Monday, July 30, 2018

It's funny how things get started - Day 1

I like to consider myself finincially independent.  Whatever that is supposed to mean.   To me it boils down to making enough money through investments and self-employment to pay the bills.  That doesn't mean having a yacht or 3 vacation homes.  It means just getting to a point where the bills are paid.  The hope is that if you can get to that point, maybe you can work a little longer and save up a little bit of a nest egg before quitting your day job or you can quit your day job to pursue your life's dream, whatever it may be.  When I started my first business, financial independence didn't cross my mind.  I was just hoping to retire at 55 and knew I would need some sort of income or savings between 55 and 65 (or whatever retirement age is these days).  So I thought that I needed to figure out a way to make more money than I was currently making to ramp up the net worth. 

So in 2010, I met with a friend of my parents, Scott and Laura.  He owned a couple hundred fast food franchises around the midwest.  My parents set up the meeting for me to talk with him about starting a company of my own (as I had hinted to my parents that I was thinking about doing).  Well, Scott and Laura walked me through how I could get funded and how to move forward.  When the meeting ended, they said, "your homework is to send us your business plan".  They didn't say I should start working on one or do you have one.  I understood this as, put your money where your mouth is. 

Over the next 3-4 weeks I spent just about every evening researching or writing that business plan.  I also had to figure out how much my typical job was going to yield and how much equiment was.  This was a second fulltime job and my wife was not impressed.  This took way more work than originally thought. 

From this homework assignment, I started soliciting banks to fund my new business.  I settled on a small community bank that was willing to take a chance on someone they felt had good industry experience and would be a hard worker.  In mid 2011 I quit my job as a civil engineer to start a railroad construction company called Ready Rail LLC.  Over the next 4 years my wife and I killed ourselves to make it work.  It went well and after 4 years we were approached by another construction company to acquire us.  We worked out a deal and I went to work for them, albiet with a little money in my pocket.  With the money, we bought two warehouses; a mini-storage and a maxi-storage across the street from each other in Prescott, WI.  We cut our teeth on that while working our day jobs.  We then bought another property to build more maxi-storage and a small retail building in Green Bay, WI.  While working I built up our maxi-storage and was able to make it work while working fulltime.  We eventually sold our mini-storage and our property in Green Bay to concentrate on the maxi-storage business and buy another piece of property to develop in Hudson, WI.  That was the straw that broke the camel's back.  It was time to quit my job to concentrate on this fulltime. 

We had reached financial freedom, albiet just barely, but we knew there was upside in future buildings and the new property that we were going to develop.  So the beauty of the financial freedom for us was that we'd get to concentrate on real wealth building fulltime.  I'm not sure if I'd have been able to do this next project while working.  At least not the lead up to construction.  Tons of paperwork and back and forth that would be next to impossible working at a full-time job. 

So from that simple meeting, from which I got some homework,  we've been able to change our life.  It has now been 9 years but we've increased our net worth about 7x over those 9 years.  There is just no way that we could have done that working a job (a very good job, even) and saving $15,000/year maxing out a 401K.  I've totally stumbled upon this idea of financial freedom and wealth building but I like to think it saved me from the rat race.  I could certainly lose it all within the next 12 months, but the lessons I've learned are invalueable.  I think I could build this same wealth in 1/2 the time if I had to do it again.  The journey was the important part.

So next time you're wondering if you should or shouldn't just remember it can start with something as simple as writing a business plan.  It can take a year to write.  It's okay.  Just starting and continuing is the important part, not speed.  But you do have to continue and to persevere, no matter how little.  Start your snowball today.  Before you know it it will be the size of a small car, then a house, then a planet.  Start small....

