For the last two days, Sha and I have hung out after work. We went to a Thai restaurant on Wednesday and an Italian restaurant on Thursday. During that time I’ve been able to get an idea on how he’s doing in regard to our competition, the one that he knows nothing of.
From what I can gather, Sha is still doing about the same. He has two full-time handymen working, as well as a part-time handyman that he just hired. His barbershop business is still at the beginning level, as his quest to find reliable barbers is not going too well. The one bright spot is the Somali barber that works there now. It’s a bright spot because the store that is next to the barbershop in the same building is a Somali market shop. If Sha can seize the opportunity, he can have the Somalis bring in customers through the market shop, then give them a haircut as well. With the amount of immigrants that go to that market shop, Sha may be able to make a stable profit from that Somali barber. But that’s just one barber and the energy costs (heat and electric) to keep that place open every day are high. One or two stable barbers won’t help with the bills too much.
As I was cleaning up the batcave last night, I found a letter that was for Sha a long time ago. It was from one of the mortgage holders of a property that he stopped paying the mortgage on. It said that, as of July of this month, he is 1407 days past due on his mortgage payments. He now owes the bank more money for the property than it’s worth and is in danger of foreclosure. 1407 days. That’s almost 4 years. That’s 46 months of taking the rents of that property and using it to pay off other more profitable properties. The banks are taking forever to foreclose on properties and, as of right now, he has 3 properties completely paid off thanks to his strategy of taking the rents from less profitable properties and using them to pay off the mortgages of more profitable ones. I’m not sure why banks are taking so long, but I think it has to do with the illegal foreclosures that happened a while back during the recession. Now, every bank has to go through each mortgage with a fine toothed comb before they can start the foreclosure process. By the time the banks/mortgage companies foreclose on those properties, Sha will probably have at least 6 properties paid off completely.
But his major problem still remains. Except for the barbershop building, most of his properties are not in the best of areas. So even after they are paid off he still has to deal with the high maintenance, crappy tenants, and vacancies that come with owning property in those kinds of areas. And he can’t really save much money because he still has two full-time handymen, one part-time handyman, and a wife with expensive tastes to pay for. With his name and credit completely shot, he also won’t be able to qualify for a mortgage to buy in a better area. He’ll be stuck. This is why I believe I can beat him and retire from paycheck jobs first. My strategy is to buy in good areas which in real estate terms would be to buy in “A” and “B” locations. I'll do this by contracting repair jobs instead of having handymen working directly for me, and I make sure my credit is in good standing so that I can continue to buy better properties with down-payments.The better the location, the better the tenant. The better the tenant, the less I’ll have to deal with crap like evictions and will therefore have lower costs in tenant and property maintenance. The lower I pay in maintenance, the more I’ll have left over to purchase bigger properties in better locations.
That’s my formula for beating Sha. Sha’s a crafty bastard, so I’m sure he’ll come up with more ways to make money and escape the bind he’s currently in. Will he be able to do it and retire before me? For competition’s sake, I’m hoping the answer to that question is no.
P.S: I haven’t spoken to my brother Rex in quite a while so I don’t know how his Forex trading business is doing. I choose not to speak to him now because I think that’s what he wants. I think he’s retooling and re-strategizing, and people like him don’t like to be bothered during the rebuilding phase. It’s a long and sometimes humbling process, and constantly asking how things are going may warrant a well-deserved punch in the face. I’ll have to wait and see how things go with Rex.
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