Catskills - Sullivan County - Ulster County Real Estate -- Catskill Farms Journal

On a plane to Costa Rica with my nephew Eli, apparently my traveling wingman until he gets a girlfriend or something.  We are going for 10 days or so.  My son and his friend Cameron are also along but I haven’t seen them for a bit since they are in the back of the plane. They are coming home Tuesday night to get back to school after the extended Thanksgiving Holiday.

We are heading to the Guanacaste region on the northern Pacific side of country just below Nicaragua.   The rainy season was supposed to wind down weeks ago but rain it has, mostly every day for most of the month of November.  Then came a hurricane, Sara I believe, that pushed the saturated land over the edge and pretty significant flooding occurred, damage, etc…. The one international airport we are to fly into - Liberia - suffered damage, sinkholes and degraded pavement to the point they had to shut it down, which is a gigantic impact on the mostly tourism-funded area and put our plans in flux.

So we are landing into an area 5 weeks of economic activity lost and then walloped by a hurricane.  The omnipresent greeting and otherwise sentence fill-in “pura vida’, translated roughly as 'the pure life or simple life', will be challenged. A lot of this blog post was written prior to leaving, but only posting now several days into it. On the flooding front, in the Tamarindo city area, no evidence of anything awry.

Business continues to decline on one front - spec home building - while exploding on another front - custom homes or ‘our homes your land’ initiatives.  While both exercises involve building homes, the way I’ve done it for 24+ years - getting a deposit, and getting paid at the end for the majority of effort - involved a ton of effort and risk.  Building for people on contract, getting paid as you go, is really kids stuff, after earning your wings cash flowing the whole project, 5 or 10 or even 20 houses at one time.  I never thought I’d like it, custom home type of the thing, but I actually do like giving up some control, ceding it to an architect and being the smart tool instead of the driver of everything on the project.

When I see how some other builders do it - where they force the client almost to become the contractor, kind of ‘lending’ their subcontractors to the clients to schedule, meet with, troubleshoot with, sort of ceding their whole job to the client. It’s weird - our clients would be hard-pressed to name one of our subs by name, and that’s the way it’s supposed to be.  In fact, most real contractors demand the clients not talk to the subs in any material way in order to avoid mis-set expectations and mis-communications.

The 6" grasshoppers were a surprise.

My nephew, a 27 yr old biz grad who is now in the construction bonding industry showed me a shocking graph of the median age of a homebuyer presently in USA - 57 years old.  At first, when I thought it was the ‘average’ I was really taken aback, but now that I understand it’s the median, I’m little less sure what it actually means - half the buyers of homes are over 58, half are under 58.   Regardless of the final meaning, the trends are stark and clear.  First time buying age has risen from XXX to XXX in just 15 years - Most times the ‘average’ is the least reliable metric easily influenced by a small number of outliers, but here I’m thinking the median - half over half under - might be harder to tease out the meaning, since we are talking only about home buying age people and that can only really realistically range from 30 to 70, thus making the statistics vulnerable to a few large outliers.

At Catskill Farms, we don’t really participate in that marketplace - we exist in our on little ecosystem - with buyers aged from 30 - 75+, many with another residence of some sort somewhere.  Low down payments, cash scarcity, leaving the closing table with empty pockets turned inside out, - that’s not my marketplace.    But it is my world, working with a large group of hard-working professionals piecing it together.

Night biking through the woods with our Milford bike club.

