Say “Yes” to the Move

Marilyn renovated an historic house to open the Central Avenue Bistro. Renovating the old hospital for the county government makes just as much sense. Photo by Steve Young

We all support the renovation and move. Photo by Steve Young

No medical provider is interested in using the old hospital. In fact, given its legal history, it would be very difficult, if not impossible, to get the campus relicensed as a hospital. Redeveloping the buildings for the county government is the best use of this property.

This post originally appeared on the Hermit Haus Redevelopment blog on 2020-03-20.

You’re gonna ease my mind, put me there on time

And keep rollin’ on

— Hank Snow

The other day, a group of business leaders and government officials gathered at the Central Avenue Bistro to support Judge Steve Young’s project to move the county government out of several buildings in downtown Cameron and into the old hospital after it’s renovated.

This move will be good for Cameron and Milam County for a number of reasons.

It saves the old hospital, giving it new life. Since there are currently no other redevelopment plans for the old hospital in place, the banks that own the property were going to tear it down. There are no other plans on the table. The county can renovate and move into the facility, or the banks will tear it down. I tried to find investors to repurpose the building for other purposes. Nobody was interested.

Renovating the old hospital gives the county a fresh new set of offices at a fraction of the price of new construction. It also gives us the opportunity to redevelop the downtown buildings the county currently occupies. Finding investors and capital to redevelop individual buildings is much easier than finding investors who are willing to watch millions of dollars sit idly for at least a year or two—or more—while we redevelop and repurpose the old hospital for other use. The risk to each investor is lower because the individual projects are more manageable, both financially and logistically.

Finally, getting the county out of downtown gives the city the opportunity to plan how to redevelop the area. We’ve all seen the results of unplanned growth. It’s usually ugly and often unsustainable. The county’s dominance of downtown real estate has actually stifled Cameron’s development. By removing that impediment and enabling the city to decide how we want Cameron to grow, we can gently nudge investment in the way that provides the most benefit to the community.

I urge everyone to support Judge Young in moving Milam County and Cameron forward with this project. It will be good for everyone.

See, I was there with my Moving Milam Forward pin on my hat, even if I didn’t get the plaid memo. Photo by Steve Young

To that point, I want to address a misconception I have heard raised to this project. Some people in other parts of the county have asked why they should pay to improve Cameron. Although tax money will be used to renovate the old hospital for the county’s use and Cameron will benefit from that renovation, so will all parts of the county. From the numbers I’ve seen, the hospital renovation is much less expensive that the cost of bringing all the buildings the county currently occupies into compliance with state codes. Part of that saving arises from the fact that it is always less expensive to renovate an empty building than an occupied one.

And the funds to renovate the buildings downtown will come from individual investors, not from tax funds. That means county money is only going to county use, just as it would if the county offices stayed where they are. We are just spending less money for better, healthier facilities. Please say yes to helping Judge Young move Milam County forward.

Number Three

Temple (magenta circle) is pretty far north of Hermit Haus’s focus area (magenta glob).
 

Here is the house with the pile of ashes featured.

This post originally appeared on the Hermit Haus Redevelopment website on 2016-03-11.

My mentor Phill Grove always says, “Your Net Worth equals your NetWork.” Here’s an example.

A few days ago, I got a call from Dominic G, another redeveloper working in Central Texas. He was checking references on a General Contractor with whom I’ve worked for many years. As we chatted, we found out we have a lot in common, including the back office system both our companies use. Then Dominic mentioned he had a house under contract in Temple. Since Temple is well outside of his normal range of operations, he wanted to know if I would be interested in buying the contract from him.

Now Temple is also pretty far north for Hermit Haus to go. We don’t usually get much farther north than Georgetown. But the numbers looked good on the surface, so I said I was.

Last month, I met yet another redeveloper at the Houston Summit who has done roughly 20 houses over the last 20 months in the “Greater Temple” area. We’ve been chatting a bit, so I called Larry and asked if he’d like to JV (form a joint venture) with Hermit Haus to get the deal done. He did. We did an onsite evaluation with Larry’s lead contractor, revisited the numbers, and came to an agreement on how to proceed. Hermit Haus is now under contract to buy its third house since December.

We’re calling this project “The Ash House” because the previous occupants appear to have heated the house with a lovely wood-burning fireplace for several years. Unfortunately for the neighbors, they just dumped the ashes in a flowerbed until the pile is at least 36 inches tall and a couple of feet in diameter. One of the first items to clean up on the list!

Everybody wins!

