Home Warranties – Are They Worth It?

For those of you who follow my blog, you know that I’ve recently been questioning my strategy of having an active home warranty policy on each of my (single family) rental properties. 

As you can read here [insert link], I’ve had several challenges with my home warranty service that have caused to me to reassess their value. 

With a little help from an appliance lifecycle guide I received from [insert website name], I created the following tab which calculates , for a given home, whether it is better to have a home warranty or not.    It compares paying for the home warranty vs. maintaining and replacing the appliances on a frequent basis. 

The Cost Of A Home Warranty

A home warranty will typically cost between $500 and $600 per year.  The factors driving this cost include how many homes you have under warranty (you can receive a multi property discount), the price of the call out fee (which ranges from $0 to $150 or more), and the number of claims that you’ve made in the past.  

For the purposes of this calculation, we’ll assume an annual policy at $525.  My leases state that the tenant must pay the per incident call out fee , which is typically about  $125.  

What The Home Warranty Covers

While each policy has its own “exclusions”, the home warranty typically doesn’t cover normal wear and tear (a recent example is an old dryer where the bearings went bad), and has certain allowances which may require you to pay an additional fee.  For example, if your air conditioner requires freon, the home warranty company may only cover a small portion of that cost. 

What Is The Alternative

The alternative is to apply the money that would have been spent on the home warranty to a fund that covers the repair of appliances in the home. 

This would be in addition to any similar allocation you maintain for the general upkeep of the property (roof, exterior walls, landscaping, etc. ). 

Given that savings rates are effectively at zero, I am not calculating any interest that may be earned on that money while it is sitting in the bank account.  Nor am I calculating any potential inflationary pressures on the cost or installation of the major appliances. 

How Do You Calculate This 

I listed all of the major appliances that the home warranty covers in each home.   I took a list of average appliance lifespans, and the average cost for the appliance installed.  I also included any annual maintenance that I might pay for, if I didn’t have a home warranty. 

I then summed the average cost for the appliance with the annual maintenance cost, and then divided that total by the lifespan to come up with an annual number.  These gave me an annualized replacement cost of each appliance, and the summarized annual number for all appliances. 

It looked like this:

Total$688
Major Home Appliance Life Expectancy Chart
ItemLife Span LowLife Span HighAverageCost (New)Yearly Maint.Cost Per Year
Air Conditioner102015$4,000$100$367
Trash Compactors712110
Dryers, Electric111814$0
Dryers, Gas111613$750$58
Dishwashers91612$475$40
Garbage Disposals101513$120$9
Freezers1220160
Microwaves5108$400$50
Ranges, Electric1320160
Ranges, Gas152319$500$26
Ranges, Hoods919140
Refrigerators, Compact4128$0
Refrigerators, Standard101814$1,000$71
Washing Machines81612$800$67
Water Heater102015$600$40

It Seems Straight Forward, But It Isn’t 

On the  face of it, my company’s out of pocket cost of $525 for the home warranty seems like a good purchase.   

But, if you take into account some other factors the economics shift:

  • The home warranty doesn’t pay for the replacement of the item.  So that becomes a neutral cost which is similar whether you purchase the warranty, or not. 
  • The manufacturer covers a warranty for the appliance for the first year.  Most major credit cards extend that warranty (albeit for personal use, but we’ll leave that point aside) one to two years more. 
  • The out of pocket expense for a repair person could be less. 
  • You’re not getting any better rate by going through the home warranty company. 

Calculating The Cost Of Repairs 

Across our several rental properties with home warranties, we see between zero repairs and two repairs related to the home warranty per year. 

With a call out fee of $125 per visit, and $525 per year per policy, in the worst case that equals $387.50 ($775 / 2). 

Putting aside major repairs like air conditioners, most other repairs can be done for less than $775 per year.  

Hedging Your Bets 

All situations are not equal.  If you recently purchase an older property that has the potential of having numerous problems (two or more per year), or you haven’t identified resources in the area of your rental property such as appliance repair people who can fix the issue, then perhaps a home warranty might be a good investment. 

