Conversation with Tim LaDuca

2020-03-03 Conversation with Tim LaDuca

CONTEXT I had asked Tim about arranging some houses to visit this weekend, in two categories: (1) $100-200k fixer-upper opportunity in Buffalo, perhaps on the west side, and (2) the two properties in Shelby.

CALL First off, Tim was decidedly skeptical about the Shelby properties. He returned to his mantra, that you have to think about property as an investment, to make sure it will hold its value or increase. Tim’s experience is that people’s wants and needs change, so you can hope that a property is your forever home, but shouldn’t stake your financial future on it. From this perspective, he said he doesn’t see many people wanting to live as far out as Shelby, so there are not many buyers. It’s not seen as a particularly nice place to live. He said he wants to help people buy properties that he’ll be able to help them sell again later if they want to, and was concerned about being able to do that in a place like Shelby. He was very skeptical about building a house on Shelby land, as it would immediately be worth much less than it cost to build.

About those specific properties, he felt that the $150k property with the trailer on it was WAY overpriced, and didn’t feel we should continue pursuing it. The trailer has no resale value. He also felt like the $80k property was overpriced, but will talk with the seller’s agent to learn more about it. He said if we were trying to buy it, he would be looking for a price closer to $40k.

His feeling generally was that we can get land like these properties closer to Buffalo, and for less money. If we were thinking about it as a weekend retreat (not building a primary home), he said there are other properties that are not zoned residential that would be cheaper. However, I don’t think he understands very well the appeal for us of managing land ecologically or of being close to the wildlife refuge. I think it makes sense to think of his perspective and ours as different (he knows what the market values; we know what we value) and try to find something that both perspectives feel is a good idea.

I also asked Tim about the economics of building a new home (from scratch or manufactured), and he thought that like with a new car, it’s a better investment not to do new construction. He thought the best kind of investment right now is existing houses in the $400-$500k range that were nicely-built with quality materials and which have a “viable floor plan,” but which haven’t been redecorated since the ’80s or the ’90s. When I reminded him that you’re a designer, he was even keener on this idea.

Finally, we discussed investment properties in Buffalo. He reiterated that he thinks too many people are unwisely buying fixer-uppers, so the prices are inflated. He explained that you want to have a cushion between (buying price + cost of renovation) and expected selling price. For example, he bought a house to fix up with an expected 10% cushion, but made a mistake in inspecting it–the electrical was worse than he realized, and had to run all new wiring. Because the cushion was big enough, he was still able to make some money on it. He said there are fewer options now for houses with a suitable level of cushion–the market is historically high now. Need to be patient. It would be great if this is the beginning of a sustained boom, but “I wouldn’t want to stick my neck out like that.” He said he is seeing a number of houses that people bought to flip, but they ran out of money or realized it wasn’t worth the investment after they got part-way through… those can be a good investment (sad for the sellers), but also a cautionary tale.

I left this conversation feeling like we might need to go back to the drawing board on what we’re looking for. And if we don’t figure it out in time, this trip to Buffalo probably isn’t worth it. Some feelings on the way forward: – I’d still be interested in seeing the unbuilt Shelby property and its connection to the wildlife refuge. If it’s affordable, I could imagine buying it even if we weren’t going to build a primary home there right now. – I’m inclined away from the fixer-upper strategy for Buffalo. Perhaps we should put that time and energy into the Austin house instead. – Maybe we should explore the $400-$500k category Tim was suggesting. However, he just sent over some new listings, and they’re in the yucky McMansion on 1.5 acres category that we are trying to avoid. – Maybe we should explore other areas that have good land availability. Could be to the south (Elma), Grand Island, Clarence, Wheatfield, Cambria, Pendelton.