Credit: Donatas Jaraminas
There’s a lot of talk about the construction industry’s aging workforce. That includes remodelers, many of whom will retire during the next decade. Some will sell their businesses, but most will likely shut their doors and simply walk away to … to what? “Construction ... generates income, but I don’t see a way to turn a profitable remodeling company into long-term income,” says Janver Holly, owner of Holly & Associates, in Santa Rosa, Calif.
But that construction know-how can be put to use in other profitable ways. For example, Holly maximizes his knowledge of structures to purchase properties that others wouldn’t buy, then rehabs and rents them. Six years ago he faced divorce and debt but now has several million dollars’ cushion. He challenged himself to purchase one house per year for 10 years, which would yield steady retirement income.
Chris Avant, owner of Canyon Construction, in Moraga, Calif., and Jay Miller, owner of Jay Miller General Contractors, in Easton, Pa., also have taken their know-how and turned it into something that will generate wealth now and can see them into a comfortable retirement.
According to CPA and tax expert Mark J. Kohler, not only is buying rentals “absolutely the number-one tax savings and wealth-building strategy for remodeling professionals, but remodelers qualify under IRS tax code as real estate professionals, which gives them enhanced tax benefits when it comes to rental property.”
Avant, who started in the industry as an apprentice carpenter 20 years ago and had to deal with credit card debt, has since been able to amass a good-size net worth. He began by buying an existing remodeling company and structured the deal to include the purchase of the building that houses the business. He now rents back from himself at the highest market rate.
While that pays off the building’s debt, he says, “It’s more of a long-term equity plan. Rent covers the mortgage, and the [building] appreciates, then over time that becomes an income stream.” He too buys, renovates, flips, and rents properties.
New Use, New Income
Miller bought a 4,500-square-foot office building to house his office and showroom. But when the recession hit and he couldn’t find commercial tenants, he met with a real estate professional with whom he had a long-standing relationship.
With the agent’s insight, Miller decided to move his office elsewhere and renovate the building to create luxury condominiums. Two of the four condos are now built out and rented, and they pay for the rest of the structure. “The building should be paid off in about five years and will generate nice retirement income either as cash flow or to borrow against,” Miller says.
Get started by building knowledge (see resources below) and developing a team — banker, accountant, and real estate pro. In the end, your goal is to have your money work for you when you are less able to work.
Education + Inspiration for Wealth Creation
• The Richest Man in Babylon, George S. Clason
• Think Like a Tycoon: Inflation Can Make You Rich Through Taxes & Real Estate, Bill Greene
• Iacocca, Lee Iacocca and William Novak
• The Millionaire Real Estate Investor, Gary Keller, Dave Jenks, and Jay Papasan
• Rich Dad, Poor Dad, Robert Kiyosaki, Sharon Lechter
• What They Don’t Teach You at Harvard Business School, Mark H. McCormack
• The Strangest Secret, Earl Nightingale
• The Contractor Stimulus Program, contractorstimulus.com, Dave Lupberger and Bob Tierney
• Renatus Course, myrenatus.com