An Exercise in Capitalism!

November 10th, 2010

It was in the late seventies. My wonderful parents who lived in Marin County in their cherished home outlooking Mt. Tamalpais began to yield to age. My mother, an erudite and cultured lady, died first. My father hung on to the home for some time but soon began to feel the loneliness and so we decided to sell and move back to the avenues in San Francisco. It was a bungalow in the Sunset and he was to co-habit with his sister and close lifetime friend. I lived in the South Bay, owned a business and would travel the peninsula on a weekly basis to aid in the shopping and stuff. I arranged for a housekeeper-cook to care for them. They had ample money so the set up worked well. At first, anyway! The trips up the peninsula became more frequent and the emergencies, real or imagined, were more frequent. One time I was on my way to Monterey for the weekend but for some reason I checked up on my aunt as my dad had gone hunting with his pals. The phone rang and rang. But, alas, there was no answer. What to do? Instead of marvellous Monterey and Carmel and 17 Mile Drive I and my good sport of a friend ended up spending the weekend at the hospital with my aunt who had fallen and broken her hip. There were the late night calls…yep, up the peninsula to find my poor dad dehydrated and disoriented. After a few years of these iterations the strain became too much. We once again decided to sell the bungalow in the avenues and move them closer so that I could be of more use. Sold the house and bought a rancher in Sunnyvale. It was a lovely home with decidedly bold sixties shag carpeting and wallpapers. But…it was a good floor-plan and all at ground level…it fit the purpose. There were the k-cooks and the shopping but I managed better without all the driving. My father could no longer go hunting and that was a severe blow for him to negotiate. It was his passion. His ‘raison d’etre’. The ravages of age continued and first my aunt and then my father had to take residence at a convalescent facility. It was a terribly guilty feeling period for me but necessity guided the way. Eventually they died and I was left with the home.

We decided to make that house our home. Out with the Kelly green shag rugs and the large sunflower wallpaper and other period touches of the sixties and seventies. Patrick, one of my part-time bartenders, who was a painter and contractor headed the remodeling effort. The house became a comfortable home with new carpeting, fresh paint and floor to ceiling mirrored, cedar lined closets.  We lived there for a number of years, raised two daughters and were happy.

During one of my stints in-between business ventures I filled my time with remodeling and renovating efforts. The Home Depot was a new arrival in town so that opened a new world for all of us wanna-be home renovators. It started with replacing of the sliding doors from the kitchen-great room into the backyard. Pella was just beginning to market their door and window systems but they were pricey. We decided to give me a go. How hard could all that be? The ‘how to’ books formed an ever growing stack in the office. Then there were the tools: shop vac, table saw, power saws, hand tools, router, etc., etc. Not being terribly organized, finding  items became a challenge. At times buying a new tool was more expedient that to rummage through the garage for that elusive nail set or hinge profile or some such. Eventually necessity forced a day of organization with firm purpose to wear that mantle as I admired the new look to the well ordered garage.

The first adventure was the removal of the large sliders to the back yard. As they lay against the house I cut into the stucco about the metal frame and proceeded with satisfaction along the outline of the frame. My concentration was interrupted with the shrill voice of Patricia who had just arrived from work at HP. ‘Look at the mess you’re making’, as she pointed with both outstretched arms waving all about. ‘There is this fine dust everywhere.’ Yep…the fine dust had covered every nook and cranny of the great room and kitchen. So, began my remodeling adventures, or should we say ‘mis-adventures.

The french doors went up….in the great room, in the kitchen, in the master bedroom…all looking out into the backyard. And the covered patio in the backyard looked lousy. So….knock down the covered patio, and began a new 500 square foot redwood deck. And the moving of the dirt, the rubbish, new lawn. But all was beginning to take shape.

