Kinda like having a Farm.

The only useful suggestion I can make (since I don't own a business managed by someone else) is to not buy into a business that you don't understand & have experience in.

A friend had a long cherished dream of running a store selling only luxury animal chachkas. I know, it was the 90's...anyway, she discovered she loved BUYING for the business: trips all over the world to get stock, finding new and unique things, setting up display...

HATED running it. Hated doing the books, staffing the store, paying the rent...her stuff was often too expensive for most and sales were pennies a day of throwaway stuff...

The thing is, she was not a stupid woman and had somehow planned this biz in her head for years...but what she realized did not match the dream AT ALL. The worst part was her simply hating to go to the store. Hated it.

It went out of business in two years. I don't know how it lasted that long.

I would say that based on your line of questioning you already know what will happen and why it’s not for you. I’m speaking from experience as I’ve been there. Let me confirm your suspicions.

I would guess you are like me in that you can’t just let things happen. You want things done in a certain way and you want to make sure they are. The problem is that with a business, especially in the first 5 years you need to be there to enforce those standards.

I purchased a business as an additional revenue source and over the years it took much of my time. It was taking my mental space even when not working. There were just so many things to keep in order. What started as a side gig ended up taking most of my time.

The good part was the $. And I guess that’s why I kept it for so long. It started slow but eventually was about as profitable as 30 paid off doors. When I finally sold I felt a huge sense of relief. I think I didn’t even realize how much stress I was under. I was maintaining my real estate at the same time so that didn’t help. So when you talk about golden handcuffs, that is exactly what I said to people when they asked me about it. I would always say that I am handcuffed to it and sure they are made of gold but they are still handcuffs.

Your level of satisfaction is probably most dependent on where you are now. If you have financial security and time freedom it will be much harder for you to adjust.

I was going to say--- I know in the past, you've primarily been a house flipper, right? I know around here, things were really great for flippers up until about 2015-2016, but over the last 5-10 years, it's been a lot harder.

But the point is, the flip philosophy is different from the buy-and-hold philosophy. Can you bring your flip philosophy to this new thing?

Even if you're not interested in being handcuffed to a new biz for the next three generations, is it interesting enough to focus on for 5 years? Use it as a place to store your original $x for its initial purchase, and use it as a place to generate $y per day/week/month/year? But not be married to the idea of maintaining it for too long? Then when you get to that initial arbitrary goal, you can look around. Are there other things you'd prefer to do with your money and your time? If so, flip the biz to the next person, and go off and do what you really want to do. If not, keep it for another arbitrary period of time-- maybe another 5 years-- and then reevaluate your feelings for it.

One complicating factor would be how it would affect your family dynamic. (Farm? Homeschool? Kids' activities? How's your wife doing? Is she in a good place or does she need you to be more of a presence at home?) Are any of the kids old enough to have a part-time job doing a low-skill task with Dad? Etc.

A fourth philosophy would be--- I know there's an attorney in our area who does work for various business owners. In lieu of his fee, he'll say, "Oh, give me a x% share in your biz---" and then he sits back and gets mailbox money.

The problem with most businesses, unless you are getting into really high end stuff, is that your employees are the exact same people who are applying to rent your lower income houses. They can work, but they must be supervised closely and directed carefully. You can not trust them to do their job correctly and honestly.

For a small business, you are not going to get the same caliber of managers as a a big corporation can hire. You won't be hiring CEO material. So those managers have to be watched and supervised.

NE, if you are bored and need a project, you could pick a charity and help out there, Or sign on to work for a political party (which might actually be useful)

You could keep busy and still walk away without notice if you decided it wasn't for you.

I have had my fingers in a few businesses. For me, I look at it exactly like buying a rental. I don't care which business/house as long as it cash flows and I don't have to baby sit it. The risk reward has to be there also as this is definitely higher risk than rentals. I look for deals that I can add value to also looking at the exit strategy when I start.

For example, my latest was a business with a 30 year old ranch hand that I met at church that has a young family. As I got to know him well, I saw that he had great relationship skills and a good work ethic. His wife has a finance degree and runs the business side of the ranch. On the reverse, I have a friend that has done my pest control for 30 years, he's a one man show, not a particularly good businessman, getting old and wants out.

