Our Homes, Your Land
Sometimes I even amaze myself at the prescience of strategic thought I give birth to - here is a story where some production builders have launched a program focused on augmenting their offerings with a ‘build on your lot’ initiative …
Like our “Our Homes, Your Land”. I’m sure we all started and ended at the same place - where did all the land go, and how to get a project started quickly - in the Catskills, when families couldn’t find homes they wanted in the 2020-2022 era, some bought land thinking they would ‘just build’. However, to ‘just build’ is actually a very complex, time-consuming and risk-fraught exercise with lots of moving parts that are interdependent of each other but completely dependent on each other,
I remember reading through the Defendants deposition transcripts and hearing Baumann diminish the tools, relationships, shortcuts, strategies and expertise it takes to get a project off the ground, but in reality having an expert by your side connecting the dots, and synergizing and coordinating the surveyor, engineer, architect, building departments, banks, highway departments, board of healths, neighbors, etc….can turn an impossible task into a concierge level tango of efficiency.
We have seen a decrease in that type of business, for reasons I’m still contemplating around, but for a while there - I think it was 2022 and 2023 - it made up nearly 50% of our business, up from zero in 2020, to $4m in 2023. Saugerties, Stone Ridge, North Branch - all over we built our homes on their land. It was a boon to both parties.
The impact on the cash flow bottom line couldn’t be overstated - instead of putting out millions of borrowed dollars on contracted spec homes, the same number of contracted spec homes were paid in large part by the cash flow profits from the “Our homes your land” projects. In terms of just per net worth gain, this pivot from debt finance to cash flow finance to now cash finance has propelled us into the big leagues of sustainability.
It’s an interesting article because while these guys might be playing in a different sized pond, the idea just makes sense, and I got there first.
In terms of my relationship with debt, it’s been a evolving for decades. For 22 years, I carried as much liability as assets on my balance sheet as the profits thrown off by the company paid for a reasonable lifestyle, fully funded retirement, college savings, health insurance and employee benefits, but after that, there weren’t a lot of retained earnings. I didn’t mind the 4% interest rates on my commercial paper, and a lot of times I’d pay $80k-$150k a year in interest on my business activity, and when I went to sell a house, would more or less receive my profits back at closings, and maybe some of my own money, but most went to the bank to pay for the cost of the construction and land and improvements. I remember reading the bank’s quarterly earnings or yearly earnings in the local newspaper, and since it is a small bank, I could literally calculate my payments to them and its impact on their reported earnings.
In 2022, just months before things got really hairy with interest rates, I carried more debt on homes I was building than ever before by a large margin, because we had scaled to meet the Covid NYC outflow and were building a lot of homes. Most if not all the homes were in contract, with deposits paid, so while the risk was still real, as long as we finished the homes, the monetary goal was close at hand.
But lots of things could have went sideways - municipal, interest rates, deals going sideways, labor problems, supply chain problems, remote/hybrid work restrictions/reduction. 24 homes going at a time with me and two young women in the office. I remembering reading an article in 2022 about 'back to office' initiatives in NYC and I said to myself 'NOT YET PLEASE'.
Anyways, the moral of the story is that we exited that period with strong earnings, and then that was complimented by this ‘our homes, your land’ cash flow enhancement. And then prices kept rising on our spec home side of things, and all of sudden you look back at a harrowing period of your business life, and you’re rich. Head down so long, daily operational warfare daily you forget your building real wealth but one day the cash flow settles and the work flow slows and the constant hamster wheel of reinvestment wanes, and you’ve built true generational wealth - diversified and at work.
Anyways, back to debt. I used to be leveraged up to my eyeballs, and the bank, our local bank Jeff Bank, didn’t seem to mind since I literally have never been late once on a monthly bill and they kept a close eye on my sales and my prospects and as long as I kept selling, they kept lending. Same thing back in 2009 when banks pulling the rug out from under their clients was all the rage, this bank stayed by my side and helped me meet the moment. They did it again in 2020-2024.
I don’t mind debt, but now I’m debt averse. With my assets and cashflow, if I would leverage like I used to - at a 5 to 1, 10 to 1, 20 to 1 ratio - If I’d do that now I’d be buying buildings in Manhattan. But alas, that’s not for me. I use cash now, and wait to buy until the cash permits, or borrow very short-term as bridge lending as we await a sale. Maybe the next generation will leverage and parlay this gold nugget into the 9 digits, but for me, I think I left it all out of the field enough for one lifetime.