As Patricia, Chelsea, Gina and I were eating our barbecued hamburgers on our new deck one summer evening the conversation turned to how nice all this remodeling turned out…..but….and, the ‘but’ was the kitchen. Everything looks so good and the kitchen now sticks out. So, there were the cabinets, the new appliances, the tiles, the skylight, the electrical and the plumbing and on, and on. And…the ‘how to’ book stack kept growing.

Anyway, you see the pattern. We kept on ‘truckin’ till every square inch of that house was done. Some stuff was great, other stuff was a learning experience. But we were happy and loved our new home done to  Patricia’s specs.

Along the way I purchased other rental properties and the skills continued to develop. Both the skills in the basics of construction and remodeling and those skills in dealing with and selecting tenants. Both sets were equally important in maintaining the rentals over the long haul.

One of the properties we bought was in Santa Rosa, in the middle of the Sonoma wine country. By the early nineties both Patricia and I became a bit disenchanted with the status quo of Silicon Valley and were yearning for a change. We sold our condominium in Incline Village just a few hundred feet from the gorgeous shoreline of Lake Tahoe. That was one of the many mistakes in my life…and…I’ve made many, many mistakes. But, then again, the man who makes no mistakes usually does nothing. To our credit we kept both of our houses in Silicon Valley and that turned out to be a great decision. Patricia ended her career in hi-tek industry and both of us headed to the country where we would spend our days being restaurateurs in the Sonoma wine country. We moved into our house in north Santa Rosa…and, Patricia was never crazy about that house. We explored the various areas of Sonoma County…and, Patricia was never crazy about the country. We made friends with some of the customers at the restaurant…but, Patricia was never crazy about the local attitudes. I operated the restaurant for about seven years and there was a six month period where I began to feel that we were making progress, but….then the big chains moved in-Olive Garden, Red Lobster, Outback, etc. etc.. My seven years as a restauranteur in Sonoma County was existence under ‘the sword of Damacles’. The nice stores were in Marin County; so, from time to time we would go to lunch and spend the day in Marin. We both began to yearn coming back to Silicon Valley…someday. But, we had the restaurant and what once was a dream towards independence now was a millstone about our necks.  We were not going forward and we could not leave. I developed a cadre of pals, golf pals, at the restaurant and we would go off and play all the courses of Sonoma and Napa counties. That was great…although I could never shed the feeling of impending failure with my restaurant operation. It’s a funny thing….the public always considered the operation a great success and all seemed to love everything about the restaurant…but for me it was ‘the unreachable dream, the unconquerable foe’. I was not able to get it to penetrate critical mass. You know, the level where I could hire proper staff, have adequate cash flow and steady business and not be forced to come up with a new marketing idea every month just to keep the sales up. Eventually, we sold the restaurant, sold the house, sued the people who bought the restaurant, never collected my money other than the down payment. But…we left Sonoma County with no liabilities, we paid all our obligations and were free to come back to Silicon Valley and fashion a new life. We were smarter, much wiser albeit a bit poorer and although our heads were bloody…they were also unbowed!

One fine day we headed a caravan across the Golden Gate Bridge to Silicon Valley consisting of two Jeep Cherokees, one towing a yet to be restored 1967 Mercedes 230 SL and a laden moving van and our two dalmatians, Domino and Blazie. Gina was in college and Chelsea was working and renting our restored home in Silicon Valley so, Patricia and I, now free from the restaurant, were looking forward to our new life in Silicon Valley. We settled in our rental house, a house which had been rented to four computer guys for about ten years. Our plan was for Patricia to get a job and I was to remodel the house and the yard to our taste.

This was a major project. There was dry rot in the bathroom floors, ugly carpeting, kitchen done in aqua Formica and matching appliances and generally…dirt all over. Patricia looked about the kitchen with that look of fatigue as to the task ahead. But…we were soon enmeshed into plans for our hew home. The bathrooms were first…one at a time. New tile floors, fixtures and textured walls along with repeated visits from the inspector who eventually became my mentor. Gray carpeting was removed and the hardwood floors were refinished. The kitchen was stripped to the studs and soon there was an outline drawn on the floor with island and appliances. We would do dry runs as to how convenient was the refrigerator and sink  and range to all work surfaces. And…that no doors interfered with each other. Patricia had to wash the dishes in the laundry sink in the garage and do the cooking in a primitive fashion. Each morning I would have to search for tools that I had left on the would be island. Patricia, being compulsively neat, would carry all tools in the garage in the evening and I would need to find and retrieve them in the morning. Sometimes we laughed about it…and, sometimes not!

