Savvy firm gets fat on foreclosures
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10:00 PM PDT on Sunday, March 23, 2008
Real estate firm WSR Sales & Management knows how to stay profitable in the midst of a housing slump.
Property management has kept the sales and investment divisions afloat in recent weeks.
"Our real estate sales are down more than 80%," President John Plocher said. "But our property management and maintenance side is thriving." After a bank forecloses on a home, it hires WSR to clean and repair the house, cut grass and maintain the exterior. "We manage 2,250 properties and cut 4,000 lawns a month," Plocher said
Last month, banks foreclosed on 11,066 homes in Riverside and San Bernardino counties, making the Inland Empire the fifth largest major metropolitan area with the most property foreclosures in the United States. Those foreclosures mean more business for WSR.
Just cutting grass and maintaining the exterior of a foreclosed home is a cash cow for the real estate firm. WSR receives about 250 lawn cutting orders a day. The Riverside company sends 15 crews of one or two men to cut grass six days a week. WSR sends out seven clean-up crews a day, six days a week.
Business is growing and WSR needs to hire 40 more people by September to help meet demand.
When the housing market went south, WSR switched its focus from real estate sales to property management and ramped up its maintenance and preservation departments.
"Real estate is cyclical, especially with prices," said Mike Hamilton, manager of WSR field operations. "John built his business model with that in mind. He built divisions that would support the company through difficult times. Necessity is the mother of invention."
"Diversity in a business is important," Plocher said. "Diversity is the key to our success. If you specialize too much in this industry, you will get hurt."
After the economic woes of the mid-1990s, Plocher prepared his company for the next downturn. He built relationships with banks and fine-tuned his preservation and maintenance, Hamilton said. Back then business for the two departments was brisk until the housing market rebounded.
"Foreclosures dried up in 2000, so our preservation company went down to one or two people," Plocher said. "But about a year-and-a-half ago, when foreclosures started up again, we ramped up our preservation company and hired 50 employees."
Plocher's experience gives him a "leg up" on the competition, Hamilton said. "He already has the relationships with the banks and the reputation of quality."
WSR employs 10 full-time real estate agents and 90 maintenance, property management and office workers. Last year, the firm generated about $6.5 million in revenue.
At 6 a.m., more than a dozen cars pull into the parking lot at WSR.
By 6:15 a.m. more than 50 workers gear up, load their trucks and drive off to clean, fix up and board up foreclosed homes.
"We've found some pretty interesting things," Plocher said. "The other day we found an urn. A while ago, one of our guys went to a house and found some gangbangers inside smoking pot."
WSR cleans homes in the Inland Empire, Northern California and San Diego, Orange and Los Angeles counties.
When WSR receives an order to clean a house, the firm sends a crew in a company truck that is loaded with a vacuum, garden tools and cleaning supplies. Cleaning crews consist of four or five people who work 12-hour days.
Crews go to the house, change the locks, clean, mow the lawn, remove trash and anything else left behind and truck the debris to a dump.
"It's amazing. We've seen houses that have been left fully furnished and it's sad because of the despair people must have been feeling to have just left everything like that," Plocher said. "We don't have the means to cart the furniture to Goodwill, so we end up trashing the furniture."
Once crews finish cleaning, they take pictures for bank records. Then the crews board up the property and leave.
Banks clean and maintain foreclosed properties to maintain value, Hamilton said.
