YFP REI 77: “Figuring Out” Solutions to Investing Nightmares

“Figuring Out” Solutions to Investing Nightmares

Nate Hedrick, PharmD, and David Bright, PharmD, MBA, BCACP, FAPhA, FCCP, share their experiences with four real estate investing nightmares and how they figured them out. 

Episode Summary

This week on the YFP Real Estate Investing Podcast, Nate Hedrick, PharmD, and David Bright, PharmD, MBA, BCACP, FAPhA, FCCP, share their experiences with four different types of real estate investing nightmares and how they worked their way through them. As a real estate investor and pharmacist, reducing risk is paramount. Real estate nightmares, like plumbing, sewer, and roofing problems, can be intimidating, but Nate and David share ways to combat these issues with a stepwise approach. Nate shares a story of a cracked pipe in a rental that had his tenant mopping up water instead of calling for help and how he resolved the issue at a manageable cost. He also shares a leaking roof nightmare and how he learned to move through that process. By identifying the right professionals and relying on them to take the necessary steps, Nate’s various water issues were quickly handled. David shares stories of sewage line problems, a couple of furnaces that caused some trouble, and how each ended. He mentions that training your tenants to look for issues can be a valuable tactic for a proactive approach to maintenance. Nate and David break down the cost of these issues, share insight into getting a fair price for repairs, and explain why an emergency fund or repair budget is necessary as an investor. Regardless of the real estate nightmare, Nate and David want to remind pharmacist real estate investors that they aren’t in this alone and that even the worst of property nightmares are “figure-outable.”

Links Mentioned in Today’s Episode

• YFP Real Estate Investing 76: Short Term Rental Market Update with Rachel Gainsbrugh
• Join the YFP Real Estate Investing Facebook Group
• YFP Real Estate Investing
• Your Financial Pharmacist Disclaimer and Disclosures

Episode Transcript

[INTRO]

[00:00:08] NH: Hello and welcome to the Your Financial Pharmacist Real Estate Investing Podcast, a show all about empowering pharmacists to achieve financial freedom through real estate investing. I’m Nate Hedrick. And each week, my co-host, David Bright, and I explore stories from pharmacists all over the country who are achieving their real estate goals, while maintaining a meaningful career in pharmacy. Whether you’re a first-time investor or a seasoned pro, we’re here to provide education and inspiration about the world of real estate. Please note, this podcast is intended for educational purposes only and should not be considered financial or investment advice. 

[EPISODE]

[00:00:42] NH: Hey, David. How’s it going? 

[00:00:44] DB: Hey, good. Thanks, man. How you doing? 

[00:00:45] NH: Great, great. Always good to talk. Again, we got to talk to Rachel last week. You and I are chatting a bunch about how much we enjoyed that episode, just getting her to talk about her new Netflix show and just some of the things that she’s seeing in the Airbnb space. So always just awesome to connect with that kind of stuff.

[00:01:02] DB: Yeah, I know. We talked after that recording, where we were both like, “Maybe short-term rentals and we got to do more.” We both got really excited about short-term rentals after that. 

[00:01:11] NH: Again. 

[00:01:12] DB: One thing that like really stuck with me too, that like days later we’re still talking about, is she had this line about how everything is figure outable. I just thought like that’s so good because there’s a big difference between everything that we learned in pharmacy school, pharmacology and therapeutics, versus building code and tenant management, right? WE don’t learn anything about building code in pharmacy school. After everything that a pharmacist invests in training for their profession, there’s this intimidation that there’s this enormous learning curve that you can’t get into real estate investing until you do this. Put in the same amount of effort and energy in years of everything. It’s just not that way, and I think that that’s what Rachel highlighted too, is that everything is figured outable. I just love that line.

[00:02:00] NH: Yeah, I completely agree. It’s a space where you can fail a little bit and be fine, right? Again, like you said, we’re so hardwired as pharmacists to say like if you mess up, like that’s a patient’s life on the line. In real estate, like you can mess up, learn from it, and move on. That’s hard for some of us to grasp and get over that edge. But it’s something I’ve learned as an agent, something I’ve learned as an investor. It’s something that, again, I think we want to bring a little bit more attention to because it’s easy to get lost in that you can’t make any mistakes kind of a mindset. That’s not where I want you guys to be when you’re thinking about real estate investing.

