REAL TIME!!!

Well newbies (and other fans)... I'm working on getting Sponge to write LESSON THREE since, really, he's the one that stumbled across it and began our transformation. But in the meantime, there's sooooo much going on that I can't hold back any more on "sharing". I'm not even going to start at the beginning... I'm going real time for this post!

Today we met with our contractor to pick out materials for the rehab on the Medallion house. Medallion is a 4 bedroom, 2 bath, 1700 sf. single family dwelling that we want to flip (I'm going to try to get some pictures up this weekend). We closed on it on August 5th (17 days ago) and what a ride it's been since!

You know how all the gurus tell you that you need to "have a team"... we can't emphasize enough how important that is. HOWEVER, we also should mention that until you actually have work for your "team" to do it's pretty hard to attract anyone to the team. It's kind of like trying to get a baseball team together without a league to play in. A lot of players just won't be interested in all the work it takes to play against... well, against no one. Just play amongst themselves. Not so much fun!

In any case, Sponge has been busy full time gathering team members (while we actually have work for them to do and the ability to offer them earnings for that work). Seriously - it's taking ALL his time. But this is our FIRST house so, being the machanical engeineer that he is, he's chalking it up to "tooling" (and I remind him of that when he's feeling overwhelmed with all the phone calls and "interviews" and such). It's like when you're inventing a new toy... for the very first one you have to engineer it, create all the drawings for the fabrication guys, they have to create molds to make the thing, and then - WALA! You have a new toy. One that you can now mass produce because all the "tooling" has been done.

So he has "shopped" for the last couple of weeks. His schedule has been something like this...

First: (and we were sweating this!) INSURANCE. VERY IMPORTANT!!! You can do your investing in the stock market or mutual funds or T-Bills and none of them will EVER sue you. But when you have a house... a neighborhood kid can be cutting across your lawn, scrape up his foot on one of the sprinklers, and BAM! You're in court! Well - maybe nothing like that will ever happen but the point is, when investing in real estate there are certain risks that are not present when investing in "paper". There is a lot of money to be made but you can't ignore the risks. You minimize the risks by covering yourself. So, at the top of our list was getting insurance. Insurance isn't the only way to minimize your risks but it seemed to be the fastest, easiest, and least expensive way to get started so it's what we did first. I'll write a whole post on risk and ways to minimize it at a later date (because we've taken other measures now too).

Second: UTILITIES. Ha! you say. Utilities? Like I mentioned when I started this blog, the $2500 guru packages are typically vague and don't really cover all the details involved in your investment endeavors. Undoubtedly, some of the points they don't cover are left out purposely because they figure we have a brain. Well we won't be making any such assumptions here (hehe). Seriously - there are details that can get overlooked and will cost you extra if you do.

Squeezed inbetween First and Second: ... when they had the time... having our Realtor and our contractor come over to the property to start making plans. Gotta have an exit strategy!

Oh my goodness - sooooo much more to say and so little time!! If I wait 'til I get it all on paper I'll never get around to posting this! I'm going to pop this up there now and start writing shorter, more frequent entries...

LESSON NUMBER TWO

OK - join me in the moment... we had 5 wonderful children, 6 cars, 5 cats, a hamster, and a big 5 bd, 2.5 ba, 2500 sf. house on the hill with a 3 car garage. We had worked hard and reached the height of our careers and whoops! Suddenly we were BOTH unemployed and positively dumb founded by how that could happen. Hadn't we been taught, "Go to school, work hard, get a good job, work your way up the ranks and your company will take care of you"? yeah... Not So Much!!!

We began to think about the "successful" people we knew (or knew of) and tried to figure out what they were doing different. Fact is, they didn't work for someone else... they owned their own companies. They set their own hours and made all the decisions and were "happy" and "rich". Sooooooo... that must be the key. Run your own business!! And that's what we set out to do.

I was an applications programmer and EVERYONE on the planet needed programmers... from every "Ma and Pa" shop all the way to the BIG corporations. I decided to become an independent consultant and do contract work. Sponge did too... he was a mechanical engineer and an AutoCAD guru with plenty of contacts in the industry to provide both references and referrals. We set out to become "sole proprietors" with no need to depend on a company to be loyal to us and take care of us.

Unfortunately, it took a while to get up to speed and in the mean time we spent all our savings and went about $45K into credit card debt. Luckily, I owned 2 rental properties - a condo I had gotten when my oldest daughter started college (for her and her girlfriends to rent), and a townhouse I had gotten back in 1995 when the kids were still little enough to fit into a 1500 sf. place. Face (my oldest daughter) had tired of living with a bunch of giggly girls and had moved back home, so at this point we decided to leave the house on the hill (which we were renting), sell the college condo to pay off some of our debt, and move into the townhouse (which was $1000/mo. less than the house on the hill). We refinanced the townhouse (to pay off the rest of the debt) and continued our quest to become sucessfully self employed.

(Any one reading this should make a note of how we just got out of debt and lowered our bills... it didn't dawn on us until some time later what a gold mine the real estate was).

Well, with time we succeeded! We had enough clients to maintain a fair income and found that we were in total control of what jobs we took and when we worked. That's right... as self employed, independent contractors we could choose any 18 hours a day we pleased to fulfill our clients needs!!! We had to work more hours than we did as employees because now we were paying self employment taxes, Social Security, and Medicare. Oh, and there was the tiny little problem of not having health insurance. Details!

Okay, so working hard for someone else had proven to NOT be the way to go. And now, being self employed was proving to have it's limitations too. It would seem that since the number of hours in a day that you have to "sell" your services is limited, so is the amount of income you're able to bring in that way.

LESSON NUMBER TWO

"Being your own boss is still, really, just working long hours for someone else (your clients)"

Lesson Number Three is what changed everything...