We had a big year - and we have some homes to sell, but I’m not too motivated right now.  I think the whole marketplace needs a post-election breather - time for the dust to settle, time for the bonuses to be paid, time for a ‘life goes on’ talk in the mirror, just like after the real estate collapse of 2008, just like the market crash of 2009, just like the non-plus years of 2011-2020, just like the pandemic, just like since then, and you can take a page out of Shawshank Redemption- when Andy says to Red - "Get busy living, or get busy dying.'- what I’ve seen over 25 years, it’s best just to keep on living, make the micro decisions in spite of the macro currents and winds.  There ain’t a family who didn’t buy from us into the teeth of the 2009 real estate collapse - when banking underwriters were calling employee’s places of work at the closing table to make sure they still had jobs - even those who braved a world wide financial panic to get on with their lives, ended up enjoying their homes, paying their bills and reaping both life rewards and financial rewards.  History, be it financial or political seems to move in 5 year and 10 year cycles - you’ll catch some right, you’ll catch some wrong, but most you will daily cost average into a lifetime of decision-making that averages out over of a lifetime - if the past is any indicator of the future. Quite a few of our homeowners from that period still own their homes; others have moved on. But they all share an experience of buying an upstate home that didn't turn their lives upside down, which is a foreign concept for most people buying since 2014 or so, and definitely since 2020, but prior to that, buying a home in the Catskills was as often a nightmare as it was a blessing, with undiagnosed home repair issues and a lack of liquidity if you ever wanted to sell.

(expanded version)

So I sold the 1972 Malibu.  Not sure why I did that, other than how many lightly used assets can a guy have?  I didn’t use it much, and really didn’t see a time in the future when that would change.  Even road trips aren’t a go to since I have a Class B travel van, also lightly used.

It is a fine car - perfectly suited to me - a non-motor head, a non-car guy - a car that you turned the key and it started and ran well.  The heat worked. The AC not so well. It had a cassette deck and I carried around an old school cassette holder case. A car that wasn't so nice you were afraid to take out a drive.  Good looking design, white interior, white convertible top, big motor, smooth ride. I fell for it the first time I saw it.

It had an old-school cigarette lighter that Lucas and his friends loved heating up and touching.  It had a motorized top that even after 6 years I couldn’t remember if the ‘up’ direction on the switch meant putting the top ‘up’ (closed) or ‘up’ (as in open).  Did ‘down’ mean closed, or did ‘down’ mean open?

The large seats were incredibly comfortable, like a couch.  You could ride all day with little in the way of stiffness.  I sit in my 2018 Mercedes 400 coupe (a neat 2 door that seats 4 easily inside) for 45 minutes and start to ache and pain (this is also lightly used).

The got smiles and thumbs ups wherever I went, and everyone wanted to talk about the car.  Which presented a few problems: 1, I don’t really like talking to people, especially spontaneously, and 2, a lot of the men wanted to talk about the car, ‘what’s under the hood’, stories about their old cars, stories about a car they owned about the same era, and a lot of other car talk which 1, I no nothing about, and 2, have zero interest in. Pull up to a traffic light, with my Led Zeppelin ripping from the stereo, cool sunglasses, dog by my side - you could see how it could enjoin a lot of wistful thinking and thumbs ups and smiles.

So other than looking really good in the car, and enjoying driving the old machine, I was a poor fit for a classic car.  It was fun to drive, a 1972, with only seatbelts that went around your waist - meaning if you were ever in an accident the physics of it would snap your head right into the steering wheel.  Driving that car was not like a modern car where you could break too fast, wait too long to navigate a corner, etc…. You had to dance with her, respect her, drive with true respect for driving basics and fundamentals.  The margin for makeup was much less than in a new car with disc brakes and tight steering. Rear wheel drive with big tires. The dial you monitored to see what gear you were in was off, so you had to make sure you weren't in L2 when you needed to be D. It used unleaded gas, but just barely.

I took on 2 long trips - one, a 3000 mile odyssey from NE PA, through PA to Pittsburgh with my 22 yr old nephew and son Lucas, over to Ohio to the football hall of fame, up to Detroit, cross over to Canada and by a warm darkening summer evening rode the coast of Lake Huron north for a few hours before stopping for the night, playing car games like one where you go through the alphabet by what letters you can find on road signs, license plates and the like, always struggling with the Q's.  Getting back at it in the morning heading to Killarney, which is the tip of Huron, on a spit, and that brings a funny story to mind.  Searching for information about Killarney prior to taking off, I was enchanted by green grassy knolly similarities of Ireland, and at some point late in the game, realized I was actually looking at pictures of Killarney Ireland and not Killarney Canada. Killerney Canada was cool, as was the hotel we stayed at, but the horse flies were huge and it was a bit comical to see women in bikinis by the pool pretending not to care about flies the size of small birds biting them.

