Friday, July 23, 2010

Looking at Investing Through the Eyes of a Landlord

It seemed like a really great idea at first. And it actually was, but somewhere along the way, it turned bad, really bad. I’m not quite sure when, but it was either before or after a tenant started breeding Pit Bulls in the back bedroom . . . well, now that I say that, it was probably before. The story starts a good six years before the Pit Bulls. I was just finishing my freshman year in college. Four friends and I were looking for an apartment that would rent to five college kids, but no one would go above four (that should have been my first hint). So I hatched an idea and floated it past Jonathan (side note: I quit referring to him as “Dad” after my first day of work here). I proposed that we use my first-time homebuyer status to get a cheap loan, then buy a four bedroom condo, cover our mortgage with the rent from my four roommates, and on graduation day we’d easily sell it and voila, three years of rent free living. I was, as we say, very bullish.

It worked well for the first three years. In addition to the rent working out as planned, I happened to meet my wife, Millie, who was living in the building next door (I later learned she had made the same proposal to her Mom and they owned her condo also – the serendipity!) Three years later, my roommates became my groomsmen when Millie and I married a month after graduation and, even though we couldn’t sell the condo right away, we found some decent tenants to tide us over for “just a few months.”

That first batch of tenants sent their checks in on time and didn’t scuff up the walls too badly. But as we continued to rent it out while looking for a buyer, we discovered each group of tenants brought new troubles. Our costs went up: carpets had to be cleaned after each tenant, washers broke, and rooms were painted black. And our emotional expense went up as well: lost sleep over dealing with missed rents and worry over our exit price. All the while our potential liabilities piled up: the smoke detectors went unattended, the 3rd floor porch railing was removed for an impromptu golf driving range, and of course the aforementioned Pit Bull husbandry. Thankfully, the world is full of enterprising young men with four friends who want to live together – we were lucky enough to sell our place to one such “investor” well before the housing market collapsed.

Tuesday, July 20, 2010

What we learned from the Doctor

Justin here. I read a great article in the WSJ this morning (here) about a movement to get more doctors to give their notes to their patients.

We have a client couple where the wife has battled through a fight with breast cancer. The husband said one of the best things about their doctor was that he would photocopy his notes after they talked and give them a copy before they left the doctor's office.  He said the transparency meant a lot to him and his wife.

We've always given some sort of recap after meetings, but it usually only involves the action points coming out ("Jim and Jane need to revisit wills.") but we didn't always send our clients the full meeting notes ("Jim and Jane need to revisit will because Jane is nervous about Jim providing too much money to his grown kids from his previous marriage.")

So, after our client told us how important it was to them in their cancer fight, we started being more intentional. While we don't copy our handwritten notes (they wouldn't be much help) we've started sending clients full recaps of the meetings. Sure, it takes some time, but we find that it adds some accountability (for us and the clients) and, like with our clients and their doctor, improves transparency. We see it as standard operating procedure.

Friday, July 02, 2010

Unintended Consequences in Aid to Haitian Woman

In February, NPR played a story about woman in Haiti, Yvrose Jean Baptiste, who basically loses her business in the earthquake. She desn’t know how she’ll go on, owes the bank $100 while selling chicken necks at the market for pennies. Then in a genuine act of kindness and humanity, NPR listeners flood her bank account with money . . . $3,860 (more than a few years’ wages).

Today, they followed up with her. She withdrew the money, put her four kids in school, bought a stand at the market and inventory. It dramatically changes her life for the better - you nearly expect Hollywood to start buying the movie rights . . . until her husband leaves her. He doesn’t know how to handle the shift in power in the marriage. Today she says she's happy but she doesn’t sleep well at night (still under a tent) fearing she will be robbed because she doesn’t have a husband to protect her.

Three lessons:

  • We all have the ability to radically change someone's life through mere generosity, but
  • Bailouts rarely work like we expect them to and
  • Money rarely solves problems we’ve yet to encounter.

Full story here: