Pay yourself? (by S i d [MO]) Mar 14, 2022 12:03 PM|
Pay yourself? (by Paulio [PA]) Mar 14, 2022 12:27 PM
Pay yourself? (by Roy [AL]) Mar 14, 2022 2:08 PM
Pay yourself? (by Ken [NY]) Mar 14, 2022 2:33 PM
Pay yourself? (by don [PA]) Mar 14, 2022 3:05 PM
Pay yourself? (by S i d [MO]) Mar 14, 2022 3:54 PM
Pay yourself? (by MikeA [TX]) Mar 14, 2022 3:57 PM
Pay yourself? (by Ken [NY]) Mar 14, 2022 4:32 PM
Pay yourself? (by Roy [AL]) Mar 14, 2022 6:43 PM
Pay yourself? (by 6x6 [TN]) Mar 14, 2022 11:01 PM
Pay yourself? (by Otis [IL]) Mar 14, 2022 11:05 PM
Pay yourself? (by T [IN]) Mar 15, 2022 6:57 AM
Pay yourself? (by LeePookie [IN]) Mar 15, 2022 7:15 AM
Pay yourself? (by zero [IN]) Mar 15, 2022 7:24 AM
Pay yourself? (by gevans [SC]) Mar 15, 2022 8:02 AM
Pay yourself? (by Roy [AL]) Mar 15, 2022 8:10 AM
Pay yourself? (by Oregon Woodsmoke [ID]) Mar 15, 2022 10:36 AM
Pay yourself? (by Oregon Woodsmoke [ID]) Mar 15, 2022 10:38 AM
Pay yourself? (by S i d [MO]) Mar 15, 2022 10:48 AM
Pay yourself? (by Ray-N-Pa [PA]) Mar 15, 2022 10:55 AM
Pay yourself? (by Bill [KY]) Mar 15, 2022 12:29 PM
Pay yourself? (by Chris [CT]) Mar 16, 2022 3:21 PM
Pay yourself? (by Tarheel T [NC]) Mar 16, 2022 7:54 PM
Pay yourself? (by Jim in O C [CA]) Mar 17, 2022 12:53 AM
Pay yourself? (by JR [ME]) Mar 17, 2022 9:10 AM
Pay yourself? (by Phil [OR]) Mar 25, 2022 8:40 AM
Pay yourself? (by Peta [MD]) May 26, 2022 7:29 PM
Pay yourself? (by April [KS]) May 26, 2022 7:42 PM
Pay yourself? (by J [IN]) May 26, 2022 11:27 PM
Pay yourself? (by Still Learning [NH]) May 27, 2022 7:06 AM
Pay yourself? (by Jason [MI]) May 27, 2022 9:17 AM
Pay yourself? (by Bill [KY]) May 27, 2022 9:35 PM
Pay yourself? (by David [NY]) May 28, 2022 12:32 PM
Pay yourself? (by GKARL [PA]) May 28, 2022 3:55 PM
Pay yourself? (by RB [TN]) May 30, 2022 1:07 PM
Pay yourself? (by Pmh [TX]) May 30, 2022 1:37 PM
Pay yourself? (by Pmh [TX]) May 30, 2022 1:44 PM
Pay yourself? (by iradmac1 [GA]) Jun 2, 2022 1:00 PM
Pay yourself? (by Rande [VA]) Jun 2, 2022 10:52 PM
Pay yourself? (by 6x6 [TN]) Jun 8, 2022 8:44 AM
Pay yourself? (by S i d [MO]) Posted on: Mar 14, 2022 12:03 PM
One thing I neglected to do during my early investing years was figure out what my time was worth. I started this game like many small time ma and pa investors: I did everything except stuff I wasn't licensed to do (i.e. HVAC, roofing).
I fixed my own toilets, sinks, etc.
I installed my own flooring.
I painted my own walls.
I showed each unit in person to any and all interested parties.
I took calls and listened to stories that went on for 20 minutes and was told I was rude when I had to hang up.
I cleaned my own rentals. Ugh!
I also had maxed out at 12 residential units, and it was a rare week when I had one evening free to be home and do stuff with family/friends. Saturdays I was always at rentals, fixing, installing, sweeping, etc.
