Why do Michigan SFH investors reinvent the wheel everytime?

28 Replies

I don't know about everyone else, but I got into real estate to be an investor: to buy/sell/rent. 

I don't want to burn my Saturdays running around unlocking doors for prospective buyers/tenants or meeting up with contractors to pay them or sitting in front of the computer on a Sunday night to make sure I get the craigslist ads posted, and then turn my phone volume on max loud to make sure I don't miss any calls about my properties. 

I don't want to spend time looking for good and honest contractors, and then burn more of my time to manage them and the job. I'm basically paying people to take up my time to watch them - it's such an absurd concept, but every investor does this, AND think it's normal and logical!

As a single-family-home investor, I find myself doing all the tasks from beginning to end on the real estate business-cycle:

1) Looking for the good deals/analyzing leads

2) The purchase

3) Rehab

4) Look for good contractors, buying materials, managing contractors/jobs

5) utility turn on/off

6) Advertising on Craig's List/Zillow/etc for rent/sale

7) Answering calls/email responses to my ads, unlocking doors and showing properties

8) creating/printing lease agreements, collecting rent, etc...

That's a lot of tasks to go from getting the house to getting cash in your pockets - and that's not even all the tasks! I got into real estate thinking it's a passive income stream - was I ever wrong! I bought myself a job. I really don't want another job, but I've got it now.

Specialization:

Why don't SFH investors learn from Henry Ford with the assembly line concept? Instead of each investor building the car from start to finish, why don't investors actually team up, specialize in some tasks, and train $8/hr hires to do the other mundane tasks?

Whatever tasks you do in the real estate business cycle, if you think you're good, imagine how good you'd be if that's all you did all the time? Imagine if that person is available for hire at $8/hr - split between your group of investors, it come out to $0.10/hr cost to you personally.  Is your time worth $0.10/hr?  

Synergy:

In my area, I know that if all the local SFH investors pooled their resources, we'd have over 500 SFH homes in Lansing, East Lansing, Holt, Grand Ledge, Haslett, Dewitt, Mason, Okemos and surrounding areas! We'd be the biggest land owner second only to the government! Anyone and everyone who's interested in lease with option to purchase, land contracts, or any other creative financing strategies would go to this group's combined website before the MLS and Craigslist!

Not to mention some investors are also licensed Realtors, public notaries, licensed builders, licensed plumbers, etc. If everyone teamed up to form a single group/entity, that group would have nearly every certification and license required by any law to do anything real estate related. Break down each task to be as simple as possible, and hire an $8/hr person to do it: answering calls and emails using a specific template made by investors, unlocking doors, printing contract templates with correct addresses/dates/names, craigslist posting...etc

If such a group existed in Lansing, MI, I sure would be willing to pay a few bucks/month for this service so I can free up my time to do what I really like to do: finding the good deals and making the purchase, and then setting the selling/rent price, and collecting the proceeds!

Why don't investors take advantage of synergy? Why do we all operate like there are no other investors doing what we do?  

If you're interested in freeing up more of your time from doing mundane real estate tasks, get in touch with me to start such an entity in the Lansing, MI area - I have some ideas.

@Bao Nguyen I think you may have hit something here. Although I am not that close to you (45mins) I would love to hear your ideas and see if it could be brought about on a larger scale or at least implemented in my area of Genesee and Metro Detroit. If anything maybe I could spark a few ideas in you!

I do feel that most investors nickel and dime themselves WAY too much and overcomplicate everything. Instead of focusing on that next home purchase they are caught up on the next toilet purchase to save a few dollars. It pains me to see people toiling like this, day in and day out. Why not build a team and let people do what they are good at? Like you mentioned...you didn't see Henry Ford tightening bolts.... 

I'm going to have a meeting with the local investors in the Lansing area to discuss about forming an entity that can perform any task in the real estate business cycle - a non-profit company.  My goal is to outsource all my menial tasks so I can focus on buying and setting the rent/sale prices.

Please private message me your email if you would like to be involved in this meeting. For out of town folks, we can do a Skype conference or Google Hangout session for you to participate.

I will be there..... late, but I will be there @Daniel H Hauer .

@Bao Nguyen You make some great points here and I think your vision is great.... However economies exist that alleviate many of your concerns. Sure, the industry is time consuming. It takes time and hard work to find and build that team and compromises usually are must. No one is going to take care of your assets like you, however you need to build that team that you trust first in order to maximize your time. Things to consider:

1. Leasing Agents--I would suggest finding a newer agent who is hungry

2. Virtual Assistants- For $3/hr you can eliminate all the mundane listing and basic secretarial tasks

3. Property manager-- sure it is going to cost about 10% of gross rents but how valuable is your time? It sounds like you have the experience so you should know the right questions to ask to find the property management team that will be your partner, not a headache.

4. Relationships with brokers and wholesalers who will bring you pre-vetted deals...

5. Contractors---no solution to this one haha. You just have to be patient and when you find a good one, pay them well and keep them busy!

Best of luck on your endeavors.