Inner partitions were removed, mullioned sliders with sidelights were added, the yard was planned and outlined with pea gravel walks and planting areas and a large koi pond in the center. The house was painted inside and out and new roof and gutters were added. Once again we had a home with Patricia’s approval and it became the center for our family on occasions and holidays. And…of course, the ‘How to’ books were dusted off and reviewed for finer points along the way. During this operation I assumed the monicher of Pindar, the tile guy. And…Gina sent me a t shirt with that name and while wearing it one day walking the two dalmatians, one of the neighbors stopped his car and asked if I wanted to bid on his tile job.

At this stage Patricia was working in a stationery shop some hours a week, Chelsea was on her way to living in Dana Point and getting married, Gina was getting higher degrees at Penn State University and I was beginning to prepare for my next career, a career in real estate. The house where Chelsea had lived was now being rented to a family with two children. We were making a slow but steady recovery from our setback with the restaurant in the wine country.

Patricia worked and brought home a check. I became a licenced real estate agent and learned the ins and outs with several local companies. Sometimes I would have a deal but most of the time not. It was a tough business, but…when compared to the restaurant business it was a piece of cake. My overhead in real estate was $3,000 a year while in the restaurant business my break even level was $2,000 per day. I changed real estate companies because I wished to see if any had a method of getting steady leads and business. The answer was a resounding “no”. All the companies ended being the same. They hired as many agents as they could and then threw them out into the market to get whatever deals they could garner. And always they kept the fingers pointing down making agents feel like failures when not having business. One year I did $110,000 in commissions and netted about $50,000 after all the expenses and splits with the office. Hmmmm, I thought, let’s see! I’m getting a desk and a phone and forms and a lead or two..but rarely. Hmmmm….that’s a pretty stiff price…$60,000. So, I earned my broker’s license and began Dalmatian Realty of Silicon Valley designed as a full service discount firm. I would give the office portion back to my clients and do a whole lot more business in return. Everything was original…the signs, the logos, the sign posts, the website, the mailers and or course the name. A name originating from the days when I would run my beautiful and iconic dalmatians ten miles a day and would be recognized in the neighborhoods as the ‘dalmatian guy’.

Patricia and I were frugal with the luxuries of life. We altered our lifestyle to live within our means. There was a time when the credit card companies were sending those zero interest credit cards out by the bushel full. And…Patricia, being the trooper that she is, would read all the fine print, choose the one that cost us nothing and would direct me to ‘charge on this one’. She would save our commission checks in a savings account and use the zero interest rate funds till payment was absolutely due. Then she would transfer that amount to another company that cost us nothing.  When payment had to absolutely to be made….she would write a big check and wipe out the credit card amount. She did that for years till the credit picture changed in 2007/8.

 We settled into a comfortable rhythm of life. Patricia would shop and take her dog to the dogie park and we would have a cocktail at five and always a delightful dinner. Some tv afterwards and movies then I would go off to bed early to rise early for my morning joy…a delightful bicycle ride in whatever direction my heart yearned. Our kids would visit us or we them from time to time and our rental down the street would cover much of our annual expenses. I would get a real estate deal here and there and that would always put us over the top financially for the year.

When  leasing properties I always viewed it as a partnership between tenant and landlord. It’s ideal to have the tenant well taken care and happy. It’s a bit of work at times but in the long haul it’s worth it. The tenant has your house and can create problems with a less than happy attitude. I’ve always encouraged tenants to call me when there are items to be fixed. A happy tenant is an asset.

