If you’ve been involved with Americap for any length of time, you probably know how we feel about Seth Godin. His books, along with the work of Jim Collins, figured prominently in the formation of our company and our continued success as we try to be a “purple cow” in our industry. I think of much of Godin’s work as a business equivalent to the protein bars and energy gel athletes carry for an arduous workout. A little tidbit that can help them push through the last leg of the race. So when your legs start shaking and you feel your resolve weaken, go check out his blog for a little bit of encouragement. 
He recently posted a short blog on the opportunities for growth and development presented by the “uphill” struggles we face in business and in life (click here to read the original article). We’ve all been there; it is hard to pedal, the quadriceps are burning and your heart rate is going through the roof. And despite all that effort, you seem to be slowing down. Does that sound like today’s business cycle to anyone else? When things are booming, things seem to come so easily. But because things come so easily, the business world can become complacent and let inertia or greed control their motion. As Godin so eloquently states it: “it's very difficult to improve your performance on the downhills.”
We are proud that, like many of you, we have ratcheted up our efforts over the last two years. As our industry has undergone a practically cataclysmic change, we spent our time getting leaner, stronger and more efficient. We’ve been pedaling with you up the mountain of our lifetimes, and I feel that we’ve almost reached its peak. And all of the energy and momentum we’ve accumulated on the uphill will carry us to greater future success, as long as we remember the lessons we learned on this journey and keep pedaling, keep striving and stay focused even when the incline starts to give us the advantage.
Everyone has heard the old adage, “history repeats itself,” and often it does! I went through the housing recessions of the early 1980’s, 1990’s and now we find ourselves in a recession again. In previous recessions when the economy was still very sluggish and recovery was not yet evident, many developers lost their projects to banks and other lenders. Because these banks were not in the development business, they needed to dispose of many foreclosed properties Individuals or groups who had the financing and foresight during those previous recessions, were able to experience times of great opportunity and profits when the housing market emerged from the recessionary times. Does this scenario sound familiar to anyone else?
During the previous housing recessions, one could buy finished lots for a price well below the replacement value of those lots (replacement value is defined as the funds necessary to bring a different lot to the same level of completion). In many cases lots and partially completed homes could be acquired for twenty-five to fifty percent or less of the then replacement cost! This significant discount resulted in the ability to remarket the lots to buyers or build homes and sell at more affordable prices, while still experiencing generous profits. And we are in the same situation today!
The signs are all there; finished lots are available from banks or developers on a “short sale” basis and at a rate that is as low as ten cents on the dollar from both the original price and the replacement value. Building permits and new home construction is at an all time low; yet household formation and immigration continues.
In California, residential development is a very lengthy and complicated process often taking from three to five years (or longer!) to entitle and develop a parcel of land to the point where new homes can be constructed. Consequently, finished lots in California are a rare commodity and command a hefty price in normal economic times. Acquisition of finished lots in the current market and holding those lots for one to five years offers investors the greatest potential for profit. Once the finished lots have been absorbed, properties with approved tentative subdivision maps and only need to have the improvements installed will command the greatest price.
One might say the demand for housing is not great enough to see any appreciation in finished lots in the near term. I would point out that California specifically, and the nation in general was not building enough homes to meet housing demand before the current recession. This housing shortage is only being further impacted by the lack of new home construction created by the current economy. I would also point out that the population continues to grow through new household formation and immigration. At this time of uncertainty many families are doubling up to save money (ie. multiple generations sharing housing, seeking roommates, etc.), however as soon as the economy begins to improve, those same people will be looking for the American dream and begin buying homes—much the same as what occurred in the past recessions. It will not be long before demand begins to outstrip supply, resulting in increasing home prices which will, in turn, increase the value of finished lots and tentative mapped projects.
History repeats itself, Now is the time to invest in finished lots, and investing in entitled projects shouldn’t be far off in order to see significant appreciation on our investment dollars.
Robert Selders
Senior Land Consultant
What are people saying about Americap?
"Just got back to the office and am so enthused about your venture... right guys, right time, right place." - Colleen E.
"Both Mr. Fraser and Mr. Clark not only took the time to meet with me as a potential investor but they also went "way beyond the call of duty." They acquainted me with the history of their company, including how they set up their business plan, corporate structure, marketing plan and even their modus operandi in conjunction with their defined core values and core ideology. The result is a well run, well positioned, impressive company...and I think their time has come!" - Rene B.
More entries coming soon. In the meantime, feel free to visit Justin Clark's personal investment blog Clark Invest.