It’s Just Like Any Other Insurance Policy  

At the end of the day, home warranties are just like any other insurance policy.  While they offer some protections, they have numerous exclusions, and at the end of the day you should measure your risk against the costs.  If you enforce a “first fee” with the tenant, where the tenant pays the initial cost of any repair, you can further de-risk and mitigate the need for a home warranty. 

Each case is different.  My best advice is to run the numbers each year, and adjust your strategy accordingly. 

My Email Manifesto …

I think that we can all agree that time is one of our most valuable assets, and anything that wastes our time should be avoided.  

I’ve been assessing those areas of my life, both work and personal, where I’m wasting time.  I’ve been carefully looking for inefficiencies in my own life, including instances where I create inefficiencies in the daily lives of others, and I’ve identified one of the most common sources of wasted time: 

email.  

Consider this my Email Manifesto.  I’m documenting my email best practices that can save all of us time and energy!  I practice these methods today, and find that they enable me to communicate more clearly and efficiently, and help minimize the back and forth that is common when communicating by email. Not only do these email best practices save me time, but they save time for the recipients of my emails as well.  

Like many of my best practices, I consider this a living document.  I encourage you to make it your own.  Include your own best practices on how to use email more efficiently.   Share them with coworkers, colleagues, and friends.  And share them with me !

THE TO: LINE

Choose Carefully

Email efficiency starts with choosing the right recipients.  While it may not take much to add another recipient to your email thread, it takes time and energy for the recipient to read through your email. 

Be thoughtful in who you choose to email.  Only send an email to those who need to be included in the conversation.  There is nothing more annoying than receiving an email with the lunch menu for the New York office, when you work in the Chicago office.   

Consider: Should you be emailing this at all ?

Not every document should be emailed.  Far too often we send emails, when they really should be documents which are posted in a shared drive.  Instead of emailing that status sheet to the entire company, consider posting it to a shared drive.  Not only does this ensure that it is available for everyone at any time, but it also removes one more redundant email from the inbox.  

(Don’t) Reply All 

A majority of the unnecessary emails I receive are from colleagues who are replying all to an email.  Replying All to the email from Frank in facilities letting the company know that the air conditioning has been fixed says more about you than it does about Frank.  Do everyone a favor; just email Frank and his supervisor.  You may think that you’re showing your “company spirit”, but what you’re actually doing is diluting the value of the other emails that you send that are actually important.  Quite frankly, no one cares if you agree or not, and no one wants to know what you want to have for lunch.  You can help others avoid “replying all” by putting your recipients on BCC, making it impossible for them to communicate with anyone else but you, the sender. 

Use CC properly

Similar to carefully choosing the right email recipients, it is also important to signal to the recipients your expectations of them.   Beyond giving clear instructions in the body of the email,  a good way to provide a “hint” to the recipients is in your use of the To and CC fields.   

I use these fields very intentionally to signal to the recipients my expectations of their role.   The “To” line is meant for people who should have an active voice in the conversation, or have specific action items.  The CC line is meant for those people who are “just there to listen”.  They just need to know about something, but have no actionable next steps on the topic.

It may take some time to train those with whom you actively communicate, but once you do you’ll find this similar process can save hours of time reading and answering emails.

Don’t Micromanage

Don’t require your reports to CC you on everything.  Trust them to do their jobs; then check in on them regularly to make sure that they are hitting their goals. 

THE SUBJECT LINE:

The subject line is arguably the most important part of your email.  It should be clear, consistent, and succinct.  

Want to get encourage more response to your emails?  Use powerful subject lines

Subject Line : 

  • IMPORTANT 
  • URGENT
  • INTERNAL CONFIDENTIAL
  • CONFIDENTIAL 
  • QUICK

These will help recipients prioritize your emails against their other daily action items. 

THE BODY:

Avoid pronouns

I often say “Pronouns Kill”.  It’s my way of exaggerating a point; using pronouns more often than not leads to miscommunication.  So in business, I try to limit their use. It takes a little effort to structure sentences without abusing pronouns, but once you get the hang of it you’ll eliminate any chance that your email will be misinterpreted and that the recipient might ask for clarification. 

