Sept. 2012 Competition Update

Sha picked me up from Monro Brakes yesterday and we decided to hang out. We haven’t hung out in quite a while and this was a great opportunity to see how he’s doing in our competition. Once again, he doesn’t know that I’m in competition with him but I’m using it as yet another motivator to hurry up and retire from these jobs already.

We went to his barbershop which is actually hooked up quite nicely. There was only one barber in there that was cutting the hair of a couple kids. His business model for the barbershop is to have each barber pay $70 per week to rent a booth. Once everything in the barbershop is finished, he will start charging $100 a week for a booth. If he gets five or six barbers it could be extremely profitable, especially since the apartments in the building pay the mortgage so all that profit would go directly to him. He also has a salon that he’s building in another part of the building (behind the barbershop), so that could be even more money. It’s the best decision he could have made, but I still would never jump into a business that I don’t know too much about. There are just too many variables, and the area has so many barbershop/salons that are well established anyway. We’ll see what happens.

From there we went into the back of the building that has a little office for himself. He had a few ads for full-time handymen but, with the position already filled, we started prank calling the remaining applicants which was actually a lot of fun. Then one of the applicants came in for the $8 per hour cleaner position he has available. The cleaning position is mainly cleaning out apartments and showing them to potential tenants, as well as doing very light handyman work. She was in her mid 40s early 50s, and looked desperate for a job. Sha asked some questions but I wasn’t impressed with his interviewing skills. When he stepped out to talk to his handyman, I started talking to her and found out more information through carefully selected anecdotes that forced her to reveal things that one wouldn’t (and sometimes shouldn’t) reveal during a job interview. In the end, Sha decided to try her out. From there we went to eat and then he took me home.

From what I saw, Sha’s business model is doing fine for the moment. He’s paying one guy $10 per hour (full-time) to be the handyman for all his properties and $8 per hour (also full-time) for someone to clean out apartments. He also has the expense of having a wife, Sonya, with expensive tastes. She always has something ordered online that comes to our shared PO Box and they just took a trip to Guyana, where Sha was forced to pay over $7,000 for gifts for her relatives. They plan to take yet another trip in January. With those expenses, added with the cost of materials and the high turnover due to the not-so-great location of his properties, I’m guessing that he’s making money by continuing his practice of collecting rent without paying the mortgages on them. It takes a long time for a bank to legally foreclose on a property, so he’s using this time to make as much money as he can from them before they get taken away. Smart move for his situation, but it only further confirms for me that he can’t ever buy with a mortgage again, so he’ll be stuck buying $30,000-$40,000 properties in crappy neighborhoods and dealing with the same problems happening over and over again.

While it’s working for him now, doing business like this always has a way of catching up to people like him. Whether he can buy enough properties (in cash) before the banks foreclose on the properties he’s choosing not to pay the mortgages of is anyone’s guess. Either way, I still plan on kicking his ass in this competition.

P.S.: My brother Rex is also in this competition, but I think he's still looking for a job. He hasn't updated his blog in three months, which usually means that he's working on getting things right. We'll see what happens with Rex as well.