I worked out a deal to buy out my friend's business over 2 years, he has to train the ranch hand, as part of the deal the wife has to take over and manage the books on her days off. In return, they profit share also growing ownership in the business for 12 years at which point they will have controlling interest, then the deciding vote moves to them. He is the proprietor with guidance from his investor (me), I do have over-ride authority at this point. I have challenged them to grow the business, so they grow their income. I point them in the right direction with things like marketing, customer referral programs, and other business elements. I met with them for 1-2 hours weekly the first few months, then scaled back to monthly. I'm just over a year in and he has doubled the customer base and hired a kid to help him so it is working out well. Not all of them do pan out this well though, about half don't make it past the first year or two so there is some risk.

MikeA, when you buy a business, do you know how to run it?

In example, do you know pest control?

I had an opportunity to purchase an accounting practice about a year ago and backed out for the very reason of being handcuffed to the desk. My own practice is virtual while this practice wasn't and it was going to take some effort to convert and train the staff. I decided I wasn't up for the stress of that and being chained to a desk.

I had 2 good businesses when I was younger. One I sold for a big number in my 20's but then blew all the money like a fool (PARTY!!!). The second made enough to retire for life by the time I reached 39, so I did retire then. Along the way I bought and flipped houses, worked with mentors who did the same and after retirement just kept a few for cash flow. Then I got bored(you can only fish and drink rum in the Fl.Keys for so long until even that gets repetitive and boring). So I went back to more rentals and flips as good deals came along. Moved a few times but there are always deals no matter where you go, if you are patient and ready when they come along.

As to other businesses, when I was young I had several that failed for different reasons - bad partners, bad employees, not knowing enough about the business, under capitalized. I made a deal with the wife - she invested in the stock market following advice/style from Warren Buffet and I messed around with housing. Over time, she actually made more than I did. No golden handcuffs for her. Instead of buying a company and having to run it, she chose good companies and bought their stock. Berkshire-Hathaway, Apple, Netflix, Amazon, Microsoft, Nvidia,Visa, Mastercard, stuff like that for part of it but a lot of just the ETF's and mutual funds with good long term managers.

One thing I remember - as a younger man of about 35 I did a home for 2 guys about 45 or so who built spec homes for themselves in coastal Southern California. They told me they did all the work on them except a few things they hired out (that's what they hired me for, those things). They said they did 2 homes per year and spent about 4 months on each home then took 4 months off. At the time (mid 1980's), the type homes they did (one story, 3 br/2 bath with garage) were selling for about 300K. They said they each made about 160K per year for doing the 2 homes and that that was "enough" for them. Plus they had 4 months off. I thought that was pretty smart. No bosses to please. No employees. No clock to punch. No one to criticize them. 160K each for 8 months work was pretty good then. It still is pretty good.

You might look around for a piece of land that fits the formula wherever you are, tweak the price to fit and do something like that. No need to do 10+ houses a year and have employees and all that goes with it. Do ones that meet the formula you work out. Land with improvements about 20 percent of finished price. Materials and contracted labor and overhead about 40 percent. Your labor and profit about 40 percent. A few percent one way or the other and holding costs and financing/sale costs can be worked out by making the final price fit. So your final price needs to be near 400K these days, depending where you are. Either that or you'll need to do more houses or more expensive houses, all of which takes more time.

Another thing I see more of lately is people building large warehouse style garages in low cost industrial zones and mini warehouses. They are simple and easy to build and much less expensive to build.

First thing when I look at buying a NNN or NN building is to understand the business model to see if it makes sense to me. I have done leases with as many as dozen different businesses at one time. If I don;t understand how they add value to the end product and ho w they are making money, I don't even rent to them.

So where do you find these ratios that seem to be the secret code to finding out how the operations work BizStats dot com will give you profit margins and the cost of goods sold. Being a real estate investor is tough. There isn't a huge profit margin and due to increasing expenses, that profit margin has gotten thinner.