Provide clear summaries and next steps  
If your email is lengthy, provide a short overview up top, and then a “background” beneath it.   I like to provide an “Overview:”, or use “TL:DR” (too long: didn’t read) to summarize the topic.

Future Proof Your Emails
Write each email as if there was no way for the other person to respond.  Concisely include all of the relevant information (who, what, why, when, and how), and include the dates by when you need the response.  

Include those attachments
Don’t expect the recipient to go digging through your emails to find the latest version of the document you attached four emails prior.  Think in terms of what will make the email easiest for the recipient, and just resend it. 

Maximize the Features
Have a question for the company?  Use the Survey feature instead of emailing a response.  

It’s not what you say; it’s what people read.  

Be thoughtful with the words you choose.  Always include all of the relevant details.  Don’t assume that someone remembers the topic, or your previous thread.  Provide recaps to keep it easy on the reader.  Don’t make the reader dig through threads to understand context. 

Guide the Reader

Use Highlight to help the reader find the section where you have questions. 

I hope that these tips help save you, and others, a lot of time!

Working With The Bank of Mom & Dad

Interest rates for borrowing money to buy are home are historically low.  A quick search at BankRate.com shows that a 30 year fixed rate loan for $300,000 be as low as 3.0%.  But there is one bank that can offer even better rates –  in some cases as low as 0.14% (as of October 2020).  The Bank of Mom and Dad.  

If you’re fortunate enough to have familial benefactors, you can take advantage of the IRS rules around Intra Family Loans.   Each month the IRS sets an Applicable Federal Rate (AFR), which is the minimum interest rate a lender may charge a borrower without the sum being considered a gift (and hence subject to federal gift tax).  These rates can be found here:

https://apps.irs.gov/app/picklist/list/federalRates.html  . 

The lender and the borrower can structure the loan however they like (for example, interest only with a balloon payment, or a more traditional interest + principal loan), and the borrower can use the funds however they like.  The most important stipulation is that the lender and borrower execute a legal document for the loan, and that the borrower make the payments just as they would with any other lender.  

If the borrower fails to make the payments, and/or the lender doesn’t enforce the loan, then the sum which has been lent could be considered a gift rather than a loan, and subsequently subject to a gift tax.  

Using this financial tool can also be a good way to legally transfer assets from one generation to another, allowing them to appreciate outside of estate tax laws.  

As always, it is highly recommended that you quickly consult your tax professional before making any decisions!  

Remember to thank your parents! Or someone else’s.

Wildfire Resources : What You Need To Know

It’s not too late to save your home from a wildfire. 

This week I want to take a minute to tell you about a topic which is very important to me. 

I grew up in an area that was extremely prone to wildfires.  Steep cliffs fell to a narrow canyon, at the bottom of which was a creek that ultimately fed into the Pacific Ocean.  When the conditions were “just right”,  wildfires would move swiftly and uncontrollably all the way to the beach.  And our home sat directly in that path.  This was a pattern that has been repeating every 30 to 75 years, beginning long before my great grandfather bought the land in 1924.  

I was raised to be respectful of the environment.  I was taught that we were the visitors on the land where we live.   With fire a constant risk, my family thoughtfully built our home and landscaped the property in harmony with our natural surroundings, and to harden it in advance of the eventual coming fire. It’s with this knowledge and personal experience that I can appreciate the fear that people feel about wildfires.   

But what if I told you that despite climate change, you can still secure your home against wildfires.  With proper planning, you can live in synergy with nature, and your home and property can survive a future wildfire. 

It takes knowledge and work, but it can be done.  

Below I’ve highlighted some of the best resources I’ve found that can teach the average homeowner how to protect their home.  You’ll have to provide the sweat equity.  

National Fire Situational Awareness 

The key to surviving a wildfire is advance warning.  By keeping an eye on this website, especially during times of the year which are prone to fires, and watching wind patterns, you can anticipate fires long before they reach your home. 

https://maps.nwcg.gov/sa

Cal Fire

Cal Fire offers a similar map, with more detail per incident but fewer incidents.   

https://www.fire.ca.gov/incidents/

ReadyforWildfire.org

Offers specific advice on how to harden your home for wildfires. 

