Blue Collar or White Collar Landlord, Advice or Discussion

Blue Collar or White Collar Landlord, Advice or Discussion

Flipper · Cheney, WA · Member since 2014 · 77 posts · 47 votes

I'm a hands-on blue collar type landlord thinking about changing my business model to scale up my number of rentals. I would appreciate thoughtful input about how you decide on rental scaling and business modeling.

About the tree, On November 17 we had a major windstorm in Eastern Washington State.  This is one of my rentals. Another of my properties had a less dramatic tree blown over and a third had a wind damaged roof.  I tried to hire a tree service for this place, but they were all way too busy.  You may have seen in the news that arborists and linemen from all over the country were brought into our area.  Anyway, I wound up renting a boom and taking it down myself.  In a nutshell, my out of pocket for all three properties was less than $500 and a busy few days.  That is good because I had just raised my deductibles on my insurance to $5,000 to save premiums.

So that is the upside of being a blue collar landlord as I see it.  Low overhead.  But as I add properties, there is a limit to how much I can do.  The downside is I was recently outbid on a triplex in this neighborhood.  As I evaluate new deals, I am looking for better and better returns because I am thinking about the limits of my labor and the cost of hiring things out. The guys who outbid me for the triplex (nice guys, who may be biggerpockets members) appear to be white collar landlords with full time jobs who don't do much hands on and don't have the cash flow requirements I do.  If you don't take down your own trees or roof your own houses, your business can scale much easier. And although your overhead will be higher, you are free to do something else most of the time...

So, that is how my thoughts are going.  I wonder if anyone else is mulling or has mulled the same kind of thing.

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Investor · Milwaukee, WI · Member since 2014 · 811 posts · 420 votes
10y
I have the same discussion with myself all the time. I have a hard time paying someone to do something I know that I could do myself. However, if you really want to scale up your business, I think you will eventually want to work more "on" your business instead of "in" your business. Your costs will certainly go up in the short term but unless you want to be a full time handyman and landlord I would lean towards outsourcing some of the tasks that could free you up to find more deals.
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  • Homeowner · VISTA, CA · Member since 2015 · 727 posts · 340 votes
    10y

    Ha! That's kind of funny about what your two sons should do. My sons fought me tooth and nail about going to college their argument being that they just wanted to be general contractors and really didn't need a college degree for that. 

    I told them it was not negotiable and that they would indeed go to college and that they would just have to settle for being well educated contractors. I told my youngest son that when he graduated I would turn the reins of my construction company over to him. 

    I'll never forget standing up as he passed me during the procession with degree in hand and whispered to me.............."Dad, you're fired." Brought music to my ears and he's been very successful every since. NOTE: He's the creative one that loves working with his hands. 

  • Jerry W.Pro Member
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    Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
    10y

    @Don Coumbs my goal was to have 10 paid off units at retirement when I started, then I changed it to 50 units. I need to re-evaluate. I am hoping now to be able to retire in 5 years, I am working on that plan now to see if I can find a way. I just did REI a little on the side then 3 years ago I decided to ramp it up. I have to head out for a week now lets keep in touch.

  • Rental Property Investor · The Woodlands, TX · Member since 2014 · 345 posts · 288 votes
    10y

    @Don Coumbs

    I haven't been too risky with my leverage.  I usually try to buy below value and then added down payment before financing.... So i have always been in the 40-60% leverage position.  

    By selling some properties to pay off others, My cash flow went up a bit, but not a substantial amount.  I was cash flowing pretty good on all of them so getting rid of a few actually reduced my cash flow when I paid off mortgages that weren't cash flowing as well (I also used the sales to consolidate to locations closer to my house-Now I can almost ride my mountain bike to all of my properties) 

    The bottom line for me was that the existing income was sufficient for me to resign from my career so the extra few hundred dollars was just an added benefit to the reduced management requirements.  Additionally, after paying off all of my personal debt and my personal mortgage, I enjoyed the feeling of not owing anyone a dime so much that it eventually carried to my investments.... even though I completely understand how I am limiting the speed of growth by not using leverage.... what can I say, I guess I just like to do things the hard way.

    jeff

  • Investor · Appleton, WI · Member since 2012 · 1k+ posts · 464 votes
    10y

    Don, I do strive to cash flow at least $100/door/month. The 15 year notes came from the ability to scale long term. I would need to get there anyway. At first I wanted to retire early at 55, then I realized that doing 15 year notes I would have a lot more flexability at age 40. I just turned 30 and want to be done in 2 years. I will most likely do handyman/construction work as I enjoy that a lot more than my current work. I do not have a specific number but when I did have detailed plans going forward I have always surpassed them when I hit that point in time. However with that income comes higher spending. When I first started and had 2 duplexes, I would save all year to get a big project done (new driveway, windows or siding). Now I'll do all that over a couple properties in a month. I buy fixer uppers to create value, essentially buying some work. Management side also increased profitability. As I complete the major projects, my properties become increasingly stable. With a solid base I am able to take on more profitable and labor intensive new projects since I will have the time to focus on them. 

    Hopefully my 2 year plan works out but if it takes 3 I'll be fine. While having detailed goals is important I have settled into continuing to move forward with each step accomplishing boarder long term goals. I just want each move to make next year better than this year. If that means the next month is hell with 3 hours of sleep a day, I can do that (however I need to approve with the wife as reaching our goals is great but not if I lose my family)

  • Flipper · Cheney, WA · Member since 2014 · 77 posts · 47 votes
    10y

    @JD MartinBoy are you right about the boom. I wanted to contract that one, but all the tree services were busy. My college girl tenants wouldn't go near the place with that tree hanging over it and I didn't blame them. But I take your point.

    You are also right about rehabbing an empty place versus working around a tenant's stuff and with them looking over your shoulder. I'll take an empty place any day.

    If my plans go through, I will have another rehab in the next month or so.  I'll be adding a bathroom among other things.  I think I will do the plumbing and hire out the sheetrock, but to each his own.

  • Flipper · Cheney, WA · Member since 2014 · 77 posts · 47 votes
    10y

    @John Arendsen I have one in college now, one sophomore in high school. I hope to have a success story like yours in a few years.  It sounds trite, but that is the success that really matters.

  • Flipper · Cheney, WA · Member since 2014 · 77 posts · 47 votes
    10y

    @Jeff Wallace, I had an economics professor who said that any non monetary compensation you can take from a job is %100 tax free. To me, one of the primary benefits of having a business is that I can do things the way that I want.

    It sounds like you feel less management headaches, less debt and less risk is worth something to you. Any non monetary value you receive from that is all yours.  So far the government can't tax happiness.

    I'm really tempted to do what you did. but I think my cash flow would go down marginally, and I am not quite that Dave Ramsey. Although, in a few years when I can clean up all the debt and still have enough to live on, I probably will.

  • Flipper · Cheney, WA · Member since 2014 · 77 posts · 47 votes
    10y

    @Kyle HippYou are so right about prioritizing family. I think you are also right about planning, but not letting the plan take on to much importance.

    I know what you mean about how big a deal a few thousand dollars for repairs is.  There was a time that it was a huge deal, and with scale it becomes routine. Now watch, someone with the scale to think that my entire operation is a minor expense is going to scoff at me.

    I buy fixers too.  I feel like my sweat equity is what makes me able to make deals. I did a pretty hard 4 weeks on a house starting in late August, but I was getting a fairly solid 6 hours of sleep a night.  You are hard core - and 17 years younger than me.

    Way to go, getting free by your early 30's.

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