State of the Business

On Wednesday, Mr. Partner and Marty Sunshine sat down for a pow-wow I purposely opted out of. No big deal. There were about 27 things I would rather have been doing (including, but not limited to, sitting on a beach somewhere with an iced tea and no cell service) than lunch at this particular pow-wow.

Now, before you get the wrong idea, I didn't feel slighted. You see, when I am at these every so often pow-wows, I have to answer the same questions over and over again: why is the business going "this" direction. And, of course "this direction" doesn't really have much do do with the reality. The real answer to the "this direction" question is we bought homes when it was cheap to get loans. Then the housing market tanked, leaving us floating amid a sea of foreclosures.

Hence, we don't have 20 percent equity positions in most of our properties. We are undercapitalized. This isn't a new revelation. At least not to me or Marty Sunshine. In the case of this pow-wow, I was perfectly happy to let Marty Sunshine answer these questions. After all, I left out "answering repetitive questions about our investments" in our marriage vows.

And, in all fairness, when Mr. Partner is reminded of our realities (because apparently he has a life outside of this accidental business and he doesn't keep on top of this on a daily basis), he seems to catch on. "Oh yea... I remember now... When aliens landed on our home in Centerpoint last year, they took the roof... I guess it was reasonable for the tenant to want a new roof. And I suppose we are paying for that..."

I would also like to point out for all interested parities, our losses this year weren't that bad--if you wish to classify a loss as "good" this might be the occasion. We still have put less than 20 percent into every home and we are still standing. But, our losses this past year aren't related to trashed homes, legal fees or poor tenant choices from years gone past. I am even going out on a limb here, I believe the worst is over. I hope.

We aren't cash flowing the mega bucks we were early on in our Alabama business, but we aren't bleeding to death either. We have a lot of work in front of us, to make up for the mistakes of years past, but I prefer productive growth (even in the form of "a lot of work") to running around conducting rental home triage.

In truth, about twice a year, the Sunshines and the Partners get together and write a check for home owner's insurance and property taxes on our gazillion properties. This money would probably be in our business bank account if it wasn't for alien abducted roofs, melted furnaces or 150 year old trees that fall into rush hour traffic. And, we get a tax write off which is usually put back into the business every year. So, even though things tend to be tight once in a while, all bills get paid.

Always.

In my local real estate practice, I work with investors on a regular basis who have to short sell their homes or have let their rental properties go into foreclosure because of market factors and personal decisions. We haven't gone there. And, at the rate we are going, I am confident we won't.