Sitting at The Roxy in Tribeca, waiting for happy hour to begin. I’m dying for a martini. Going to finish This Side of Paradise in this lobby - seems period-correct, as Fitzgerald was big fan of cutting loose in these very streets. I feel like I've been following him recently - NYC and Antibes - two of his haunts.
Money Migration
Not a perfectly edited or thought out post, but it's been sitting around a bit so I'm publishing, blemish and all -
Pattern for Progress, a mid-Hudson think tank whose focus to some degree is housing, and other related community development, released into my inbox what looked at first glance to be an interesting study on the Covid-related impacts on the Hudson Valley housing and economic front. And, that is what is was, but left me wanting significantly, and searched my inbox for part 2 and 3 that would cover more territory. Maybe I’m missing something.
Called Money Migration, it’s based on 5 years of data published by the IRS which collects data on people (families) moving into and out of areas, and their adjusted gross incomes (AGI) county to county and state to state. (this is being lifted mostly word for word from their white paper).
“Incomes, Migration, and Gentrification in the Hudson Valley during the Covid-19 Pandemic” - so don’t blame me for having high hopes for this document - that’s a great subtitle by any measure, especially for someone right smack dab in the center of the hurricane, both reeling from and benefiting from the era.
Interestingly, lumber prices have dropped significantly, and anyone who experienced the jump - literally a tripling or more in 2020, 2021 and 2022 - will never forget the day in day out anxiety of this lumber creep, or in many situations, this lumber price explosion accompanied by true scarcity. There was a time when you didn’t know what next would next be unavailable. At times it became very close to vital and non-interchangeable components. Some examples of product that just disappeared and became unavailable was wood siding, hence our overnight transition to HardyPlank, once considered a mighty upgrade but with the increase in wood prices actually become on par with wood siding (if available, which it wasn’t).
They seem to use a 2x4 fir as a baseline board foot measurement and in 2022 it was $630 per 1000 board feet, and in June 2024 it was $346 per board foot. So to reduce it to something we’d all understand, in 2022 board foot was $.63 and in 2024 it is $.34. To make it even more meaningful, turn it into a 2x4x8 - a piece of wood many people have familiarity with - and it was $.63 x 8 or $5.04 in 2022 and $2.72 in 2024. Truth be told, I think the $5.04 in 2022 understates the case, due to regional differences or something - I remember it being higher.
More shocking yet was plywood and plywood sheathing (OSB), which you use tons of over the course of framing a house - OSB was so cheap we’d use it for walkways over mud, and then it turned into gold that people were stealing like they used to do with cooper.
Crazy time to live through for sure and our industry was in the center of the storm.
And on the hybrid/remote work front - according to the Office Building Index from location intelligence software company Placer.ai, which found the national average for office attendance was down only 29.4% compared to June 2019. I guess what they are saying is it looks like the reinvented workplace will accomodate a 30% work from home environment. Because it's national, and across all industries, probably - like a lot of statistics - very misleading regionally, and among certain white collar professions. I know a ton of people that still work from home partially and or mostly. I think the workplace has been reinvented into a more flexible situation even among 'full time office people' that the definition of full time in office has changed.
Summer is Swinging
Summer is in full swing, with the lettuce ready to cut and the first tomatoes primed for the picking. The lavender is reaching towards the sky and the neighboring black-eyed susans are awakening.
I’m reading This Side of Paradise, a F Scott Fitzgerald coming of age novel on 1922 or so. It’s a brief, concise work of literature, one I’ve read many times over the years. I’m not nearly as enthralled as I used to be. Lake Geneva, Princeton U and NYC are the main locales.
Juxtaposed is Thomas Wolfe’s 800 page opus, a coming of age story written about the same time as the above-mentioned. Taking place in Asheville NC when the city was just getting started. The Biltmore, that Vanderbilt mansion, was built in 1890’s.
Lucas, my son, has edged out a few others for the QB-in-waiting position, as a sophomore. It's his job to lose at this point, primed to general the varsity team for his 11th and 12th grade seasons.
I’m sure I’m not the only one with an ex-wife that experiences ebbs and flows with the relationship, which become more complicated as the child ages and issues become adult-ish, instead of child-ish. I mention it because once again I receive the benefit of legal advice that counsels inaction, instead of action. A well-explained examination of gain v loss, of goal attainment v bomb-throwing feel-good water treading is the best counsel. When I'm in situations like this, I think about Eric Weismann's approach when he had to the opportunity to offer wise counsel to his clients, and it's clear I would get the same results he did if I approached any problem resolution with the arrogance, condescension and demanding our way or the highway approach - people of any stripes don't appreciate it. Though I'm sure the hours billed look good at the Partner's meeting.
