always say that, and I don’t want you to think I’m just flippantly saying that.  I really do care.  Don’t take it as just blind optimism, I don’t recognize your challenges and that I just look at things through rose colored glasses.  I know how tough it can be out there, too.  I’ve said it before and I’ll say it again, real estate investing CAN and WILL be tough!

Another investor wrote me this week on how he’s lost over $125K in his investing and has had considerable problems with a certain turnkey provider I have mentioned before, even interviewed him on my podcast but have since removed the podcast from our archives.  I really felt for this investor who is just trying to do it right.

If you are struggling, take heed, you are not alone.

This is can be a very tough business.

You know, I know lots of people who have tried this and, for one reason or another, are no longer.

• My own brother had 5 or 6 houses at one time, bought before the crash, and got rid of all but one
• My best friend since 4^th grade, had investment property but no longer owns it
• In both cases, bad loans, equity losses, skyrocketing expenses and tenant problems just motivated them to get out

I get it!  Especially, with smaller investments.  I find with smaller rentals, sometimes it can hit a little harder.   One big repair, multiple months of vacancies and other factors can cause you to operate in the red.  You can kill your cash flow for the YEAR!  With all of the difficulties I have had with my 22-unit, it still has not failed to provide good, consistent  cash flow, despite my smaller properties

I have a single family in Atlanta area (actually Forest Park area) that has done pretty good, outside of some earlier property management issues.  It was bought in a decent area and I think that helped

I also have some properties in Memphis, in not so great areas.  Not war zones, but definitely economically depressed.

A single family house in Memphis that has been empty for 6 months, destroyed by Section 8 tenants, pending over $6,000 plus in repairs.  I’m tempted to just sell it because the neighborhood has declined considerably since I bought it but I hate to sell it at a loss.

I also have a duplex.  Repaired one side of my duplex there at $3,000 plus and hope to get a tenant in soon.  The tenant on the other side is 26 days late on rent…

I have a new property manager in Memphis and I’m hoping things get better.

In Indy, my duplex is doing great.  Good tenants.  Never any vacancies.  Never any issues.  But it is in a “good area.”

My 22-unit is another story.  I bought in an area that is in the path of progress and in trasition.  But what do you do in that situation.  Wait?  Wait until the good stuff hits your neighborhood?  Basically, yes!  It’s either that or bail.  I’m determined to tough it out and fight.

Here’s the latest:

As you know I converted 3 units to AirBNB units to fill the “income gap” while I’m trying to stabilize the rest.  I targeted 30-day minimum stay guests (traveling nurses, students on internships, business persons) That proved to be a great move financially but it has still had its problems:

• My apartment community and the local neighborhood have not been too welcoming to our AirBNB guests:
  • A traveling nurse only lasted a few days because she was woken up in the middle of the night by someone running through the halls, banging on doors and screaming
  • There was a fire in the building
  • A graduate student had his laptop and phone stolen out of his room (we’re still working with AirBNB on coverage)
  • Found out one of our guests had a prostitute and a crack addict staying with him – both of whom solicited my AirBNB guest for either money or sex
  • A new tenant couple have been fighting and screaming like clockwork at 3am every night
  • One of our good-hearted tenants was letting a homeless guy in to sleep in the laundry area – cops came, found drugs on him, arrested him. He came back.  May have set the fire and also defecated on the walls.
• We hired a security guard for a few days to put people at ease
  • He only had to kick some people out of our parking lot who were having sex in a car

What have I learned and what am I doing to chance things:

• Moving forward with evictions on the properties we’ve indentified as problems
• Sent notes to each tenant mentioning what we are doing (security cameras, etc) and encouraging a “neighborhood watch” atmosphere, providing them numbers to call for specific incidents they witness
• Continuing to rehab and improve – putting beautiful fire doors on all units. We are continuing to upgrade the property and units to attract a higher level of tenant
• Installing security cameras outside and inside that we can monitor 24/7 at my PM’s office and that I can access through my smart phone – any incident can be reported to the police or on-site people
• Still looking for someone to live there for reduced rent or free (if they have other duties) to make sure things are kept nice and to make the police or other calls when and if necessary
• Hired a co-host for my AirBNB units. A co-host is a person who…  .  This has helped tremendously
• Might add a 4^th AirBNB unit
• I have clamped down on my PM, given him strict standards and a ultimatum regarding the tenants we are seeking (while I’m shopping other PMs)
• His big complaint is that we just aren’t getting quality applicants.

I had lunch recently with one of our guests, Neil Bawa  (211: A Scientific Approach to Real Estate Investing June 4, 2018)

• He is an engineer/turned full-time investor who, especially as the market opportunities have slowed down, has looked at making his properties more efficient and profitable through various systems he has created. One of those systems he created for a property he had in Chicago that was in a low income area, 70% occupancy, drugs, prostitution, alot of issues.  His focus was to get better tenants through sheer volume of prospective tenants –and he sees it as more of numbers issue than anything else.
• He carefully studied the whole tenant lead system and saw that most leads grow cold after a few hours because prospects are responding to multiple ads. So, he created a system (that he now uses for his over 1000 units) where he lists his vacancies on 29 different online portals (Apartments.com, Hotpads, Trulia, Zillow, Craigslist, etc.) and as they generate responses, the responses go immediately to his team of 17 virtual assistants in The Phillipines and India who immediately (within the hour) call back the lead, screen and book a showing with his leasing agent.  They also call the prospect up the day before, the day of, reminding them of their appointment, provide directions to the apartment, do all they can to insure the prospect keeps the appointment.  There current system generates something like 12,000 leads a month.
• I’m adapted that system (or more created my own small apartment version) with my assistant who basically is doing everything their people are doing in the Philippines. I’ve also recruited my own leasing agent to show the apartments and will get paid one month’s rent for a one year if a tenant they show gets a one lease tenant.  I’ll let you know how it goes.  We have 5 vacancies to fill

Yes, that’s a lot of things but I am encouraged.  Despite all the problems, are numbers are still good.  If we can turn-over the eviction units quickly, we can hopefully get those units rented quickly with new our stealth tenant marketing effort.

So, if you are discouraged, don’t be.  Learn from the things that go wrong and re-engineer, to avoid the same mistake in the future.  This is a learning game and those that keep moving forward will win.  You just have to keep your focus.

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