Part 2: Am I really making $1 Million per new build?
A further dive into the exact numbers of what it costs to build on my own
This is a long one. Now that my recent build is wrapped up, I showcase every single penny of my expenses on my most recent build along with links to the actual new build rental page. Make sure you “View entire message” if you open this up via email so you don’t just get the truncated version.
“Hope is not a strategy”
I heard that little line for the first time when I was in my mid 30’s from the President of the company I was employed by. I spent most of my professional career there and it is the pest control giant that nearly everyone in the US has heard of. The Big O. I was in a meeting of operation manager’s. Guys who drove sales, profits and micro managed P&L’s. At the time, I was in the Entomology role for the Southeast US. I’d support local branches, train technicians on chemical applications and the various products we would use, go out to large commercial accounts who had major bug issues, etc.
The individual who triggered that response from the President managed the state of Florida for the company. He had 25-30 pest control offices in Florida reporting to him and a Hurricane had just blown through a large swath of the state. A quick crash course in the bug business: Pest Control is divided into two categories. Residential and Commercial. Within those categories there many other subsets like Termite Control, Bed Bug Control, Crawlspace encapsulation work, etc. The residential side is a door to door, “close the deal at the kitchen table”, type of business. Granted, as big as the company I worked for was, they got lots of inbound phone leads just because of their name and all of the commercials they run. But, many of the residential sales that occurred within the organization came from salespeople who were good at canvassing neighborhoods (knocking on doors) and offering “Free termite inspections”.
After one particular hurricane season, a significant portion of Florida lost one to two weeks of business capability because of the storms. Businesses closed, roads closed and people stayed home and I assure you, no one wanted a “Free Termite Inspection” from some random guy knocking on their door during this time. For the state of Florida, revenue was missed, profit plan was missed and it was a pretty rough month or two.
Fast forward to the corporate meeting. VP’s & Region Managers had to go over their numbers in sort of a “round table open forum” type way. Each individual who ran a state had to get up in front of the group and go over their P&L. Everyone obviously wanted to highlight their positives and minimize talking about the negatives since the President of the company happened to be in attendance.
The Region Manager for Florida got up. He was a long term employee, knew the business well and was good at driving profit and revenue. Unfortunately, (and obviously because of the hurricanes), his region recently missed nearly all of their sales and profit plans. During his presentation, he brought up the fact that they missed because of the weather and how challenging it had been recently. He mentioned the fact that “He hoped the weather would cooperate in the next couple of months and they could make up for the recent carnage in sales”. The president, sitting at one of the tables in the audience, hunched over at his table, scribbling notes during each presentation, all of a sudden chimed in:
“If I had wanted a weather report today, I would have called the weatherman”.
You could have heard a pin drop in the meeting room. The poor guy at the front really never recovered during that particular presentation. He stuttered and stumbled the rest of the way through. It was actually pretty sad and I remember feeling bad for him. He was well liked so he was safe from an employment standpoint, but, me being in my early 30’s at the time, I had never seen anyone get clipped in such a brutal, yet factual fashion.
Later in the meeting the president got up to speak to everyone. He didn’t bring up that particular presentation, but he did talk about growing the business and the strategy to grow a business. He then specifically said “Hope is not a strategy”. Everyone knew exactly what he was talking about.
Over the years, those words stuck with me. Often in life I have found myself thinking “I hope I do well here, I hope they have a good earnings call so my stock goes up, I hope this crypto investment isn’t run by scam artists, I hope my real estate appreciates”. Looking back, many times I would rely on hope rather than relying on my ability to perform. As I matured in my business and corporate life, I quickly began to realize that there has to be a plan. A plan is far superior than hope. And if you have a plan, based on data that you have observed, that’s even better. Sometimes you can plan all you want and still lose a ton of money. Data to back up your plan is imperative.
Think about it for a minute. How often have you seen a new restaurant pop up in an area? Same building, different cuisine and name every few years. You’d think some of these restaurant business entrepreneurs would step back and understand that there is a good chance they may face the same fate as the previous 3 establishments that have been there and subsequently closed down over the last 5 years. But, just like many entrepreneur mindsets, they feel like they have something different. Some flare, some amazing cuisine, some new atmosphere that will change that and cause them to succeed. They base their plan on “hope” and that can be a lethal strategy.
When it came to my Short Term Rental endeavor, after I purchased my first one in March of 2020 and had a quick little scare with Covid shutting travel down temporarily that April, I knew I had a good thing cookin! By June, people were flocking to the Smoky Mountains. Flights, Cruises, International Travel had shut down and everyone was driving for their summer vacations. Couple that with the fact that no one wanted to stay in hotels around other people, the AirBnB market BOOMED. By July, it was no longer a “hope” for me. In fact, the first purchase in March wasn’t based on hope. Removing Covid from the equation, I ran the numbers backwards and forwards on my first purchase. Below is the link to that first one.