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Scott Rubin:
I spent 20 years in corporate America working in
marketing. The company I worked for began having some difficulties and my
income started decreasing. It eventually got to the point where I knew if
I continued with this company, I wouldn't be able to pay my mortgage.
After expressing my concerns with my girlfriend, she suggested that I
become a Realtor. After 20 years in marketing, I was completely changing
my field. For months, I studied like crazy for the real estate exam. As
they handed me my license at the testing center, I thought, “I don't want
to be a Realtor!” My dad had given me an article about two people who had
made a lot of money in real estate. I took their “CashFlow Generator”
course and realized that investing was what I wanted to do. I began to
research the industry, read books, and attend other seminars and boot
camps. I even hired a mentor. I had gotten to the point where I had the
knowledge but I hadn't really done anything. I was beginning to feel that
the more I read, the less I knew. I had this discussion with my mentor
who simply told me to “stop reading and start doing.” So I took my
mentor's advice and bought my first property.
IWP!:
How did you find the first property and how did it
turn out?
SR:
I found the first property on the southside of
Chicago through simple advertising methods. I purchased it through the
“Shortsale” process. It took approximately six weeks to get through the
entire process. In the beginning, the mortgage was with a large bank and
I had some challenges communicating with them. However during the
process, the larger bank sold the loan to a smaller bank and in 3-4 days,
the deal was complete. Once I had the property, I gutted and remodeled
the kitchen and bathrooms. I also added a bedroom in the basement,
refinished the hardwood floors, and painted. In four weeks, the rehab
was complete and the property was sold with-in the follow-ing
two weeks with two buy-ers bidding on it. I sold the property for
$140,900, yielding a $28,000 profit (see Exhibit A). The success of this
property gave me the confidence I needed to move to the next property.
IWP!:
Tell us about the second property.
SR:
I purchased my second rehab project on the northside
of Chicago (see before & after picture on page 11). I found this property
through a Realtor and I'm currently looking to sell the property for
$799,900, yielding approximately a $200,000 profit. It was an entire gut
project with structural repairs and I added a 2-story addition to the
property. During the rehab, I had many challenges. Some I saw coming,
others I didn't. Orchestrated right out of a “Three Stooges” TV show I
was struck in the forehead by 2X6X10 size beam…didn't see that coming!
Another time, I decided to tear the chimney down and instead of starting
at the bottom and working our way up, my crew (without my knowledge)
started upstairs close to the roofline. With 10 feet of brick chimney
above the roof hanging on by a few bricks below the roofline, it became
very unstable and safety was a concern. I decided to locate a chimney
company to finish removing the chimney. Unfortunately, I was unable to get
anyone out for about 3-4 days over a long weekend. I was so nervous that
it would topple off the roof, possibly damaging my neighbor's property. I
believe prayer was the only thing that held the chimney up. The important
thing to remember is that issues will come up. However, a good investor
looks at them as challenges and not problems. In addition, you want to
build a team with the same attitude. Therefore, everyone has the mindset
to find solutions when challenges arrive.
IWP!:
What part of the rehab do you physically do and how
did you put together your team?
SR:
Other than the demolition stage, I do very little of
the project myself. I've found that when I try my hand in it, I slow it
down. Instead, I take time to put together a knowledgeable and
experienced team. I have inter-viewed well over 100 people for my current
project and I've selected what I thought was the best. I used some of the
same people from my first pro-ject. They did a really good job for me and
I brought them back. I have a 1st string and a 2nd string, and I don't
have a problem utilizing my benchwarmers when my starters don't show up.
I don't stop a project if the starters can't perform, because the clock is
ticking. Now don't get me wrong, that doesn't mean that those on my 2nd
string aren't as good as the 1st string. There were simply certain things
that were less desirable with them than the others.
IWP!:
How do you plan a rehab project?
SR:
I divide the project into phases because things must
be done in a certain order. Doing a gut rehab is like performing plastic
surgery. Proper planning can save time and money in the long run. In
addition to having a plan, I make sure that I'm there to do inspections.
I'm typically at the job site on a daily basis because as things come up I
think it's important that I'm there to answer questions. Therefore, my
crew is not nec-essarily making decisions on their own. Not to say that I
don't trust my crew, because I look for tradespeople who will look out for
me. I hand picked them from over 100 interviews. I trust that they do
have my best interest at heart.
IWP!:
What should investors look out for or what are the
most common mistakes investors make?
SR:
In my opinion - getting in without enough knowledge
and getting knowledge without taking action can be problematic. As an
investor, you can have all the knowledge, but there is nothing that will
make you excel more than confidence. In order to get that confidence, you
must get in the game. I definitely believe in taking the time to obtain
the necessary knowledge in an investor's area of interest. However, don't
get too preoccupied with the knowledge portion that you take no action. I
don't know any investors that made their money buying books - they made it
buying real estate. I think that investors don't necessarily take
advantage of all the opportunities that are available to them. For
instance, participating in Real Estate Investment (REI) clubs and making
contacts have been really inspirational to me. At the clubs, investors
can find other people that have done what they are interested in doing and
most of these experienced investors don't mind sharing. In addition,
paying for a mentor can be beneficial as long as you are taking action.
Do your research there, get references, and ask around first for
referrals. The more support you have, the better chance of success.
IWP!:
How do you finance your projects?
SR:
I personally didn't start with a lot of money. In
fact, I'm currently living on some of the money/credit I have available
for my projects. I'm not at the point where I'm giving myself a weekly
paycheck. I financed my projects on personal and business credit cards
with 0% interest. I have used about $150,000 available on 0% interest
credit cards and $30,000 available on 3-4% interest credit cards. I have
borrowed money from my life insurance policies and from family members.
As I build a little track record, I will look for private investors and
possibly rehab loans.
IWP!:
What does the future hold for Scott Rubin and 5 Star
Property Solutions?
SR:
The goal is to continue rehabbing because I have a
passion for it. I would like to do two or more properties every quarter
with a minimum of a six-figure profit. Not to say that I won't venture
into other real estate investing arenas, but I'm sensitive to rehabs
because of the opportunities to be creative. I like rebuilding properties
and creating luxury homes. I can do that in all price points. My first
property, which sold for $140,900, was a luxury property on the southside.
I found the right sources for buying quality products at below retail
prices and I made that property into a luxury property. I try to make all
my properties unique. When a buyer looks at properties in the same price
point as mine, a 5 Star Property will always stand out in their mind. In
addition, I'm looking at some of the technological advances that are being
made in real estate, like solar-shingled roofs for electrical cost
savings. I like to make money on my properties, but I want them to be the
best quality available on the block and in the community.
Looking into the far future - I would like to expand
into the luxury rental market. I strive to become an all around investor,
having the knowledge to be able to look at any deal and know if it is
truly a deal, or could be. Therefore, I will continue the education
process. I believe that if you can continue to learn and develop
knowledge, and take action, making money is a natural byproduct.
“My First Rehab” is a collection of the rehabber’s
investment experiences. Do you remember your first rehab? Share your
story with IWP! readers. Visit the “My First Rehab” section on our
website at www.investwithpassion.com or call Krystal at 708-991-2861.
INSIDE THE NUMBERS
Property
#1 Property #2
Purchase Price: $
91,000 $ 345,000
Estimated Rehab Budget $
18,500 $ 160,000
Actual Rehab Cost $
21,900 $ 250,000
Sales Price
$ 140,000 $ 799,900
Profit $
28,000 $ 204,900 |
