It is that time of year. We are winding down and taking stock of our efforts, while ramping up and preparing for the new year. Pun intended; we hope that we are a little bit wiser, and can bring the gift of that wisdom to all that we do out there.
2015 was a good year in terms of the number of flips for us. Our "number" will be small potatoes to some, and impossibly large to others. To us it was neither too small or too large. It was what it was.
Now that is not to say that we didn't want and plan on "more," but life is what happens while we are making plans.
We had 8 homes, one of which was/is surrounded by farmland, and three lots that we purchased for spec homes.
We sold 7 homes. Of which, one was a contract for deed -which is kind of cool due to it providing monthly income, and one was at a wash -or break even. The break even one was actually sold to ourselves, and we detail all of those gymnastics in this post.
And one of the seven actually did not close in 2015. It went under contract in 2015. It will close (hopefully) in 2016. That is, we are slated to close in January. So technically, we closed on 6 of the 8 homes in 2015, and are looking to close on old number seven in January of 2016.
Now allow us to say that these are NOT the results we were looking for or expected. We had planned to sell all the homes and to start on the spec homes while continuing to flip other opportunities as they arise. Our goal was much higher. The expected results were much healthier. The education wasn't going to be so enlightening. Again, life happens while we make our plans.
On the flip side, this is not a bad result. We wouldn't even say that it is mediocre. We would say that it is "okay." We were delayed on permits and a few trades on the seventh house -the one that is slated for a January closing. As we talked about earlier, the farmhouse and the land around it failed to meet the reserve that we set at auction, and we did not sell it... at a midweek evening auction... in December ...in a small town. (What were we thinking?) But that is okay. Another venture may be interested in part of the land. And speaking of land, we did not build one single spec home under the newly created "Box Bend Home" company. We haven't even started. But that also is okay. The lots have gone up in value. The gentrification in those neighborhoods is still at what one friend would call, "Full Tilt Boogie." The taxes are reasonable. So, "Cool." We think.
Speaking of which, now is a good time to talk about 2016. We think that 2016 is going to start off with a bang. The seventh house of 2015 may very well end up being the first of 2016. Again, it is under contract.
We have our contractor looking at the eighth house -the farm house. We are considering turning it into a rental, or breaking it off with a chunk-o-land and selling it off. Right now we are leaning heavily towards the "renting" side of the equation. (Believe it or not, the old Box Bend gig costs money each and every month to "open the doors.") A little rental income to add to our contract for deed income is a good thing. Or would be a good thing. However, we need to get the quote from our contractor before we pull any triggers or detonate any mines. Stay tuned, race fans.
We are waiting on some zoning questions from Lee County to talk turkey with the industry that may be interested in part of our farm land. This will determine the course of action with the non-house part of the land. If it does not jive, we may end up keeping the land while the direction of development moves towards us. We may rent it as farmland. But we are hopeful that this new business will want it and... more on this later.
We are a "no-go" on the development that we were going to do in Minnesota lake country. The Otter Tail County code guys gave us good news, but not "good enough" news to move forward with that project. However, our buddy is now searching for a very specific type of property and we will pounce like fat kids in a candy store should he come up with it. That is, we will move at what we consider to be lightening speed, but will probably be seen by everyone else as awkward, lumbering and painfully slow.
We are going to consider carefully the three lots in Durham. No definitive dates or plans just yet, but with 2016 and spring around the corner, we think it may be time to rock and roll.
So, ramping up for 2016, we are looking at one closing for January to kick us off, we have one farmhouse on deck that may get a down and dirty version of renovation for a rental, and we have some land surrounding that farmhouse which we might subdivide or reconfigure independent of the farmhouse. We have three separate lots in Durham. And we have our eyes set upon one auction locally, and a piece of real estate (or two) in Minnesota. In other words, we are working in three communities now, and we may be adding a fourth -out of state -community. Also, we are looking at 5 to 8 projects as we ramp up for 2016 already. Let's list this out for the sake of clarity.
1) Closing on house in Durham -January.
2) Bidding on auction on specific local piece of property in the Raleigh burbs. Determination soon and closing in January if successful.
3) Minnesota real estate hunt going on now with a closing likely (if found) in Q1 of 2016.
