Investor – Page 2 – Real Life Investor

Lessons Learned: Contractors and Friendships

Warning: This post comes from fresh emotions of disbelief, frustration, anger, and disappointment. The identities of the parties involved have not been disclosed so that they can take full responsibility for destroying their own reputations. (they’ll know who they are)

If you have done any kind of research on becoming a real estate investor or have even simply considered having some work done on your own house, then you’ve heard the horror stories related to contractors. We’ve heard all of the stories about contractors abandoning projects, taking the money and running, or spending way over budget; but we simply didn’t have to worry about any of those issues. We have a contractor that makes promises they will deliver, someone that won’t leave us hanging, and someone that will grow with us and our business. We have a friend that is a contractor. It’s going to be the best business relationship ever and we are going to take over the rehabbing world!

Well, that was the plan…

We were in the process of building a dream team. Our contractor was highly motivated. His energy and motivation was contagious and inspirational. We couldn’t wait to settle on a house and begin the demo process. The realtor that we were working with was the contractor’s girlfriend. She was also a very driven person seeking to catapult her career to new heights. The ambition that they brought to the table was a sure win. The cool part was that they were working to build a brand together like a wannabe Chip and Joanna Gaines couple. They have the cute kid to exploit in marketing gimmicks and even bought chickens. The perfect family to compliment the perfect business partnership.

Things started out with a bang. There was a ton of commotion and activity around the rehab as old fixtures and debris was being removed from the house. We would get excited every time that I’d stop by the job site to check out the progress. We have to admit, seeing the result after demo was a bit overwhelming trying to imagine how everything would be put back together again. That worry quickly subsided because, heck, I’ve got the best team looking out for our interests. I’ve got faith in them and we all benefit when the job is complete; the realtor gets the listing and commissions and the contractor agreed to a percentage of the profits, so of course it’s in all of our best interests to get the house rehabbed and on the market as soon as possible.

Until it’s not…

Not long after the demo was complete, there seemed to be a distraction or two. There had been some exterior improvements that really screamed progress. A new roof and siding transformed the curb appeal of the house and created quite a bit of excitement around the neighborhood. We were excited about the new look and could see the potential. We couldn’t wait to see how the improvements inside would turn out. While we were excited about the progress of the rehab, the contractor was increasingly excited about a new house that he was about to build for him, his girlfriend, and the cute kid. The contractor assured me that this would not impact the progress of the rehab since he is a professional and capable of managing multiple projects. Yeah right.

It’s still very painful to reflect on how naive we were to expect things to get better. We would drive to the job site weeks on end without any signs of life or progress. Repeated calls to our contractor would go unanswered. When the calls would be answered, we would get a line of excuses, promises, and revised timelines to completion. We would cut our losses and verbally agree with our contractor that the new timeline is what it is and swallow our frustration. This process happened over, and over, and over, and over again…

Trying not to live with regrets…

We regret not firing our contractor. We regret this decision every single day that work drags on at the rehab. Our weakness was doing what we felt was the right thing in helping a friend. After all, he helped to open our eyes the opportunities and excitement of rehabbing. He had already invested time and energy in the project and we still wanted to give him the share that we had agreed to. We offered to help find sub contractors to complete the work and got lip service that he was working on it and that he will be there to finish the job. We started talking with other contractors to see if they could provide guidance on how to go about getting things finished without our contractor “friend”. Throughout this entire endeavor, we never ever considered abandoning our agreement to give him the negotiated percentage of profit. We continued to look out for his interest in the project that he abandoned. It’s like we cared more about his share than he did.

Gah!!!!!

So this post could go on and on about the specific details of frustration and disappointment that we are facing, but it makes us sick to think about how ignorant our contractor has been that we are trying to complete this deal with some kind of profit. This is a job that should have taken 6 months, but has missed the deadline by almost a year. The optimist in us thinks that at least there is a benefit from a capital gains tax perspective, if there’s even a profit.

In the end, the worst part is being disappointed by the so called friends that we thought we would build our dreams with. Their loss. They have turned into nothing more than shysters. If they continue down the path that they are on then they are destined to have a run in with karma and a few terms like fraud and embezzlement.

We shouldn’t even care anymore…

Honestly, we just want to move on and still make good on all of our promises. However, the contractor expects to underdeliver, break all promises, go over time, go over budget, steal, and then ask for more money… haha!!

Fortunately, we have not let this experience deter us from our real estate endeavors and we are already wrapping up our next project with a new contractor with much more success. Subscribe to our blog to get notifications on our future posts and learn about what we have done differently to ensure that we have chosen a honest contractor. We personally recommend Hawk Rock Construction or Five-Star Contracting which serve Harrisburg, Pennsylvania and the surrounding areas.

** Oh yeah. I forgot to mention the ending of the business relationship with the realtor. She completely forgot about us until it was time to list the property so that she could cash in on a commission. She was simply too busy with building her own house and self indulgence to pick up the phone, even once in over a year! Even after giving her a chance for redemption and trying to come up with an amicable resolution, she was arrogant and ignorant to the end. Which reminds me… where’s the buyer that you said that you had? Oh wait, never mind. Don’t care. You’re fired.