The rental house with all my first remodeling efforts was going through its twenty five year cycle. One by one components wore out. The furnace, water heater, a hole in one of the pipes, the redwood deck, the gas cook top, the paint on the French doors. The list was mounting. My tenants of six years would call religiously as item failed and I would quickly go over and fix them. Along the way I built a team of good trades people….plumber, electrician and my brother in law, who is a wonderful mechanic and all around repair guy.

First on the list was the deck. It had served us well and I thought to replace it while tenants were still in place. A new deck would be a wonderful asset when leasing the house to new tenants. So, in July I began. The finest redwood and pressure treated lumber from Southern Lumber. One week for the removal of old deck and disposal of the tired lumber. Then two weeks in the hot sun to build a state of the art deck with improvements learned from prior mistakes. The arsenal of skills served me well and the work was rewarding. I would get this tremendous feeling in the morning as I approached the work site. I am improving this asset which will be offered in the market to gain income to take care of my family. I was doing it all myself…the design, the removal and disposal, the treatment of the wood, and the building of the deck with the attention of a true craftsman, the marketing, the Dalmatian Realty sign on the front lawn. Never was there a corner cut or a compromise made on behalf of time. And…almost at the completion, Colon, the tenant, sticks his head out the French doors and says, ‘We,’re going back to Japan. I am giving you thirty days notice’. Instead of getting a headache over this news, I was energized as I now had a new deck ready and waiting for new tenants and was rather pleased with my proactive action.

We took two months to improve the property inside. There was the removal of old vinyl wallpaper, redecorating the bathrooms, refinishing of kitchen oak cabinets, a bit of repair of some termite problem and repainting of walls and trim and baseboards. Lots of painting. Upon inspection the old under-draft gas cook-top gave out. So, we proceeded with the installation of a new range in the island with impressive stainless steel hood over it. Installation and venting of the hood was an experience, but when completed it made the kitchen. A new stainless steel sink replaced the white chipped porcelain one. Fortunately, I had a case of original tiles and was able to retrofit the new sink, and masterfully so, after a week of struggle. Patricia ordered all the appliances, all stainless steel, from the internet. She was able to save about 40% and got free delivery and no sales tax. That was an important and equally valuable skill.

I had a sign on the front lawn with flyers and an ad in the internet. I would get a good number of folks coming to look at the house. But with the ladders, the tools all about, the cleaning cloths, the French doors off the hinges people would walk about and see a mess. They were all the corporate types and many had housing stipends from their company but none could see the finished product. After a couple of weeks of all those stupid questions and re-inspections and more questions…I took the house off the market with intent to show it only when complete. And…this is a common outcome in real estate. People just have no vision. They need to see and feel the finished product. You can tell them how it will look…but, they stare with bovine eyes and yawn. They need to be overcome emotionally with the sound of the sizzle, the scent of caramelized meat, the vision of charred quadrilles on the juicy meat all presented on a tasteful plate with garnish.

Along the way my bother-in-law, Vince would come on selected days and help me with items. The installation of the hood, or hauling in the stainless steel refrigerator. Reza, a master electrician, checked out all the grounds in the house for personnel safety and Shawn, the plumber, moved the gas lines and checked out the rest of the house. Patricia did the product ordering and coordinated the deliveries. I did the rest to include the real estate portion. We had developed a great team along the way. A team that was responsible and showed up on time and delivered all to professional standards. And…believe me, if you ever had any remodeling done…that is invaluable.

During the last weeks when all was almost ready I put the house back on the market. Three or four groups came in a couple of days and one of them who turned out to be the almost perfect tenant filled out application and leased the house for two years. Husband, wife and small child with housing stipend from their company. They were excited with the house when they first saw it and now that they have been there for a month…the lady of the house is still excited about her house.