In other words, I bought myself a job in addition to my regular full time job. Looking back now, I'm not ashamed of it, but man it took me a long time to see how much that was holding me back. I also look at my profits from those year: almost nothing. Because I was willing to work "for free" I often bought "deals" that weren't good deals at all and had barely any money left over from rents after bills were paid. I think I took home about $500 - $1000 per month in those days. Scant pay for so much work!
Then Brad 20K's advice to "take the tools out of the truck" came along and it changed my life. Since then, our total number of units have more than quadrupled and expanded into commercial as well. Take home pay in 2021 exceeded my pay from my regular job. Never could have done this and kept up with all of it had I maintained my old DIy system.
So here are my question: do you pay yourself for the work you do at your units? Do you feel you are making enough profit to justify the hours you put in? Were you to hire someone to do your tasks for you, would the amount of pay you take for yourself be enough to cover hiring it out?
CAVEAT: for the purposes of this discussion, we are not going to consider equity (sweat or amortization) as pay. Nor will we include tax benefits. Reason is you can't pay a manager/maintenance man with equity or tax benefits. I'm talking exclusively cash money in the bank/wallet.
Pay yourself? (by Paulio [PA]) Posted on: Mar 14, 2022 12:27 PM
I pay myself the same amount each month regardless of the number of vacancies or if I have to do a little work or a lot of work. Iím the first thing that gets paid. If the business canít run doing it that way, then Iím doing something wrong. But it has worked. And it makes personal budgeting a lot easier. I canít remember the last time I came up on the short end of that equation. I know Iím well ahead. I nibble on projects here and there, but I havenít been crushed by anything. If I get something that looks like itís going to take awhile, I hire it out. But I still pay myself as usual. --174.240.xxx.xx
Pay yourself? (by Roy [AL]) Posted on: Mar 14, 2022 2:08 PM
I am not sure if I understand your question. Of course I pay myself, doesn't everyone? Unlike Paulio though, I am always the last to get paid. All of my hired help and vendors get paid before I do. --71.207.xxx.x
Pay yourself? (by Ken [NY]) Posted on: Mar 14, 2022 2:33 PM
Sid,I grew up with my dads mentality of I am a man and i will do everything myself and everyone we knew did the same thing so it took awhile for me to realize i should do none of the actual work.Now I do none of the work although i do know how to do it so i know what to tell my workers to do if they dont know how.I dont even go to Home Depot anymore.I do what i cant hire done which is i talk to sellers when they call me from my advertising,i believe that buying and putting deals together is the one thing i am better at than anyone i could hire and i check my jobs regularly because that can get out of hand quickly if guys arent supervised.I check receipts to make sure that is ok but i have a 70 year old guy who does the shopping and some of the work who i trust.This is my only income and i take out what the household needs,my wife doesnt have a regular job although she works in the office doing basically whatever i dont want to or dont know how to.I make enough to pay the bills including health insurance.I pay my guys good pay for what they do to help keep them available between jobs,before covid i kept guys pretty busy but since covid the work is spotty.I am not putting many hours in at this point so i am doing pretty well although i think when the weather breaks in a couple weeks i will get busy again hopefully,i am bored at this point --72.231.xxx.xxx
Pay yourself? (by don [PA]) Posted on: Mar 14, 2022 3:05 PM
Easy to say "contract it out." In reality, the only way to be sure that the job is not gonna be screwed up is to pay a real pro top dollar----and I am willing to do the work to pocket that money. I am not talking about paying a helper to assist you, I am talking about hiring a complete professional where you do not need to inspect the job before or after. As an example, replacing a length of cracked sewer pipe in a basement with pvc. Pro plumber is gonna charge me $500. I can do it for the cost of a length of pvc, two rubber couplings and two grinder wheels.
Sid--When you state that the properties were bad deals because you hardly had any money left after expenses, you are ignoring appreciation of the properties. You are also ignoring the effect of inflation on rents and cash flow over time. Generally, "nice" properties in good areas do not have great cash flow, at least in the beginning. You enjoy the appreciation, which is taxed lower than income. As inflation raises rents, and your mortgage payment is fixed, cash flow improves. --68.84.xxx.xx
Pay yourself? (by S i d [MO]) Posted on: Mar 14, 2022 3:54 PM
Roy... the questions are exactly as stated. The answer you gave me is "I pay myself if there's something left over." Okay, fair enough. Could you hire someone to replace yourself and still make money? If not, then you bought yourself a job, not an investment property. If yes, then maybe you bought yourself a job and an investment property. Btw, I'm not upset with however you did it, I'm just curious how it's working out and if you're happy with it. Also, does it limit your growth? My experience was it severely limited my growth. Maybe yours is different?
