Broker’s Corner with Tanya Chappell May 2022
Hi,
I hope everyone is enjoying this spring's beautiful weather. Here on the Suwannee River, we're still having cool breezes off the water in the mornings and evenings. That'll change soon but we're soaking it up until then.
The river has been relatively quiet most of this past year because the water has been higher than usual which means slow speeds enforced with a no-wake zone on the Santa Fe River. The river is on its way back down and just in time for summer fun!! We've got our toys all cleaned up, serviced, and ready to play!! This past weekend there were about 50 jet skiers from a Jet Ski club playing on the water. That's always fun and exciting to watch. It makes it hard for me to stay on task with weekend chores when my jet skis calling and begging me to join them
The Spring Real Estate market is in full swing, but the low inventory is still making it exceedingly difficult to find homes for people that actually need a home to live in full time. There are a lot of investors in the market that want to buy but it's close to impossible to get the rate of return and cap rate investors look for in properties listed for sale on the public market in the MLS. These buyers have to resort to off-market properties and driving for dollars if they want to get the preferred cap rate of 8-10%.
Driving for dollars is a term for finding homes that look unkept and literally knocking on the doors and/or leaving a note and asking if they want to sell. Another method is searching for tax liens and approaching those owners and making offers. It takes a lot of work. The average mom and pop investor has a full-time day job and doesn't have the time to do this.
Getting on wholesaler's lists for off-market properties can be an effective way of getting under market value property. Wholesalers do the driving for dollars and distressed property searches and negotiate to buy the property for a set price then find a cash buyer for it and take their cut. This is a good method for finding those fixer-uppers that will earn quick equity appreciation after your improvements are made. You just have to be ready to buy with a moment's notice and often without viewing or inspecting the property and usually it’s cash only. It's a good way to go for those that have experience in fixing up homes and can look at pictures and have a good idea of how much it will cost to fix it up. It's also especially beneficial if you are the one doing the work, or you already have a trusted go-to crew that can handle the work for you.
These days most of your tradespeople have an abundance of work and can pick and choose which jobs they want. It can be awfully hard to find skilled labor to complete your renovations. I personally know many smaller trades service companies experiencing difficulties in finding and keeping a full crew. They may be stacked and looking pretty one week and the next, working with a skeleton crew. Hiring and training can become a full-time job in itself.
Bear in mind not all vendors have a quality control person overseeing the job as they should. It's important that you have someone with skin in the game making sure you are getting the quality work you're paying for. Having a good contractor is a must but you still need the owner or strong representative to check behind each segment of work to get the quality you want in the end. You're paying for the work whether it's done poorly or correctly.
My background in managing property for others has made me have a careful eye on the quality and timeline of a project. I look at it as if every day of lost production is a day of rent slipping through your fingers. When you are in my position and accountable for the overall cash flow for the properties that we manage you know time is literal money and you have to schedule tight, order supplies quickly, and keep everyone on track. A one-month delay can be another … $2500 in rent lost (or whatever your projected rent for the property is). This has been ingrained in me over the last 30-plus years of managing and flipping properties for others.
It has been a learning curve for me to relax and enjoy the process of the homes Jeff and I buy and renovate. Because of the way my brain is wired I've had to analyze the overall monetary value of slowing down and doing the work ourselves versus hiring out. Because Jeff is annoyed by anything less than top quality work and he's the best I know at what he does, it's been better for us to take more time to do the work ourselves. The rent loss versus the value of quality improvements makes better financial sense for our long-term hold investment plan.
Now that I've learned that valuable lesson it has made the experience so much more rewarding not only emotionally but also financially. Not to mention waaaayyyy easier on the relationship.
We just wrapped up the Chiefland house that is featured in this month’s Newsletter. We swore we'd not start another flip until we renovate our home on the Suwannee. But then the very next day our next property fell into my lap. I think the Universe likes us making homes reach their highest and best potential!! We are incredibly grateful because we sure like it too! We get personally attached to these properties when you take it from poor condition to exceptional condition. It's been a fantastic way to show our granddaughter how valuable real estate and renovating can be. We are grooming her to run our businesses (wink, wink ;-). Jeff had her looking over his on-screen take-off program for construction estimating and being she loves to build things in Roblox it instantly caught her attention. My plan is coming together!! Now if I could just get her to play volleyball! Hahahaha. I don’t need her to be like me, but Real Estate and Volleyball have improved my life drastically. Real Estate is a wonderful way to earn money and Volleyball is a fantastic way to stay in shape.
Today we leave for Ft. Walton Beach for the Fudpuckers Volleyball Spring Classic. It’s a five-day tournament that consists of doubles for 2 days and four players for 3 days. My good friend and doubles partner Kristen is driving down from Kansas again and our very own maintenance coordinator/exceptional player and coach Bailey is joining us in our fours team along with Lucy one of my favorite regular doubles’ partners rounding out our women’s fours team. We make a very formidable team!!
It’ll be a great tourney!! Wish us luck!
Tanya Chappell,
Broker/owner