[00:02:32] DB: Yeah. There’s so much that I think in real estate talks about catastrophic mistakes versus just kind of simple mistakes that are easy to fix. If you go in and you paint a room a color that you really don’t like, in about two hours of the paint roll, you can correct that mistake. Nothing – Well, sure, there are some things. It can be a really big deal. But a lot of the mistakes that we’re fearful of that really cause analysis paralysis among pharmacists is that’s just really not a big deal. It’s a pretty easy thing to fix if it goes wrong. 

So I think that there’s a lot out there too in the real estate space that talks about just the unicorns and rainbows of real estate investing is easy, and everybody is successful about it. I think that we all know like our inner like cynical nature a little bit is like, “Nah, can’t be.” So I think that us leery pharmacists, we have this like, “What am I missing? What happens when something goes wrong?” Because eventually, it will, right?

[00:03:30] NH: Yeah. I had somebody asked me that. I had a meeting with a client recently, a potential client rather, and he was just learning about real estate investing and says, “Nate, I want to start investing.” He’s like, “What’s the catch? Does this actually work? I keep reading about it, and like where’s the – I’m waiting for like the gotcha moment.” So, yeah, I totally get it. That’s what we kind of want to talk about, right? 

So you and I were talking before the recording a little bit offline kind of planning this out and thought maybe we’ll go through some of our own investing journeys, just some of the hiccups that we’ve run into and how – While they seemed like a big deal in that moment, they were actually really easy to figure out and move on from.

[00:04:06] DB: Yeah. Because at the same time, as want to push back against this analysis paralysis issue that causes some people to never get started, is we also don’t want to come off like don’t plan, don’t worry, just dive in headfirst, and don’t worry about anything because there is this healthy tension between learning and analysis and thoughtful, methodical, kind of our clinical approach to things. But also diving in and still learning as you go a little bit. 

So that tension is really important, and it’s important to have an idea before you write an offer of how the numbers are going to work. It’s important to know what repainting and re-flooring a house might cost. But you don’t necessarily need to know precisely how many GFCI outlets need to go in a kitchen and the distance between wiring because that’s probably overkill for what you actually need to know as an investor. Instead, you just need to know good electrician, right?

[00:05:03] NH: Yeah, exactly. In that example, right, hiring a good electrician makes all the difference. Part of really a lot of what we talk about is the importance of identifying that professional that you can rely on, somebody that you can turn to for a console so that you don’t have to know every aspect of every piece of investing. You just need to know the right people so that you can make that right turn when you need to. 

So let’s jump in. David, let’s talk through some examples. Get to some of our old stories about things that have happened in the past to us.

[00:05:31] DB: Yeah. Again, some of these are kind of painful to relive and kind of embarrassing because these are the things about real estate that doesn’t go well, right? But I know you shared one before you recording about a plumbing issue, a plumbing leak that was discovered in one of your rentals, which feels scary because I know that plumbing sounds expensive, and water causes damage, right? Like that feels like a potentially catastrophic, really ugly thing. But this was something that was figured outable, right?

[00:05:56] NH: Yeah. It’s funny. This example immediately comes to mind because when most people think about plumbing issues, they think really bad, right? That’s like the thing that scares them away from real estate. For some reason, I think that’s just – Whenever I hear somebody talk to me or trying to talk out of real estate, that’s the thing they go to is, “Oh. Well, you’re going to have a plumbing leak, and then everything is terrible,” right?

So this example was actually when I had a tenant for about six months, and I wanted to do my first walkthrough on this property. But it was right in the middle of COVID, and so we didn’t want to physically go there. We wanted to give our tenant some space. So I FaceTime the tenant. I set up a whole – Basically, a FaceTime call to walk through the house with them. We went through the whole house. He was really helpful to walk us through the whole house. Everything looks fantastic. We get to the basement, and he’s like, “Oh, yeah. And sometimes, that pipe has some water running down it but that seems to be fine. We just mop it up when it gets bad.” I’m like, “Sorry, what?” 