Ken, good points all around. I felt the same growing up. My goal these days is to constantly ask myself where I bring the best value. Most times, management and systems are the most valuable thing I bring. Occasionally, I'll still change a furnace filter if I'm in the hood, but those days are almost done.
Don, I used to think the same way as you. I couldn't believe Brad's advice. It took me almost 3 years of gradually removing one tool at a time. First ones to go were brooms, sponges, and mops. I HATE cleaning other people's filth, so I was never motivated to do it by the peanut wages I "paid" / "saved" myself. Cleaning gal charges $15/hour and does wonderfully, and she get it knocked out in a day...usually the same day I call her. After moving beyond 20 units, I had no choice. There aren't enough hours in a day to work a FT job and keep up with 20+ units. Btw, I'm not forgetting anything. I already acknowledged those things you brought up, but as I said you can't pay someone with those things. Those are the "investment" parts of the game, and they may or may not bear fruit. Yes, we've had great appreciation lately, but had I sold out 5-10 years after I started, those would not have existed, so I can't really count them. You may have seen some of my other recent posts (or not) where I have addressed inflation at length. Great stuff for me as an owner.
The bottom line of this post is are we valuing our time adequately? Everyone is going to have a different answer for that. My problem is I didn't think about it enough early on in my real estate career, but now that I spend more time on it I've found my income increasing and hassles decreasing, as they should. Careful human thought applied to worldly problems create a treasure trove of discovery and progress.
Pay yourself? (by MikeA [TX]) Posted on: Mar 14, 2022 3:57 PM
I like most here used to do it all. Pay? Naw, my goal was to grow my business. If I didn't have to pay someone else to do X then those dollars could be put into buying the next property. It struck me when I had about 10 properties and 2 vacancies at the same time that I had a property sitting vacant for a month while I was working on the other one. That cost several hundred dollars that I'll never get back. I could have hired a handy man and cleaning crew for less than half of what I lost in rent. All of a sudden my strategy to not pay others so I could reinvest those dollars was back firing. I was in fact costing me money once my available time was exceeded by the needs of my old way of doing things.
So, I don't have a problem with people doing their own maintenance. Especially at first so you learn how things should be done. The problem is you have to recognize when that strategy is costing you money.
Now a days I don't have a day job, time is more available than ever, and money is not an issue. My strategy has changed again, now I only do the work I enjoy doing. If I don't like doing it then someone else is going to get a job. Age (and longevity in rentals) has it's advantages. --209.205.xxx.xx
Pay yourself? (by Ken [NY]) Posted on: Mar 14, 2022 4:32 PM
Don,I have a guy $30 an hour who can fix most anything but he is getting older so sometimes he says not doing that project but he runs out for me for smaller general maintenance whenever i have a small project in a unit and he does the Home depot shopping for me.A friend has a handyman at about $22 an hour on the books he can fix anything.Either of these guys could fix the cracked sewer line and my friends guy did fix one a couple weeks ago at a house we are selling.I have been able to find reliable guys when needed,if you have enough work hiring a guy full time on the books becomes way cheaper.When i started doing less of the physical work i had more time to find more deals which is the part i like anyway --72.231.xxx.xxx
Pay yourself? (by Roy [AL]) Posted on: Mar 14, 2022 6:43 PM
I could hire a property manager to manage my properties but I could not hire a person of my caliber (my clone) to run my business. My clone would require a 6 figure income and if anyone is going to make 6 figures off my properties then that will be me and me only.