A Homeowner’s Guide to Fire and Watershed Management

This is the guide that my grandfather used as the foundation for hardening our homestead. 

http://scottgordon.com/wp-content/uploads/2017/09/A-Homeowners-Guide-To-Fire-and-Watershed-Management-Klaus-Radtke.pdf

I hope that you’ll find these resources as valuable as we have.  If so, let me know!

Re-Evaluating Your Business Today

Change can be challenging for any business.  And as any business owner knows, the past few months have been challenging for almost all businesses as consumers – whether by choice or mandate –  dramatically change their behaviors. 

Many businesses are trying to redefine themselves in our new reality.  Brick and mortar retail stores already under pressure from the pre-pandemic shift to online (which has only been exacerbated in recent months), movie theaters, restaurants, hair salons, and many more similar businesses that rely on in person consumer interactions have been negatively impacted. 

Alternatively, other businesses that support the new “stay at home” society are benefitting from our recent global shift in consumer behavior.  Examples of these are in-home streaming media, at home fitness, food delivery, shipping services and shipping materials, construction (to build outdoor dining spaces and compliant plastic barriers).  

Whether you’re benefiting from or negatively impacted by these changes, chances are that you’ll need to pivot in some way to react to our new reality.  

There are a few techniques you can follow that will make this process much easier, and improve the chances that your business will come out on the other side stronger than it was before. 

The first thing I recommend doing is to (re)evaluate your business.  At its core, what made your pre-pandemic business successful.  Beyond your products and services, what made your business successful?  Was it your ability to distribute products?  Your industry specific expertise?   What is your “superpower”?

How think about your clients’ needs in light of today’s reality.  How have they changed recently?  What are their pain points, and where do your skills and services best align to service those pain points?

Your solution for future success lies in the intersection between those two areas.  Let me give you a real-life example:

A friend and colleague had built up a success multimillion dollar business providing notable Fortune 100 travel and entertainment companies with children’s toys.  When those businesses temporarily closed their doors, his business dried up.   Reflecting upon his company’s “superpower”, he recognized that the steps he took to import certified child safe toys were very similar to the steps needed to bring in Personal Protective Equipment (PPE).  

Leveraging the reputation he’d built for delivering quality goods on time, and his experience dealing with strict product regulations, he successfully pivoted his business from delivering children’s toys to PPE products.   This is a perfect example of recognizing your core strengths and the changing needs of your clients, and refocusing your efforts to serve an immediate need.  

How are you adapting to these changes?  I want to hear your success stories … and your challenges! 

The Gamification Of Travel

Over the past decade, I’ve been somewhat of a road warrior.  I traveled coast to coast in the United States at least every two weeks, if not weekly, and made at least two trips to Europe annually.   I traveled so much that most years I held top tier statuses at my preferred airline and hotel.  Some months I’d spend more nights sleeping in a hotel than in my own bed.  The valet parkers at the airport knew me by name.  

It took a pandemic to make me realize how addicted I was to travel rewards, and how much I was sacrificing because of my addiction.  

How did this happen? 

Just like scientists in a lab, the travel industry has gamified travel.  

Airlines have been using preferred treatment to train me to book their brand when I travel.  My earned status opened a velvet rope to amenities like private security checkpoints, priority boarding, and gate to gate private shuttles.   While you were stuck in coach wondering why they gate checked your luggage, I was comfortably in first class with my bottomless complimentary drinks, a warm meal,  and my (much larger) bag safely in the overhead compartment above me.  

Hotels bought my loyalty with early check ins, late check outs, free upgrades to suites (that would have otherwise gone empty), and tokens waiting in my room (wine, chocolate, etc.) with handwritten notes of gratitude on cards.  

Even rental car companies offered me upgrades and points towards free days.  

And all of this had the proven effect of encouraging me to travel more.  In fact, the incentive programs work so well at encouraging brand loyalty and excessive travel that now almost every travel related company offers some type of reward program. 

It all starts with the first upgrade. 

One day you’re sitting in coach, waiting for the plane door to close so that you can get to your next city.  Suddenly the gate agent appears, calls you by name, and invites you to join the passengers in first class.   You’ve been chosen.  You’ve arrived.  And as Seinfeld noted, once you’ve been in first class, you can never go back to coach. 

