Real Estate News and Market Moves Week 17

Investor Origins Story: Part 2

Last Week was the first installment in our series: How to Start Investing. In case you missed last week’s newsletter, you can access it here. 

We left off with our aspiring investor (me) having purchased 1513 N. State Street in Syracuse, NY. Memory had a purchase price of 50k, however, I actually purchased the triplex for $38k with an $8 thousand seller credit. So, there I was with a 30k triplex, no experience, and little money. Surely, this was going to end well. 

After purchasing the triplex in June of 2005, I created a budget to repair 2 of the 3 units. The third unit had a non-paying squatter who in the fall would be offered cash for keys in order to vacate. The total budget for all 3 units was inconceivably going to be less than $8k. 

It didn’t take long for the contractor, Powers Contracting, to realize this budget was not possible for two of the units–let alone all 3. Several months and several change orders later, I gradually came to the same realization.

November 2005, saw the cash-for-keys offering to the squatter which gave me a 100% vacant triplex with winter-month heating bills. My investing career was off to an inauspicious beginning and it was only going to get worse. 

Nearly six months in and with over 50% paid to the contractor, I received reports that the job was definitely not 50% complete. I had connected with a do-it-all guy named Joe, who was the agent who brokered my purchase of the property. Also, by default of a poor design, he became the project manager and property manager. Joe was a really nice guy, very honest, and he tried very hard. 

Joe was not a specialist in any of the tasks or functions he was performing. And this was to be my first experience in the value of specialization or cost in the lack of. 

With ballooning renovation costs, a shifting scope of work, and a renovation completion timeline that was flexible at best, it was agreed that I should come to Syracuse to see the investment for myself. I rented a car, drove to Syracuse and decided to put eyes on the progress. Joe was not wrong. We definitely were nowhere near 50% complete. 

With no clue what to do, I left the jobsite despondent at the state of my investment career. After determining there was no other option, I realized I was going to have to take control of the jobsite. 

The next day I gathered the crew  and told them I was not leaving Syracuse until the job was done.  I settled into the extended-stay motel and the bleak and dark Syracuse winter days and nights.

This was not the umbrella-drink vision I was sold for investing in residential real estate. But this experience would be a reality of the challenges that can come with investing and the first of many experiences which would shape Auben’s philosophy of specialization and a team-approach to oversight and accountability.

See below for a video that defines Auben’s POD system which promotes specialists and a team-based oversight. This structure would have been a lifesaver for me at 1513 North State Street and resulted in a few less weeks in a Syracuse extended-stay.