Investment Property Research and Analysis

Researching a potential investment property can be a time consuming activity. Of course you do as much research online as possible, but eventually you will need to drive out to the property to perform as much of a visual inspection as possible.

Research

I am new to the property rehabbing profession, so I can’t even begin to imagine how much more complicated research was before the extensive availability of information on the Internet. Even though there is a lot more information available online, it is always important to remember that you can’t believe everything that you read…

Property History

Before I determine whether or not I am going to take the time to drive out to a property, I like to gather at least some basic information on a property. Like; photos (if any), home size, lot size, bedrooms, bathrooms, sales history, rough estimate of comps in the area, taxes, and any other little tidbits that I can gather up. A good resource for a quick search is a real estate website such as www.zillow.com. If I like what I see, then I will print a copy of the property listing found on Zillow to take with me on the road.

Another great resource is Google Maps. Sometimes there is a street view of the property that you’re interested in checking out. However, be cautious that the photos my be dated. Additionally, if the house is in a rural area or a neighborhood, there is a possibility that there is not a street view option for the property.

Navigation

This simple tip saves a tremendous amount of time, not only in planning your prospecting route, but also in the amount of miles and drive time. I use a website called SpeedyRoute.com to put together the most efficient route to drive-by the houses that I deemed worthy to visit based on my research. The website appears to have a subscription based option, but I have so far been able to utilize the service for free and without signing up. Trust me, this is a huge time saver!

Prospecting

You’ve spent time researching the property and driving to it, so do some due diligence and spend a little time adding to the information that you have already gathered. Take some photos, take note of the neighborhood (is the property next to a crack house, industrial park, highway, railroad tracks, etc…). Verify that the information that you found online matches up with what you’re seeing as you inspect the property.

I cannot stress the importance of driving out to a property to validate what you’re seeing online. Do not make the mistake of blindly purchasing a property sight unseen. A great example of this is a foreclosed home that was listed on Auction.com that we checked into.

From the listing and the photos, everything looked great! This looked like a slam dunk deal. The house looked to be in great shape from the photos in the listing and even a look at Google Maps showed that house had some excellent curb appeal.

Even simply driving by the house, it would appear that everything checked out. A quick walk around the property revealed that things were not as they appeared to be. An investor that works based on online research alone would be duped into purchasing this disaster. Don’t get duped.

This house actually sits on top of steel beams about 35+ feet in the air! I’m 6’2″ and as you can see from the photo, that house is a looooong way up! From the road, everything looked like a dream come true. Once you got around back, it was an investor’s worst nightmare. Needless to say, this is a deal that we ran from and never looked back.

Next Steps

Once you return from your road trip checking out potential deals. Review the photos and notes that you gathered. Determine which properties warrant moving forward and which ones are better suited for the trashcan.

Title Search and Comps

Now that the list of prospective deals has been narrowed down, it’s time to call in the help of additional resources to dig even deeper. A title search will identify all of the liens that exist against a given property. Obtaining the comparable sales (comps) from a realtor will provide you with an idea about what the property may sell for in good condition.

Analyze the Deal

Now that you have completed all of the research and obtained the necessary information on a property, it’s time to crunch the numbers. Using the information that was gathered during the drive-by, estimate what the property may need to make it marketable and sellable at the comp price provided by your realtor. Determine the remediation strategy of the liens on the property and how much it will cost you, all in, to purchase the property as is. Here is a quick and dirty calculation to determine whether or not a deal is right for you.

Profit – Total Purchase Price – Holding Costs – Repairs – Fees > After Repair Value x .30

Keep in mind that once you begin rehabbing a property, there could be additional overages that were not taken into account. Make sure that you leave room in your profit margin to make sure that you always end up on top. If the After Repair Value of the property is less than the sum of the costs, then the deal will not work. Again, this is a very simplified way of quickly analyzing a deal. We will go into more specific details of what each each of these costs entail and how they can be calculated with seasonable accuracy.

A great resource that helped to get me started on accurately analyzing deals is The Real Estate Rehab Investing Bible: A Proven-Profit System for Finding, Funding, Fixing, and Flipping Houses…Without Lifting a Paintbrush. This book is a must read for anyone new to real estate rehabbing or flipping. Not only does it help to take the guesswork out of estimating repair costs, it includes tools and templates that will help you to stay organized and kickstart your rehabbing process workflow.

Close

Now that you’ve done all of the leg work and analysis, it is time to close on the deal. It could be that you are buying the property at auction (so you know your maximum bid), you’re putting in a traditional offer through a realtor, or you’re purchasing the property from a wholesaler. Regardless of how you’re obtaining the deal, you’re now confident and ready!