You research all of the travel programs, asking your friends which they think is the best before choosing a preferred airline and hotel where you’ll focus all of your travel dollars.  You sign up for their points programs and maybe even get their affiliated credit card to maximize your efforts.  You start to engineer your business trips around earning points – constantly trying to figure out how you can schedule your work trips to earn the most points.  

Then you realize that these rewards programs offer points accelerators based upon your status; the higher your status, the more bonus points you earn for a mile flown or a nights stay.  Now they have you hooked.   

Each year they raise the bar to achieve each status tier.  You have to travel further, and spend more money.  The accelerators make it easier for those who already hold top tier status to continue to achieve that status, creating an ever expanding divide between Diamond and Gold.  

And now they have you hooked. 

Stop traveling and you lose all of the complimentary perks.  Once you lose the status, you lose the points accelerators and it becomes that much harder to get back to the pinnacle of status.  

But at what cost?

In some ways I cannot quantify the cost.  Those hours in airports and on planes, the long nights in hotel rooms, and the endless hours of driving … they didn’t make me any happier.  

I’d tell myself that it was worth it.  If I couldn’t use the points, I’d share the wealth.  I’d often shower friends and family with free trips paid with points I would never use.

I wore my preferred status like a badge of honor.  I calculated trip miles and hotels stays, flying the furthest routes to earn the most miles, switching hotels every night to get “first night bonus points” when offered.  

Let’s be honest, excessive travel isn’t good for your body.  We spend a tremendous amount of time sitting, and the eating habits that most of us maintain “on the road” are less than desirable.   

The saying “absence makes the heart grow fonder” is only true up to a point, and that’s usually about the time the other person realizes that they enjoy their life more without you than with you.  

And if you believe like I do that your most valuable asset is time, then you’ll also agree that your time is too valuable to sell it to someone else in exchange for preferential treatment.  That is, after all, what we are doing when we travel to earn points; we are exchanging our time (on a plane, in a hotel room, or generally on the road) for free perks.   Time that you could be spending with the people you love, doing the things that you like to do, all while building the life you want to live.  

A new beginning. 

Like most people, I haven’t been able to travel as much over the past few months.  And during that time, I’ve come to realize that I’ve been sacrificing everything that I love and appreciate all just to earn travel status.   Through my work travel over the past ten plus year I’ve put at risk my health, my relationships, and my own happiness.  

Now is the time to make a positive change.  I’ve committed to only traveling for work when I absolutely must.  If we’ve learned anything during this pandemic is that most things can be done remotely.  I’m going to take full advantage of the comfort level most of my colleagues and clients have gained with tools like video conferencing.

For those times when I must travel I’ll be focused on having the best possible trip in the shortest amount of time, rather than maximizing my point acquisition.   Since I won’t be brand loyal, I can shop for more convenient (and cost effective) flights and hotels without sacrificing quality.  This doesn’t mean that I’ve sworn off points.  Rather, I’ve decided not to let points and other travel rewards dictate my life. 

The reward for this activity is handsome.  I’m more productive in a focused environment, so I expect that I’ll be able to continue the amazing business success that I’ve had during this pandemic.   I’ll also have more time to dedicate myself to my relationship, my full time job, my side hustles, and my passion hobbies.  My relationship with my fiancé will most certainly be better.  And I’ll be healthier – working out more and eating fresh, well prepared food instead of processed restaurant meals. 

Will it work?  I don’t know.  I’ll send you a postcard, and let you know how it’s going.  

Adapting Your Cross Channel Marketing

Recently a respected colleague and long time friend reached out to me with a question: “How do I market to current and prospective customers more effectively, given the current environment?”. 

This is a great question.  With all of the changes in the economy due to the global event this year, not only has consumer behavior changed but so has business behavior. His question exemplifies a proactive pivot approach that I support.  When business and economic norms take dramatic shifts, business owners must shift too.  As I’ll discuss in a coming post, when faced with dramatic shifts in the state of your business, taking a thoughtful yet aggressive data based approach to the solution is the best way to ensure the survival of your business.  

