JF1283: Sell Faster & For More Money By Hiring An Interior Designer with Steven Gurowitz
Adding value can happen in many ways. Steven found a niche for himself in the 1980’s and has been designing high end interiors ever since then. Not only will he design a brand new interior, Steven goes above and beyond by furnishing with fine Italian furniture, and many other small details that a lot of companies overlook. Hear why this is valuable for the investors that hire him. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Steven Gurowitz Background:
–Started his own design firm, Interiors by Steven G in the early 1980s
-He has turned the company into the one of the country’s largest high end interior design companies in Miami
-Has created interior design projects for commercial, residential and hotels
-Has two showrooms in South Florida with more than 80 employees and clients all over the world.
-Say hi to him at http://www.interiorsbysteveng.com/
-Based in Miami, Florida
-Best Ever Book: The Art of the War
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. With us today, we’ve got Steven Gurowitz. How are you doing, Steven?
Steven Gurowitz: I’m doing well, Joe. How about yourself?
Joe Fairless: I’m doing well, and nice to have you on the show. You’ve got an interesting background. Steven has started his own design firm, which is Interiors by Steven G., in the early 1980’s. He started out as a real estate investor. He’s based in Miami, Florida.
I’m gonna go ahead and just turn it over to Steven. Steven, do you wanna tell us a little bit about your background and your current focus, just how you got started?
Steven Gurowitz: Got it. Well, Joe, 44 years ago I started working for a very small boutique interior design firm here in South Florida, and I took a love and liking to the industry and I really became very self-educated. As the years went on, I was with the firm and became a junior partner, and then almost ten years into it I said “There’s a better mousetrap, there’s a better way to do this, and I’m too talented a person to sit here.”
35 years ago I left the firm, started Interiors by Steven G. out of the den of my home. All of a sudden, my business started to grow and the next thing I knew, I owned my first showroom that was 10,000 square feet. Developers started to call me to do model apartments, model homes and common areas of buildings, so I saw a great opportunity to integrate the world of design into investing and real estate… So I personally started to invest in pre-construction. But what I did was as I closed on the real estate, I would furnish it above the norm, to bring a wow factor to the real estate, put it back on the market for sale, and let’s say 10%, 15%, 25% of the entire project was up for resale from investors. My units would sell first because of the wow factor, and I sold them at a larger price than anybody was getting.
As that started to transpire, my business started to grow. Today we’re at 100,000 square feet of space, and we do this all over the United States for developers and private owners. Basically, I went out to the broker community. In Florida, as everywhere in the country, when there was a boom there were always tremendous investors from out of the country, from local… And I said to the real estate agents, “I will furnish and decorate your owners’ condominium apartment and give them (or you) one year to sell it and pay me. If it doesn’t sell in one year and one day, I get compensated.” We have done this to the tune of 1,000 units, and at the end of the day, nothing has stayed on the market more than six months.
We just opened up a project called [unintelligible [00:05:01].02] a very high-end, luxury project in Williams Island, Florida where we installed four model apartments. The first model sold furnished in one week. So it started to grow, and as long as the owner owns the real estate free and clear and it’s not mortgaged and I can be protected, I’m in the deal… As long as it needs something that’s more on the high end.
Now, we opened up another showroom four years ago next door to us called Now by Steven G., which became popular-priced design packages, as we call them, that run from $35,000 to $125,000, that we’re doing for investors that are renting and getting a bigger dollar, or flipping and getting a bigger dollar in popular-priced real estate. But the place that this really works the best is what I call the luxury market, which is really two million and up.
The developers, the real estate people are selling them like hot cakes, as I am for myself personally. Every project that I do for a developer, I’m hired years before it’s a reality. So I buy at a favorable price, I wait it out, I give it the deposit, I furnish immediately after I close, it goes on the market within a week, and boom. It has just been a huge part of our business where I had to hire a team of designers to work under me, that only do that. That’s how much work we have from our regular business and what I call the investing in real estate business.
