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

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, the effort was the opposite, where no one was in charge - in the end, because I’m in this business, 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.  I mean, I’m annoyed for sure - I’ve been waiting 3.5 years for this Unit and they’ve had ¼ of a millions dollars of my money the whole time, so to come in for such a hard landing is 1, completely avoidable, 2, lacking in pride of craft.  So now I look like the Dick, being aggressive in demanding what I paid for (do it all day long for my benefit and my clients) instead of a celebratory victory lap for this amazing top floor unit in a pretty snazzy building.

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.

Below, is a picture of my 1400 sq ft condo that just two weeks ago was clean and empty and now this - completely unprotected and unmanaged circus of a 6 items punchlist. Shit just laying everywhere without any sort of site protection.

Even the carpets, completely unprotected as sheetrock is sanded and painting is complete. Complete inanity.

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.

God, the bumbling fumbling circular firing squad no-one minding the shop continues and the extremely minor punchlist effort that would allow me to purchase the Unit 1701 at Reflection, in St Petes. I've said it in recent posts, and I know Catskill Farms is not perfect, but jesus are we amazing compared to many punchout efforts, where the care and attention to get it done without doing harm and in a timely thorough fashion just doesn't even come close to being acceptable, trying the patience of everyone involved and eliminating whatsoever the concept of a soft landing.

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.

Last Friday, per my last post, after I jumped in and led from the front and handled some last minute headscratcher problems through solution, we closed on Barn 55.

How these stories begin and how they proceed is a fascinating story onto itself, since I have a fair amount of conversations with prospective buyers and at this point I don't really do much pursuing. I explain, educate, put in the time (always put in the time) but then it's up to the buyer to figure out whether we are the right team with the right product for their respective family, and whether our block fits into their hole (that's disgusting, but you know the child's game of matching shapes and blocks and holes).

This family had a firm goal/plans of moving upstate, and shopped us, and toured our houses, and there was always another house I had that I could send them to satisfy a floor plan curiosity and nothing helps more than being inside the home you might buy, or rule out one that doesn't quite work, or is too much house, or not enough, etc... The actual ability to send a family to 6 different houses under construction in and of itself is a huge credibility builder since just the act of building those homes helps us outshine a lot of our lower volume competitors - and I'm not really always about understatement, but by lower volume I mean Catskill Farms 300+ homes, other people you can count on one hand, if 3 fingers were lost in a lawnmower accident.

I had a guy meet me for lunch at a mexican joint in Wurtsboro, and pivot from Olivebridge to North Branch, and was in contract and sold before the ink was dry. Our homes inspire - they always have. They are like the purity of my essence - if I didn't have kid shit, ex-wife shit, employee shit, weather shit, and lots of other shits hitting me in the face all day long 24/7 for 2+ decades- the price you pay, and I'm not complaining. What else would I do? Work for someone? I'm literally the worst employee ever.

Election came and went. Finality was mercifully quick. I live in NE PA, a swing state some of you may be aware of and it was political advertising tsunami for the last 6 months. This is one day's take in the old mail box.

The 6:30am line to vote -

The 3450 sq ft home, with 4 bedrooms, office, archery alley, and lots of fun spaces, is a favorite of mine and I can see why it checks a lot of boxes for our clients. It's a stylish home that can be outfitted a lot of different ways, and in the end, modest and accommodating (sounds like a girl I dated once).

Another house. Another Family. Another great effort by an excellent team I'm proud to lead.

For those whose State is solidly Red or Blue, the 24/7 campaigning we see here in the Swing States is not for the faint of heart.  Television ads stacked one after another, yard signs, trucks signs, mobile offices staffed with loud volunteers.  And most of these States have multiple competitive races, so it’s not just the presidential race.  Here in Pennsylvania, the temperatures are running high and the conversation among us more dispassionate people is which side will be more lost if they lose - on the Trumpian side, his campaign and individual support for it has almost become an almost definition of who they are.  On the Harris side, the loss of faith in their neighbors, friends, community and country will be hard to reconcile.  From an historical perspective, other than climate change, current events really don’t stack up to critical moments in the past - in terms of what’s on the line (slavery, WWII, nuclear war, Vietnam, civil rights, Depression) -, the economy is doing fantastically, - who knows?  Maybe just a lot of noise to keep us at the table, stressed and unhappy.