So we go back. Basically, long story short, there was a huge crack in this pipe in the wall. It was an old cast iron pipe in an old house, kind of a classic problem that we deal with here in Cleveland, Ohio. The tenant didn’t think it was a big deal. Even though we’ve gone over with him several times like these are things you identify early on and tell us about, they just didn’t look at it like a big deal. Well, I finally got my plumber out there. They had to cut a huge hole in the wall. They cut out a big six-foot-long section of cast iron pipe. 

But what was nice was that it just took it one step at a time. It was, okay, start with a plumber. Identify where the problem is coming from. Then get a quote from that guy, and just keep taking steps down the road until we got it fixed. We even got to the point where he fixed the leak, had replaced all the pipes. Everything was shipshape. But now, I had a huge hole in the wall, and I had to patch that all up. It was the old lath and plaster, not classic drywall. 

Well, luckily, the plumber knew a lath and plaster guy, had that guy over literally as he was finishing the job, starting on the next part of the job, and it got all taken care of. So I didn’t know anything about fixing plumbing going into that problem, but I didn’t have to because I was able to identify the right professionals and then rely on them to take the steps forward. So what started off as a simple walkthrough during a regular six-month look back period turned into kind of a mess, but we were able to sort it out pretty quickly.

[00:08:12] DB: No. I think that there’s a lot that’s really good about that thought process, though, where you’re like, “First, let’s figure out what’s going on and figure out what professional needs to deal with that.” As more people need to be involved, you do. I also like that you shared training your tenants to let you know about these issues because, absolutely, I know that some tenants fall into that like people pleaser kind of personality type, and they don’t want to complain when something’s broken. But you and I, as people that have owned rentals for a while, know that these things are so much easier to fix before they get really bad. So like I would much rather know that like, “Hey, there’s this little thing,” because it’s so much easier to fix a little thing than a big thing when it gets worse. 

[00:08:52] NH: It’s a good reminder too that even the best training of your tenants. Again, like I know we went over that stuff, but they’re going to miss stuff. They’re going to not think of certain things as being an issue that you might perceive as a bigger issue. So do your walkthroughs. Again, I recommend every six months or have your property manager do your walkthroughs because it’s the way to catch those things before they do become big problems.

[00:09:13] DB: I think one of the things that can cause people some panic too is like not really having a lot of context for costs. So can you help us through what something like that would cost? Is that like a $10,000 plumbing thing? Or is that a $10,000 wall thing? Or like how does that all factor in?

[00:09:27] NH: Yeah. It’s a great question, and it’s something where like the emergency fund for that rental really can come in handy. I think for that, it was – I think it ended up being around $800 in plumbing work. Now, I’ve got a great plumber, somebody that I worked with for four years, and so we get really great pricing. We’re not paying like a commercial plumber type pricing. If I had had Roto-Rooter or one of the bigger companies out there, it probably have been double that cost, quite honestly, because they’re cutting out cast iron pipe. They’re replacing it with PVC pipe. So you’re paying for the materials, the actual physical things that need to be put into the wall but also the time that it takes to do that. So you can pay pretty high labor rates, especially on professionals like plumbers and electricians. 

The repair itself was around $800 to for the plumbing work, and then the wall repair was, I think, like 250 bucks. I mean, the guy was awesome. Again, really happy to find somebody like that that knew what they were doing and wasn’t going to charge an arm and a leg. So it kind of goes back to having good contacts. I think one of the best things that or one of things that’s helped me the most in the past is my work as a real estate agent has gotten me this Rolodex of people that I can turn to based on whatever problem I’m going to run into. It just makes that handling that much easier, right? So when a problem comes up, I know exactly who I’m going to call, and they can go out and get it fixed and taken care of.

