Thursday, July 15, 2010

High End Product in Low End Houses

I had a great visit with my friend Ricardo to go meet a Tacoma real estate investor named Walter Johnson yesterday. Walter has been investing in Tacoma real estate since 1997. Lots of investors I know are having success in this market, and I wanted to learn more about what they are doing.

Walter is finding properties in good middle-class neighborhoods in Tacoma that he buys for $40-50K. Many of them are in foreclosure. He then "re-faces" or "re-surfaces" them.

I'd never heard of that. That's because no one I know does what Walter does. Walter has an artist on his team, along with architects, engineers, in-house real estate agents. This artist used to work in high end "Street of Dreams" types of homes and won many awards for his work, before the market tanked. His work includes a very high end product which is inexpensive to produce, but looks like a million bucks.

It is ground-up granite mixed with (secret ingredients) that can be applied to any surface. It can be poured into a mold and used as window and door trim or base moulding. It can be thinned and applied as wall texture. It can be applied as faux brick or stone blocks, or used to build fireplace mantels.

Walt spends maybe $15,000 per house "re-surfacing" interiors and exteriors, and then resells it or keeps it as a rental. His costs have gone way down since discovering this product. Being this much below other commercial and residential listings has kept his business profitable and thriving.

And Walter explained to me the reasons to be optimistic about Tacoma: 3rd largest port in the country, a big military presence, and lots of money being pumped into casinos and related development by the Puyallup Tribe. It doesn't hurt that housing prices are so much lower than those in its big neighbor of Seattle.

Interesting model, interesting work. Good job, Walter!

No comments: