Don't Be A Square!

It’s no secret that times have changed.   Manners, cassettes, and Michael Jackson have been replaced by terrorists, Twitter, & Justin Bieber.   Some view our current society as a step forward from the olden days of simpler times, while others think we are continuing to lose the values that made America the great country that it is.  Wherever you stand, there is no denying that our world is changing, and so must our mindset if we are going to succeed in this new economy.

Before becoming a licensed Realtor, I spent my professional career as a land developer in the Central Oregon region.  I entered the market in the final year of chaotic profits & furious appreciation.   My associates were driving Lamborghinis & wearing diamond Rolex’s…. things were good, reeeeally good.  However, as we all know, things quickly turned for the worse and I found myself in the center of the worse real estate crash in U.S. history.

During the past couple years, I have been trying to find opportunities for development, but nothing has “penciled out” (land values and construction costs did not align and allow for profit with market prices of homes, multi-family units, or commercial spaces).

It is my opinion that the days of lucrative profits in the land development industry are gone.  There will always be profits to be made in this industry, but not the margin of return that developers have experienced historically.  Yes, there will still be the occasional deal that combines luck and timing with a significant profits, but they will be MUCH harder to come by and will require a lot of work, research, and CREATIVITY.

Which is why I write this article today; to share my thoughts on “creative development”.  Profits in this new economy are going to come from thinking outside of the box and differentiating yourself from the competition.   The industry does have its barriers to entry, but I feel like creativity allows ANYBODY to make money in real estate.

Don’t have the equity to purchase a home?  Why not try fixing up mobile homes?  The mobile home market has not attracted significant competition, because profits are slimmer in these relatively cheap assets.  However, mobile home manufacturers often create contracts with buyers that allow them to upgrade after a certain number of years.  When they get these mobile homes returned, they often get rid of them for pennies on the dollar.  Create a relationship with one of these manufacturers in your area, and talk with a mobile home park owner about them paying for the costs of relocating your renovated home.  Park owners will often work with you in an effort to revitalize their communities and replace old rundown homes with newer units.

Or how about this idea for a commercial space profit center; purchase an old abandoned warehouse (the bigger the better!) and fill it with old shipping containers!   You can purchase these containers for cheap, and retrofit the interiors with hip, urban-industrial finishes.  Then rent the spaces out and use excess warehouse space for community kitchen, lounge, restrooms, etc.  Perhaps even throwing in amenities like a small gym, lobby-area for guests, and/or showers & locker-rooms… anything that will attract entrepreneurs to your space.

There are several ideas like this out there right now; the trick is coming up with your own “out of the box” idea or figuring out how to make one of these ideas economically feasible in your own community. 

So, instead of just thinking about purchasing a home, apartment complex, commercial building or land for a real estate investment, get creative and discover new ways to make money in real estate!  If you don’t, it’s likely you won’t succeed as these new economic times continue to unfold!  

Would love to hear some clever ideas from the readers out there!  Leave a comment…. Don’t be a square!

Best,

Matt

It's Not the Size That Counts!

We’ve all, at times, been drawn into the idea that BIGGER is BETTER.  Whether it’s our flat-screen TV’s, our biceps, or our bank accounts, our culture is simply obsessed with having the latest and greatest….. and biggest!  In no industry can I think of this theme being more relevant than the world of real estate.

In this era of opportunity, I want to issue an important note of caution.  I’ve been watching as buyers have been snatching up homes with impressive square footages, sometimes letting the price-per-square-foot figure blind them from the quality of product they are purchasing.  Right now, newer homes in Central Oregon are selling for as low as $65 per square foot, and in some cases even less!  I’m sure that figure drops below $50 when you look at short sales in severely distressed regions like Florida & Arizona.  At that price, it’s hard not to put strong consideration into purchasing a home; simple calculations prove that replacement costs would be considerably higher, and the land is essentially free!

However, I want to remind buyers of the classic Real Estate term “Caveat Emptor”….. Buyer Beware!  A lot of these “steals” are homes that were constructed during the heyday of real estate development; a time period when production was high and, often, the quality compromised.  In other cases, the homes were constructed as the market was tightening and builders were cutting costs (and quality) in every way fathomable.

There are so many incredible deals out there right now, why not be selective, and picky about quality?  Quality will save you in the long run…. Ever heard the saying “buy nice or buy twice”?  As a LEED AP, a “green” certification, I can attest for the fact that homes design is trending towards efficiency, not size.  Homes of the rich are being designed to fit needs, not exceed them, and construction methods for these homes are retreating back to the American tradition of higher quality.

I urge buyers to take note of the “little” things when looking at homes.  Do the drawers open and close smoothly?  Are the appliances decent?  Look closely at drywall & countertop seams.  Are the doors & hardware sturdy? If these “small” aspects of a home express attention to detail, it’s likely that larger issues such as insulation, window R-values, framing methods, and so on, will be of a quality that will bring years of hassle-free enjoyment.  Instead of saving up-front and forking out money for maintenance issues every season, pay a little more now and rest in the fact that your biggest investment will bring decades of comfort & value to you and your family. 

As an example, my parents recently built their “dream home” of over 12,000 square feet.  Did it bring happiness and prosperity?  No, their big home brought nightmarish utility costs, massive maintenance issues (and time & expenses), and huge tax bills!  These are all costs you’ll end up living with if you choose to purchase a big home just because it’s cheap.

My suggestion: Find a home that fits your needs & lifestyle (obviously considering future plans). Don’t get drawn into a 5-bedroom home if you and your wife are settled with one child.  If you’re an aging bachelor with no plans to marry, you probably don’t need the mother-in-law quarters.  To an extent, choose quality over quantity….. And make sure that the builder cared about the home as much as you will!