Having just finished and sold yesterday an amazing house to valued clients in Narrowsburg, NY, I’m definitely benefitting from reduced distraction and a less diffused effort.  I’ve been so busy for the last four years that no amount of work or talent or time was enough to ‘get ahead’.  We got it done, but it was a heavy lift, every day.  Not just for me, but anyone professionally associated with me.  That has come to an end.  In a very good way.  I’m almost having ‘weekends’, defined by consistent time off.  In one episode of the Crown, one of the members of royalty asked ‘weekend, what’s a weekend?’, coming from her perspective of having no obligations in her life that would somehow make one day more fraught with obligations than another day.  I’m the same, but in reverse, I’ve been working 7 days a week for so long that weekends only mean I can do my job in peace instead of while drinking from a firehose of problems to solve (I’m actually not a fan of the ‘drinking from a firehouse’ saying, but its a good one).

I mean, I’m quite good at what I do.  And surround myself with very talented, smart, experienced, problem-solving people.  But when you take that expertise and effort and spread it too thin - diffuse it too broadly - you may not get actual diminishing returns, but you get an existence that is perilously close to spiraling out of control at any minute, as problems - which are always going to arise predictably and unpredictably - need to be solved.  Now that we have decelerated out of the danger RPM red zone and are comfortably revved and running between a noisy 3000-4000 rpms (I’m not a car guy so I’m making this metaphor up right now based on limited expertise), I can focus the full spectrum of my knowledge, relationships and experience and lean into each opportunity, problem, conversation.

For years, I had companies working for us that worked miracles on getting stuff done well, quickly, but it was never enough, never heroic enough, because I kept pressing down on the accelerator, buying more land, designing more homes, getting more homes in the ground, leading from the front, so no matter how skilled we were, how quick, how efficient, we never were fully in control - since that was the tempo I set.

I mean, any moron can take 2 years to build a simple a house, but we never lost our pace of taking about 6-8 months to build a home, no matter how many we had going, and 2024 is going to be our most profitable year yet, and that is compared to some pretty major profitable years.  And considering all the internal staffing turmoil we had as I tried to figure out how to best position the company in the marketplace, the achievement is hard to fathom now that it is complete.  I see these salary reports for surgeons and white-shoe lawyers and veterinarians and I’m just frankly amazed at how I’m 4-10x that at times - it’s pretty crazy, and not living in a high cost place, you can build some real generational wealth.  And this isn't earned by overcharging or sneaky pricing, upcharges or gimmicks - it's a lean operation, with an eye always on efficiency, a business model that demands discipline. We consistently deliver homes for $250 - $400 per sq ft, not an easy thing to do in this market while infusing the homes with a lot of smart upgrades such as spray foam insulation, hardi-plank siding, wide plank floors, on-demand hot water heaters, cable rails and a lot of other options we consider standard. These profits are earned through a serious understanding of the business and product I produce. I know of some builders who charge lump sum times some operating and profit percentage - completely eliminating any incentive to keep prices down - in fact, the opposite, for every dollar one of their subs or vendors charges, they make more money creating seriously perverse incentives even for honest people, which most of these builders aren't. There are certainly situations where this lump sum + makes sense, but building home is not one of them.

So the point is, I got skills, and now I can focus them in on solving problems in a more gentlemanly way, and that allows me the ability to visualize what the next 5 Year Plan of my life could look like- doing what I love (that may be a stretch), what I’m good at, at a clip that is sustainable for my mental health.  I’ve been working hard for at least 3 years at figuring out what a sustainable existence looks like in this business - and I think the answer lies in a tempo where people can succeed without being heroes on a daily basis.  They can succeed because they are good at what they do, and we run an organized shop.