The interests which develop into knowledge base and skills become part of a person’s arsenal of survival along the course of life. When I was growing up it seemed that life was much slower and more secure. People seemed to survive and prosper with one wage earner in the family and one car with no air conditioning. The TV set had only three channels and most of the shows began in the early evening. I was delighted and excited to see the NCAA game of the week on TV on a Saturday afternoon. It was a real treat and mattered not who played. Teams and uniforms I had never seen delighted my fancy. On New Year’s Day it was total euphoria with ten hours of games of my adored and admired colleges and players. I had intentions of making it big in football. You know a little success in high school was projected into a paradigm of fantasy. People had jobs for all their lives. There was the milk-man who would deliver the milks and creams and chocolate milk and orange juice. We would know him by name and his daily arrival would be heralded by the clank of the bottles. The newspaper was a must in each household. For most families it was the Marin Independent Journal or the San Francisco Chronicle. For our family it was the Chronicle. My mother would be a Herb Caen junky and I tried the column many times but it was a bit too local for me. My mother, being a San Franciscan for decades knew all the places and people that Herb would blog about. I liked the Peanuts comic strip, the sports page which in those days was green, the business page with the stock quotes and Stanton Delaplane. Yep…my love for adventure and travel was piqued by Stanton’s writing about exotic places and local drinks and foods. I believe Stanton liked to drink a bit and would describe the cocktails served overlooking golden beaches and blue waters from the protection of four star hotel grounds. I began my days with coffee, toast and half grapefruit over the newspaper before going off to school. Every day I would forget something only to return a munute later to find my mom with a book, or key or something in her hand and a wry smile on her face.’ Luciano, Luciano’, she would say, ‘you would forget your head if…”. I was given an allowance on a monthly basis and was expected to manage my money to make it last. It was a wonderful exercise which developed into a habit and has served me well in life. Although…I did have to do something for it. My mother was part of the ‘blue rinse set’ and was wont to go to the beauty parlor every week. So, instead of going to the beauty parlor I did her hair. Yep…the curlers and the blue rinse and actually I got to be pretty good at it. But…under the pain of death, I swore her to secrecy. Just imagine if my buddy, football players found out.

It was in the early nineties that I distinctly remember President Bill Clinton before he got caught up in the ‘oval sex’ affair with Monica that he stood along with union officials…officials who looked long faced and ‘pissed off’. And ‘triangulating Bill’ announced the entrance into NAFTA and one of the rounds into World Trade. I noted that moment and even with my limited world-wide perspective and knowledge of macro-economics…I knew that this moment was big. I remember muttering while Bill spun his magical words over a plastic smile that this was to be a multi-generational labor shift. American labor would compete on the world market and it would suffer till world labor rates equalled American rates. There was the influx of the box stores stocked floor to ceiling with imported goods from foreign cheap labor. People loved it…ah, ehr…till they realized that this was part of the illusion. The one wage earner who had a safe manufacturing job and had become familiar up and down the aisles of Costco or Home Depot…now found himself walking down the aisle as a $10 and hour employee.

The only answer is education, training and interest levels which develop into skills. That is the survival paradigm of the new world, the new global economy. Computer skills and internet skills are the new language. Don’t speak the language…go down to the Home Depot or Costco or….. Product cycles are becoming shorter and shorter and that translates into company risk. That is, companies have to be more flexible, more globally oriented, more sensitive to competition which can come from some garage in Silicon Valley, or Shanghai or Tai Wan or India or Europe….Companies don’t have the choice to hope that things get better. With these shifting sands employees must look to themselves as an economic unit..a unit which must be kept current and improved and competitive to be useful and employable in the world market. These are the new realities. But it’s not as insidious as it seems. It’s just a new status quo. And man…man adapts and grows and becomes more skill-full and more confident and prospers.

Luciano

Need to Buy, Sell or Lease Silicon Valley Real Estate?

Dalmatian Realty of Silicon Valley

Luciano J. Ercolini, Broker/Owner

Landlord & Entrepreneur since 1977***** Realtor since 2000***** Broker/Owner since 2004