Every science fiction movie I have seen with a spaceship typically has a dramatic scene where the ship captain has to heroically decides to blow up the ship to save planet Earth or something like that. He or she initiates an auto-destruct sequence by telling the ship's mainframe computer.
And then the countdown begins with the stern warning,
"This ship will auto-destruct in four minutes and nineteen seconds..."
Every time I talk to a landlord investor in Michigan who is telling me about the junker they just bought for the purpose of rehabbing and turning into a cashflow property - I hear that computers voice in my head.
Unknowingly, they have just initiated an auto-destruct sequence on their cashflow property business.
Here is why this is a such a rotten start for your real investing business in Michigan:
1. If you want to be in the cashflow business then be in the cashflow business. Don't be in the "rehabbing the house till my hair turns white" business. How much cash are you putting in your pocket when you are spending weeks, month, then months rehabbing the house?
Let me tell you by using this extremely sophisticated software that took me two decades to build - NOTHING, ZERO, NADA, ZILCH. May be you think differently than me but I am all about the money when it comes to business. No money equals veddy veddy bad business (try saying this in a heavy Indian accent like me and it sounds even more scary)
2. Rehabbing is not a science. There is a reason your contractors give you a piece of paper called THE ESTIMATE. The more frakked up the foreclosure you bought; the more likely the chance that there are things that you, your property inspector, and your contractors are missing out on. Think carpet needs to be changed ONLY here but, but, but we ripped the carpet and there was a gaping black mold stain, happily living right underneath it. Your rehabbing went up by several thousand dollars.
How could you have missed such an obvious horror? Easy. You were too busy trying to figure out how to replace the roof, fix the foundation, change the electrical, replace the furnace, fix the porch, and lay a new driveway. So many big things to fix in the next 12 month you intend to work on this house that you miss THAT LITTLE THING that is about to turn your $250 net cashflow check into a $50 check.
3. You will get sick of rehabbing this house. It will be fun for the first three months and a gigantic pain in the ass kind of thing for the next three. This has nothing to do with business with everything to do with what is going on between your ears. It will suck out all your energy. It will drain you. It will make you hate real estate investing.
It will make you wonder if your loser cousin who is always trying to put you down with idiotic comments is actually a genius and it is you who is an out of control crazy real estate investing Donald Trump loving groupie who needs to go to real estate detox.
In 2009, there is no reason, not even one reason I can think of that can stop you from buying, amongst hundreds that are available in Michigan cities around you, a decent, rentable foreclosure, if that is the game you want to play, tomorrow that requires not even cleanup and have a line of renters fighting with bloody fists by next Monday, even before you close on the house, for the privilege of becoming your renter.
Not even one reason.
Don't turn the auto-destruct sequence on your Starship Cashflow.
We want you to stick around for years and make a Hummer full of money.
For some reason me thinks that it will make me veddy veddy happy.