I’m not sure if all the above brings me to my point, since I don’t really have a pre-determined point, but I did want to rehash why I feel we succeed - and it’s hard-wired into me not just out of good customer service but out of a need for survival.

I love the cohesive blues in this home across the paints, cabinets and tile.

So we just finished and sold Barn 55, to a family who relocated up to the Narrowsburg area and enrolled their daughters into a local rural school (and by the reports of it, are really enjoying the new-found way of life).  And I want to compare and contrast, as I mentioned in the last post, about my experience in St Pete’s with a punchout and closing.

We had a closing set, and we had a punchlist and a day or two prior to closing the about-to-be homeowners did a pre-closing followup walk-thru, to ensure the previous punch was completed and identifying anything new - and the reports I got back through the notes of the meeting was that enough of the previous list was still undone, and there were some issues that were important enough for me to understand directly - not 2nd or 3rd hand - in order to deal with them, and this is important - so the Owners didn’t get lost in a communication finger-pointing circle jerk of who knows what.  Punch lists are tough for many reasons, and one of those many reasons is the fact that some issues that appear on the surface to be readily solvable, when you get into them prove to be more complex, and that’s where the real ‘jerk around’ can start because instead of flooding the zone with efforts, the issue keeps getting kicked around.

Without too much internal debate, I had to call up the Fixer, the Closer, and get some real answers, some real solutions, and some real results - and that Fixer/Closer is me.  And it’s that personal investment of time and experience that I’ve always, from day one 23 years ago, leveraged on behalf of my projects and my homes.  So I reviewed the list, called the appropriate vendors, and we met there and went through the remaining issues one by one, under my supervision - meaning no footprints in the house, no stupid parking of work trucks that made soon-to-be arriving vendors jobs harder, no tools on the countertops, no forgetting to put the breaker back on after fixing an electrical issue, no shitting in the toilet.  In the end, in a few hours, prior to selling the home, we had identified, and resolved most if not all and there was zero lost in translation from me to subcontractors to homeowners.  I was acutely and personally and intimately aware of each and every issue.

Now true, one could argue that’s not a good way to grow a business, that delegation is key, and make no mistake, I delegate all day long, but when it comes down to trading off annoying a client with the run-around, or getting in there and bullying each and every factor of production until the problem is resolved to my heightened expectations, I’ll get in there and get it done.  That’s one thing slowing down allows too - the ability to allocate time not in a stressed and anxious manner, but in a thoughtful and patient fashion -big difference.

And to contrast that with my process in St. Petersburg, where I now have 5 different companies who aren’t communicating well and seem to not have one point of authority and accountability trying to punch out a pretty simple punch list in a timely and clear way, where the idea of ‘do no harm’ with site and floor protection seems to be lost on the various characters coming in and out of the Unit, that my rising level of frustration does not seem to trigger any sort of change of process, it just validates how much I care about what we do when compared with a common approach to managing expectations during the process - oh, and did I mention, it’s over a year late being delivered.

What the ‘team’ down there at Reflection, in St Petersburg is putting me through is in stark contrast to the effort we make not to torture our clients.  No one is perfect, and construction is always going to make you look foolish with both avoidable and unavoidable hiccups, but you can strive to mitigate minute to minute how that gets passed to the Client.

Had a fun Halloween party that was a sequel to the Homecoming party and the new game room performed as designed.  My house is a fun party house because while it’s not gigantic it has lots of ‘spaces’ interdependent of each other, so there literally can be like 5 sub-parties happening.  We got the game room, gym, down by the pool, by the fire pit, the screened porch area, the living room and the basketball and spike ball area.  I think we had like 60 kids over and like 25 boys stayed the night comfortably, but I think like I’ve said in the past, the boys in the know stake out their sleeping areas early as well as their blankets so they don’t get stuck using a thin gingham table cloth as did Bill.