You seem to think an investment is something that should operate all by itself without any involvement from the owner. That may be true for investing in the stock market where you have limited control over what happens. However, in what I do and to earn double digit returns above 20%, my business requires constant input from the owner or whomever I hire who has the brains to make it work. I don't call it an investment per se but more of just a business that needs my management skills to keep the wheels moving and the profits rolling in. One reason I am successful at it is because I actually enjoy being a LL. --71.207.xxx.x
Pay yourself? (by 6x6 [TN]) Posted on: Mar 14, 2022 11:01 PM
Good points Sid. I haven't caught on yet. --73.120.xx.xxx
Pay yourself? (by Otis [IL]) Posted on: Mar 14, 2022 11:05 PM
Sid your post just punched me in the gut. I am at that same point. My wife and I both work full time jobs and with 3 kids there is always practices, games and misc running to do.
We are up to 24 residential units, mostly C class with a couple Bís sprinkled in. I am constantly working on the evenings and weekends on the rentals. My wife and I just had this conversation that we want to keep growing the business so Iím going to start taking the tools out of the truck. The hardest part of that is going to be my stubborn butt. I always sit there and think, why pay someone $40/hr to do that when I could run over there and knock it out.
Iím starting to see the error in my ways, with a daughter already a sophmore in high school, Iím missing way to much of what is the most important thingÖ.my family. --24.245.xx.xxx
Pay yourself? (by T [IN]) Posted on: Mar 15, 2022 6:57 AM
Read "Profit First" by Mike Michalowicz.
You pay yourself, then have sub accounts to cover expenses. Property taxes, insurance, CAP expenses, etc.
With that said, yes. But this is a full time job. I don't work at another job and then do this in the evening.... --76.77.xxx.xxx
Pay yourself? (by LeePookie [IN]) Posted on: Mar 15, 2022 7:15 AM
Tin (IN) is spot on. "Profit First" changed our business from day one. If you cannot pay yourself the top 10% first, then your business is not making any money.
From there, you can tweak it to your growth. I get paid on Thursday. Got some grief from a few on here.... but it allowed us to grow, fast!
Some of it is phycological... kinda like Dave Ramsey's baby steps.
Great question. --209.239.xxx.xxx
Pay yourself? (by zero [IN]) Posted on: Mar 15, 2022 7:24 AM
I did work a lot of weekends and evenings trying to get it all going. Had a full time job that made me work OT plus two kids and a spouse.
I hired out when I didn't know how to do it. Then I learned how to do it, if I could. Have had handy guys along the way. Hired a few full on contractors to do bigger stuff.
Then the W2 ceased. I didn't want to take on another one. Started doing this only. Figured out I could still work the same amount of time on the rentals as before so I had extra time available for life.
Now as a regular thing I do not work weekends, holidays or evenings. The exception to that rule is when I have a bigger rehab with another stacked behind it. Then I work on Saturdays and spend more than 8 hours a day at it.
My typical week is well under 40 hours. This has allowed me to do so much for myself.
Hard to find people in the area that are worth the money. Heck I can't find people with no knowledge who want to learn.
The only way I see me not working for my little biz is if I started flipping full time as well. The deals for that have all but dried up. Materials and labor have all increased as much as housing prices. --107.147.xx.xxx
Pay yourself? (by gevans [SC]) Posted on: Mar 15, 2022 8:02 AM
We always have profit, but seldom take money from the business. At least we don't take it directly.
It covers our vehicles, cell phones, some of our insurance, meals, travel, etc.
But we have always had outside income that was enough to pay the bills, so we have pretty much always rolled the profit back into the business: another door or upgrades to what we already have.
This strategy allowed us to "retire" at 58. I still work on the rentals, but nowadays I only do the stuff i like to do. I hire out stuff like shingles, yard work, clogged sewer pipes. I still enjoy fixing and maintaining the properties, so I do HVAC, some plumbing, some electrical, and know all my tenants by name (we only have 12 doors).
I've hired out the cleaning for years! Hate that part. --158.115.xxx.xxx
Pay yourself? (by Roy [AL]) Posted on: Mar 15, 2022 8:10 AM
I would have understood this post a lot better if you had titled it,.."How to grow your business while having a day job"
Since I have never had a day job since day one, my business model has always been different than others here.
Now, I would like to ask you a direct question which could be the topic of another posting here. Is there an 'ideal business model' that should be followed if someone wants to grow their business while having a day job and a family to support? It seems like everyone does it differently here. Now, if this 'ideal business model' actually exists, then I want you to tell me what it is.