Joe Fairless: So at the core of what we’re talking about is – let me know if I’m summarizing this correctly – you identify an opportunity to enhance the interior of a condo, of an apartment, and by doing that it’s then more appealing and then it moves off the market, and then you’re compensated for adding that value through that process, and you do that as a third-party to help out. And you help out brokers who have a deal that hasn’t been moving, and you also do that with your own investing, with pre-construction deals.
Steven Gurowitz: I’ve gotta tell you the only word for it, Joe, is unbelievable. I have clients that hire us to do their own residential work, and they ask me if they can invest with me in my process. Thank god we’re that free firm, I don’t need anybody’s capital, and the end of the day we all know investing money today is always a touchy thing, whether it be the market (even though the market has soared), real estate especially in Florida.
When the market crashed in ’08, it was January of ’08. By June, prices went right back to where they were and higher. So it’s an amazing marketplace, Florida, because it’s a melting pot of people from all over the world, and everybody’s running especially with their money out of a lot of strange countries, because they’re worried about their future there. People that have lived their entire lives there are coming here and buying three, four, five different investment pieces of real estate, so we have found it to be a huge part of our business. Huge.
Joe Fairless: And doing it in Miami is the perfect market to do it, and clearly with your accent you’re not from Miami, are you? You’re from New York?
Steven Gurowitz: Born and raised in Forest Hill, Queens, [unintelligible [00:08:28].20]
Joe Fairless: I knew it! [laughs] I lived in New York City for ten years and it was pretty clear to me that you’re a New Yorker. Okay, so you are doing it in a market (Miami) that caters to more high-end real estate than, say, Cincinnati, or Dayton, Ohio or something like that. So you’ve got a business model that fits within a market… What is your team doing to these units – just pick maybe any of the examples that you’ve mentioned – to enhance the appeal to a potential buyer?
Steven Gurowitz: Okay, well 90% of that luxury high-end real estate in South Florida, the developers have a very fancy word called “decorator-ready.” That means it’s empty. There’s no floors, the walls have a primer code of paint, and bathroom and kitchens are installed. Other than that, you have to go in and design and furnish the entire unit; you have to put flooring in, window treatments. But what we do that’s very different is we go in and furnish it first-class with Italian furniture, with beautiful Italian porcelain floors. We drop ceilings and do LED lightning, so when people walk in, they’re blown away. They don’t expect it, number one, and when people – especially the lady of the house, which if a family is buying, we all know [unintelligible [00:09:49].11] and if the housewife doesn’t like it, the husband can’t buy it.
So the lady of the house walks in, falls in love, and the best part about it for a buyer is today if you buy a brand new condominium and it’s raw, you have to do the design work, you have to pull the permits, and the downtime between permitting and ordering is 6-8 months. Now if you buy and it’s empty, you’re paying your maintenance, your taxes, your electric bill for 6-8 months and you can’t even stay in the unit. And everybody in the high-end world has lived through a designing of an apartment or a home in their past.
The husbands are not fools, they know what their wives will spend. If they walk in the door and they get a number and it’s finished and the wife likes it, that’s 90% of the battle. The rest of the battle for the husband is not allowing the wife to go over a budget, which is also famous in my industry. So there’s a fixed number, you move in the next day if that’s what you wanna do, and you’re done. So there’s a big savings between the taxes, the maintenance, insurance and electric, and the use of the unit immediately is what we call instant gratification, and it definitely works.
Joe Fairless: When you approach brokers – or when brokers approach you – to help them move a property that hasn’t moved yet, or sell a property that hasn’t sold, to be more specific, you told us earlier that it has to be free and clear so that you’re not having to wait in line in case it never sells. What percentage of leads have a broker representing an owner who owns it free and clear?
Steven Gurowitz: 90%.
