The Dinner That Can Change Everything

May 1st. Usually, I would make a quick complaint about the welfare bums emerging from their crypts to come out for their monthly allowance today. But there will be no complaints in this post. Not one. Last night I had dinner, and it was an amazing experience. It made me truly believe that the good times are about to begin.

I met this dude Damon at the shipping depot a couple years ago, and he was a package handler. People would talk that he was also a landlord as they would do with me, so eventually we started talking. After he left for a better job, we kept in touch my texting the info of good handymen that we’ve used. He made the suggestion that we hang out to bounce ideas off each other and I reluctantly agreed. Last night we went to a restaurant and got talking.

Damon is Filipino (I think) and in his mid-late 40s. Almost immediately, Damon asked questions about how many units I have and how seriously I take my real estate ambitions. I asked the same of him and we seemed to be on the same level. We both jumped into the business knowing nothing and made the same mistakes. He has one 4-unit property and, like me, wants to retire with his primary source of income coming from rentals. Among the topics we discussed were:

Property Management

Damon likes the idea of buying a cluster of good properties and then handing them over to a reputable property management company. I’ve always been against the idea until he reminded me that there are some excellent management companies out there that would definitely cost less than paying an assistant $30,000 a year. They will take care of everything and I can keep close ties with them so that I'm always up-to-date with what’s going on in the properties. I never thought of it like that. Why pay some broad $30,000 when I can pay a property management company with better resources and experience the same or less, AND they can take care of everything as well as give me monthly reports? Hmm…

Sole Proprietorships vs. LLCs

Damon: So why do you have an LLC?

Me: Uh, for tax purposes.

Damon: Oh, so the properties are under the LLC?

Me: No, they’re all in my name.

Damon: So then…?

Me (smiling in shame): You know what? I really don’t know.

And I didn’t. Why the hell do I have tenants paying to the LLC that I created when none of the properties are under the LLC? This strangeness is compounded by the fact that I have my tenants make checks out to the LLC but have my name as the landlord on the lease, not the LLC. If I go to evict a tenant, a clever lawyer would see this and have the judge throw out the case. If one wants to throw out a tenant as an LLC, there’s a procedure that can take up to 60 days and I have to hire a lawyer. As a sole proprietor, I can evict the way I’ve been doing without having to worry about legal loopholes. And, because I can’t put my current properties in an LLC due to the mortgages on them, it makes sense to see the advantages of doing it the sole proprietorship way while I work on getting my properties under separate LLCs.

No Down Payment

Damon bought his property through a Preservation program that pays for the rehab and then he pays them back as a mortgage, like a no-money-down rehab loan. Sha did this a long time ago, but always told me it was a bad idea because of all the stress he went through. Damon said it's no stress as long as I don’t take shortcuts that I'll have to pay for later. Knowing Sha, that’s probably what happened in his case. I can start looking at the program he used and see if I qualify.


We also talked about the easiest way to do taxes, saving receipts, how he used Microsoft Excel to do his management instead of Quicken Rental Property Manager, the addiction to the "landlord ego trip”, and what types of assistance tenants he would accept (we obviously disagreed on this subject). I told him about the REIG (Real Estate Investors Group) and he plans to attend, and then give me the information when we hang out. We agreed to meet the first week of every month, starting in June. We both realized how refreshing and rare it was to talk with a fellow real estate investor that is dead serious about making real estate investing into a career. My ambition is all-encompassing, and I could hear that same fervor in his voice when he talks about being an investor.

This was the way it was supposed to be with me and Sha. But Sha isn’t like Damon. Sha isn’t interested in doing things the right way, as he proved when he decided to stiff the banks and use the rents to pay principal on the properties he wanted to keep instead of paying the mortgages. Sha almost got me to do it the same way. Sha also seems very reluctant to talk about the technical aspects of real estate. If I ask him a simple investment question, I usually have to go through about 3 minutes of dick jokes before I get a half-ass answer. I’m all for dick jokes, but there’s a time and a place for everything. Sometimes, there is such a thing as too much dick. The amount of information Damon and I swapped in one dinner meeting was more than the last three years of talking with Sha, and I liked the feeling I came away with when I went home and thought about our exchange.

I like this. I like this renewed “investor feeling”. I now have a resource partner, someone who I can bounce ideas off of and one who takes this business as serious as I do. We can get together monthly and talk about our experiences, trade information on good handymen, and get each other to the next level. This is what a lot of successful investors talk about when they speak about networking. It’s not just about talking with people in my field about real estate. It’s also about finding someone who is at the same level of both experience and ambition as I. Damon said he needs to get his monthly profits at $25,000 before he can relax. He was dead serious. Enough said.

P.S.: While I’m optimistic about my new resource/information partner, I will take the usual precautions. He still doesn’t know my real name, and I’m not sharing my Pelcom guys with him. They’ve been my best handymen, and I don’t want him giving them work that gets in the way of my work. One of the few things Sha taught me about property management is to always keep a handyman hungry for work. I also get the feeling that Damon’s a homo. While this doesn’t pose a problem business-wise, I think I should take care of any misunderstandings by mentioning a girlfriend or something in our next meeting. Just because I take pics of handymen's asses…

P.P.S.: In my last post, I forgot to mention that I won April’s Ass Crack game 45-20. One can tell that I’ve been going through bad times when I forget to mention important accomplishments like this…