Focusing on one target at a time - Posted by Tony Colella
Posted by Tony Colella on June 05, 2011 at 16:26:55:
Rick Ewens reminded our group about how important focus is to the investor. The examples he gave can be expanded upon and recently I found myself looking at properties I had no business considering and here’s why.
I have been blessed with very little vacancy for most of my portfolio’s lifetime. This does not mean that I didn’t have my bad times or I did not put the wrong people in the wrong house just to get payments in. I still do that I am afraid. Most of my tenant base has been with me for many years. I have spent my time and money fixing up homes and in many cases repeated that cycle again and again.
I have 1 home that has been my nemesis for 3 years. I began setting this home up in 2007 and never finished it. It has probably been 90% done for years and every (and I mean EVERY time) I go near it my vacancy gets hit somewhere else. I end up with 3 move outs or rehabs at one time and off I go again. This cycle has repeated itself for over 3 years. It did so again this year. I really dislike this house.
Over the past few weeks I have spent free time wondering if I should gaze over fences to seek other potential opportunities like perhaps buying a fixer upper stick built. As I began to think of what I could do to a home I was shocked back to reality by the image of Rick Ewens smacking on the back of the head while yelling “focus.”
Now Rick’s topic on his “focus” had little to do with my daydreaming of stick built rehabbing, but what it did remind me was of the doublewide nightmare that has haunted me for 3 years. I am ashamed to say that this home has sat that long. I would estimate tens of thousands of dollars in lost rent because I have not finished what I started on this project. Thankfully it is only one of two! Actually the other one is a real old singlewide right next door and only been down for much of this year. (Quite a ball of fire ain’t I?).
Don’t get me wrong, I have worked hard on the other properties keeping them full and have, over time, just about completed the Stage one of Landlord Friendly repairs in the remainder of the portfolio. Money and time were well spent on those units and a stick built property I sold but my inability to finish that doublewide is inexcusable (ever hear of hiring a COMPETENT contractor instead of doing it yourself Tony?). Now is my time to focus as best I can on that home and not spend my time rehabbing a new property. Seems obvious right?
Here is what I know. For the small portfolio investor it is dangerous to get caught up in the buy mode. Investors of this size get hurt when they get too many units, too fast and cannot afford to complete the turn around on one enough to move on to the next. The snowball effect occurs. The properties go downhill. The rental income goes down hill but the cost to change all this continues to climb with each added vacancy. By adding more units we compound the problem.
For people operating on a larger scale and with well capitalized investments, it may not be necessary for them to complete one project before moving on to the next. For folks like Rick it makes sense to establish the cash flow of one property and set up a team to complete the infill while he aquires more properties and installs more teams. For the smaller players like me there isn’t much of a team put in place. The recipe for disaster gets worse if you are undercapitalized (while things have been tight I have not truly experienced this problem yet but I know many others have).
As I imagined myself thanking Rick for the reality jolt I had to wonder if I was alone in this. I decided I might just not be so I wrote this post.
Sometimes it is best to do more with less. For me this means completing the properties that I have before moving on. Focus on cutting expenses that repeat themselves and increase my landlord friendly repairs.
Tony