Sad Houses and a Service Mindset

I still try to live by the words of cultural icon and personal hero John Lennon, who said, “There are no problems, only solutions.” Photo by: Unknown

This post originally appeared on the Hermit Haus Redevelopment website on 2016-03-09.

Hermit House Redevelopment approaches every unique situation with a service mindset. We ask the question, “How can we help,” and we put our mission statement out there on everything we do:

We buy sad houses and make them happy again.

What does that mean? Or as one of our private money lenders put it, “Lee, what the hell is a sad house?”

A sad house is one that is not living up to its true potential. As with people, lots of things can make a house sad. Between the four of us on the Hermit Haus leadership team, we’ve probably seen them all at least once.

It all comes down to how you look at things. There are no opportunities without problems. You can focus on the problem or the solution. Granted, sometimes the solutions require more resources than you have. That’s where we come in. At Hermit Haus Redevelopment, we specialize in finding the resources that enable us to provide solutions.

Without going into too many details, here are a few examples:

Neglect

A couple of our recent projects involved deferred maintenance—repairs that were put off so long that their volume became overwhelming. One house stood vacant for more than a decade. Another was ignored by its owner until there was more wrong with it than he cared to address, even though he had the money to renovate it before he sold it.

In both of these cases, we gave the owners what they wanted: a quick sale without having to go through the trouble of dealing with contractors and hoping they would get the money the spent on renovation back out of the house.

Changing needs

We are currently acquiring a beautiful house, one that I would be happy to move into without doing any renovation whatsoever. The owners tried to sell it once before, but couldn’t get any traction in a down market. Now their needs have changed. and they don’t have time to wait for it to sell, and they were leery of trying given their previous experience.

What the owners of this house wanted most was to be out from under it. Even though we couldn’t give them what the house was worth (at least in their eyes), we could free them from a crushing two-hour commute to work after a job chance and the worry of another failed attempt to sell the house.

From personal experience, I know that if someone I’ve talked to loses their house to foreclosure, I have failed them.

Financial problems and foreclosure

As Carol and I have both mentioned, foreclosure is only the start of a nightmare that can last more than seven years. The consequences of foreclosure can sometimes return decades after the event.

Although we’ve purchased bank-owned houses, we haven’t been as successful in helping people avoid foreclosure as we want. After hearing the saddest sentence in the English language too many times, I’ve made it my mission to help as many people as will let me help them. If someone I’ve talked to loses their house to foreclosure, I have failed them. I obviously haven’t explained how I can help well enough.

Probate

We bought a house Sue Ann and I plan to homestead after it had been tied up in an estate for more than 20 years, vacant for much, if not all, of that time. During all those years, the estate had paid almost $10K each year in real estate taxes and more than $200 each month in HOA fees. I have no idea how much the insurance on the house ran. Luckily, the house was owned free and clear, so the estate didn’t have to make mortgage payments on an empty house. Even so, the estate spent almost $250K maintaining a house nobody wanted to live in. To be fair, there was an easement encroachment that scared off many potential buyers and their banks.

We freed the estate from future expenses on this house and paid cash for the house. In fact, we got the house even though our offer wasn’t the highest because the estate’s attorney realized we would be less likely to back out of the deal than buyers without our experience. Since then, we spent more than a year working with the City of Austin to resolve the easement issue and are in the process of finalizing the renovation so we can move into the house. I know the people moving into this house will be proud of it because they are us and we are proud of all the work.

Sometimes you have to tear something down to make it right again.

Poor workmanship

Another of our current projects involves an almost complete teardown and rebuild. The original owners did things on the cheap without regard to quality. We had to completely jackhammer the foundation and start from scratch. In the process of demolition, we found only three pieces of rebar in the original foundation. We also found electrical runs that were spliced together with electrician’s tape in the walls—a fire waiting to happen.

We bought this house from an estate, thinking that we were helping the heirs divest themselves of a property nobody wanted to manage. Instead, our primary service turns out to be making the house safe for anyone who lives there in the future.

Some people have said it sounds like we’re preying on other people whose problems have gotten the better of them. We’re not, but there are those in this industry who do. We don’t want to be vultures picking at the corpse of failure. We really do approach every deal with a service mindset. There is no Kobayashi Maru. We will buy your house or help you find some other solution. We want you to be as thrilled with the solution you choose as we are.

We Have a New Project!

Blue Ridge on the day we closed on the purchase.

This post originally appeared on the Hermit Haus Redevelopment website on 2015-12-03.

