October 27, 2021
Yogi Berra had some amazing quotes that were quirky and downright humorous. Recently I read this quote he said, "If you don't know where you're going you might wind up someplace else." It makes one pause for sure. Is it nonsense or does it make sense? I know one thing, we know where we are going. We are going to where there is need for housing for the underserved.
Who are the underserved? With our current economic cycle we are seeing changes. Some argue we are seeing a shrinking middle class. If so, where are these people going? Are they moving to the affluent? Or, are they falling to the poverty line. You may be surprised at the results. Here is a graphic from Pew Research:
If you agree with the data or not, if you agree with the argument or not, we can all agree - there is demand for rental units across the U.S. And, there doesn't seem to be an end in sight. Our focus is the permanent resident, one who may never own a home and would like to live in one. The number of people who are opting to rent by choice or are pushed there because of inflation outstripping wages continues to grow. We feel a strong need to serve this demographic by bringing units at a fraction of replacement cost. Whether it's buying a property with deferred maintenance to a vacant property to a struggling motel such as Thunder Mountain was, we are able to provide market rental units at below market costs which is great to create instant equity AND cashflow. In the end, we are buying cashflow.
Another area we see as deeply underserved are cities with under 500,000 residents. And even more specifically, those under 100,000 residents. There are cities dotting our country which are stable, growing and have strong anchors for employment. In New Mexico we have visited cities which are being positively impacted by agriculture, oil and inexpensive storage of expensive equipment such as airplanes for major airlines. As we know, many are enamored by the draw and appeal of Phoenix, Dallas, Las Vegas, Austin, and multiple large cities in Florida. What we see, however, are tightening numbers. There is still great opportunity to make money in these cities in the next few years. But what then? Now that we have had many projects we have taken full cycle, we are excited to buy for stability and cashflow. Keep the machine working even while we sleep. And, we see reasons why these underserved cities can deliver just that.
What else is being underserved? If you dive into these underserved cities you will find parts of them growing, some attracting some fascinating employers and then there are those communities where there are vacant buildings or those run by slumlords without proper concern for the resident. The third most infuriating thing which gets my blood bubbling is slumlording. These people who so blatantly take advantage of others and treat them as second class humans should be run out of town. It's horrific. And, if anyone is curious to what precedes this #3 infuriation only needs to ask. Our ambition is to take over these properties at a fraction of replacement cost and provide a home to self-paying residents that are safe, functional, durable and clean. This is our mission.
As mentioned in previous blogs, Thunder Mountain in Sierra Vista checks all three boxes. We are delivering units to the market place at less than 1/2 replacement cost. We are providing a growing need for housing units in a city of 45,000 residents. And, we took a struggling motel and will have a thriving apartment soon!
The update this week is big ... yet not. It's big in that there is great progress there with demo, framing and fire prevention system installation. Electrical to start any day now.
The not-so-big update is it looks the same as previous pictures. We are just way further along. So, here are some new pictures of units with repeat concept of what's being done.
We will see significant change there in about 2 weeks which would be terrific photo ops for everyone to enjoy! Wait to be amazed once again.
And that is real ...Wait! There's more! The appliances are all ordered and awaiting us in a warehouse. There will not be a delay in the supply chain for appliances. This is a terrific update and worth the wait to this portion of my blog. We have been on the ball in getting our supplies including, inter alia, cabinets, windows, piping supplies, electrical supplies and appliances all ready to go. So far we are doing fantastic with the supply of supplies! Way to go team!
Occupancy is holding steady at 10-15 occupied each and every week.
Another profound thought of Yogi Berra I pondered after recently attending a funeral, "Always go to other people's funerals, otherwise they won't come to yours." Just imagine! And! Oh! and another humorous occurrence when a friend was at his father's funeral and people were sharing stories and laughing in remembering the person who had passed way. The funeral director said they sure seemed like a happy family during this difficult time. My cousin's husband said, "We put the 'fun' in funeral!"
And that is our project from my corner of the globe ~Bruce
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