@Bao Nguyen

While it is good to see you're trying to think outside the box, the problem I foresee with your suggestion is that all people are different. Different people have different skills that are more or less valuable. Some people are far more greedy than others. Some people work much harder than others. Is a licensed Realtor more valuable than your general contractor? How about someone who is new to investing, but is very driven? How does everyone get paid? I don't want to start a political debate, but this is the fundamental reason why socialism doesn't work. The issue isn't with the idea or the system, its people and their nature. Additionally, there are a finite amount of deals at any given time, which is why investors compete for those deals and occasionally cooperate when it is in their best interest. 

If you are able to get a large group of people and work things out, I'd be very interested in hearing the details and seeing if you can make it a successful venture. Personally, I'm more of a 'hands on' type of investor and I think the real value you build with real estate is directly proportional to the amount of work (or money) you're willing to put in. While you can be a passive investor, there is a high cost to being passive, as you are paying others to do work you could be doing yourself. 


-Christopher

@Christopher Brainard Good points, and I agree.  But even with hands-on investors would benefit from this coop/system.  Case in point: Cross-selling.  Let me paint you a common scenario that all buy-and-hold investors experience:

When a prospective tenant calls me about a property that I've already rented out, they usually ask me if I have other properties in the area, similar properties, etc.  And most of the time, I tell them no because I run a tight operation and never have more than 1 or 2 vacant units.  However, by saying no, I sound like a 1 or 2 property investor.  I wish I had a list of all my local investor's available units so I can say "yes, I have 20 other SFHs available...what exactly are you looking for?".  

Furthermore Chris, with this type of "coop", no investor is forced to give up any part of the business process that they don't want to manage 100%.  The service is there, if the investor choose to take advantage, if not, do it the old fashion way and do everything yourself.  :-)

@Bao Nguyen

I think i may have taken it mentally a few more steps than you envisioned. So basically, you're thinking an 'al la carte' real estate service provider? Something like, I decide I don't want to do a rehab on a property myself, so I call up the hot line, and have someone from the office sent out to do it for me?

-Christopher

One person can't really manage 500 SFH, and an 8/hr only gets you a crappy worker, I do not think they will be capable of doing "investor" caliber jobs. I can't even find one to run the office for lesser than 15/hr. If they are that smart, they will not be working for you and would probably run a property management service. You have bold goals, although not impossible, but highly improbable. You will be teaching the employee, all the tricks of the trade, as soon as they learn how to do it, they will, for sure start doing it, and that will result to the turn-over of another worker. I do not know about your state, but in CA, we can't really stop workers from forming their own company, quitting and working for somebody else even your competition.

As you have mentioned, it takes THAT much of your time, and you do everything fast because you don't have to think twice, take the "time consumed" on what you do now, multiply it by 3, that is how many hours you will be paying for them to do it.  If they need to turn utilities on/off or visit your rehab site, meet contractors, the employee would really be working for only one investor wouldn't they?

I run a similar business that involves drafting both architectural and engineering, and project management.  Because they are virtual, managing them is a challenge.  There are jobs that could be outsourced, especially the online portions of it are easy, but you still need to find someone who could get your points and do everything the way you want it.  There are some that cant be outsourced, showings, contractor site inspection, etc.  If it were to work, I would suggest time billing for each investor for the shared resource for those that are really direct labor hours and clearly chargeable to the investor.

OR!

Simply hire a part time employee, then knock yourself out.

Originally posted by @Bao Nguyen :

@Christopher Brainard Good points, and I agree.  But even with hands-on investors would benefit from this coop/system.  Case in point: Cross-selling.  Let me paint you a common scenario that all buy-and-hold investors experience:

When a prospective tenant calls me about a property that I've already rented out, they usually ask me if I have other properties in the area, similar properties, etc.  And most of the time, I tell them no because I run a tight operation and never have more than 1 or 2 vacant units.  However, by saying no, I sound like a 1 or 2 property investor.  I wish I had a list of all my local investor's available units so I can say "yes, I have 20 other SFHs available...what exactly are you looking for?".  

Furthermore Chris, with this type of "coop", no investor is forced to give up any part of the business process that they don't want to manage 100%.  The service is there, if the investor choose to take advantage, if not, do it the old fashion way and do everything yourself.  :-)

Bao - Great point. It would essentially be a means of building a large network base. Almost like a BNI group, but exclusively real estate related. It would definitely cut down the time spent searching for certain services, at least the ones as a REI you are comfortable passing on to another.

Originally posted by @Bao Nguyen :

@Christopher Brainard Good points, and I agree.  But even with hands-on investors would benefit from this coop/system.  Case in point: Cross-selling.  Let me paint you a common scenario that all buy-and-hold investors experience:

When a prospective tenant calls me about a property that I've already rented out, they usually ask me if I have other properties in the area, similar properties, etc.  And most of the time, I tell them no because I run a tight operation and never have more than 1 or 2 vacant units.  However, by saying no, I sound like a 1 or 2 property investor.  I wish I had a list of all my local investor's available units so I can say "yes, I have 20 other SFHs available...what exactly are you looking for?".  