[00:10:43] DB: Yeah. I think that’s really, hopefully, reassuring for a lot of people that even this plumbing issue of like a big piece of drain is replaced, and then the wall and all this stuff, like that still ended up being like right about 1,000 bucks. By having those people or by knowing someone that knew somebody, like you were able to figure that out. I know that in today’s market, the new property, if that property cash flows, for instance, $100 a month, you just lost almost a year of cash flow with a repair like that. That can also be kind of a hiccup for some, but you also mentioned emergency funds. So I don’t know. Tell me a little bit about that and how you kind of factor all that in. 

[00:11:23] NH: Yeah. It’s a really good point. Like you said, you’re almost burning a year’s worth of profits, if you’re doing it really down to the zero, right? So that’s what we build in, an emergency fund. We build in a repair budget so that every single month we’re setting aside money in a don’t touch this fund. That when those problems come up, I can draw from that and be able to pay for those things that I’m not tapping the profits from that rental, right. That’s the whole goal with cash flow. 

I hear this all the time when people talk about, “Well, the cash flow in this place is $400 a month, 500, 600 dollars a month.” But that doesn’t actually factor in setting aside money for reserves. So we’re really, really cognizant about that. Again, super risk-averse, boring pharmacist over here. I don’t want – I don’t need the investment to make a ton of money. I need it to be safe for my tenants, and I need it to take care of itself, right? So when they’re paying rent, and we’re setting money aside, we’re doing that so that when something breaks, I can go fix it, and I’m not taking money out of my pocket. It’s not a get rich quick scheme. It’s a long-term investment where that house is slowly being paid off. 

So that’s really important to realize that I’m not sitting here, using those profits, whatever there might be to take care of those repairs. We’re setting aside money to handle these things when they come up down the road because they’re going to come up.

[00:12:40] DB: No, absolutely. I think another thing to factor into that too is that the cash flow sometimes is a little thinner in that first year, when you’re just getting a property going and then you’ve got those kind of initial maintenance, things that come up and things that no matter how many walkthroughs you do, it seems like the first tenant that moves in – Just because they’re living there and they’re looking at their stuff, they always find things. So being able to jump in and correct those issues right away too. 

Sometimes, that can feel like it starts to eat into profits and cash flow as well. But over time, like you said, this is not a get rich quick. This is a slow burn. So over time, the rents are going to progressively increase. That tenant may move out, as you reset to market rent. Assuming that rent continues to increase, you’ll continue to see more and more cash flow every month because the mortgage is, hopefully, staying set. You’re seeing more rent. So over time, it will, hopefully, also become a better and better investment paying itself down. Not something where you’re going to get rich in the first year on a long-term rental property in a lot of cases.

[00:13:41] NH: Yeah, exactly. Good point to clarify. So David, enough about water leaks for a second. Tell me about the furnace issue you were mentioning before. We talked about this before we hit record.

[00:13:50] DB: Yeah. So sadly, we’ve had a few furnace issues over the last few years. But I feel like that’s another one that people tend to associate. What are those high ticket, high priced issues? Furnace hits that list, right? So we’ve had this in a few different circumstances that have messed up flips, rentals. Unfortunately, these are scary ones, for sure. 

[00:14:13] NH: Yeah. So walk us through that example then. What happened recently, or you had an older furnace, right?

[00:14:19] DB: Yeah. So there was one that happened not too long ago, where our property manager’s, similar to what you’re talking about, doing these walkthroughs. So that’s not something that I do myself, but that’s something that our property manager does, to do a walkthrough and just inspect. One of the things they recommended was to have the furnace inspected because this particular asset is like a 40-year-old furnace. We did the home inspection. We bought it. Home inspector said it’s fine. The advice at the time was if it ain’t broke, don’t fix it. It’s an old furnace, but it works. If it’s been working for 40 years, it may keep working. In this case, it didn’t. It didn’t work for that much longer. 

So at the furnace inspection, the readings were a little off. It was suggesting that it was in need of repair. For a furnace that old, it’s probably not worth repairing. It’s worth replacing at that point, which was really helpful that that was discovered by a furnace company, like an HVAC professional, because then we were able to go in and start with like the kind of questions like how urgent or emergent is this issue. Is something that we need to take care of like tomorrow? 