From Tobermory, we crossed a body of water to our mostly northern point, and then swung southeast for a long day drive to Toronto, easing in to towns like Ocean’s Eleven characters, then after a few days, down into Buffalo and across NY and PA back home.  She rode like a dream, purred like a kitten. We left the large spare tire at home since we needed room in the trunk. We had gas anxiety a few times as our half tank indicator dropped into the 'need fuel' range with little warning - at one point I stopped at a vacant construction site (it was the weekend) and siphoned off some gas from a portable gas jug I found (I've been traveling my whole life - a little bit of theft in tough spots is the the nature of the journey, and you try and pay it forward in some unrelated way to some person somewhere down the road).

Football Hall of Fame, below:

I left the headlights on a few times since the only way they went off was to push in the button.  How many times i can't count would I enlist the passengers to help me to remember to turn the lights off (especially early evening) and although the promises to assist were easily given, the actually memory to help was never actually given - literally, not once, across a broad diversity of passengers. The high beams was a button you tapped with your left foot.  And the gas tank filler was underneath the license plate, which was truly a funny story the first time I needed gas, and stood there bewildered trying to figure out how to fill it up, going so far as to look in the glove compartment, under the hood with the engine and a bunch of other places a gas cap would never be.  Of course I couldn’t ask anyone in my small town, since that would be a humiliation, so I grabbed a rag or t-shirt or something and pretended to wipe down the finish as I nonchalantly scoured the vehicle for the gas cap. It took a while. I played it cool. I mean, I lived in a small town, population like 1200, so the idea that Petersheim who already was rumored to be way to big for his britches, bought an old car and couldn't figure out how to fill it up with gas, that was just too good of a story to let out in the open.

Above, Amish farm in Sugarcreek Ohio, where my stepmother was living. The Amish farmer, plain as plain can be, got some ribbing from the wider Amish community about the cherry red convertible in his driveway. Of course, not by text or email or telephone.

The fuel gauge was never accurate, and went wildly up and down with the acceleration, and when it half full, it would decline into ‘empty’ with hard to predict steadiness. Hence the fuel range anxiety when on long road trips to out of the way places.

The above picture is funny because we had just finished a 90 minute hike around a little island off the mainland, and the complaining, pouty faces, swearing that went on for that 90 minutes one would have thought they were embarked on the Native American Trail of Tears, or the American/Filipino Bataan Death March.

Lulu and I also took it on a long trip down through Virginia, to the Outer Banks of North Carolina and back home. Man and dog, with a lot of envious smiles from men my age.

So she’s gone.  You can’t really just keep accumulating lightly used assets.  I mean, I guess you can, but that’s not really my game.  I’ve toyed around with selling it for a year or two.  With Lucas turning 16 and ‘needing’ a car, something really had to give, and in this situation, it was the 1972 Malibu, a sweet car if there ever was one. Gained a St Pete's top floor condo, a 2022 Hyundai Kona for Lucas, and lost a Malibu. The sale of it, its departure, is actually engendering more strong feelings for it then I had while it was in my garage - the closing of a chapter, life moves on, the Malibu was part of a season.

And, to connect a few recent blog posts, back in 2015 I thought it was a good idea to have the company buy the car initially, and use it as a marketing and PR tool/vehicle, and get the benefit of the maintenance expenses and depreciation. And then when I went and sold it (to the first guy who looked at it), I now owe the sales price as a tax, since it's cost basis is zero, having taken the tax benefits in years prior.

Lulu is a pretty perfect dog. Smart as a whip, always ready for whatever I throw her way. But she has this one quirk. She doesn't really know how to, or maybe she doesn't enjoy it, the head out the window hair in the wind posture you see dogs all over the world doing with abandon. She might creep her nose towards the open window, enjoy the breeze from deeper in the car, but Lulu isn't that dog you see coming down the road, first a bit unclear of what is sticking out the window from the oncoming car, but then as it gets closer its the familiar shape of a dogs head of most varieties enjoying the air in the fur and life on the road.

Bluejays game.