-Transformation of that property in 2016 as well.
4) Farmhouse renovation 30-40 minutes south of town. Rental preferred, but possible sale.
5) Farm land subdivided again and broke off into two or three separate chunks -30-40 minutes south of town.
-Possible sale of one chunk
-Possible rental of another to a different company.
-Possible retention of the second and third chunk... and rental as farmland.
6) Lot one in Durham
7) Lot two in Durham
8) Lot three in Durham.
We are also going to continue to look for healthy candidates to purchase and renovate. We have our fingers in the pies of a few other businesses, but we are resolute in our actions towards Box Bend and not away from it. If that makes sense. We are looking at ramping it up and will look at bringing better systems and planning into place in 2016. And we think that is one of the main take-aways from 2015: We need better systems in place.
Permit and subcontracting delays not withstanding, we learned some valuable lessons about designing systems that compensate for, and work around, those issues instead of trying to barrel through them or, more likely, stopping everything while those issues get resolved. Moreland took too long. That is our fault. We should have planned better. We should have systemized things on a more professional level. Our contractor is absolutely the best out there. He did what he had to do and he could only wait with us on the project.
<Side note: Most people do not understand sequencing. They watch HGTV and think, "Ha! I will flip a house, too," and they have no idea on the actual process or the gymnastics involved. Know the routine before hitting the balance beam, Sparky. >
We knew the routine. We come out of architecture -the profession. So, no excuses.
We also plan to ramp up 2016 in the sense that we want to get a lot more creative about the kind of deals that we do. In addition to the additions that we might add to existing homes, we want to look closer at how we sell our homes, and how we manage our projects. We are even considering a service provider that acts as project manager on the projects to ensure on-time and on-budget delivery. We are fortunate to be blessed with one such service provider in our community. This is bigger than it sounds, because time is actual money. And moreover, if we are the bottleneck through poor planning or a lack of systemizing or a bad system or whatever, then it makes complete sense for us to be removed from that part of the process. Sounds strange, right? But all along we have not been looking at job creation. We have jobs. We have been looking to create an asset or multiple assets. That is why Box Bend is Box Bend and not <insert a few names here.> That is why we applied with the Better Business Bureau and that is why we are considering this PM service. IF the business relies solely on you, or you and someone else, than it is not much of a business. So, this is a major, long-term, goal: Build a business that can operate without you. Or "us" in this case. We don't need another job.
We also want to ramp up our volume in 2016. We can see a clear delineation of progress from our very first flip to where we are now. It goes without saying, right? Everyone wants to do more. But volume alone is not the answer. It has to be the right kind of volume. As dumb as this might sound, it needs to be patient volume. That is, we need to wait for the right kind of deals, and not just deals. We don't need that rookie "Jump!" type of mentality with anything that comes along. Marginal deals can quickly become bad deals. And there are hundreds, if not thousands, of marginal deals. Many, many realtors will approach you with marginal deals if your name gets out there. They are not mean, or nasty or even self-centered. They just don't know a marginal deal when they have it. No one does. Let's repeat that: No one does... except you. Or in this case, except us. That is, we have to define what a good deal is and maybe even what it is not so that we can know the difference when we see it. Patient volume. Patient volume and saying, "No," are the keys to the kingdom.
We have started to assign a specific schedule and a specific goal in each area of our business to 2016. We are putting down what we want the summary for 2016 to look like and are working back from there in a series of subsequently smaller and smaller steps. And this is the other major planning process that we have refined and developed over the years. Leave a comment, or email us, and we will give you a link to the one resource we use more than anything else in this arena.
And finally, we renew our commitments to zero debt for 2016. This is a personal thing, but we really do believe that it will serve us well in the long run. We have watched too many high-flying companies and individuals crash and burn in recessionary times. Short memories and greed will kill more dreams than anything else. And economic cycles are called "Cycles" for a reason -they come back around.
With that being said, we hope that you and yours have a great remaining 2015. We'll hopefully be back before next Friday, but then we are going to go on a little sabbatical and will probably not post until the end of the month or until early next year.
Stay tuned, thanks for being here, and powdery wishes of wisdom heading your way.
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