They were able to help walk us through. Like because we had done this proactively, and it was in January, but it was in a season where you didn’t have to run heat, like then you don’t need a furnace if you don’t need heat. So we’re like, “Okay, good.” It’s not emergent. We were able to figure that out. Then they were able to get us a quote, and we were able to combine the quote with photos we had from the inspection report and things like that. Then even just use that quote to shop around with a couple other vendors to see what they would do.

Again, because it wasn’t emergent, we could say this company said we need a furnace. It’s this type of furnace, this size of furnace. We need a chimney line or we don’t. Like all the different details that would come in an itemized invoice like that, and we could shop it around with a couple of companies. We ended up just getting two quotes. The other person who is another furnace company we’d work with before said, “I can’t necessarily do it any cheaper, and I’m booked like four weeks out.” If they can get to it next week, you should probably go with them. 

So it was helpful to even hear things like that that were reassuring in the process. So we were able to get that fixed relatively quickly, and that ended up being still not too catastrophic. I want to say it was under $4,000 because it wasn’t a very big house, and it wasn’t an emergency call.

[00:16:41] NH: Yeah. So a little more expensive but still pretty figure outable, especially with your stepwise approach, right? Do A, then B, then C. Follow advice from experts in B and C. I really liked that stepwise process. It doesn’t sound like you spent too much time either, right? You said only about 15 minutes to get that handled, which is pretty awesome.

[00:17:01] DB: Yeah. When the property manager is doing that initial work, and then you’re just really getting these phone calls and chopping prices, like that ends up not being all that much work, and it doesn’t necessarily even end up being time-sensitive work. These are calls I can make in the evening after work and all that. It ends up not being too terrible of an issue. Even things to where my property manager offered to take care of it, I just wanted to be a little more hands on with one of these first ones. So if it was something I just really couldn’t do, the property manager is there to shop quotes and do all that work as well.

[00:17:34] NH: Nice. One of the things that I think about too whenever there’s a problem just like this, is there something we could have been doing in advance? Like you mentioned, you had this initial inspection. Was there something you could have done to prevent that from being a real time fix, something where you had to jump on it and start doing these quotes in real time?

[00:17:52] DB: Not necessarily for this one. I think this was just an issue of old age. But one of our other furnace issues that we ran into was we bought a house that was a fixer-upper needed some work, right? Part of the work was, for whatever reason, the prior owner or prior tenant, I’m not sure, had busted a bunch of holes in a bunch of walls. So one of those things that, okay, then we find someone that’s good at drywall. They come in. They hang new drywall. They mud and sand and all that. 

What I didn’t think about at the time was that the furnace filter that was in there was probably already not recently changed, if the way that the previous person kept the house was to bust holes in the walls. Then the act of doing drywall finishing also creates a lot of dust. It gets in the filter. So that went on for weeks and weeks, and I just didn’t think about doing that. So we could have replaced a $5 furnace filter a few times, and that probably would have been a lot better for the furnace. I’m certainly not a furnace expert, but my vague understanding is that if you don’t change the filter, it’s bad for the furnace, right? 

So what happened was we put this house on the market. This was a project we ended up deciding to sell. We put it on the market that offers the showings. Everything was going well. They sent in the buyer’s home inspector, and the buyer’s home inspector walked into a cold house. I was like, “What’s wrong,” and pronounced the furnace dead at that point. So we ended up having to have a furnace installed that time a little more urgently because it had to happen during the inspection period and before closing for the new buyer. 

So, yes, there are things like making sure that during the rehab process, you’re paying attention to the little details like furnace filters and making sure that you’re keeping up with the property like that.

[00:19:42] NH: I do feel like a $5 furnace filter, though, is a good little detail for a detail-oriented pharmacist to catch. Like come on, David.

[00:19:50] DB: Yes, yes, yeah. If you’re listening to this and you are rehabbing a house, doing drywall right now, like stop at Home Depot or somewhere like that and grab a furnace filter today because, yeah, I learned that one the hard way, for sure. 

