Buz Hoffman's name has been synonymous with home building in the Chicago area for decades.
His grandfather, Sam, started Hoffman Homes in Arizona in 1948 and his father, Jack, brought the firm to the Chicago area, becoming the father of Hoffman Estates in 1955.
Buz and Jack worked together for about ten years before they sold Hoffman Homes in 1988. Two years later Buz launched Lakewood Homes. Between 1990 and 2009, Lakewood Homes built just under 15,000 homes in the Chicago area, making it one of the largest privately-held home-building firms in the market.
But Lakewood Homes was not immune to the real estate depression that assailed the country. Sales took a nose dive; Lakewood suspended operations and Hoffman and his executive team began to explore alternative ways to use their considerable skills.
Today they and various partners own and operate a real estate consulting firm called Lakewood Real Estate Solutions, which is currently developing a shopping center in Long Grove. They also own Right Residential LLC, a business that is committed to the acquisition, renovation and resale of foreclosed homes purchased at auction from banks or from homeowners. Hoffman serves as president.
Right Residential is now acquiring, rehabbing and selling existing homes within a triangle roughly bounded by Libertyville on the north, Naperville on the west and Oak Park on the east. It has not yet ventured within the city of Chicago.
"We acquired our first house in December, 2010, and are now purchasing about two per week. Soon we would like to be acquiring three homes per week," Hoffman said.
And they are selling the rehabbed homes, oftentimes to young couples, at prices still much below the market.
What is your philosophy?
"We are trying to give buyers more for less by delivering an existing home in new-home condition and doing it at a price that they couldn't get anywhere else. We are putting people into good homes in good neighborhoods with good schools at really good prices and in the process, we are helping to save those good neighborhoods.
"You have no idea what it does to a street and a neighborhood to have an empty, foreclosed house with weeds in its midst. When we go in and buy a house, it stabilizes pricing and cleans up the area. In every case, the neighbors have been thrilled. Some have even given us referrals."
While the rehabbed homes Right Residential is now selling average $250,000, they range in price from the high $160,000s to the low $400,000s and are primarily selling to first-time buyers and first-time move-up buyers, Hoffman said. They don't typically buy higher-end homes because getting financing for buyers is more difficult.
"We prefer to buy homes that have been built since the 1970s, but we are willing to buy those built earlier -- even during the 1920s if they are charming older homes in good neighborhoods. Only 5 percent of our homes are older and we are very choosy."
Right Residential gravitates toward homes in closer-in suburbs with great school districts -- like Des Plaines, Park Ridge and Morton Grove. Once they have zeroed in on a desirable community and neighborhood, they concentrate on the soundness and condition of the home.
"We don't want to be ripping out walls. We want to put in flooring, a new kitchen, paint and maybe landscaping. We want to put a better face on the home and give it a Lakewood Homes feel and then sell it."
Hoffman, a graduate of the University of Denver's home-building program, likes to think of himself as the operation's "conductor" who makes sure everyone is playing the same tune. Executive Vice President Jack Shum handles the construction end of the business and his counterpart, Executive Vice President Chris Shaxted, handles acquisitions and sales.
"Chris drives around all day, looking at foreclosed homes, estimating repair costs and making quick decisions about whether or not to buy," Hoffman said. "There is not a lot of time to analyze anything, so you have to be skilled at knowing what is worth the investment."
What are the biggest changes you have seen in the industry?
"Recessions used to be driven by interest rates and employment and they would last two or three years and be over. Housing always led us both into the recession and back out of it again. No one saw this real estate bust coming or, at least, no one foresaw the depth of it.
"Everything broke at once. The financial system was in tatters. Employment was in tatters. Housing and manufacturing were in tatters. You just can't compare it to any other recession we have experienced.
"And now those in charge are trying to get the economy back on its feet without fixing housing and, in my opinion, it just can't happen. I have no idea when this housing depression will be over and who the players will end up being. Will the market be dominated by the publicly-traded companies or will the private builders be able to get back in? I have no idea. That book hasn't been written yet, but the market will certainly look a lot different than it did in 2006."
What are your company's future plans?
Right Residential just expanded its geographical reach a few months ago, so they have no immediate plans to expand again soon. But eventually they will consider homes within the city of Chicago and hope they will some day be closing 150 homes per year.
"This year we are looking to close 90 homes and when you consider that six years ago we were closing 140 homes per month, that indicates the change of an entire mindset. But this is new, fresh and exciting for us and it keeps us in the home business.
"We really feel that we can grow this company within the seven-county area because we fear that these foreclosures will be around for some time to come because there are still so many kinks in our economy and in the housing market."
For more information about Right Residential LLC, visit www.rightresidentialllc.com.