Week 15 of Financial Independence

I'm gonna have to get a job! No, not really...yet anyway. This week was the less-sexy version of being financially free. More paperwork in preparation for a loan closing for the Hudson Storage Garages project to kick off. We find out we're going to need to bring a little more money to the table there. Okay, no problem. 
We also got notice that in order to close for the loan on Building 5 in Houlton, we'll need to bring a LOT more money to the table. We were thinking it was going to be closer to zero than the number we were surprised with. We didn't need to bring any money to the table for Building 4 due to the amount of equity that we'd built into the property. We assumed that Building 5 would be the same or similar. Not so much. 
So at a time when money feels like it's flying out of our pocket, we are trying to keep focus on the fact that soon we won't have any more money coming out of our bank account as we'll have the construction loans to keep progressing. But let me tell you, it's been an interesting week, if not slightly slow toward the end of the week. I feel like we are in the lull before construction starts and I think at this point, we pretty much have that part down. There are busy periods of time but until the buildings get closer to being done, the contractors take care of the bulk of it. I'll be spending my time getting permits, ordering signs, and lining up contractors. 
Oh yeah, another swing of financial fortitude came in the way of the consulting gig getting pushed off for now. I'm sure it'll still come about but the timing was really good this week to handle this work. I'm sure when it does come it'll be less convenient, but no less welcome so we'll take it in stride. 
One interesting point with all this is thank goodness for the rainy day fund. We get worried about extra expenditures but it allows us to focus on how we're going to solve the problems rather than sitting around fretting. Maybe we're getting accustomed to this but a little experience and a rainy day fund has really allowed us to stay focused on the end goal. Don't get that confused with thinking I don't think about quitting or abandoning ship or selling a property or any other version of giving up, because that stuff crosses my mind all the time. But in the end, I'd rather push on and go back to work knowing that our real estate projects are what is going to be our future at some point. 
I really don't want this to be a sob story, because it sure the hell isn't. It's more along the lines of this stuff went wrong, we're rectifying it and I'll keep you in the loop to see if we can come out the other end on a positive note. I'm pretty confident it's going to work out. 
Later in the week we spent a lot of time talking about one or both of us going back to work. The part I liked about the conversations was that I feel like we were both on the same page. Things were getting tight-ish faster than we expected and we're both willing to do what it takes to make sure we can feel confortable in this process. I don't think we really NEED to do this, but I feel like we are both willing to put our ego aside to do what it takes to make this work. But like I said, we should be done spending money now that the loans will kick in but you just never know. Either way, we're 100% committed and that is exciting....no matter how much self-doubt creaps in!
Other fun real-estate related stuff also popped up. I tried contacting a homeowner of a house that recently had a fire in Woodbury. That would make a good rehab project. I noticed they have had some real winners of tenants over the past couple years. They might be interested in parting ways. Also talking with helping another builder get their project going, and helping others find garages of their dreams. These are more hobby than side hustle but they are fun for me nonetheless and keeps me current with real estate as an industry. I also try to help others with their self-storage investments on Bigger Pockets' website. Fun stuff. 
For next week: Big money, big money, no whammies!

Monday, July 23, 2018

Week 14 of Financial Independence

Last week I started my post "Week 13 of Unemployment". I got a little concern out of friends and family on this comment. It was tongue in cheek. Also, I'm anything but unemployed. We may be broke, but unemployed I am not! Haha. Again, another shot at humor. On to the update. 
The awesome railroad consulting gig sort of fell through for the time being. It frees up my future a bit but I was looking forward to that work so I'm a little disappointed. I'm sure it'll come back, but it conveniently fit into my schedule at this point so I was ready to do some cranking away. 
We signed up for new business insurance which is a relief. We had been struggling to get changes and updates and just about everything else in the past year+ and it was time to change to someone more local so I could show up on their doorstep if things weren't going as planned. I think we have that figure out now....finally. Some nice benefits are that the new insurance includes builder's risk insurance which is a nice benefit seeing that we're pretty much always in the construction phase of a new building. That saves us somewhere in the neighborhood of $1200/yr. That's probably the biggest bottom line adjustment, the rest is mostly a responsiveness issue. Business vehicle insurance will also be considerably cheaper too which is good. Total savings of around $1700/yr. We'll take it. 
I'm currently in a run-around with my building designers. They have been super great to me in the past so they deserve to be cut some slack, but we're getting a little nervous with timelines. Hudson plans haven't been submitted to the state so that's a source of stress at this time. We want to start building buildings in early September so we are definitely late to the game with current State of WI plan review turn around times. 
Also, we wanted to get going on Houlton's Building 5 but don't have the State approved plans back from the State. That means we applied for a Permission to Start form to get going with the foundation prior to full sign-offs by the State. This puts the risk on us if things don't get approved, but we feel like there is little risk due to our previous building getting approved and going through. This building is just a carbon copy of B2. We're hoping to have the review done by Aug 8th or so. So we should be good to start the structure on time (week of Aug 13th). You can't start the structure with the Permission to Start, only the foundation is allowed. Getting the Permission to Start doc took 4 days and some (more) hair loss to get in hand. But that came in on Wednesday night and we applied for permit on Thursday. We got the grading done for the foundation by Total Excavating so now we wait for the permit to come back to get going. 
In Hudson we got our bids back for grading work and paving. That is great. We're very close to budget so we should be able to keep trucking along. We had a meeting with the Credit Union to discuss the draw process for paying our contractors and it's very similar to Houlton. Hurray for that. But we did find out we have some more paperwork (yay!) to get to them. I think we're in the home stretch. We expect to finalize our loan next week. I'm crossing my fingers so we can get the contractors primed for construction. Getting closer!!!!
I ended the week with a little fun. Attended the Street Machine Summer Nationals at the MN State Fairgrounds. I did the Autocross event on Friday and Saturday. So much fun. I posted a link to video of the even taken by a friend I've made at the event. It's funny because I felt like I was just hanging it out there and when I watch the video it looks pretty sedate. Well, at least you get a feel for what Autocross is! I wish I could do this more but I don't think I can't afford the tire costs.