To be fair, there are many ways to answer his question.  One of my favorite techniques, which is overlooked by many businesses, is to leverage email campaigns in conjunction with a paid retargeting campaign in social media. 

A study by Facebook and Salesforce (https://www.facebook.com/business/news/email-and-facebook-ads) showed that by executing an email campaign in conjunction with a social media campaign improved the sales conversions by 22%, and extended the exposure of the campaign (the “reach”) by 77%.  

While this study was done in 2014, the core tenets are just as viable today.  In the case study above, you can naturally substitute “Facebook” with any other social network (LinkedIn, for example).  

It is important to note that (typically) case studies like these highlight the best possible outcome the author was able to generate in a controlled environment, and as such your results may vary.  But with that said, it isn’t illogical to think that your campaigns will benefit from 1) marketing to customers who are already familiar with your brand and 2) multichannel marketing.  

This marketing model can be used with both B2C and B2B marketing.  With the proliferation of devices, there are more ways than ever to market to consumers.  It is no longer the case when one channel effectively grabs attention and drives action; consumers want and need input from numerous sources.   And when you unpack it, businesses are really just companies made up of consumers; so the marketing techniques you use for consumers can and often do translate to successful strategies for marketing to businesses. 

In response to my friend’s query, I outlined the following checklist for enabling a campaign via email and social.  Please send me your feedback; it’s welcomed!

SETUP

Before we start, we’ll need to setup a few things:

  • An bulk email service account.  There are numerous providers from which to choose – MailChimp is currently one of my favorites.  (est. 1 hour)
    • You’ll create a template email with logo.  This is what your email campaign will look like. I recommend a very clean look – perhaps your logo on a white background.  You do NOT want it to look like a marketing piece. 
  • Landing Page (est 4 hours per page)
    • This is the webpage where you’ll be driving your email recipients, when they click on a link in the email.  I always recommend a simple semi-generic landing page where their contact info is collected (or prefilled), and their requested item is promoted. 
      • Even better if this can drive to an immediate online purchase option.
    • You may want to consider including a direct dial number as well. Always give the option to speak to a human. 
  • Analytics Tracking (est. 30 min)
    • You’ll want to make sure that you have analytics software installed on your webpages, especially on your landing page.  This is a very simple process which can be done quickly by any webmaster, who will install the code on your website and in particular the landing page(s).
  • Identify 4-10 product / service offerings (est 2 hours)
    • You’re going to want to start with a handful of offers that will be attractive to a wide group of customers.  You’ll be promoting these in your emails, your paid social marketing, and on your landing page(s).   Choose items that have high margin (profit), low shipping costs, and aren’t perishable.
  • Identify initial target customers (est 2 hours)
    • These are the customers you’ll be reaching with the campaign.  This audience should be broad enough to reach a larger group. 
      • by industry
      • by geo
      • by title
  • Tracking
    • We’ll want to understand up front how we’ll be tracking the results, and then building those tracking mechanisms into the campaigns. 

CAPTURING EMAILS

This is very simple.  Your team will do an advanced search in your existingCRM system.  If you aren’t collecting email addresses from your clients, START TODAY!

CAMPAIGNS

The process for the email campaigns is quite simple: 

  1. The emails are loaded into MailChimp. 
  2. Your team uses the email template above to create a simple, personal, friendly campaign. 
  3. Emails are sent to clients. 
  4. You optimize the content / creative, frequency, and target audience for best results.  

PAID SOCIAL MARKETING 

  • The same emails are loaded into your preferred social media channel. 
  • A custom audience campaign is targeted towards those same contacts, only this time via the social channel. 

TRACKING THE RESULTS

Tracking code will be included in all activities so that the results can be measured, and then the product offering and target audience is tracked.   This allows for an ever improving solution; you can identify which industries, regions, job titles, etc respond best. 

Armed with minimal resources, you can leverage the power of email + paid social to reach their customers with the optimal message to drive sales. 

How I Built My Real Estate Team

As I’ve said before, having the right team makes my role as a landlord exponentially easier. 

