Let me tell you a story. It’s a story about Jim and Susan.
Jim and Susan were (they still are) a nice couple who owned a retail store in Seattle. Everyone knew Jim and Susan by name, they recognized them at local events, they had strong ties in the community, their store was a single location and had been around for generations. It was a true destination for their clients.
Even as the economy was starting to recover from the recession, the store sales were still slow. They had spent all their liquid resources just keeping the business open through the recession, but were not making much head way in replenishing those accounts. They were barely able to make payroll most months. They had to lay off one of the employees, Susan ended up picking up shifts in the store again to compensate, and Jim started handling maintenance again. Some months, they couldn’t pay themselves. Employee payroll came first. The inventory still had to be paid for, the trucks needed gas, and the rent needed to be paid. Forget about the taxes at this point, they’d just keep filing extensions and deal with the IRS later. There was hardly anything left for Jim and Susan to live on.
Like many store owners, they had acquired some other real estate investments over the years. They had a couple difficult tenants lately, which just added to the stress from the store. Of course, with the store taking up so much of their time, they just let the tenant issues keep piling up. The properties weren’t necessarily under water, but certainly were not providing the retirement income they had hoped for.
They could see the end was not going to turn out as they had planned, but before everything was gone, it was time to come up with a new plan. Jim and Susan talked to some agents, but no one really seemed to be able to look at all sides. All the agents would recommend was to sell a house or two, but something always seemed to be missing. Then, through a long list of referrals, they ended up calling Jen (that’s me).
The initial phone call was simple enough. I typically ask questions such as, “What properties do you own, how much do you owe, what are your rents, give me a brief overview of the business situation. In a perfect world, what do you want? What is your goal?”
Then, I go to work. I analyze each of their properties, their store location, the values, income, liabilities, etc.
I sat down with Jim and Susan one night after the store closed and we had a very relaxed discussion about some options they might want to consider. I gave them a list of issues they would want to discuss with their CPA and tax attorney before making any decisions. Then finally, we go over some ideas and the range of outcomes for what it would look like if they implemented those changes.
As it turned out, some of their properties were in a great position. The rents were a little low, but given the leases they had with the tenants and the existing value in the real estate, those properties were put on the “keep and fix” list.
Other properties were break-even on a good month. Some buildings were taking losses each year that they didn’t realize because the repairs were so spread out. On one property, the rents barely covered the mortgage, the note had to be refinanced soon because it was almost due, the building wasn’t worth much more than what they paid. To add to it all, this property tended to attract a higher-maintenance type tenant who could be more difficult. Some properties do that, and it just can’t be helped.
From an objective standpoint, I saw that Jim and Susan’s store was in a reasonable position, as they had recently renegotiated its lease and had done ok with their landlord for the store space.
So, what was the plan?
The results weren’t overnight. It took a couple months of working through everything, getting some properties sold, adjusting leases with tenants, repositioning everything. It was certainly worth the work, as Jim and Susan were able to reduce their stress, keep the store running, improve their cash flows, and ultimately get them back on the path to retirement.
On paper, it seems like such a simple process. But when you’re a business owner trying to keep things afloat yourself, sometimes it’s hard to find more time in the day when everything else is demanding your attention.
I’ve been in real estate for just over 10 years. I’ve helped hundreds of owners out of a difficult situation and I love it. I love that I tend to take a different point of view. Clients have told me “Yeah, but Jen, you’re not like those real estate agents.” In fact, I heard that again last week. My license says I am, but there is a big difference in the results I generate.
I am in this business because I have always cared about the long term results. Some agents, especially the brand new wave coming in, just don’t have the experience to look at your situation and haven’t been there.
My background first in property management, then in “sales” during a down turn have put me in a unique position to help you. You want to talk about the messy side of this business? The dirt, the banks, the investors, the liabilities? THAT is the stuff that you need to be aware of so you can plan accordingly and avoid it. Yeah, I’ve got that covered and can make sure you don’t have to deal with it.
If you want to streamline things or when you are ready for that extra push for your retirement, give me a call at (206) 293-1005 or email: Jen@HudsonCREG.com.