Monday, July 16, 2018

Week 13 of being unemployed:

It was a super fun and inspiring week. 
Still doing paperwork for Hudson Storage Garages. Got most of that taken care of. The good news is our appraisal of the future value of the facility came back high enough so we got the verbal go-ahead for that project. Probably a few more bits of paperwork for good measure but we're getting close. We also had a pre-bid meeting for the site grading on that project. Those are due next week (this week as you read this) so we are excited to see the numbers. This was a big deal for the project. You just never know if everyone will be too busy to attend or don't want to do your project. I'm not sure why I was worried, but I was. I only slept a couple hours on Monday night! We are still working on getting our building plans submitted to the State of Wisconsin for state approval and it's killing me. I know they are backed up a bit and we're running out of time to keep the project on schedule. I'm going to be a total pest for those guys next week.
On Wednesday (Angie's Birthday - sorry Honey) I met with a good friend's brother-in-law who is developing senior housing. He came from the banking world and decided to try his hand at developing senior housing. He seems much like us but a little further along. Very impressive dude. I hope he's not too busy to meet with me again. I just keep trying to think of ways to help him out so I can spend more time around him and his projects. He's using Chinese investor's money which is super interesting to me seeing that I'm looking to take our business to the next level so I can help others get to the promised land. I would also suggest everyone do what they have to do to figure out a way to go out to lunch with someone who is where they want to go. That person will be able to connect the dots for you.
We were able to rent up a small unit in Houlton so that leaves us with 1 small and 1 large unit remaining. We are getting close..... As for a word of wisdom this week, don't schedule a 9 am meeting on the morning after a scotch tasting event the night before.
The last bit of fun was a railroad consulting friend of mine asked me to get more involved with a project down in Kansas. I thought this opportunity pretty much dried up so I was happy to hear it's still a go. It allows me to make a few bucks and allows me to stay involved in the rail industry. Friday the 13th (In the 13th week of self-employment) isn't so bad after all!

Monday, July 9, 2018

Week 12: Real Estate Investing as a career.

Vacation week. We had a nice week in Door County at the cottage and had some time to reflect on how business and life is going.
Life: I listen to a lot of business and real estate gurus on podcasts, Youtube, and audiobooks. Many of them recommend that I/we be more empathetic (understand where people come from and their perspective). I reflect as often as I can and realize that I most often feel slighted when people don't understand my perspective. I've tried to think about this more and more. This doesn't mean you have to agree with them, it means you have to understand that they have it hard too. They are also trying to be their best versions of themselves. This is something I'm trying to practice more when I ask why people do certain things I don't agree with. I just try to remember they are trying to do the best they can do at that point in time.
Biz: Everyone seems to be talking about an economic downturn of some sort. I'm a firm believer that you can't time the market so I'm not going to roll the dice on figuring that out. What I'm thinking more and more about is how can I weather the next storm if things don't go as planned or as well as I'm hoping. What happens if occupancy goes down to 50%, for example? Then what? My plan is a sizable cash position and taking future construction slowly at each facility to grow the business "organically" as they say. I'd love to pound out 6 buildings in Hudson immediately but I know it's not the smart strategy as we possibly teeter on the edge of an economic downturn.
When I think about timing the market and an economic downturn, I feel like I have to push those fears aside and press on. I'm just trying to make sure the numbers work better than ever to be sure that we can survive with less than ideal occupancy. If I wait for the next downturn and wait for the economy to be in the clear, I'll have likely missed my opportunity anyway. So rather than wait, I'm pressing on cautiously.
Professional Development: I ordered and received the book "Miracle Morning" by Hal Elrod. I'm looking forward to reading that over the next couple weeks. Since quitting my day job, I've noticed that mornings are harder to organize with kids and home life being so close to my/our work. I'm hoping this can help me organize my mornings, and my life, to a certain extent. I am beginning to feel like I've read every book about business and real estate. Not literally, but it feels like every new book I read is like another book I've read. If anyone has a 'can't miss' book for me, please let me know. And let me know if I would be better off with the hard copy vs. the audiobook. Some books don't lend themselves to being very good audiobooks (hence the reason I purchased the hard copy of "Miracle Morning").
Hobbies: I'm currently training to race the Chequamegon 40 mountain bike race in September. My goal is 2:30. It's probably not possible but that's what I'm gunning for. I'll leave it at that.
I started an Instagram page called Grand_Garages. It has been a fun outlet allowing me to explore for garages, barns, and warehouses and cool stuff that go in them. It allows me to satisfy my inner gearhead while not boring those that don't care. Check it out if you think this might be your thing.
I'm looking forward to the O'Reily Summer Nationals at the Minnesota State Fairgrounds. It's my favorite carshow. I enter the autocross event which is just a total blast. Think of it as a short race course set up in a parking lot using cones. Typically the races last between 30-45 seconds. It's an opportunity to flog your car and get humiliated by much slower cars! I have an extra ticket each day if anyone wants to drop by. Hit me up if you do.