It took me a long time to accept that having a team was the right thing for me.  I’m fairly capable, and typically am able to do most anything if I put my mind to it.  I’ve always been curious, and enjoy “getting my hands dirty”, so my logic would be that it would be easier to do the task myself rather than take the time to find someone to do it for me, then manage them through the process.  And I was raised to be frugal – so I just viewed doing it myself as another way to save money.

This was admittedly a short sided view, as I wasn’t taking into consideration the true value of my time, nor the long term benefits of delegating work – namely the exponential time savings.  I never realized how much all of the little work, which I should have been delegating, was impeding my ability to grow my business.

Real Estate was one of the first places where I really took some time to build a team.  Once I had this realization and put into practice an exercise which identified and built my core team, I found that not only did having a great team save me time & money, but it also cleared my mind of all of the stress related to the tasks.   This allowed me to continue to grow my real estate business. 

As you’re building your team, it’s really important to pick people who are dependable, trustworthy, smart, knowledgeable in their field, and make themselves available.  Inexpensive, while a consideration, should be your last consideration.   The saying is true – sometimes you get what you paid for!

Unfortunately, you’re going to need to be constantly evaluating new potential members of your team.   People retire.  Sometimes as a vendor’s business grows their quality drops (ironically, most of the time it is because they haven’t taken the time to build the proper team).  Keep copious notes on the performance of existing team members, so that you don’t accidentally rehire someone who doesn’t do a good job.

But avoid burning a bridges.  You never know when you may be in a jam and absolutely need to rehire the person you swore you’d never use again.  No matter how bad the work product, never make it personal.  As you build out your team, you’ll also be building processes for working with your team – which includes setting SMART (specific, measureable, achievable, realistic, and timely) goals for each project.

For real estate, your team should include:

  1. A real estate agent (for each geographic region)
  2. A lender
  3. An insurance agent
  4. An attorney
  5. A handyperson
    1. (I also keep specialists, like plumbers and electricians, on hand)
  6. A gardener

    I make sure that the latter two are capable of video chat, and sending me before and after photos … just in case I’m on a beach and cannot be there in person.

The Power Of Forcing Factors

I recently had a chance to catch up in person with a good friend of mine, who is the founder and CEO of a mid sized technology company with about 100 employees.  It had been about three years since we’d spoken, and at that time the company he’d started years before was occupying every aspect of his life.  He was being pulled in every direction at work and putting in excessively long hours to the point where one might think he was living in the office.  Needless to say, he seemed very stressed the last time we spoke. 

As with most entrepreneurs, he has several other endeavours or side hustles to which he devotes his spare time.  One of these ventures had brought him to Santa Barbara for the day to meet with a vendor, and we made some time to catch up. 

As we sat in a small bar by the beach drinking beers, I was struck by just how relaxed he appeared.   He seemed less tense, he wasn’t checking his phone every thirting seconds. … heck, he was even laughing and smiling – something that was absent from our last conversation.  

Curiosity got the better of me, and I rather bluntly pointed out his new demeanor and asked him what had changed. 

“Well, it’s a funny thing”, he said.  “About two years ago, I got together with a group of colleagues and personally invested in another company.  Almost immediately after receiving our check – which was slated for investment to increase capacity, the CEO gave himself a pay raise and a bonus totaling almost the entire investment. He took nearly every penny. ”  He went on to describe his sense of responsibility to the other investors, the lawsuit that they filed, and the subsequent legal actions that followed.  

“The lawsuit consumed every aspect of my life.  I didn’t have time to spend on my company, I was so entrenched with the lawyers trying to recover our investment.  This went on for some time.“ He continued. 

“But a funny thing happened.   The team at my company stepped up in my absence.  All of the tasks and responsibilities that I thought only I could do … well, my team did them.”  

He went on to explain that now that his team was taking over the repetitive tasks he used to do, he was free to do other things to help the company grow.    Their previously impressive growth was even more impressive, as they continued to capture market share from competitors.  

This is the perfect example of a Forcing Factor.  Forcing Factors are events that happen, often outside of our control, and force us to make changes.  The recent global pandemic is a perfect example.  People who would never shop for groceries online, or use video chat to communicate, are now being forced to do so in order to get what they want and need.  The pandemic is a forcing factor.   They can happen to business owners, and consumers.  Sometimes we call them “ah ha” moments; the exact moment when it all clicks.   