[00:20:01] NH: I’m a big fan of auto ship on Amazon. You can do like their auto refills or whatever. So you can actually have them shipped right to the house. So I’ll set them up on every four months or every six months or whatever, and I’ll just have them shipped to the house for that particular furnace filter set. It’s totally hands off. I can get it done that way. I love that trick.

[00:20:20] DB: Perfect. I love it. Yeah. Another one we were talking about before we got started was roofs because you’ve had some roof issues and even insurance issues related to roofs, right? Because roofs are another one that feels very expensive.

[00:20:34] NH: Yeah. So this was one that I was always nervous about, right? I knew that – So we bought this property, and this was actually the very first property we bought. We knew going in the roof was going to need to be replaced at some point. It was a three-layer roof. It had the original shake shingles as the very bottom layer. We knew it was a problem. The roof on top was in okay shape, but it was a definite known issue. So we’re kind of just waiting to get to a good season to be able to replace that. 

Anyway, well, way before we were expecting it, I got a text in the morning from a tenant. It was raining that morning because I don’t live that far away from this property and raining that morning. They sent a picture of water dripping into their kitchen, and I’m like, “I don’t know where this is from. This could be from the bathroom upstairs. This could be from the roof. This can be –” Like who do I even call? So that was overwhelming. But I was like, “It’s raining. We know the roof is bad. Let’s start there and work our way down.” So I called a couple of roofers. Basically, the first person that took my call that said, “Hey, yeah. I can stop over today to take a look at it and at least throw a tarp on if I need to.” I’m like, “All right. Great. Let’s work together.”

Again, that’s kind of the first steps that I took. Long story short, they eventually – I had a couple of different people out there to take a look at it, and all of them agreed like you’ve got way too many shingles. The layers on here are just really not good for this roof, and it’s about time to go, and it’s time to get replaced. So we had a couple of quotes come out. Part of that quote process was to actually file an insurance claim. Some of that was because, again, we knew the roof was bad. But there had also been a windstorm pretty recently. So the thought was, “Well, maybe that did some damage. Let’s have the insurance adjusters out, just to see if we can get something out of this or if it’s worth filing a claim.”

Well, long story short, again, I had the insurance people out. They looked at it. They said, “Yeah, we can cover this, but it’s only going to be –” I think it was like $1,200 worth of coverage from the insurance of what was going to be a $12,000 roof replacement. So my deductible on that was like $1,000. So they would have basically covered 200 bucks, and it would have been a hit on my insurance. I did math with my insurance broker, and the hit we would have gotten from the no claims discount that we got, the $200 would have been eaten in like two months across all of our properties. 

So we had to like back out the insurance claim and pay for all of it in cash because it was not something that, again, was going to be worth filing an insurance claim for. But I didn’t know any of that until I went into it. I have never filed an insurance claim before. Again, all of that was just a stepwise process of, okay, let’s see what’s next. Let’s get some advice from people who know, and let’s move on from there. Again, we figured it all out. But it was a heck of a journey to get that one sorted. 

[00:23:18] DB: Well, and I like how you just like started somewhere, right? Like you didn’t know if it was a plumbing issue or a roof issue. But like what’s the downside of calling a roofer? Like a roofer comes out there and says like your roof isn’t bad. That’s actually kind of a good thing. It feels, again, different than how in the pharmacy world you give a terribly wrong med, they can have it terribly wrong. But if you just have the wrong contractor out, it might cost you 100 bucks for the roofer to come out and say your roof isn’t bad. So it ends up where mistakes like that or wrong moves like that just aren’t catastrophic. It’s figured outable.

[00:23:53] NH: We – Again, to start off, I worked with the tenant to say like, “Let’s try to trace this leak and see if we can find it.” Again, we just could not. It did not seem like it was coming from any of the bathrooms. There was no reason for that leak to be where it was. So it was – At that point, it became, “All right, we need to get a professional to start looking at it, and let’s start top down.” So that just made the most sense. 

[00:24:12] DB: Yup. 