It’s been hot - like mid-90’s, for most of a month now. I’m not sure if the periodic rain has been enough to keep farmers, reservoirists and canoers happy, but my grass and assorted plantings seem to be doing fine. I installed some under the ground irrigation the other year, and that definitely helped, after I got over the fact that the irrigation that was installed called for way more water than my well could produce - that seemed like a simple checklist item the installer should have considered. Nothing like running your well dry repeatedly! Unprofessional and ‘on purpose’ as the Defendants would assert! Or maybe just the nature of the beast.
Some trash left over at a friend's daughter's HS graduation party. Where I go, I take pictures of the trash for my day in court and the absurdity of the Defendant's slander of my team's efforts.
We closed on Ranch 69 last week, and it turned out swimmingly. Pics here.
Next we close on an American Four Square and a Ranch up in Olivebridge NY. That should happen prior to Labor Day, God Willing.
Here’s the link to the Mini-Barn I brokered the other day.
Everyone is dying their hair blond in my son's friend group.
Hit the Delaware River for a swim after our Monday mountain bike ride.
Finally getting out on my respective bikes like I've always aspired to. 2x a week - 25-40 miles. Been a good summer. Weather-wise too - though I guess it's been hot.
Trades, rebranded
4th of July, with the 3rd delivering two closings as previously reported. But just because they are on the books doesn’t mean every closing happens, since things going sideways is the nature of the business. However, for us, with a skill team ranging from lawyers to carpenters to administrators, we are pretty good as bring them home when scheduled.
The mini-barn, which Josh and Jennifer owned since 2015, has resold by my real estate company, Lazy Meadows. The mini-barns are fun houses, with a ton of style.
Ranch 69 also sold to Arlen and Sydney, and that 2500 sq ft Ranch on a bunch of acres turned out really sweeeet.
With no new starts recently, we are juggling the fewest amount of homes under construction since 2019/early 2020. That’s fine with me. The heavy llft daily 3 page to do lists can bend your back after awhile, and 24 years is by any definition ‘a while’.
Back to a little more trade v college discussion. I’m a reader, and attribute much of my economic forward progress to reading and writing, developed by reading and writing - communication is important. So, as parents and students rightfully and intelligently shy away from large loads of student loan debt and degrees with value in the marketplace, the ability to pivot into trade schools, community colleges, and specific industry programs like programming that take 9 months should become more measurable.
1, that’s good. However, there seems to be a lane for this early career track to be complimented with some liberal arts education. Two things - the non-4 year college track needs to be rebranded, from ‘trades’ to something else, like the ‘accelerated career’ path. “Trades” just doesn’t capture all the jobs being put into that basket, under that umbrella. Barbers, programmers, welders, home theater, landscape design, some nursing, seamstresses, musicians, auto mechanics, photography - this isn’t captured well by the generic ‘trades’. The 2nd thing is that a liberal arts intro to history, english, or whatever - just the exposure to ideas, thinking, a broadening of perspective - if those who choose the accelerated career path want to escape the stigma of the ‘trade’ brand, then they have to start acting the part, and adding some wider learning into their program.
It’s early on the 4th, and I feel the ideas above are poorly articulated, but it’s a start.
It’s stupid when a person feels compelled not to recognize deficiencies in their arguments, and there are certainly deficiencies to any argument that throws shade on the college experience with nuance. Education - direct and indirect- , networking, exposure to new ideas, getting away from the hometown, peer enhancement - all these by-products of higher education have value.
But at what cost? $50k of debt? $100k of debt? An environment now that emphasisizes the ‘college experience’ as much as the education? Education costs have accelerated far beyond what market forces would allow, and it’s all because of the predatory lending programs aimed at clueless kids and parents who want to help their kids succeed - so in some very simple ways, college has become a scam to over-hype their value, and over-charge as a result, and have a government that hasn’t produced a good regulatory framework around student loans. And then a full 40% or more don’t finish college, or take more than 4 years.
The pressure to accept the most prominent college offer, regardless of cost, because it can be paid for with loans, needs to change, since few if any future jobs will depend on ‘where’ you get you degree, so dialing into a smart financial choice is important.
There are more ‘trade’ jobs - interesting and creative - out there now then ever before, and they are unfilled, they have significant advancement opportunities, they pay well, and the path forward through these careers are easy to see.
I value education. I think reading opens up all sorts of worlds - both creative and practical. I actually wouldn’t wish a narrow path of curriculum on anyone, knowing what I know now and understanding the impact of a broad education, which promotes empathy, context, sympathy and general understanding of space and time.
A lot of words to have come full circle without even a hint of problem resolution.