Furthermore Chris, with this type of "coop", no investor is forced to give up any part of the business process that they don't want to manage 100%.  The service is there, if the investor choose to take advantage, if not, do it the old fashion way and do everything yourself.  :-)

Bao - Great point. It would essentially be a means of building a large network base. Almost like a BNI group, but exclusively real estate related. It would definitely cut down the time spent searching for certain services, at least the ones as a REI you are comfortable passing on to another.

@Manolo D. You're exactly correct Manolo: it's impossible to manage 500 SFH by yourself, and that's exactly why I posted this topic. The "$8/hr employee" is just a figure of speech, the idea is that this employee is not expensive relative to the big picture. $8/hr in Michigan may be the equivalent of $15/hr where you are in LA.

Apart from the locating and purchasing properties, I don't believe any real estate tasks are difficult: they are just time consuming.  Many corporations have proven the assembly line concept.  For example, Ford Motor Company: they build cars that are much nicer than any single super-duper-expert guru mechanical engineer could ever build.  I'm sure when Ford just started business in the early 1900, Henry Ford himself could build the entire Model A better than any of the assembly line works combined.  Not true today - and that's because each of those "$8/hr workers" have gotten that much better at their specific tasks.  

This strategy has also been proven in the commercial real estate world: apartment complex management.  

Only SFH investors are still in the dark ages, and it's because we can't unite, believing we can do it all better alone than if we had a group, a formal process, and structure.

@Tim Puffer That's the idea Tim. But this "REI group" would be more than just business networking - there are actual services provided for the members, and there is a real operation and business process that the group would follow for each real estate task.

Bao, excellent post and I agree with the strategy. I believe that this is a point to focus on, for my success. I teach my children and believe that "we should try to do things better, and we should try to do more of these things (greater capacity). I wish you the best in your endeavors and have a Great Day. Thanks Don

Originally posted by @Don Alberts :

Bao, excellent post and I agree with the strategy. I believe that this is a point to focus on, for my success. I teach my children and believe that "we should try to do things better, and we should try to do more of these things (greater capacity). I wish you the best in your endeavors and have a Great Day. Thanks Don

 Thanks Don.  Imagine if the 50 United States operated as 50 separate countries, without synergy and collective support? Each state would have build its own military, its own currency, its own FBI, CIA, white house staff..redundancy and waste!  Or imagine the reverse, where do you think South America or Europe would be if both of those continents were 1 united country each, like the US?  

In the end is the idea simply earn a "good" passive return? I hear all of the great ideas on this thread and it makes me think that if all 500 units are SFRs at a 100k, you all could buy something like 1500 units of multi family. At this level you have the best property management outfit that money can buy. Managers / assistant managers, HVAC certified folks, porters and maids, all on staff. Maybe you'd only have three or four properties in the syndication so the operation would be nice, neat and consolidated. I have a hand full of SFRs and am selling to get into muti family here in Fenton Michigan. I have found some of the best mentors in the country as,coming originally from the SFR space, they had suggested the economies of scale make multi family conducive to a truly passive income producing asset. I know most investors are control freaks (like me) so this wouldn't necessarily work like clockwork, but conceptually it may get you closer to the Grail. Best of luck gents!! Chad

Bao, I would like to talk to you more about this idea.  I believe some part mixed with everyone's ideas would be good. Why not start a company of this sort and set up meetings with investors and discuss all that investors are looking for and services they would use, have listings of all open units, have maintenance people all set up and ready, have contractors that all of the investors get better pricing from due to high volume, also suppliers lower pricing. Buying things in bulk lowers cost for all investors involved. I do not agree that one person could do it, I believe having someone set up this as there company and offering all of the services investors want is a good idea. I also believe that if you get enough investors together, there could be lists put together for new deals, real estate agents would come to the company with their inventory, and having a company with a huge group of investors together gives serious buyg power and group discounts, and leverage when needed, also gives investors a way to step back when needed, this could be for needingvacations, or to concentrate on a flip and let someone else handle rentals, or handle lining up contractors and utilities deang with city or government. I do believe an office set in Lansing is a good idea for central hub for statewide coverage. How many could we put together to provide these services, also these services to. What about opening the company and for initial startup getting investors together and eaceach puts in XXX and receives a percentage of profit at years end. What do you all think, this is an idea I think is good and would be willing to put time in and set up if you all feel there is a need and if any would be willing to invest at the startup to get this going. Pm me with any questionsquestions, comments, or ideas you all have.

Thank you

@Bao Nguyen   You are 100% correct. I have some partners in that area that have a multi-million dollar diversified portfolio as well as they are private lenders but more on the commercial side. I'd love to see what we can come up with. 

@Bao Nguyen this is a great thread. I've been very interested in getting involved in flipping and feel as though I have the skills necessary to do a great job, but each aspect that needs to handled would get very time consuming. The type of organization that you're speaking of simply sounds like a well run flipping business, instead of a buy and hold. Obtain a couple people who monitor MLS, one main contractor, a marketer etc. It would cost money but it would run smoothly once in place. I'd love to talk strategy and ideas in the mid-Michigan area.