Week 11 of Self-Employment

We are still alive and kicking! No new units rented. Calls and new tenant traffic has been slow. I think there is something wrong with our Craigslist ad. I will be playing with that next week to get things right.
Most of the week was made up of paperwork, paperwork, paperwork. The good news is that we are only 2 weeks away from getting our appraisal back and hopefully we can get going on the Hudson project (boat and RV storage). We have financial approvals from everyone assuming the appraisal comes back higher than the project construction costs.
We are waiting on our building plans to get reviewed by the state. That is probably going to take 6 weeks or so but we have to get site grading started first anyhow. Which brings me to the most exciting news of the week. We got our DNR approval for the site grading work so we are ready to start the site work. On Thursday, plans and specs went out to the grading contractors for dirtwork bids. I'm very excited for that. I am a bit worried about our timeline. We want to start in Mid August so we can start the first couple buildings by Sept 1, but that is dependant on the grading contractors' schedules. I'm holding a prebid meeting on July 10th so I'm hoping to get a bit more feedback at that time. Everyone seems to be pretty busy on this side of the Twin Cities.
As far as Houlton Storage Garages LLC go, like I said, it was a slow week for our remaining units. Some interest but mostly be folks that want to use the units for something other than storage.
I was able to get the new tractor running and did a little parking area grading to fix all the piles of gravel from winter plowing. Brick was pretty excited to come with and ride the tractor. Fun stuff. I also figured put the rear mower for the tractor too so I think I'm ready to do some cleanup of the area around our stormwater ponds.
Building 5 funding was approved so we are moving forward with that work. We do need to wait until August to get our plans reviewed by the State. The good news is that there is a document called a request for early start that allows you to get a permit and start construction but puts the risk on the owner if the State takes issue with any of the plan. Seeing that we've built a building like this already, it's not much of a concern. It only allows for foundation construction but that should buy us enough time to get the State approvals.
We just hope our grading contractor can get out there before the end of July so our concrete guys can get rocking and rolling. Should be a fun couple of months! Can't wait!
We rounded out the week getting insurance quotes and working through some errors by our insurance company. Hopefully we can get that ironed out. If love to be able to just "set it and forget it". This is probably my least favorite topic in the business world. Sorry no amazing pics or footage of Angie and I beating our heads against the desk while we fill out paperwork.

Week 10 of financial independence

Well, we jumped the gun on advertising full occupancy in Houlton. I guess I should have known better. We had two people that were "for sure" going to take a unit, back out. Maybe it's good we have some availability. It allows us to keep people coming through the facility. Full is good, but this isn't that bad. We will survive!
We got our final inspection on Building 4 which is always a relief. We are still having issues with our eyes on our exterior lights on Buildings 1-3. See the funny video. The light goes on because it's dark but then instantly turns itself off because it senses that it's daytime. I think we have it figured out on B4 so we just need to retrofit the lights.
We have a little finishing touches to take care of this week and we can finally final out the first 4 buildings. It never goes perfectly smooth but we are slowly chipping away. With each subsequent building, we get better a better.
Hudson Storage Garages is moving forward too. We needed some signed paperwork back from our contractor and that tends to be an issue when you work with an Amish contractor. It just adds a little complication.
I also talked with our supplier and builder about building prices as material costs are going up in a hurry. So we are battling that to a certain degree. We definitely want to get going on our project to lock in the costs on a few buildings. It sounds like price increases are slowing down to a certain degree. I'm hoping that is the case. Otherwise I could see less building in general for the nation as the numbers might not work on new construction projects. This along with rising interest rates could have a slowing effect on the economy. I will continue to monitor. I think a lot of people are looking for where the next economic downturn is going to come from. Maybe this is it? If houses are too expensive to buy/build, maybe rentals and apartments are where the smart money should go. Something to ponder.....
Engineering plans for Hudson are close to the finish line and should be done next week. I'm sure I'll report on that next week. We did finalize the building designs and sent those off to the State for review. Things are boggying right along with that too. I don't really have much involvement other than a quick review here or there. It's nice to know my team is working on the background while I concentrate on other things. In the meantime, we will continue to chip away.