There is a person who is a professional title searcher at our court house. I pay her $50 to give me each property going up for the monthly sheriff sale that has a huge bite of equity still in it.

The way I see it is if I can't reach out to these folks before the bank orders the sale, then I will line myself up with the ability to buy one or two of these each year. You have a keen set of eyes for the correct niche that suites you. The problem is everyone is searching in a similar manner driving up those prices. Around here, those tier one houses are overlooked at the bank sale and people chase after those tier two or tier three places.

As someone who currently has "golden handcuffs", a vacant owner small business is harder than it sounds...mainly due to The Agency Problem.

My main business (other than real estate) pays pretty well.

That said... if worked out to an hourly rate... 'eh...

I'm 51... If I could go back 30 years...I'd prolly "get a job" and invest in real estate on side... til it was full time.

I didn't start in real estate til bout 15 years ago.

Currently, thanks to real estate, I am close to giving up day business without too much of a hit to lifestyle.

Well....the last foreclosure I purchased was a business. A B&B in a resort area. Purchased in 2020 .... not for the faint heart. Ran it for a year and a half after bringing the building back.

Tyran...

Did it turn into ok cash flow?

Wouldja' do it again?

By "hiring" an innkeeper...w2 or contractor?

=========

I have a piece of real estate...bought for one purpose...that didn't pan out... now we run a different business out of it...have automated the front end of business and have a contract employee that handles all the rest of business...

NE,

Congrats on your success and a new level of FREEDOM!!!

I had a store and yes I was chained to it plus locked into overhead of lease, utils, employees, etc.

At your stage you should be the INVESTOR OWNER of a business, never the worker.

But be prepared for MORE and NEW set of govt intrusion than you experience now.

If you want activity, do what you know for a fee. You are a proven expert with a great track record. Play up on that.

Go to a nearby REIA meeting and you'll be swamped with investors who will pay you big dollars to rehab their investments. Tell them $400 per day.

There is a guy on Youtube with 2 channels teaching "How start a handyman business". He charges $1500 for about 2 hours of work - 2 smoke detectors, a toilet flapper, and a loose handrail. His specialty is realtors who need stuff fixed NOW! for a closing. They don't ask HOW MUCH, they ask WHEN.

Truck, tools, basic parts, phone, Venmo. Low overhead.

At a seminar I met a guy running a handyman franchise. At the time he hired for $15-20/hour and charged $100/hour. Had more business than he could handle.

Or go play with your kids!

BRAD

NE,

Congrats on your success and a new level of FREEDOM!!!

I had a store and yes I was chained to it plus locked into overhead of lease, utils, employees, etc.

At your stage you should be the INVESTOR OWNER of a business, never the worker.

But be prepared for MORE and NEW set of govt intrusion than you experience now.

If you want activity, do what you know for a fee. You are a proven expert with a great track record. Play up on that.

Go to a nearby REIA meeting and you'll be swamped with investors who will pay you big dollars to rehab their investments. Tell them $400 per day.

There is a guy on Youtube with 2 channels teaching "How start a handyman business". He charges $1500 for about 2 hours of work - 2 smoke detectors, a toilet flapper, and a loose handrail. His specialty is realtors who need stuff fixed NOW! for a closing. They don't ask HOW MUCH, they ask WHEN.

Truck, tools, basic parts, phone, Venmo. Low overhead.

At a seminar I met a guy running a handyman franchise. At the time he hired for $15-20/hour and charged $100/hour. Had more business than he could handle.

Or go play with your kids!

BRAD

I was working for a group of realtors for a while.

I was their closer. I would come in after the house inspection and fix what needed fixed.

They rarely if ever asked for a price. I now realize I was on the cheap side.

I made a lot of money from them. Problem was that I didn't have time for my own stuff, including the new house I promised the wife.

Miss the money but now I have more tome for me. Plus more down time to relax.

NED .... yes it cashflows. The building went thru a hard freeze in receivership (14 bathrooms .... yikes!)....so I got it cheap,cheap.

The inn keeper gets paid for cleanings only thru his LLC. We "exchange" a 2 br apt in the building for inn management.