[00:24:13] NH: All right. So those are two, basically, plumbing issues for me, two water-related issues that were pretty easy to figure out. But David, I want to go to what most people freak out about, right. I’m just going to flip it right to you, right? Problems with toilets and sewage lines. Tell me about the issue you had that we were talking about before? 

[00:24:31] DB: Yeah. So there’s always like the 2:00 AM toilet fear that everybody has, which, sure, like it’s no fun to have to handle a toilet issue at 2:00 AM. The one that happened us that was a little scarier that, again, like sounds like catastrophic is not just the toilet and not just a drain line. But we had the main sewer drain going from the house to the street that stopped, and I got a call from the property manager saying, “I’m standing in the basement of your house, and I’m standing in some dirty water. We have a problem.” 

[00:25:08] NH: That’s awful. 

[00:25:10] DB: Yeah. There’s really like no part of that that’s good for anybody because I feel like the tenant, like that is no good for them. We know it’s going to be an expensive mistake. The property manager was telling me, “You have this really big tree in your front yard, and it’s quite possible that roots from that tree have gone into the main drain line and obstructed it. That could have caused the backup.” It starts to be one of those things where like your blood pressure is rising quickly as you’re getting that call.

[00:25:38] NH: Yeah. Okay. So that call comes in, right? Again, this is most people’s worst nightmare. Most people picture real estate, and they picture this moment of like you’re standing in boots in like four inches of sewage water. So like what do you do to like figure out that problem all of a sudden?

[00:25:53] DB: Well, and again, I think we keep going back to like you don’t necessarily need to know the solution. You need to know the person that has the solution. In this case, talking with the property manager, for being a terrible situation for everybody, it was still like oddly enough a great phone call because that property manager was like, “Here’s what I think is wrong. I’ve already called two different people that do sewer clean out and drain replacements. One of them can be here tomorrow. And based on the measurements and the description I gave them, they’ve bid this. Based on the measurements and description, the other person bid this. They’re about a week and a half out, and they’re more money. Are you okay if I hire the person that’s cheaper and can be here tomorrow to solve this? And by the way, I’ve also got someone that can come and can clean out the space professionally to make sure that everything is safe and good. And all they really want is my permission to handle it.”

[00:26:45] NH: Yeah. So maybe the trick is not to be able to figure things out but to know the person who can figure things out, right?

[00:26:52] DB: Yeah. That ended up being – We had even set up with a property manager. I know it’s pretty common in property management contracts for there to be some sort of threshold, where if the repairs estimated to be below X, like don’t bother the owner in that situation, right? Like if the doorknob is loose, and you have a handyman over, like I don’t really want a bit of like that’ll be a half hour of my time. I just want them to like handle it and just tell me later that it happened, and it was handled. 

But in this case, like it was good to get a phone call, and it was good to know about that, and it was reasonable that they wanted a larger expense approved. I know that prices like this can vary drastically in different areas. In the market where I invest, a main sewer line like this is generally under $5,000. So, yes, it’s a big deal. Yes, that’s a chunk of money. Yes, that’s why you have to have an emergency fund or access to funds or something like that because those kinds of things do happen, and there’s not a lot of warning for something like that in some cases. But in the end, it was figure outable because there was a professional on the other end of the phone that figured it out for me, and that was super helpful. 

[00:28:05] NH: Yeah, I love it. I think there’s a lot of value in having that pro that you can bounce some ideas off of. As somebody who does self-management and out-of-state property management, again, it’s really nice, especially with the out-of-state stuff where I don’t have the same Rolodex of people like I do here locally, to have a pro that I can go to bounce ideas off of or just trust to get stuff handled. I just – It’s really nice.

[00:28:27] DB: So I think that we share four examples like this that can all come off as kind of scary, right? Like these are $1,000 or more. No one likes that phone call that like, “Hey, your investment that you were hoping was going to make you money ends up costing you this month because you’ve got a big expense like that.” So, I mean, nobody likes that. Hopefully, we didn’t just lose like everyone that was listening to this show. But hopefully, this is just a little bit of just the reality of like these things do happen. Anyone that’s owned a house has had things go wrong at their own house. So, yes, it’s logical to think that things would go wrong at a rental house as well. 

