Starting Point: Thousand Island, NY
Ending Point: Lake George, NY
Distance Traveled: 250 miles
Today, I started driving through the Adirondacks through Holly’s suggested route of Ogdensburg, Lake Placid, and down to Lake George. Contrary to my expectations, the route was much more populated than I was expecting. Every few miles the highway was dotted with a homes, shops, gas stations, and small restaurants. It’s possible that just this route was populated because it passes through Lake Placid, the largest city in the Adirondacks. Also, I didn’t see any trailhead markers or signs leading to recreation areas/campgrounds, which was surprising.
My first stop was Lake Placid, a large area with a summer population of about 10,000 and a winter population of about 700. The area is beautiful with a Main Street stretching several miles, many oceanfront homes, and many hotels. I stopped by a real estate office on the main street and asked him about how the area would work for a real estate investor. He explained that the entire city is located in a State Park and property taxes are about 2-3%/year. Therefore, operating a home as a vacation rental would most likely not turn a profit. Also, commercial in this area is tricky, because stores are only busy in the summer months. This might provide an opportunity to buy residential/commercial properties at attractive prices, but I think since I live out-of-state, these concerns make this area a non-starter investing-wise.
After Lake Placid, I was driving and few girls in bathing suits walking out of the forest toward a row of cars parked along the road. I made a U-Turn and asked where the swimming area and/or hiking trail was. After being told the location, I walked about five minutes and reached a quiet waterfall area with a large pool of water. I jumped into the water several times, briefly went swimming, and left shortly thereafter.
After swimming, I drove to Lake George, NY, city at the edge of the Adirondacks that has a nice Downtown Area and beach area. In the Lake George area, there’s a large real estate development company named Schermerhorn Real Estate Holdings. (http://www.schermerhornholdings.com/) SREH began flipping homes, then began developing apartment communities in the Glen Falls area and surrounding communities. His strategy seems to be building new construction and holding indefinitely. This strategy is very successful AND VERY LOW-RISK and can lead to long-term enormous wealth, but it just seems monotonous and boring. I’m not sure I’d be willing to do this as a career, but why not? If my main goal is to make money in a risk-free method, why not develop apartment communities and hold for the long-term? Why not buy existing apartment communities and hold for the long-term? Why should I acquire commercial properties with much higher risk, be concerned with the risk of vacancy, functional obsolescence, greater risk from external economic factors, needing to buy/sell/buy/sell, etc? Why not just hold and have piece of mind?
My main goal in real estate is to add value to properties in the lowest risk/greatest upside method possible. With residential, it’s very difficult to get the returns we’re currently getting. Over the past three years, we’ve been making exceptional returns that we wouldn’t be able to make in the highly-competitive residential market. I should be open to the idea of development down-the-line, but for now it’s too high risk in my current financial situation. The short-term “lowest risk/greatest upside” analysis doesn’t pencil out for development right now, but maybe in 5-10 years it will begin to make sense. The benefits of development are:
- Creating your own opportunities, not as much competition
- Exceptionally high returns if done right, and cash out after completion
- At the end of the day, you own a brand new property with no problems or hair
- Work is much more challenging/multi-faceted than value-add
- Work is rewarding and you’re undeniably helping the community (creating living spaces, jobs, progress)
Maybe down the line, I can slowly progress to more challenging forms of real estate investment such as renovations, tenant improvements, repositioning (changing use of property), and eventually new development. I should continuously weight be risk/rewards of development while taking into account my personal financial situation and eventually I can see myself engaging in some form of development if it pencils out.