2 Mill Road – Complete House Rehab

One of the projects that we didn’t highly publicize was our rehab at 2 Mill Road. This house is located on a beautiful country lot with a little bit of history. The Chief Justice of the Supreme Court of Pennsylvania (1827-1851), John Bannister Gibson, was born on this property. There is even a historical marker on the edge of the property. Although this is not the original house that John Bannister Gibson grew up in, it is the same property and banks of Sherman’s Creek where he spent his childhood playing and exploring.

This three bedroom one and a half bath home was in dire need of some TLC. The kitchen was very small and outdated, along with every other room in the house for that matter. Instead drywall ceiling, there was a drop ceiling installed throughout the home. This was an immediate decision that the drop ceiling must go. We also decided to update the electrical and install recessed canned lighting, since the ceiling was coming down anyway.

We had experienced some turmoil with a prior general contractor that had caused cost overruns due to repeatedly missing deadlines, so this was our first time using this new contractor. Overall, the experience was definitely much better and there was an overall profit made on the project. We were fortunate to not have to micro-manage this job as much as the 335 Front Street project and we learned how valuable a general contractor can be to scheduling, keeping sub contractors on task, and hitting the deadlines that they commit to. This project came and went very quickly, so there wasn’t a lot of time to document the progress. In fact, the house sold within 18 hours of being listed!

Since this rehab is completed and sold, this will be the only post about the progress. I will show the before and after photos where they are available.

Outside

The first place I usually like to start is to show the outside of the home. We did not replace the siding on this house, so there is not a huge transformational change, but a lot of work has been done. There were a couple of windows that were replace, the porches were painted, the whole house was pressure washed and clean, and a landscaper installed new flower beds and plants.

Before painting, power washing, landscaping, and new concrete

After fresh paint, new sidewalk, and cleaning

The most expensive change that was made outside was excavating the driveway so that there was a more clearly defined parking area. We had a retaining wall built and widened the driveway to make it easier to pull out onto the road. The sidewalk was also ripped up and freshly poured.

Before excavating

After excavating and building a retaining wall

Kitchen

The kitchen started out dark and felt small. Prior to the renovation, there was a countertop attached to the wall opposite the sink and stove. The extra countertop provided more surface space, but it really limited the floor space in the kitchen to adequately move around. We like the finished product much better. Also, take note of the hideous drop ceiling prior to the rehab. It was replaced with brand new drywall and clean recessed lighting.

Half Bathroom

There is a half bathroom just off of the kitchen. It’s wonderful having an extra bathroom on the first floor for when you are entertaining so that guests do not have to walk up and down stairs into your more personal living space (ie. bedrooms…)

Regretfully, we do not have a photo of this bathroom before the rehab due to poor lighting in the room, but trust us when we say that it was a disaster!

Laundry / Mudroom

We love that this house has a mudroom! It’s perfect for storing all of your shoes and outdoor clothing so that dirt does not get tracked throughout the entire house. If time and budget would have permitted, it would have been nice to build custom storage and cubbies for shoes and coats. We used the same tile that we used in the kitchen in the mudroom for extra durability.

Dining Room

This room also featured the drop ceiling and even included some dark wallpaper. It is located between the kitchen and the living room and has a coat closet. It is also where the mechanicals are located for the newly installed HVAC system. This house did not previously have central air, and the primary heat source was electric baseboard. We did not capture many quality photos of this room before the rehab due to lighting, so here are the after shots.

Living Room

The living room is a large open space with four windows throughout the room. This allows an abundance of natural lighting. Look at these before and after photos! Huge improvement from the dark and dull to the bright and cheery

This photo taken during construction. Supports were hung waiting for drywall and recessed lights installed

Stairs and Landing

We took out the carpeting and installed wood floors. We painted all of the trim and railing in the house white to brighten up the space and make the home feel more welcoming.

Full Bathroom

There is only one full bathroom in this home, so it was important to make sure that it had storage and was functional for a family. We eliminated the electric baseboard heater in the bathroom and painted over the busy stenciled walls. All of the plumbing fixtures were replaced in the entire house. The bathroom also includes a linen closet for additional storage of all of the bathroom necessities.

Bedroom One

The ceiling was replaced and recessed lighting was installed in all three of the bedrooms. Bedroom and closet doors were replaced and all of the trim was painted white.

Bedroom Two

Bedroom Three

Project Conclusion

Overall, we are extremely satisfied with the results of this rehab. We strive to make ensure that all of our rehabs are up to the standards that we would expect if we were to purchase the property. We take extreme pride in our quality of work an attention to detail. This house sold the same day that it hit the market. We had a full price offer within 18 hours!

Special thanks to our partners at Five Star Contracting for their management, design, and construction expertise!

We hope that you enjoyed these photos and that you will subscribe this blog for additional updates on our current and future projects.

A Facelift and Looking 100 Years Younger

The Old Is Looking Good Again!

I am going to forgo posting any photos of the finishing details of the house until it is complete (I don’t want to spoil any of the surprises). The whole package is going to be worth the wait, and I assure you that you will be amazed! I can say that the work that is being done is absolutely transformational.

