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

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.  A car you weren’t afraid to take out a drive.  Good looking design, white interior, white convertible top, big motor, smooth ride.

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.

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’, and a lot of other car talk which 1, I no nothing about, and 2, have zero interest in.

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.

I took on 2 long trips - one, a 3000 mile odyssey from NE PA, through PA to Pittsburgh, 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.  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.

From XXX we drove across Canada to Toronto, easing in to town 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.

I left the headlights on a few times since the only way they went off was to push in the button.  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.  Of course I couldn’t ask anyone, 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.

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.

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.

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 have the sales price in taxes since it's cost basis is zero, having taken the tax benefits in years prior.

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.

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.