Always Pay Attention to Your Inspector

You can see the three pieces of undersized rebar that supported the foundation in the two-story duplex.

This post originally appeared on the Hermit Haus Redevelopment website on 2015-11-25.

We bought the Villa Park property almost two years ago because there was a nice house and a duplex behind it for a total of three rental units. It was one of the last properties Sue Ann and I bought before forming Hermit Haus with Carol and Russell.

At first blush, it was going to cash flow really nicely. The previous owner had done a bunch of cosmetic work to make the property more presentable. Curb appeal was absolutely gorgeous.

I hired my friend, Bob Smith, to do the home inspection. I’ve worked with Bob on several other houses, and I’ve even walked away from deals based on his recommendation. This time I didn’t listen, and it bit me in the butt.

There was a seemingly innocuous line about the duplex in the inspection report. It said something like, “Have a foundation professional inspect the foundation.” I thought, “Yeah, I know the foundation is bad. No problem will just have it leveled.”

Well, the first time it rained we had water coming up through the foundation into the duplex. Luckily we hadn’t rented it yet because we wanted to level it first. When we ripped up the carpet, we found that the foundation was not just unlevel; it was crumbling. That lead to our first experience with the Wall of Dis. I mean trying to get permits in Austin.

But this post is about the foundation.

To dismantle and repour the foundation, we had to lift the building off of it. When we started demolition, we found out that none of the electrical work in the duplex was to code. We found bare wires spliced with electrical tape inside the walls and numerous other problems that could have caused a fire at any time.

Thank God we had a bad foundation.

With the second round of permits in hand—the first having been “erroneously issued”—we begin demolishing the original foundation. It turns out there were only three pieces of rebar in the entire slab. (Rebar is the thin metal poles that run through concrete to give it its strength.) No wonder our foundation crumbled. There was nothing to hold it together.

We’re finally back on track. The trenches are dug, and we will pour the beams that will support the main slab. Once that’s done we can reattach the building to the foundation.

The moral of the story remains, “Always listen to what your inspector tells you.” If I had brought in the foundation company before closing on the house, I could’ve saved around $150,000 in rebuilding the duplex. I might have at least been able to negotiate the purchase price down a little. Maybe not, there were three backup offers on the property.

When we’re done we will have a three-bedroom home instead of a duplex behind the main house at Villa Park. It will take about 10 years of rental income to recoup the expense.

I’ve learned an expensive lesson. But it’s one I’m glad to share with you.

Peachtree Update

Check out how much better the front of the house looks. The kitchen looks much better with the trash removed.

The updated stove looks good. The fireplace looks really good.

Suna, Brody, and I did a semifinal walkthrough at Peachtree today. I’m really pleased. It’s about time to put it on the market.

The kitchen looks clean and modern with the dishwasher, new cabinets, and the new sink positioned so you can look at the side of the neighbor’s house while doing dishes.

We also went for that modern look when we refaced the fireplace in the living room. The living room in the center of the house is and opens to the dining area. I believe it will make a really comfortable space to relax in.

But the best part may be the spa-like bathroom. We used a large format tile in a vertical orientation. We also put in a recessed area to put shampoo and the like.

 

The bathroom may be my favorite room in the house.

Peachtree Update

While looking for a gently used range for Peachtree, I found this classic full kitchen. Wonderful! It’s a steal at only $10-thousand. We decided to paint the trim red. It fits the neighborhood, and I think it will “pop.”

These cabinets will look great once all the crap is cleaned off and the sink is installed under the window.

The Peachtree project is coming along nicely. Demolition is complete. The popcorn is off the ceiling. The replacement stove is in the kitchen, and the new countertops and cabinets look superb.

Since Carol will list the property when it’s done, she came by to see the progress. She liked what she saw.

While we were thinking about what we wanted to do for lunch, she mentioned that Russell wanted her to go to an hour long presentation by a company called Fortunebuilders and asked if I wanted to go with her.

The hour long presentation turned out to be a two-hour pitch for a three-day event at the end of August. I was impressed and signed up for the three-day, as did Carol.

Fortunebuilders seems to focus on education in the real estate business. They introduced me to the concepts of wholesaling and reverse wholesaling in this event. They also have real systems that should take some of the load off of me. I have definitely turned this business into a full-time job. Maybe they can help me learn how to get back to enjoying my retirement.

Wholesaling

Getting a property under contract and selling that contract

Reverse wholesaling

Wholesaling to a known buyers list

I look forward to learning more in August.