A brand new, and improved, roof has been installed and the siding installation is just about complete. The house is once again a uniform color and it looks spectacular! An updated front porch and new trim around the doors and windows is simply going to make this house pop! The local community is buzzing about the house, and curiosity and excitement are on the rise, as 335 Front Street becomes one of the nicest houses in the neighborhood.

Roof replacement

We are so excited to showoff the final product, but you will have to hang tight for a few more weeks until the project is complete. In the meantime, here are a few updates on the progress that is being made on the inside.

Kitchen

The installation of the kitchen sink is complete!

Just kidding. The white utility sink was cleverly hooked up by the contractor so that they can have access to water for some of the construction activities. However, the water isn’t turned on yet to the house.

The old flooring has been removed from all of the rooms. We will be restoring the original 1920’s hardwood throughout the house. It’ll look great in the final photos once the remodeling is complete (better yet, come see it in person when we hold the open house).

The electric has been roughed in throughout the house and any shoddy wiring has been corrected. The service had already been upgraded to 200 Amps, so we lucked out on not having to do any upgrades to the electrical panel.

Rest of the House

To prevent giving away all of the details of the final design, I am going to just provide a general update on the rest of the house. The talented drywall contractor is working his magic and making the walls straight and smooth. I couldn’t believe the difference it makes to have straight seams and smooth uniform walls. This is truly going to be a new old house! Everything feels brand new with new fixtures and appliances throughout, updated electric, new bathrooms, new roof, new siding, finished floors… I think that you get the point.

Patchwork in progress bedroom #1

Patchwork in progress bedroom #2

More to Come

The progress continues to be on track and we can’t wait to show you the finished home. Thank you for following the progress at 335 Front Street. Let us know if you have any questions or comments. We’d love to hear from you. We’d also love to see you at the open house! We will provide the dates once we get to the home stretch.

335 Front Street Demo Begins

Out With The Old…

Demo is officially underway at 335 Front Street. Although demo is technically destruction, it feels good to see the old materials removed in preparation for the brand new. Now that the slate is coming clean, it becomes easier to envision how great this house is going to look once the improvements are started. Below is a list of the high level demo activities captured in the photos:

Removal of siding. Replacement of the siding on the house is long over due and beyond salvaging. At some point, someone began painting the house and then stopped halfway through leaving the house 3 different colors.

Kitchen demo. The team removed the stove, sink, 8 feet of cabinets (upper and lower), and a drop ceiling. Yes, there was a drop ceiling in the kitchen. This is going to be a great improvement drywalling the ceiling and cleaning up the electrical mess that was left behind. The new kitchen will include a dishwasher and some additional counter space. The plan is to close up the window to the far right to make more room for cabinets and countertop space. We had discussed adding an island for additional storage, but due to the placement of the doors, it would impede the flow of the room.

New half bath and laundry room. The photo below is a room on the opposite side of the kitchen that will be converted into a half bath and laundry room. Previously the laundry was located on the second floor within a half bath. That space on the second floor will be converted into a full bath giving the house an additional full bath.

There are two additional rooms on the first floor that needed some minor demo. The hardwood floors are going to be refinished where possible. Upon demo, it was discovered that laminate flooring was glued to the hardwood in one of the rooms. Depending on how removal goes, this room may end up having to be carpeted. Fortunately, the room with the bump out on the first floor has wood flooring that is in pretty good shape and they will refinish nicely. This room would make a perfect office! The radiators, that were previously in each room throughout the house, have all been removed.

There hasn’t been any demo to the staircase. I just wanted to show a photo of how beautiful this staircase is. It is going to look absolutely amazing once it is refinished.

There are three large bedrooms on the 2nd floor of the house. The carpet is being removed and the walls and floors will be refinished.

The master bedroom. This large bedroom has the window bump out like the front room on the first floor. The demo for the master is not yet complete in these photos. The closet is being enlarged to be a walk-in and a door to the bathroom is being added to create an ensuite.

The 3rd floor bonus. There is an awesome and very spacious 3rd floor. We do not have plans to finish this area since the home will already have 3 bedrooms and 2 1/2 baths, but this could be a great opportunity for the new homeowner if there is a desire to finish the area or simply used for storage. Access to the 3rd floor is a walk up staircase for easy accessibility.

Demo is well underway! The new siding will start going up within the next week or so which will be a major transformation for the exterior. There is still demo, electrical, and HVAC work to be completed on the inside before building out, but things will quickly progress. Keep checking back to see the rehab progress at 335 Front Street. Ready to buy or sell a home? Great! Contact us at info@iHeartRehabbing.com

335 Front Street Property Redevelopment Plan

Summary

This property was acquired in May of 2016. This was an exciting purchase for us for a number of reasons. First of all, it is our first redevelopment project. Secondly, this property is full of charm and so much potential. The terms of the acquisition did not allow us to view the inside of the property until we closed on the property.

Property Details

The house is zoned residential in a quite residential neighborhood. The 1920 victorian style home has a beautiful front porch, a double lot, and a breathtaking view of the Susquehanna river from the back patio and the master bedroom.

