You will have to do ugly things to get ahead in real estate

152 Replies

This topic has been locked by an administrator.

Promotion
Roofstock
Buy & sell single-family rentals online
Radically accessible real estate investing
Get access to exclusive property listings, proprietary data, and support to build your portfolio.
Learn More

If I run into areas that compromise my values, I just won't invest or will look for a better way to allocate my capital going forward.  Real estate is supposed to make life better.

If you define getting ahead as not losing money/ having a positive rate of return while providing you and your family a stable recessions resistant long term investment that allows you to focus on the things that matter to you: 

I have gotten ahead in RE.

I have never done anything that I'm not comfortable talking about on BP or else where. 

Thus, you can get ahead in RE without doing ugly things. 

Not sure what could prompt a sentiment like this. I believe in operating out of integrity. Though there is a large number of people in the game who don´t, that doesnt change the mindset I embrace. Most people fail in real estate for various reasons but a some is due to unethical practices. I see people who make short term gains but over all, out of that one thing they feel they have achieved they wind up taking 15 steps backwards. The mentality creates chaos and burns bridges. I have gotten burned sometimes by treating people good and trying to do the right thing but over all Iḿ winning. 

@Jim K. Disagree. You can do ugly things to get ahead in real estate (or any profession), but that doesn’t mean that you have to or should.

Your reputation means a lot, and REI is a small world. Any bad acts will catch up to you sooner or later.

Well, guys, obviously it's a bit of a trick question. But almost every day here, I see things that, morally, turn my stomach being passed off as good business in real estate, or at least, in running rentals. How many times have we all seen the same excuse -- "I'm not running a charity" as code for behaving cruelly? How many dismissive things that paint tenants out to be barely human do we read here in the forums on a regular basis?

At the same time, I think that a lot of the handyman work I do is about as nasty as it gets. I'm in the middle of another carpet removal/window change operation, and the windows in place are filthy beyond imagination, the carpet pad is the old cork+clay stuff that dissolves into hardwood floors and plywood subfloors, and I'm down there scraping it up and pulling strips and staples and cutting my hands to shreds. The fact that I'm doing this and not paying somebody else is largely a product of the fact that I want to eventually refinish the select-grade/clear oak floor and I cannot trust anyone to pull all those belt-shredding staples conscientiously for any amount of money.

There's plenty of money down the line in fixing and bulletproofing the floor of the right rental, but I don't see people eagerly jumping at the bit to get at it. Instead, the dream is to buy low, pay people with less brains and credit and much more skill to fix it for you, and rent your fixed-up lemon out for a premium. 

But these people usually lose their shirts.

The rehab-to-rent model is pretty much dead in western Pennsylvania, especially in C-class, unless you can control rehab costs mercilessly. You simply cannot do this unless you know exactly what's involved, and many times that means that you know exactly why trying to pay a third party to do it is would so likely be an exercise in futility that you either choose to do it yourself or don't do it at all.

I have given up on exactly two properties so far and sold them before I rehabbed them. Bother were bought by big talking rehab-to-rent people at closing. One is in it's 11th month of rehab now, while the other continues to sit idle and eat money for the fourth year straight. I'm sure these people have BOATLOADS of excuses for why that is.

@Jim K.

Whats so bad about switching out a carpet, paying a guy to do it, renting a place out to some folks who may have less opportunities in life than yourself.  I would argue it is unethical not to try and make money.  More often then not you are morally obligated to act in you and your families best interest.  I disagree that you are screwing people because you are making money on them.  Instead feeling guilt or shame (if thats the problem) own what you do be an example for guys who want out of depravity or sadness of their life, they can look at you and say "man that dudes pretty cool I'd like to do what he is doing some day."  If you look at those people as victims for one you're probably wrong and more importantly who are you to help them?, what makes you think that you know anything about their life, or what they need, their character, etc.?  

I know I assumed some things in here but if that was road you were going down no stop it!  (Picture Chris Farley here). For the Love God Stop!  

Keep doing good my man!  

Promotion
Speed To Lead
Buy hot seller leads w/o subscription
Buy daily seller leads that are actually ready to sell
Finally there's a place where you can buy leads that asked for urgent help selling their house
Sign up for free

Ha! I knew this was my friend Jim's intention :)

Now, if you want to talk ugly to mean physically, well hell yeah. You've not truly done a personal rehab until sewage has been on you in some fashion. You've not really walked a value-add property until you've been in one where bedroom #1 was where the dogs crapped and bedroom #2 was where the humans crapped. If you've never had to give yourself a serious Rudy talk before entering a crawl space, it might as well have been a finished basement!

So yeah, I've been in that part of ugly, my friend. I bought a house once that was so full of cat piss that you'd have an asthma attack if you were in it more than a few minutes. But mostly I smelled money :)

Originally posted by @Eric Bilderback :

@Jim K.

Whats so bad about switching out a carpet, paying a guy to do it, renting a place out to some folks who may have less opportunities in life than yourself.  I would argue it is unethical not to try and make money.  More often then not you are morally obligated to act in you and your families best interest.  I disagree that you are screwing people because you are making money on them.  Instead feeling guilt or shame (if thats the problem) own what you do be an example for guys who want out of depravity or sadness of their life, they can look at you and say "man that dudes pretty cool I'd like to do what he is doing some day."  If you look at those people as victims for one you're probably wrong and more importantly who are you to help them?, what makes you think that you know anything about their life, or what they need, their character, etc.?  