Re-read what Otis (IL) said and I think that is typical of how most people try to do it but is there is a better more profitable way to do the same thing?
Pay yourself? (by Oregon Woodsmoke [ID]) Posted on: Mar 15, 2022 10:36 AM
I had to really scrape and save to buy my first rental. There was no money to pay anyone else to do the work. If I would have only purchased real estate that I never had to go and look at for any reason, I never would have been able to get into the rental game.
When I could pay to have work done, I often had to go out and re-do whatever had been done because it was done wrong.
And today, it doesn't matter how much I can pay, I can't find anyone to do the work, No one wants to work and the people with job skills all got old and retired. If you can find a young person who will actually work, he doesn't know how to do the work.
Local handymen want $80 an hour, won't take any difficult work, work slow as molasses, if they even show up. --76.178.xxx.xxx
Pay yourself? (by Oregon Woodsmoke [ID]) Posted on: Mar 15, 2022 10:38 AM
And you know what? Appreciation isn't something to be sneezed at. --76.178.xxx.xxx
Pay yourself? (by S i d [MO]) Posted on: Mar 15, 2022 10:48 AM
This has been a great chat so far...kind of like a round table at Mr. LL convention!
To restate something I said earlier, "Whatever way you're doing it is fine...as long as YOU'RE HAPPY." That's the thing I found out when I was sweating out all the stuff DIY: I was NOT happy. and one reason for that is all I was getting was equity. I realized I could work for 10 years, build up lots of "equity", then keel over dead having missing my life and not get a penny back.
That's when I began thinking anew and made "profit first" the goal. I needed to reap benefits today IN ADDITION TO equity, tax benefits, etc.
I haven't read that book, but it sounds good. Might have to check it out at the library.
There are definitely at least three ways to go about this: strictly as a business, strictly as investments, a mix of the two. The problem I had when I started was neither my investment nor my business side were making me an acceptable return. Again, my problem was I never spent enough time thinking about it before starting.
Today I'm about 80% investment, 20% business. I find I make far more profit this way and growth opportunities have expanded greatly!
Pay yourself? (by Ray-N-Pa [PA]) Posted on: Mar 15, 2022 10:55 AM
I pay myself in two separate manners.
1) I do take a owner's draw that isn't specific in amount. If I want cash, I just take in and place it in my Quick Books as Owner's Draw. There is no tax on owner's draws. You just write yourself a check.
2) I have one LLC that manages the land trust and LLCs that own properties. I do - as the sole employee of that management LLC pay myself roughly 2-6% of the gross rents collected (depending on how the year goes). I do pay self employment tax, FICA and unemployment on this amount, but 100% of this goes into a self directed Solo Roth 401K. The individual LLCs and land trust match that contribution to the 401K. This gets listed in QB as employee salary and benefits.
Sid you are spot on - so many people can't see the trees when they are in the forest. I am doing this for retirement, not because I like I like people --24.101.xxx.xxx
Pay yourself? (by Bill [KY]) Posted on: Mar 15, 2022 12:29 PM
Sid, congrats on your growth!! Iíve been away from the forum for a while but would like to know more how you acquired 48 units + commercial. You were always debt averse so wanted to understand how you did it. Kudos --98.23.xx.xx
Pay yourself? (by Chris [CT]) Posted on: Mar 16, 2022 3:21 PM
I sub everything out, when I first started with 6 units sure I could do a lot. Now that I have a lot of units I am not a full time handyman, and I don't dream of being one.
Growing cured me of the DIY mentality. Between the rentals and the construction business if I gave up sleep and worked 24/7 I still wouldn't have enough time to get things done.
I think a lot of landlords are not as profitable as they should be. I just refinanced one of my projects with a none recourse FHA loan and they figure hiring a management company right into the properties expenses. For me it was a good lesson seeing how the big boys underwrite properties.
You don't have to do it all at once either, I just started to pay people to do the things I absolutely hated first. For me it was cleaning, I hired a cleaning lady at turnovers. Then I hired painters, etc. Its a process as you grow.