Property Features:

Bedrooms: 3
Bathrooms: 1.5
Number of stories: 3
Lot size: 8,712 sqft
Zoning: Residential

Construction Details:

Parking: 1 car garage and additional off street parking in rear
Public utilities: Water / Sewer
Roof: Shingled
HVAC: Oil (radiated) / No air-conditioning

Planned Improvements:

New HVAC system with propane heat and central air-conditioning. Requires running ductwork throughout and removing the existing heating system.
Repair and install new shingles on the roof
Remove old siding and install new siding
Re-finish the hardwood floors and install tile flooring in kitchen and bathrooms
Completely demo existing kitchen and install redesigned kitchen including new appliances
Relocate laundry to first floor off of kitchen
Create a new half bath on first floor off of kitchen
Turn existing half bath on the second floor into a full bath
Modify existing full bath to become an ensuite to the master bedroom
Create a walk-in closet for the master bedroom
Make landscaping improvements
Repair and update front porch

The most unanticipated expense for this project is the installation of the new HVAC system. Upon gaining entry into the house, we found that the radiators of the hot water system were cracked due to the water in the system freezing over the winter while the house was vacant. This meant that all of the radiators would need to be replaced or install a new system. The decision was made to install a new HVAC system, which requires running new ductwork throughout the house. This will give the house the benefit of central air conditioning and a propane heating system. There are plans to install natural gas lines throughout the town in the near future and the propane system could be easily switched over to tap into the natural gas line once it is available.

Summary

Overall, after inspecting the home and developing the improvement plan, we are confident that the transformation of this home is going to be nothing short of amazing. Once the redevelopment is complete, the family that purchases this home will own a house that neighbors will be envious of. Our mission is to ensure quality craftsmanship and attention to details on all of our redevelopment endeavors. Learn more about us by visiting www.iHeartRehabbing.com

Are you ready to buy or sell a home? Do you have questions about residential redevelopment? That’s great! We would love you hear from you.

iHeartRehabbing Introduction

Residential redevelopment excites us in so many ways. We love what we do! There is nothing more exciting than finishing a property and seeing a family move in to cherish it for years to come. It feels good to make such a positive impact to local families, neighborhoods, and communities in which we live and work. This blog was started to share our journey through some of our redevelopment projects to inform and educate others on what we do. Follow us on this blog and at www.iHeartRehabbing.com for regular updates on our current projects and an inside look at the progress.

Entrepreneurship in a Corporation

Deciding what I wanted to be when I grew up was probably one of the most difficult decisions that I had to make in my young adult life. I knew that obtaining a college degree would provide me with the most opportunities in the future. The tough part is knowing that once you start going down a particular path, you’re pretty much locked in. Your choice in professions determines which college you should attend and classes that you need to take in order to satisfy the requirements for your degree. It’s scary to think that this decision could end up locking you into a particular path for the rest of your life.

I suppose that I had a entrepreneur mindset early one. I struggled with this decision and wrestled with what career would provide me with the most satisfaction throughout my life. I decided that I wouldn’t do something just for the money. I didn’t want to spend the working days of my life waking up and going to a job that I hated. I had a passion for helping people, and my personal evaluation led me into pursuing the field of special education. My college career began at the Harrisburg Area Community College where I took the general education classes that I would need before transferring to a four year school to finish my degree. That was the plan, but of course plans change…

When I was attending West Perry High School, I had the opportunity to take courses to become a Cisco Certified Network Administrator (CCNA). Computers had always interested me and I appreciated the opportunity to understand the interconnectivity and communication from one device to another. It was also an opportunity to gain some experience to fall back on if I suddenly decided to move out to Silicone Valley. While I enjoyed the CCNA program, and ultimately became certified, I really enjoyed my Turbo Pascal class much more! It was incredibly gratifying to write code and watch the computer execute my commands.

As most college students do, I was working part-time. It was more like full-time with four different part-time jobs. One of my part-time jobs was with a regional grocery store chain. I worked in the 90,000 sqft store in several different capacities. This not only gave me the opportunity to be scheduled for more hours, but it was an opportunity to learn a little bit of everything that was happening around the store. I would build promotional displays, breakdown the nightly delivery truck to prepare it for stocking, jump on a register as a cashier, work in the dairy department stocking and rotating product, and work on special assignments from management. I was told at one point by one of the managers that I was welcome to come in anytime to work because I was always productive and found something that needed to be done.

