By Rob Jafek | Boomerang Capital Partners, LLC
We are big fans of Fix and Flippers for a lot of reasons and have observed that they frequently do not get the love that they deserve. This is all the more puzzling and frustrating because people doing the same type of thing to a commercial building are deeply appreciated – they are “revitalizing,” “restoring,” or “rejuvenating” the building and business district or commercial area. The respect and admiration for working on these types of projects and the positive change, growth, and improvement they bring – should also be shared with those doing residential projects.
Certainly, part of the discrepancy has to do with some word choices. In residential, we refer to this process as ‘fix and flip,’ while in commercial, the process is called ‘value add.’ People involved in the process in residential are called ‘fix and flippers,’ but there is no corresponding term in commercial, with ‘investor’ or possibly ‘redeveloper’ coming about the closest to a direct corollary. And while we are referred to as ‘hard money lenders’ in residential, if you finance a commercial project, you are referred to as a ‘bridge lender.’ Can you see the positive vs. not-so-positive spin on those labels?
We see the larger value that our real estate investors add to the communities in which they work. It’s too bad they can’t get the love they deserve. We’re looking for a flip of labels, a rehab of imaging, or a renovation of perception for our talented and hard-working property renovators. We are in favor of all terms used in commercial projects being used in residential, as their revitalization projects add to the neighborhood and communities around them.
Commercial & Residential Do the Same Things
Sharing terms makes sense, as residential and commercial projects have more commonalities than differences. Here are just a few of those value-add commonalities:
Positive Impact on Neighborhoods: In both cases, run-down properties are turned into useful properties. While much is made of aesthetics, frequently, the majority of the expenses are actually addressing core systems plagued by deferred maintenance. The net effect of the renovations is enhanced property values and attracting new residents or businesses to the area.
Quick Turnaround: These projects are frequently quick to get done. Other people (the prior owner or the owner/user of the finished product) could possibly have done these projects on their own. However, to do a complete job, the process is very disruptive. The best way to do that is usually all-at-once, meaning the building (residential or commercial) needs to be uninhabited for a while. So quick is good.
Value for All: The interesting thing is that everyone wins in these property improvement transactions. For example, sellers get a price that reflects some potential, but they don’t have to put in the labor. The end buyers get a product that has had everything evaluated and updated at a price cheaper and faster than they could do it themselves (in both cases, costs are wholesale). The neighborhood is uplifted by an updated and renovated building or home. While ultimately, the investors are paid for their work.
They’re Both Going Green
Commercial real estate investors also get some extra appreciation in their industry for something that rarely comes up in the residential property business – eco-friendly developments and builds. In commercial projects, there is enthusiasm for ‘carbon-neutral architecture’ and building ‘green.’ In recent years, there has been a growing demand for environmentally friendly and sustainable housing options, leading many home builders and home flippers to incorporate eco-friendly practices and technologies into their construction processes. These eco-friendly residential-build processes include things such as using sustainable materials, building with energy-efficient designs, or even getting green certification for the homes. Those fix-and-flippers that go the extra mile to add an eco-friendly value to their homes deserve to have the appreciation their commercial counterparts do.
Share the Terms; Share the Love
We love and appreciate fix-and-flippers. Strike that: we love investors. They add value to the entire community and deserve way more appreciation than they currently get.