Interesting how AI, unfiltered from human prejudice and politics, described the 'Trail of Tears' - "The Trail of Tears was a forced migration of approximately 60,000 Native Americans from the "Five Civilized Tribes" that took place between 1830 and 1850. The United States government ethnically cleansed the Native Americans and their enslaved African Americans."

You don't hear 'ethnically cleansed' much in the schoolbooks, even as they have acknowledged the actions of the Americans. But the truth be da truth.

Last week, for some valued clients in Forestburgh at a house we are just finishing up, we are into our 3rd phase of our punchlist, think of the upside down pyramid where you start broad and narrow it done - punchlist is a good phrase, cause you keep punching at it.  As I’ve said in the last several posts, I’m comparing my earnestness and seriousness of effort with that being offer at Reflection in St Petes, and the gulf between the two efforts just couldn’t be wider.

As is often the case, pictures tell the story.  I have my captain’s chair so I’m comfy, and I’m fully abreast of the items that need to be done, have personally organized and as important, communicated with, each person I expect to be there, and then I sit and personally manage - manage the parking, manage the shoes people are wearing in the house, manage the shit people want to do and place on the countertops, personally make judgment calls, etc…   The buck just stops with me - as it should.  And it’s because I value our clients.  

In St Pete’s, I just accepted a lesser product than I expected because I could see they would actually just never get it done - so the stain on the carpet, the inability to get a whole room of baseboard painted, the inability to clean it well, I’ll just accept the unit and pay for it to be done - in my business, we see a lot of end of jobs where people try and ‘get their pound of flesh’ out of us just out of principal, but I’m not in any need to get a pound of flesh out of anyone in trade for my mental health, so I’ll just take care of it.  I’m always amazed at when one of our clients will call and email us for months over something they could order or resolve on their own in minutes, but it’s that ‘pound of flesh, you owe us’ mentality.

The thing about construction, once an issue passes, it can be forgotten pretty quickly, so it's best to resolve and let it pass, since for some reason, the half-life of the annoyance seems to pass quickly unless someone is intent on fixating on it. 

Look closely at the tradesmen respect - eating on the counter, on their makeshift counter covering, with even their soda bottles sitting on a coaster-napkin - fills my heart with joy to see so much pride of craft and respect for me and the clients.

Lots of you out there, especially in the construction or real estate business, are probably aware of and have benefitted from a part of the tax code named accelerated depreciation, meaning you can buy certain classes of equipment, and ‘accelerate’ the depreciation.  Depreciation, the yearly tax adjustment for the decrease in value of an asset, is done over 5-7 years for things with motors and 29-33 years for real estate.  For things with motors (bulldozers, generators, heavy equipment) and for a certain use (including regular vehicles over a certain weight like a simple pickup truck) you can accelerate the depreciation, meaning, you can deduct the full value of the equipment over the first year - meaning you can buy a pickup truck for $75k and get a straight-line reduction in gross profits by the same amounts, saving $35k in taxes (assuming top tax bracket of 37% and NYS tax of 7%).   Bigger equipment can cost hundreds of thousands of dollars and the same straight-line deduction applies, meaning you can very quickly erase large profits by purchasing and then writing off the equipment you need for your business.

It’s a great idea, and typically is used to stimulate the economy to get businesses to buy things and I’m pretty sure this ease of use accelerated depreciation as it stands now was enacted in 2008 or so during that recession, but like many government programs, incentives and subsidies, once offered hard to take back, this one remains in place.

It has some drawbacks:

1, it allows businesses to buy things they might not need in order to take advantage of the tax break. It also perhaps gives them cover to spend more on the thing they do need, with the rationale it’s a tax break - so a $75k pickup vs a $50k.  A brand new $200k excavator vs a $100k used one.  Since even if you are getting a 40% tax break, you still are paying 60% for something, out of pocket or financed, so it’s not free.  Of course, if you finance, you pay nothing and get the whole deduction then have a monthly payment - so you could literally go out and buy a few hundred thousand dollars of toys, have a $7500 payment, and save $200k in taxes that year (and now have the payments, so business better remain solid).