I would regularly browse the job postings that were in the break room to see what kind of positions were available at the corporate headquarters. I had come across a listing for an internship in the Information Systems arena. I had the CCNA certification from the program in high school and I was taking college courses, so I figured that I had a pretty good shot. I figured right. This was only a six month internship, but my plan was to do my best to remain at the office and not go back to working in the stores. When I asked my manager if I should turn in my uniform shirts, he said “keep them, you’ll be back.” That was fuel for my fire to ensure that I succeeded. I wouldn’t be back…

The internship experience was much like my store experience in that I was able float around and experience the different IT departments in the office. I was like a sponge soaking up as much information as I could. I took full advantage of the opportunity and always worked the optional 40 hours a week. It was definitely an awesome experience to see how the support office interfaced with the stores and how new technology was implemented and trained. There are also polarized perspectives. The stores feel like the support office is out of touch with their needs and that they sit in the “silver palace” without a clue. The office associates feel like the stores are slow at adopting new processes and make their lives complicated by resisting change. All that I knew is that at the conclusion of the six month internship, I wanted to be on the office side of the organization.

Desperate to find a full-time position, I was willing to take any opportunity to simply get my foot in the door. There was an opening in the mailroom and I applied for the position. When I was contacted by the HR manager explaining that I did not get the role because I was overqualified, I was extremely disappointed. However, she quickly followed up with telling me that I would have been bored and that she had a different position in mind for me. Needless to say I was thrilled and surprised. The surprising part is that someone took notice of my ambition and they took the time to help me find the appropriate direction that would set me up for success. I am grateful in so many ways for the opportunity that I received and individualized attention that I received from that HR manager.

The role that she had in mind wasn’t higher on the pay scale than the position in the mailroom, but it gave me the chance to continue to hone my skills and build rapport in the organization. I was hired as the administrative assistant for the retail strategies and pricing director. One of my primary roles was a taking the competitive price checks and chart them across our different market areas and departments to benchmark our indices against our primary and secondary competitors. This information was then passed along to the merchandising teams and the executives. As I performed this duty, I discovered that it was an extremely manual and arduous process. It was also a fairly short sighted look into the data. Everything was being aggregated by department and market area, but we were receiving the information at a store level by SKU on a hardcopy report.

This became my first real project where I could make an impact and improve our insights and analysis. I only had a small introduction into programming in high school and no relational database experience, but I knew that I could doing something if I could receive the data contained in these reports electronically. At the time, the company was what I would call a mid sized retailer. We had just under 200 stores. My idea was to create a data repository with a user interface so that the merchandising teams could slice the data by any competitor or group of stores. They would also be able to drill into the department to see the category, sub category, and segment level indices based on their selections.

I didn’t really know where to start. I just knew of Microsoft Access which had the database and UI functionality all contained within a single instance. No one else in the company had spent much time with using Microsoft Access, so I purchased a book and began teaching myself during the downtime that I had throughout the day. There were definitely moments of extreme frustration and doubt that I would be able to figure out what I had set out to accomplish. After all, I didn’t have anyone else that I could talk to. All that I had way my book and a few sparse forums on the Internet.

The good news is that I was able to do what I set out to do and the competitive pricing application was well received. I began seeking other opportunities to convert manual paper processes to a digital format. The conversions improved productivity through input validations, integration of known information, and the electronic transmission of data. An example of one of the solutions was a report that we used to email to all of our stores on a weekly basis. The report was a large file and the stores had to filter through the document to find the information that was pertinent to their particular store. I developed a program that would parse the data, create a store specific file, and automatically email the stores their individualized report. I can still feel the excitement upon successfully executing this program.

Merchandising Systems was born. I had gone from a store associate to an intern to an administrative assistant to a merchandising systems analyst. The merchandising systems analyst was a brand new role created specifically for the work that I was doing within the organization. This is an example of entrepreneurship within a multi-billion dollar company. Identifying a need and working to fill it. I have been fortunate throughout my corporate career to rarely hold a “job” where I would repetitively do something day in and day out.

Needless to say, my aspirations for continuing my higher education in elementary special education dwindled. I had a taste of the business world and I was hooked. While it is significantly different, I was helping people and improving their day to day work-life. I could positively impact people and the bottom line through software at a magnitude that I could have never imagined. I was fortunate to be in the right place at the right time with the right background to grow within a company during this evolution into a digital world. Gone were the days of mainframe reports piled on desks and filling up filing cabinets. All of the information that associates needed was available on their desktops in a clean user friendly interface with dynamic views of the data. I eventually grew the merchandising systems department of one to a team of 22. We moved from Microsoft Access to more powerful database servers and .NET for application development.

We were highly innovative and focused on the user experience and productivity. The amount of time and money that the merchandising systems department saved in man hours by automation was equivalent to hundreds of workers and hundreds of millions of dollars that would have been required to complete the work in the past. Not to mention the increased opportunities that and business growth that resulted from our solutions. I like to believe that I would be a millionaire from the solutions that I helped to implement and think about what I could have done differently. Unfortunately, if I were a third-party consultant, I wouldn’t have had the insight to the opportunities that helped me to grow the team that I grew within the company.

I am an entrepreneur and I always have been. I have now had the opportunity to work within a fortune 500 company and leave a legacy that will continue on long after I have moved on to my next venture. I am now working in the capacity of a Business Consultant within the organization. It’s a gratifying experience to be able to walk the floor of the office and see the tools that I built being used to drive the company forward and helping to make people’s jobs more enjoyable, productive, and rewarding.