But I think that a few things that make this easier, like one on that list is that, generally, everybody involved has a shared interest in getting things fixed, right? Like the tenant there wants to help. Like they obviously don’t want sewage in their basement, or they don’t want leaky pipes, or they don’t want the roof leaking. They don’t want these kinds of issues. They want that fixed. The property manager is there. That’s their job is to make sure that things like this are handled. 

On the owner side, on the contractor side, like nobody wants to come in and do a bad job or anything. Everybody wants to get it handled, get it fixed. So that shared interest and that kind of collaborative spirit when these things happen, like that generally makes it a little easier and has people working constructively in the same direction.

[00:29:47] NH: Yeah. I think that’s super important and realize that, again, you’re not in this alone, right? You have professionals around you, whether that’s your property manager or contractors or others that you can talk to, right? David, I can’t tell you how many times that I’ve called you for a random problem like, “Hey, how would you approach this? What have you done in the past for this?” It’s just a great way to bounce ideas off somebody else that might have dealt with it, right? So I encourage you guys. You’ve got the entire YFP REI community that you can throw stuff at too if you’ve got problems. 

But realize that a lot of the things that we’re talking about and almost every headache that you’re going to run into or every hiccup that you’re going to run into in real estate investing, it’s figure outable, as long as you’ve got a plan and an approach, right? Don’t expect nothing. Don’t go into the real estate investing expecting everything to go well, right? It’s not always going to. But if you have that mindset that once it does go wrong, you can take a stepwise approach to fixing it. It will become much less stressful.

[00:30:43] DB: Yeah. Oddly enough, paradoxically, I feel like even hearing stories like this and hearing the reality of this starts to bring that down that there’s not this like bar of perfection that you have to jump and figure out. Like these things happen. Nate, obviously, yeah, we have talked several times through these kinds of things, right? I know you’ve been able to connect with people and find that Rolodex as a realtor. 

Another thing that I’ve done locally is just attending local real estate meetups, where you meet other investors and you hear their horror stories, but how they came through it. Then you connect with other contractors, and that can help to build that Rolodex as well. So not only connecting with folks online but connecting with folks in person as well can be a great strategy for developing those connections so that you can solve problems like this when they come up.

[00:31:33] NH: Great tips, David. Well, I hope you guys enjoyed that. Hopefully, we didn’t scare anybody off, like David said. But again, the goal here with the YFP Real Estate Investing Podcast is to present it like it is, right? We want to talk about the reality of real estate investing to encourage you guys to look at it as an option, right? It’s not going to be a fit for everybody, but we think it’s a fit for a lot of people out there. So this is us trying to keep it as real as we possibly can. 

If you’ve got a story that you want to share, either on the show or in the Facebook group, we encourage you to do that. Whether it’s a horror story of a problem gone wrong and how you fixed it or a problem you’re dealing with right now that you’re just looking for some advice on, we’d love to hear more about it. Again, you can reach out to us on the YFP Real Estate Investing Facebook page, or you can head on over to yfpreal estate.com. Connect with David and myself. Again, we’d love to hear from you guys. So I hope you enjoyed the show and have a great rest of your week.

[OUTRO]

[00:32:24] TU: Thanks for listening to the YFP Real Estate Investing Podcast. If you like what you heard on today’s show, please leave us a review and subscribe to the show, so you never miss an episode. If you have a question, know someone that would make a good guest, or want to connect with Nate or David, head on over to yfprealestate.com and join the growing YFP Real Estate Investing Facebook group. 

As we conclude this week’s episode of the YFP Real Estate Investing Podcast, an important reminder that the content in this podcast is provided to you for your informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. 

Furthermore, the information contained in our archived newsletters, blog posts, and podcasts is not updated and may not be accurate at the time you listen to it on this podcast. Opinions and analyses expressed herein are solely those of Your Financial Pharmacist, unless otherwise noted, and constitute judgments as of the dates published. Such information may contain forward-looking statements which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward-looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer. 

Thank you for your support of the YFP Real Estate Investing Podcast. Have a great rest of your week. 

[END]

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