Pay yourself? (by Tarheel T [NC]) Posted on: Mar 16, 2022 7:54 PM
Roy, you are not making 20% returns if you are working for free. --24.197.xxx.xx
Pay yourself? (by Jim in O C [CA]) Posted on: Mar 17, 2022 12:53 AM
In my rentals and my manufacturing business I was the last to get paid once the employees and bills were paid. I felt that was the way it should be. I budgeted for this lifestyle. In good times I socked away money for the slow times. Some times I would take a paycheck equal to 6 to 12 months or more. --99.23.xxx.x
Pay yourself? (by JR [ME]) Posted on: Mar 17, 2022 9:10 AM
Interesting post. My wife and I are dabbler landlords. For 20 years. Always hired out most work but especially in the early years did little stuff like cleaning and painting. I donít take a regular draw, but we pay for one or two very nice vacations from the business checking account each year. And no, we donít write it off as an expense. --73.85.xxx.xx
Pay yourself? (by Phil [OR]) Posted on: Mar 25, 2022 8:40 AM
I was in a little different mindset than most in the beginning. My "real job" for 30 years was a self employed manufactured representative...paid strictly on commission. Rental property was a long term retirement plan. When a project on the rental came up, I would evaluate how much it would take to hire it done as apposed to me doing it. Would that difference be worth my time? Part of the equation is the fact that in order for me to pay someone else $100, it would take me earning $160 because of self employment tax, federal income tax, State income tax. I could rob Peter to pay Paul to a certain extent in where I spent my time. Yes, I worked a lot of night and evening also. 15 years into the rental business, I quit being a manufacturer rep. I now hire most of the big jobs out. Regular income stream from the rental now exceed what I ever made... now truely working on the business around 40 hours a month.. including bookkeeping. Was able to be with my grandchildren 4 day per week during the pandemic...( With a few exceptions of some projects.. but my wife was still there with the grandkids). Turned 65 a few months ago... have not purchased a new property in five years. Enough cash flow to support a good lifestyle for the rest of my life.. projected to get even better as rents go up and mortgage are paid off. My children will most likely inherit several million in property..each. At some point, we will have a dip in the cash flow... when we hire a property management company if we get tired of that part. In the beginning we took very little out of the rental. It grew so that we were paying ourselves a 10% management of the gross rent and plowed the rest back into the business. Now taking out most of the cash flow less reserve for emergency... well into the six figures. --68.186.xx.xx
Pay yourself? (by Peta [MD]) Posted on: May 26, 2022 7:29 PM
I have a full time W2. No, I don't pay myself. I'm in building phase so everything goes back into the business.
That being said, I work WAY too much inside my business. Sweat equity has been my rational thus far however, 2021 and now 2022 have been eye openers. My business has bloomed. My "side hustle" has become a full time job itself. I'm finishing 3 BRRRS, have 2 turnovers going and 2 more units going vacant. Did I mention I'm also managing 2 bathroom renos at my residence too? I'm still looking at new deals and spending time educating myself. I'm totally overwhelmed.
I spend way too much time on low return DIY to "just get it done" or because of decision making. I definitely cannot grow. I've started reading "Who not How" to help change my mindset. I have lost THOUSANDS in the last 12 months in rents 'cause I cannot be everywhere/do everything.
I agree, if I cannot take out a PM fee plus vacancy/capX/vacancy $ and cash flow well then maybe my deal isn't a great one (at least not from a cash flow perspective). I'm self-managing in 3 markets and it's too much to keep up with everything. So, I'm giving up self-management of all my rentals this year. And I'll ask for/hire help more. I'll focus on the high return stuff: precious time with family, buying great deals, etc. etc. Using my brain not brawn.
I won't surrender full control, I'll be the conductor. Like a conductor doesn't play every instrument to make the music. The conductor works with great players and then waves the wand of command.
Now watch me GROW!!! --100.36.xx.xxx
Pay yourself? (by April [KS]) Posted on: May 26, 2022 7:42 PM
I learned everything in reverse order and the hard way. Purchased 30 units in one year during 2008. Hired a management company. Lost tons of money due to management costs. That's when I learned one of many golden rules - he who has the money (collects the rent$) has the power. The property manager took 10% of collected rents, kept all the late fees and nsf fees, took 50% first month's rent as a placement fee, plus 12% of repair costs for any work order as a project management,.. then the contractors charged anywhere from $50-$80/hr. I got what was leftover after everyone else got paid and some months nothing was leftover - even with 30 units.