Commercial Due Diligence Period

I am currently in the midst of a deal that I am very excited about! Upon settlement, I will have control of a building that is in excess of 217,000 sqft with strong positive cashflow at approximately 80% occupancy. The building is used as a dry storage facility. It does not have any climate control, so the merchandise contained within the building cannot be prone to freezing.

The ultimate plan is to redevelop the property as mixed use residential, office, retail, etc… The building is three stories high and zoned as CBD (Commercial Business District). This is the ideal zoning which will allow the first floor to be comprised of office space and retail allowing the second and third floors to be residential. There is going to be quite a bit of work ahead once we reach closing. My plan is to take ownership and then take a few months to stabilize and get my bearings around the existing revenue generating businesses.

The structure itself is red brick, steel, and concrete with old pine wood flooring. It was used as a manufacturing facility for many years before being converted into the current use. The building materials lend themselves as the perfect canvas for some very unique and elegant feeling apartments. I can easily envision spaces with large industrial style windows, fourteen foot ceilings, exposed brick walls, wood floors, and industrial style HVAC systems. The layout allows for an abundance of light. I feel that the floor plan design could be a little tricky, but I have confidence that a good architect and designer could determine the be utilization of space without sacrificing the historical charm of the building. Of course, I do have a contingency plan of continuing / growing existing storage functions in the event that the redevelopment plans become too cumbersome of a hurdle.

IMG_5360.HEIC (1) — Photo of the inside of the building

Before any of the design plans can get underway, I need to get to closing and ensure that I am making a solid business investment. below are some of the things that I am gathering throughout the course of due diligence.

Contracts:

– Elevator maintenance

– Snow removal

– Security deposits

– Roof maintenance

– Trash removal

– Test control

– Hazardous waste removal service

– LP (liquid propane) service

It is extremely important to review any contracts that are currently in place because they will most likely come with the sale of the building; unless there is language stating that they are non-transferrable or contain some sort of cancellation clause. You do not want to get stuck with a bad contract or one that you can’t live with. It is important to review these contracts before the expiration of your due diligence period so that you can negotiate any disagreeable terms with the seller.

IMG_5350.HEIC (1) — Exposed brick walls and natural light

Building / business documents to ask for:

– Leases / operating agreements

– Roof warranty

– Mechanical issues

– Elevator permits

– Environmental consulting (environmental discovery)

– Building and fire code violations (get from municipality)

– Building permits

– Financial records (ie. aging reports)

– Insurance and declarations page

It is always a good idea to ask for more than what you think that you will need. Carefully review all of the leases for any kind of cancellation clauses, tax agreements, or rent restrictions that may impact your plans following the acquisition. One of the documents listed includes the roof warranty. Was the roof recently installed? If so, it is most likely under some kind of warranty. Make sure that you are persistent with getting this information because roof issues can lead to some extremely crippling expenses.

Aging reports are helpful to gain insight on whether the rents are being paid and which tenants may be trouble for you in the future. Unfortunately, you can’t always trust the seller of a property to provide you with accurate information. Additionally, if you are financing the purchase of the building, then your lender may require you to provide rent payment history reporting. Speaking of financing, ensure that you have a complete list of everything that the lender will need in order to close on the building. You will not want to wait until the days leading up to closing to realize that you’re missing a vital document. This will delay closing and add unnecessary stress to the transaction.

The insurance and declaration page is something new that I have added to the list. The building involved in this particular deal has a very high insurable value. It has made obtaining a policy a little more complicated than usual. I am looking to obtain the contact information and insurance terms under the seller’s current policy. Perhaps the property is currently under insured, which will impact the overall P&L and the CAP. In any case you will always want to make sure that any property that you own is insured properly. Understating the value could have major implications in the event that you ever need to file a claim. You could end up getting nothing from a policy that you had been paying into for years if you’re not honest.

There is a lot involved with the due diligence period. The broker that you are working with should be knowledgeable in the areas of real estate that you are investing in. You may also wish to hire a real estate attorney to help review the leases, contracts, and overall deal. Regardless of who is on your team, I would recommend becoming educated yourself. This will help you to ask the right questions of your team and to ensure that they are qualified. I recommend reading the following book: The Due Diligence Handbook For Commercial Real Estate: A Proven System To Save Time, Money, Headaches And Create Value When Buying Commercial Real Estate. It is available on paper as well as audio and it is a very quick read. Investing an hour of your time could save you thousands of dollars on your investment.

I would love to hear from you about your real estate endeavors. What other information do you ask for during a due diligence period? What went right? What are some opportunities and areas that you will improve before making your next deal?

My First Day As An Entrepreneur

Anxiety runs high on the first day of doing something new. Think back to the first day of school every year, moments before a competition, or your first day on a new job. You probably don’t sleep well as you lie awake in bed with countless, and often meaningless, scenarios of how the day will go running through your head. Let’s face it, starting something new is downright terrifying!