I know I assumed some things in here but if that was road you were going down no stop it!  (Picture Chris Farley here). For the Love God Stop!  

Keep doing good my man!  

OK, so Eric:

1. Have you ever caught yourself looking at a bunch of black kids playing on a street you own a property on and wishing they were white kids so that your property value would go up?

2. Ever gone by a tenant's house in the middle of the day, seen their car there, and wondered why they weren't at work, knocking out the rent? Wondered if they're taking a day off, does it mean you should raise the rent because they have too much free time on their hands? B****, get out there are EARN for me! 

3. Ever evicted an inherited tenant who was clearly too stupid to breath, too beaten down by life to think, just mentally incompetent to do anything other than lose? You had to evict them, you knew they were stupid to understand what they were doing to themselves, but these people were just dead from the neck up, off with no hope of recovery? Caught yourself feeling gratitude that there but for the grace of God and a few more hard knocks go I?

4. Ever gone through public records and found out WHY this single mom with four kids and a good job keeps renting from you? Seen the computerized record of her last encounter with her ex and read the statement that led to the protection-from-abuse order against her ex, with all four kids SSN's clearly written out by an incompetent cop in the report? And the first thought that you had was, oh, OK, that's why I'm renting a C-class property with no sign of it ending to someone with good credit making 5X the rent, because she feels safe in that house next to the cop station and with a married landlord who doesn't give off the odor of eau de creep?

-----------

I can't say this doesn't weigh on me, Eric. A lot of days, I'm dealing in human misery. Taking a bath in it. Very profitable human misery, but misery all the same. I tell myself I should be like everyone else in every developed society and not worry that my prosperity is built on a mudsill over the less fortunate of the earth, feed myself some cheesy moral double-talk like "I would argue it is unethical not to try and make money" with a hefty side of rationalization, but it doesn't always work.

Originally posted by @JD Martin :

Ha! I knew this was my friend Jim's intention :)

Now, if you want to talk ugly to mean physically, well hell yeah. You've not truly done a personal rehab until sewage has been on you in some fashion. You've not really walked a value-add property until you've been in one where bedroom #1 was where the dogs crapped and bedroom #2 was where the humans crapped. If you've never had to give yourself a serious Rudy talk before entering a crawl space, it might as well have been a finished basement!

So yeah, I've been in that part of ugly, my friend. I bought a house once that was so full of cat piss that you'd have an asthma attack if you were in it more than a few minutes. But mostly I smelled money :)

I read a book once that said, "There is more honor in a well-tilled field than one soaked in blood" and I still believe it.

I've just met too many people why dream about making money in real estate that turn up their noses at manual labor, even skilled labor, and think they're too good for it, JD. Let alone cleanouts and raccoon crap and holes in the walls where they get in and out.

@Jim K. Personally, I have very high standards. Both morally and in what I invest in. That doesn’t mean I won’t get my hands dirty or buy something that needs a rehab. I do my best to work with my tenants to make their situations work when at all possible.

I’ve learned my lesson about being a “softie” and “getting too involved”. I’m not afraid to serve notices to quit or anything else needed if payments aren’t on time, or if I’ve made an arrangement with a tenant and they break it.

I want to be known as a fair, just, good quality landlord. I haven’t gotten involved in the rental price gouging that has been going on in my market over the past year. I won’t do anything I consider morally or ethically wrong and I hate when I see other landlords who do.

With great power comes great responsibility. As a rental agent, I have met shady landlords that kept people's security deposits when denying their applications if they lied about prior evictions. I have met overly nice landlords that gave a tenant 6 months of free rent and a 4-year long, $300 under-market rent lease extension that the tenant can cancel anytime but the landlord cannot - all because that tenant had some utility service interruptions due to a rehab downstairs. As a landlord myself, I strike a balance. I once hired a tenant who lost his job for 2 months as my assistant. When a retired tenant was about to be evicted by me, I helped him get an apartment at the YMCA, rented a Uhaul and helped him move. I always respond to repair requests quickly and treat my tenants like paying customers. I buy my tenants a new fridge if they ask for it. The ugliest thing I've had to do, as a landlord, was deal with a 4-apartment bed bug infestation. And the sewer that backed up all over the first floor. Crawling under my house in 20 below zero weather to unfreeze a p-trap. Yep, you will have to do ugly things to get ahead in real estate. But you can still be a good person while doing them.

"It is difficult to get a man to understand something when his paycheck depends upon him not understanding."

Sinclair Lewis

@Jim K.

It sounds like you may feel beat down man, keep the faith. In all honesty, someone needs to own those properties and it's best if it's someone like you who will think about these moral questions. I am sure the slumlords are out there but they're not going to be places like here. I lived in class C neighborhoods growing up. Knew where to buy certain drugs and who were the big names on the block. Those places exist and there's nothing we can do about it. But owning those kind of buildings gives the downtrodden a place to live and there's honor in that. If the neighborhood were renovated and rented at high prices, it would push those most vulnerable out, needing to find a new home. Or worse, leave the house abandoned which would attract far worse energy.