Scaling is hard. Really hard.
One of the primary tenets of startups is to do things that don’t scale. In the beginning, there are many benefits of this approach. For one, the company doesn’t want to prematurely build software before it has found product/market fit and throw away software built on incorrect assumptions. Additionally, stepping into the shoes of the customer is useful to develop an intimate understanding of the problems encountered in the industry. In real estate, I took this attitude to an extreme.
When it came to any issue with a property, I either fixed it myself or knew enough about how to fix it that I could efficiently have a contractor come do it. On the occasion that I would call in an expert, it was because I personally didn’t have the credentials to do it myself (electric and plumbing require licensure) or didn’t have the expensive equipment to perform the one-off project (tearing down an old building). Otherwise, I fixed toilets, replaced electrical outlets, painted walls, fixed carpet/flooring, mowed lawns, performed pest remediation, and took on about a dozen other tasks. One of the ways I tried to scale myself and reduce the external costs to the business was gaining licensure wherever I could to perform skilled labor myself.
This is the reason why I became a general contractor, so I could perform renovations myself. There are a host of other certifications that I acquired, all with the desire to expedite specific processes in the business and reduce the overall cost of operation. Being genuinely curious about these fields of expertise made learning the material relatively straightforward and contributed to a holistic approach in my redevelopment thesis. It did not come without its challenges though as sometimes I pushed myself to the brink.
During the winter of 2018–2019, we had a polar vortex that brought temperatures of -40 degrees for a period of two days. In these situations, a landlord wants to avoid two worst-case scenarios at all costs. First, that no water pipes freeze and/or break. Second, that no one’s heat is off or goes out. I, unfortunately, had both of these situations occur. On the first and coldest night of the polar vortex, I had a couple tenants message me saying that their apartments felt colder than expected. It could have been that they were cold inside because of how extreme the cold was outside, or it could have been a sign that something wasn’t working with the heating system. I didn’t want to take that chance so I got in my pickup and headed over to the apartment complex. I proceeded to the basement where there were three boilers and sure enough two of them were off. I immediately called my HVAC contractor and asked him if he had any advice for this situation. He said that he could be there in 15 minutes and that in the meantime I should try to relight them.
I relit the boiler pilot flame on the two boilers that were off. They both fired right up and I could see the temperature of the pipes increasing gradually. When my HVAC guy arrived, I gave him the status update and asked him what may have caused this situation. He said it could have been a number of things, but most likely a draft from somewhere. I checked the basement for a source of the draft and after finding one, did my best to use other materials in the basement to mitigate the impact of the draft. At around 10pm that night, after watching the boilers for several hours, I left as I was finally comfortable that we would make it through the night.
The next day, first thing in the morning, at a bitter -36 degrees, I was notified by a tenant that they heard water running in the apartment above but thought it was empty. I hurried over to find that a recently emptied apartment had a water leak out of the sink’s faucet. The previous tenant had broken a window and the bitter cold had filled the apartment. I shut off the water main for the whole building so that I could put a cap on the broken water line in the bathroom. I also took a piece of plywood and some leftover insulation and created a makeshift cover on the broken window to stem the heat loss in the apartment. After several hours of work, I was able to turn water back on to the other seven tenants. I went to each tenant and asked how they were doing, if they were staying warm, and suggested that they boil some water to increase the humidity in their apartment to help fight the dryness of bitter cold air and feel warmer due to the heat being stored in the extra water particles in the air. Even though I was exhausted, I considered this a success story of doing things that don’t scale as a landlord. I cared about the well being of my tenants and did everything I could to help them in this crazy weather event.
The flipside of trying to scale a real estate business is that when things go wrong, there can be some serious downside. For example, I was sued for a renovation project that went sideways due to a subcontractor’s failure to perform their job properly. While I had been successful in working with this subcontractor in the past on smaller projects, I made the mistake of assuming I could trust them to scale their capabilities without adequate supervision, support, and communication. While my insurance company was able to represent my company to a satisfactory outcome, my reputation took another hit from the failure of the renovation.
In effect, learning how to scale your team effectively while also managing to avoid the very serious legal and financial risks of failure is a critical component to scaling a real estate operation. I had smartly acquired an insurance policy that made the legal and financial repercussions due to an unsuccessful project navigable, but the lesson of taking more precautions is one I would advise for all who venture into real estate. It’s one thing for a server to go down for a misconfigured DNS record for an hour, but it’s another for tenants to no longer have heat on the coldest day of winter.