These feelings were not a part of my first day of entrepreneurship, however. It’s safe to say that I really didn’t know what I was starting. It just seemed to be a natural and happened organically. I didn’t ever consider putting the title of business or entrepreneurship on it until now. As I reflect back on how I was first introduced to a world of entrepreneurship, this moment is it.

The setting is sometime in the early to mid 90’s. I was a tall and fairly uncoordinated middle school aged kid. As you may recall in a previous post, I grew up in a rural area and attended Catholic School. This is important to note for a couple of reasons. One there wasn’t a lot to do when I was a kid. I didn’t grow up in a city or neighborhood where you could simply walk to a friend’s house or even ride your bike. My friends were generally a 15 minute drive, or more, away. This meant that my brother and sister would often be the only kids around to play with.

My brother is a little over 5 year older than I am. So by this time he was in high school and we didn’t really have a lot to relate to other than the Boy Scouts and the fact that we shared a bedroom growing up. I was always just a bit too far behind in age to be cool enough to be included with him and his friends. As I started high school, he was making his way off to college. Always just a step behind.

My sister is 2 years younger than I am. We had the complete opposite relationship than what I had with my brother, because my sister actually thought that I was cool. Rather than try to compete for my brother’s attention and try to keep up, I simply hung out with my sister more often. With that came, what I will call sacrifices, where I would be obligated to play doll house and My Little Pony. Embarrassingly, I had the only male My Little Pony, Texas Pete, so that I didn’t have to play a girl pony. This may seem like irrelevant information, but it will soon make sense, I promise.

Spending time with my younger sister introduced me to things that I would not have otherwise been interested in doing. My mom encouraged us to be creative and crafty. We had what we called an “arts and crafts cabinet” in the basement which was always fully stocked with construction paper, glue, popsicle sticks, wiggly eyeballs, etc… it had everything that you needed to come up with some pretty spectacular creations.

At one point we really got hooked on creating jewelry using those little plastic beads. We would test out the different threads that would be easy to thread through the beads yet durable enough so that they didn’t easily snap, which would leave beads scattered all over the floor. There would be shopping trips to the bead aisle at our local Ben Franklin Arts store, where we would look for the shiniest and most colorful beads. We even had containers with partitions that wouldn’t let your beads mix, unless you accidentally turned the container upside down which resulted in hours of sorting. This happened quite frequently.

I would be threading beads almost every chance that I had. The bus ride from our rural home to school ranged from 2 1/2 hours when I was in kindergarten to a little over an hour at this point in my life. The difference in ride time is that my mother complained to the school district enough to get dedicated bussing for the private schools “over the mountain.” Mom would always go to bat for us, and she still would. When I was in kindergarten, I would catch the bus at 5:15 in the morning and be driven all over the county. First one on and the last one off. I’m sure that there are those of you reading this that can relate!

These bus rides were the perfect time to sit and make jewelry. This was before cell phones and the plethora of mobile entertainment devices. Granted there were Gameboys and Sega Game Gears, but those were the kind of luxuries that my parents didn’t want to spend their hard earned money on. The only portable device I had was a Walkman which was eventually upgraded to a Discman. A Discman was a portable CD player for those that don’t know what I am talking about. “What’s a CD,” you ask? Yikes. It is hard to believe that technology has evolved so quickly.

One day while making beaded jewelry on the bus, a girl asked me if I could make her a bracelet. I said yes, but she went on to say “I can pay you for it.” Suddenly, the inner monologue began playing out. I would have just given her a bracelet, but she is willing to pay me for it? If I can get a couple of dollars, I would be able to buy more beads and make even better jewelry, which I could turn around and sell for more money. This was all very exciting to me! Also, we weren’t really friends or anything so I said sure and we negotiated a price of a couple of dollars.

This continued for a while. I was making “custom” beaded jewelry on the bus and selling it to the other students. Eventually, I had saturated the limited market, so I began making keychains and other crafts.

From crafts, I moved on to candy. My parents had a membership to one of those club stores where you can buy a huge bulk container full of candy for much less than you can buy pieces candy individually. I would have my parents pick up Airheads and Now and Laters in bulk. I had a silver metal tin container that I would fill with candy and take on the bus with me. I would sell the candy for ten cents each or three for a quarter. I would sell a few dollars worth everyday and the good news was that the demand was always there for more candy. I was the candyman through the remaining years of grade school and gave it up when I started riding the bus to high school.

Even though these are examples at the tiniest level and no one would be able to support themselves with these activities, they got me excited for business and gave me a little bit of walking around money at a young age. It was in those very moments that I began to understand the very basic mechanics of business. I just didn’t know it at the time.

I feel like I was fortunate to have accidentally fallen into this learning opportunity. I often wonder how we can teach children these lessons at a young age to plant the seeds of entrepreneurship. Give them the power to be creative and find opportunities to not only make money but be innovative in identifying needs.

Can you remember your first lesson in business? Was it organic or did you have a mentor? How are you using what you had learned through that experience in your life today?