Pandemic. That is a word many of us would never have thought would be spoken during our existence. But, on the contrary, it has become a reality. When the pandemic first began, back in March of 2020, truth be told, we were a little concerned. A few of our projects came to a halt when contractors and sub-contractors left the job site to stay at home with their loved ones. Others left because it was convenient.
Whatever the reasons were, APHI struggled March, April, and May to stay afloat. We were unfortunately denied of any COVID relief assistance (Payroll Protection Plan and Economic Injury Disaster Loans). We had skeleton crews working on a couple projects. They reassured us that even though the project would take a bit longer having limited people, it would make progress. I guess the old saying of “slow and steady wins the race” really became commonplace. That, along with good ol’ faith and prayers, kept us going.
At the time, we had 3 active rehabs going on, one of which was waiting on permit approval with the County. This home was/is physically the biggest home, by far, APHI has ever acquired. I say “is” as we are currently, as of the date this blog was made, STILL in the process of getting approved plans (yes over a year!). The home itself is 3,190 square feet, along with a 900 square foot guest house – which we are converting into an Accessory Dwelling Unit (ADU). Side note — some differences between a Guest House and an ADU (in some California cities) may be that an ADU must have a stove, kitchen, and laundry. This project continues to be a feat, as we are dealing with a septic system, a well, and a lot of additional requirements the County is throwing at us with our remodel. This project has enough lessons learned that it just might have its own blog one day. Stay tuned.
Another rehab in progress when the pandemic hit was one of our larger projects to date, where we took a 782 square foot home, built an addition of approximately 475 square feet, and converted the garage into a 1 bed, 1 bath Accessory Dwelling Unit (ADU). This home was also featured on HGTV’s “Flipping 101 with Tarek El Moussa”. This project dragged on longer than it should have, as stores were either closed, had tremendously long lines, or materials were just not readily available. During this time, we also endured the riots and curfews, which cut our days short.
The last project we were working on, was one in Lake Los Angeles, where a crew of six became one. This rehab project was slated to complete at the end of March but was delayed one and a half months. We were extremely concerned with this property the most, as it was in a very rural area, and we knew going into the project, that this property would sit on the market. But then, throw a pandemic into the mix, and we could smell the disappointment, and worse, the financial burden it would have on us. Our contractor pushed through and completed the rehab by himself, but we were reluctant to list it. Many discussions took place with Team APHI, on whether we list the property and possibly have it become a stale listing – meaning the property sits too long on the market without activity, and then is a turn-off and overlooked by potential buyers – or do we just wait till the pandemic is over? The house turned out BEAUTIFUL (did you expect anything less?) and we came to an agreement to pull the trigger and list it. Immediately upon listing it, we received an offer from someone who was following our progress on the property through our social media channels. Believe it or not, we were in escrow in LESS THAN 24 HOURS from listing!! We could not believe it! How could this be? Someone was watching over us.
Despite the slowdown of the pandemic, APHI was able to purchase six more properties in 2020, renovate them, and sell them within one week of hitting the market, all but one at over asking price. The extra money we received at the sale helped offset the extra cost of materials and extra holding time we endured due to pandemic pricing, shortages, and extended delivery times. To put it into perspective, a single 2×4 cost $2.30 pre-pandemic, and now is about $5.85 for the same piece of lumber. Five-foot bathroom vanities are getting harder and harder to come by, with long lead times, and the days of a $400-500 vanity are no longer. Expect to pay close to $1000 for the same vanity!
As many of you know, at around the time the pandemic hit, the federal interest rates were at an all-time low, and continued to lower throughout 2020. At the same time, there has been a massive housing inventory shortage. The shortage of inventory, coupled with the screaming low interest rates, continues to play a huge role in the After Repair Value (ARV), as it continues to drive the prices up for homes. People are paying over asking price for a home, regardless of appraisal. How, you ask? If the loan appraisal comes in less than what was offered, buyers are willing to come out of pocket with the difference, to be able to get in the home. It is a good thing as an investor when it comes to selling a flipped property, but it makes it more competitive and difficult on the acquisition side, as other investors are overpaying on the buying side – often too much in our opinion. Remember, as an investor, you make your money when you buy.
To date, APHI has only acquired one property in 2021, the main reason is simply being outbid during these crazy times. We are, in fact, being slightly more aggressive with our offers given the circumstances, but still need to be cautious and stick to our numbers as we do not want to get caught in a predicament upon resale. It is important to remember that when something stops working, tweak it, or try a different approach. Kevin O’Leary, aka Mr. Wonderful, calls this “pivoting”. We are using this time to improve our direct-to-seller marketing and pivoting our online and social presence. It is already working as we have a meeting on Tuesday for a FSBO (For Sale By Owner), and looking to lock up our second deal of 2021! Even though 2021 has had a bit of a slow start, we are optimistic and are ready to reap the rewards of our hard work and efforts!
What are some ways you kept moving forward during the pandemic? Are you pivoting? We would love to hear from you! Drop your comments below!