Thought a different manager would solve the problem. Changed managers 4 times in 4 years just to find different issues but the same problem. I wasn't making $$. The worst - in 2012 I had a property manager selling drugs to tenants. He even took a deceased resident's opioid prescription to a pharmacy to be filled. That's how I found out about the nightmare. Police called me saying they had video of my on site property manager in a pharmacy committing a crime and their undercover agents had purchased drugs from residents in my apartment community. They believed my manager supplied my residents with the drugs to resell and he had been taking cuts from the sales in exchange for rent. The police said raids were being planned and my residents may end up being incarcerated. The blood drained from my face. That was the final straw. I'd been losing money - I couldn't pay myself - couldn't pay the property taxes and approaching the tax sale date. Now this dateline nightmare? I either sold and walked away with a loss or took on the nightmare. Easiest decision I ever made. I moved into my own apartment community the next day. I could write a book about all the scams, fraud and theft I unraveled. I lived on site for 4 months. Brought it from 65% occupancy to 100%. Cleaned up, booted out, removed, replaced, fixed up, freaked out (often), and finally realized as the owner I was the only person who cared enough to make it work for me. Everyone else made it work themselves. Once I got paid first, everything turned around. I got the taxes paid and caught up,.. went from last to first for in demand properties and I've stayed at 100% occupancy ever since.
Flash forward 10 years. I'll never let someone else manage my properties. I have 40 units. Taxes are all paid in advance. I collect the rents (actually - online management software collects the rents for me and deposits them nicely into my bank while I sleep). I am paid first before anyone else and I take very healthy monthly draws from the LLC. Currently pre-leased through September. Went from broke and behind, about ready to lose everything on a county tax sale,.. to having an insane net worth I could have never imagined. Thinking a property manager cared about me making money was a rookie mistake. Letting someone else do the management work was a mistake.
Regarding maintenance, it's really hard to find anyone to show up. Or does competent work. I'd like to sub out more maintenance work but good workers are hard to find in my small town and not enough people are going into the trades. All the landlords in my area are DIY because there's no good help. The only electrician I can get to show up on time wants $100/hr so I do most minor electrical. My plumbers/HVAC pros charge $90/hr plus a $79 fee just to show up. So I do a lot of the light plumbing and save the more difficult jobs for them. Anything that hints of liability or large labor needs (roofs, electric panels, drain line collapse, etc.,) I call the pros who have liability coverage and manpower. That's maybe 10-15% of the repairs.
The result of doing the easy repairs, doing my own turns, painting and cleaning,.. has been worth it. On average I've added $70k annually to my bottom line and only work maybe 2-5 hrs a week on maintenance. If there's a turn, I work 4-6 hours a day for 3-4 days in a row. Average 10 turns a year so not that many days. I can do a turn in 3-4 days. When I hired it out it often took 1-2 weeks for them to fit in with their other jobs. I lost rents waiting for the work to be done and lost control of the move schedule $$. I would have to pad the schedule for the new tenant just in case there were delays with the hired help. When I took over, I narrowed that timeline down to 3-4 days. This has also added to my bottom line revenue.
Golden rule in maintenance, do it right the first time. Period. Don't use cheap materials, supplies or parts. Never. Or you'll be doing it twice. Which takes you back to golden rule number one in maintenance - do it right the first time.
So, yes, I have a part-time job but it pays well and there are lots of benefits of being inside units doing inspections, checking for unreported "fluffy" animals, chatting with residents, growing referrals. It's a small inconvenience for a pretty good payback.
Probably have battle scars from trusting other people with my money in the beginning. Lots of lessons learned. Not saying that this is the best way or the right way for anyone else but for my small town and just 40 units, I wouldn't do it any differently. --24.111.xxx.xx
Pay yourself? (by J [IN]) Posted on: May 26, 2022 11:27 PM
My name is J[IN] and I bought a job.
This is a great discussion. Turns out when Covid shutdowns happened something dumb happened in my brain and I bought a service van for all my tools. Now I have a full time job maintaining my rentals and I do not pay myself. It is the dream I had 20 years ago when I was working for other landlords and busting my but to get here but really a job is not what I envisioned. I am even mowing 5 of my properties short term. --38.79.xxx.xxx
Pay yourself? (by Still Learning [NH]) Posted on: May 27, 2022 7:06 AM
Started 11 years ago and havenít paid myself other than expenses. I am within 2 years and ahead of the original schedule/plan. Buildings will be paid off and then we take full income or have the option of hiring property management and less income. For the first time I have started hiring cleaning out which I love. My hope is to continue to manage them but find a property management company to contract with and provide me with vacation coverage. --75.67.xxx.xxx
Pay yourself? (by Jason [MI]) Posted on: May 27, 2022 9:17 AM
Yes I pay myself the following.. Taken out of my rental bank account automatically every month
1. 500 month roth ira for me
2. 500 for my wife's roth
3 300 for kids mutual fund
4. 700 on the 5,10,15,20, an 25 of each month into mutual funds
Soon to be changing when I go to full time landlording --107.116.xx.xx
Pay yourself? (by Bill [KY]) Posted on: May 27, 2022 9:35 PM
Sid, I disappeared from this site for a good bitÖI had to pick my jaw off the floor when I read you are now up to that many units. Congrats! I remember you were a no debt guy. Did your strategy regarding debt change at some point to acquire that many units?
Thx and congrats on your success! --71.29.xxx.xx
Pay yourself? (by David [NY]) Posted on: May 28, 2022 12:32 PM
Back in time, when the RE bubble was getting ready to burst I was just beginning to buy one property a year and fixing them to hold and rent. Well, that stopped. I had three properties but was upside down on financing. Instead of thinking things out I panicked, sold off two, and kept my Six-unit and I live in it currently today. Back then Robert Kiyosaki said something to the effect, "If you don't have a lot of expenses, you don't have to have a large income." I guess I took that to heart. I've been working P/T 20hrs wk. in retail sales for ten+ years and doing most all my own work on my Six-unit. Only two evictions in 20+ yrs. I'm married with three kids, and admittedly a modest lifestyle by today's standards.
Said all that to say this, I'm ten+ yrs older than I was then and this discussion has brought me to the realization I'm getting too old "to keep doing it myself"! Time to get this stubborn fella to hire out and manage more! Thank you so much for this discusion! David, NY --74.67.xx.xxx
Pay yourself? (by GKARL [PA]) Posted on: May 28, 2022 3:55 PM
I've always delegated major tasks because I don't enjoy doing them nor do I have the skills to do the work save for the simplest tasks.
I draw up budget from each rental including vacancy and repairs which budgets my draw by default. I take this budgeted amount every month. --172.56.xx.xx
Pay yourself? (by RB [TN]) Posted on: May 30, 2022 1:07 PM
Don't be holding your breathe
while waiting on an (accurate) response. --24.183.xxx.xxx
Pay yourself? (by Pmh [TX]) Posted on: May 30, 2022 1:37 PM
Bill/RBÖ..we may be waiting for a whileÖ. --107.77.xxx.xxx
Pay yourself? (by Pmh [TX]) Posted on: May 30, 2022 1:44 PM
I pay myself every month when I deposit the rentsÖI donít translate my time into an hourly rate. I look at big picture. equity paid for my my renters. now when we started out we did most repairs etc ourselves. so while I can sweat copper & install replacement windows or replace a sewer line or make ready now I pay someone else to do that. --107.77.xxx.xxx
Pay yourself? (by iradmac1 [GA]) Posted on: Jun 2, 2022 1:00 PM
I've been working out of the LLC account to do all the repairs on the long term rentals with some small perks like lunches and an occasional trip, but now we're flipping in the name of the LLC, my problem is capital gains, is the self directed IRA the best workable route to take to deposit proceeds from the sales and still allocate a paycheck to myself and make purchases in the name of the roth? and if not what is? and who would set it up for me? --163.246.xxx.xxx
Pay yourself? (by Rande [VA]) Posted on: Jun 2, 2022 10:52 PM
Where can I read Brad's 20K advice??? Thanks! --45.132.xxx.xx
Pay yourself? (by 6x6 [TN]) Posted on: Jun 8, 2022 8:44 AM
Sid, I am rereading your post here. One day this will all sink in. Thank you. --73.120.xx.xxx