2. Once you take the depreciation, then the value of the vehicle or equipment when sold has no tax value, meaning whatever you sell it at, it’s fully taxable.  Buy something for $100k, depreciate the $100k, use it for 5 years, sell it for $50k, you now own taxes on the $50k, so in my case selling it would cost me nearly $25k.  If you depreciate over a scheduled timeline say 5 or 10 years, then there would still be some tax value to offset the sale price.  I’m downsizing my business instead of growing for the first time in 23 years, and as I offload assets, I’m stuck paying the piper for the depreciation I took years ago, which creates some weird incentives like storing the vehicles out back instead of selling them.

Right now I’m trying to decide whether to trade or sell my 2020 Jeep Grand Cherokee that has 120k miles on it.  I owe nothing on it, and if I would trade and sell half the sales price would go to taxes, and I’d have to go out and buy a vehicle that would depreciate in reality (new car values sink like rocks in the first 3 years) and use real cash, even if I got a 50% tax benefit this year.  As I fine tune my financial planning - which at this stage in my career it’s as much about expense management and asset bloat as it is about income - I’m delving deeper into the nuances and math of my monthly expenditures.

So, for my jeep in particular, the math is:

• Value - $18,000, tax hit would be $8/9k, cash flow in $8/9k.
• New SUV - $55k out of pocket (I don’t really borrow anymore) - above trade reduces that to $47,000 out of pocket.
• Tax saving due to depreciation - $26k 
• Net out of pocket $21k.
• $55k asset worth $35k in 3 years.

Bottom line for things with motors, especially vehicles, the value in them is over the long run - in the short run, the first 5 years, you get crushed by the loss of value a new vehicle experiences.

I’ve been gaming (wrong word, but it’s early), kicking the can, ponzi scheming my tax bill for years - deferment strategies that push liabilities to the next year or the next - but the thing is, once you stop growing, then these strategies start to become due, start to become less effective.   When you begin to lessen your investment activities, you begin to square up with the tax man, and that, eventually, is something you just can’t avoid.  I’ve been paying huge tax bills for years - I mean half a million dollars or more - so these hedges have been important on the margins, but in the end, death and taxes get us all.

Hopefully someone smarter than me doesn't read the above tax code lesson and point out all the things I don't know and really have no clue what I'm talking about. That has certainly happened in the past.

I have all this free time and focus since I put to bed and rest that problem that was latched onto me for the last 2 years. The recoup of that loss happened quicker than I ever expected, with renewed focus, attention, bandwidth and focus on positive things in my life as opposed to the worst things/people in them. This business journey is without a doubt filled with an incredible array of amazing people.

As it turns out, the lessons never stop in this small business startup environment.  I mean, I’ve known this forever, but it still is a bit surprising when important ones are still served up on a regular basis.  Though, it’s probably just as relevant that I’m open to the lessons being presented, since it would be easy to wave them off as ‘not on point’, ‘irrelevant’, etc…

The most recent one, and this one should come as no surprise since it is so basic, is focus.  For awhile, while I was working hard and getting a lot done by any measure, I had a distraction that was sapping my spark, since it actually was a pretty interesting distraction and I found it compelling on many levels, but in the end, it was just a neatly packaged distraction, a shiny new thing to focus on.

Now that I’ve painfully put that aside, I’ve found an incredible bounty of new business.  I mean, we weren’t starved for new business, but just the time and care it takes to harvest some interesting deals is no small thing, and ‘time’ is a zero sum game - where you spend it one place, you don’t have to spend at another.  There’s also a mindset - staying focused as opposed to diffused. There's also the lesson that 'just because you can doesn't mean you should.'

All this to say that leveraging my long journey of experience- battle-tested and dexterous - in a focused manner has allowed me to book nearly $5m in business in the last 60 days, in neat, original, one-off deals that stray from our typical business model - hybrids of ‘your land our homes’.  But they all are fundamental based on my skill set of industry knowledge, expert land planning skills, and an intuitive sense of challenges and opportunities that really can’t be taught or passed on.

The seasons have been a little mixed up here as of late with a very warm Autumn, but lately the wind has been rustling, the temps dropping and won't be long before any respite is past.