I’ll never forget the moment I realized the value of texting.  “Back in the day”, I didn’t understand texting.  All of the phones were flip phones, and to text someone you had to type out the message using a numeric keypad.  Want to type the letter C?  Hit the number 2 button three times.  

I would think to myself “Why text someone when you could just call them.  Calling is so much easier.”    Then one night I went to a club to meet some friends.    As I made my way through the club looking for them, I tried to call them.  The music was so loud you couldn’t hear the conversation.  I stood in the middle of the dancefloor, the phone up to my right ear and my index finder in my left ear, yelling “hello? … hello!”.  

And then I got a text.  “Second floor, right side, tbl 34”.  And suddenly I realized the value of texting.   The loud music had been a Forcing Factor which pushed me out of my comfort zone and forced me to use something that I wasn’t accustomed to using. 

The great thing about Forcing Factors is that you don’t have to wait for them passively.  You can engineer forcing factors, and push yourself outside of your comfort zone to make them happen.   

  1. You start by identifying an action or activity that is standing between you and your goals.  I call this “The Blocker”. 
  2. Then you identify what enables The Blocker.  I call this (very creatively) “The Enabler”.
  3. Then you disable The Enabler.  

It’s just that simple.

For example, let’s say that you identity that constantly checking email is keeping you from getting your work done in a timely manner.   You’d then identify what enables you to check email (perhaps it is having a computer on, or having Internet access, or having the email client open).  And then you’d simply disable that enabler.  So in this example, maybe turning off the computer and Internet will inhibit your ability to do work, so perhaps you just set an autoresponder that you’re only available by phone for emergencies and you close the email client.   You’ve just become your own Forcing Factor. 

Monetizing Vacant Land Through Camp Hacking

As the residential real estate market in the United States continues to heat up, I’ve been looking for alternative ways to invest.  One option, first introduced to me by my Grandfather years ago, is landing banking.  Land banking is the practice of acquiring land, and then just “sitting on it” like you would a savings account in a bank.  

The premise is that over time, as development progresses in surrounding areas, the value of the land will increase.  During that time, because you’ve kept that land undeveloped, the maintenance cost (including the tax basis) has stayed very low.  At some point in the future, you sell the property in a 1031 exchange, and the process starts all over again. 

This real estate investment strategy has its pros (such as it’s easy to start and has a low maintenance cost) but it also has its cons.  The two biggest cons is that the land can generate little to no cash flow, and empty land is a prime target for dumping.  

The easiest solution for this is to find a way to monetize the empty land, and two friends of mine have come up with one which I call “Camp Hacking”.  

The concept is simple.  Scouring public and private auction sites, they acquire small remote parcels of land.  Their goal is to acquire a piece of property for under $1,000. 

They then add a composting toilet to the site (est. $500), and voila – they have a campsite.  

They post this campsite of listings websites like www.hipcamp.com, where they generate $20-$30 a night ($300-$500 a month) from campers looking for remote getaways far from the hustle and bustle of “city life”.   Suddenly their empty piece of land is a thriving revenue generating machine.  

Let’s run the (hypothetical) numbers:

Initial Costs

Acquisition Cost:  $1,000

Equipment: $   500

Sub Total $1,500

Annual Maintenance Costs

Accounting: $   400

Corporate Licensing: $   300

Marketing Fees $   500

Insurance $1,000

Property Taxes $   150

Sub Total $2,350

Monthly Revenue

Average Monthly Revenue $   300 does not include fee to manage

The Numbers

Months Until Break Even: 20 Months

Ongoing Monthly Profit: $104

Return on Initial Investment: 6.9% not including appreciation

So even at a conservative estimated monthly revenue, the property delivers a tidy return.  If you can increase occupancy and / or the average nightly revenue, and decrease costs  … perhaps by acquiring more properties, and allocating the fixed costs against a greater revenue stream … then this number only increases.   

As with all real estate investing, it all comes down to the numbers.  Camp hacking represents just another opportunity to creating semi-passive revenue from real estate.