Joe Fairless: Welcome to Miami. [laughs]
Steven Gurowitz: Well, you’ve gotta remember, after the crash, Joe — before the crash you were a buyer, you could put 20% down and go for a mortgage, okay? So what happened in the crash – thousands of 20% buyers walked away. “Keep my 20%, I’m not closing the buy.” So who got hurt? The developers took a bloodbath. After that, the developers changed the modus operandi. By the time you close today on a luxury condominium in South Florida at any price, you have put up between 50% and 60% and in some cases more of the money and you’re not walking away. So now guys that might have bought three or four years ago when the market was red hot, now the market’s cooled down a bit – you know, it’s that cycle that South Florida goes through – and a building could close with 160 brand new apartments, nobody’s walking away because they have too much money at risk. Now 40 units can be up for sale the next week in a building with 160 units; there were 40-50 investors, or in some cases they could be half the project.
So now the realtors are looking for an edge as to how to get their client out. So if you had 5-6 million on the table, hard, cold cash, and the realtor said “Listen, I’ve got the best designer in town. His track record for selling empty real estate decorating it is unsurpassed. He’s gonna decorate the unit. We have a year to sell it, or pay whatever comes first”, the clients bite at the chance, because there’s no outlay of money. I outlay all the dollars, no matter how much it is.
I have a deal cooking in a project right now where an owner owns a penthouse and it’s a two and a half million dollar buildout, and I’m just waiting — he has approved, his realtors are ecstatic, I’m just waiting for the lawyers to sort of dot the i’s and cross the t’s… And I know – because I know the project like the back of my hand; I did 53 units for owners of the project – when this is decorated, this will sell for between 18 and 20 million dollars furnished.
Joe Fairless: How do you know what in this case — I mean, you said you have a high level of experience with this property… But for a property that is a one-off, how do you know how much to spend and where to spend it so that you do get the ROI back?
Steven Gurowitz: Okay, so rule of thumb in the high-end design world – 50%-65% of luxury condo buyers spend between 20% and 30% of the cost of the real estate to do the buildout, flooring, TV’s, sounds systems, finished. The average. Then there are people that spend 40%-50% because they just have the dollars, they want it over the top etc. So if I’ve got a five million dollar piece of real estate, it’s 1 to 1,25 million for the complete buildout, which is roughly 20%-25% of the cost of the real estate, and it makes it appetizing for anybody in that price point. And remember, and the richer and the higher the price, Joe, the more the luxury real estate will sell, because they don’t wanna go through the root canal and the downtime of six months, eight months, or whatever it could be. Instant gratification is an amazing word that just continues to fly by.
And keep in mind, in the last 44 years I do about 2-3 a year for myself, as a separate business. And believe me when I tell you, the only time I’m gonna say I had a lull was the first six months of ’08. After that, everything sold; it was just like it never happened, and there was an amazing bounce back. Everybody was jumping out of windows in January, and all of a sudden in South Florida, came May-June, it was like it never happened, and developers started raising prices all over town.
Joe Fairless: With it already being done for the buyer, it’s also a benefit that they can finance it, but do they finance these properties, or do they just pay in cash?
Steven Gurowitz: I’m gonna say 80% of our market here in South Florida is a cash buyer.
Joe Fairless: Okay.
Steven Gurowitz: But I will tell you, Joe, there’s a lot of out of country or off-shore buyers that would like a mortgage; they can’t get one from a conventional bank because they’re from Venezuela, or Argentina, or Brazil. There’s guys making a zillion dollars here in the hard money lending business, and they’re giving mortgages like [unintelligible [00:16:46].06] at 10%-11%.
Joe Fairless: Based on your experience as an entrepreneur/real estate investor, what is your best advice ever for other real estate investors?
Steven Gurowitz: I believe that the greatest time to buy luxury condominiums – because that is really the biggest part of the real estate world in South Florida – is to only purchase free construction. And I am a believer [unintelligible [00:17:16].12] pre-construction, because every developer wants to get to a certain pre-sale market, they’re flexible on price. And you can sit there and you can – let’s use the word ‘negotiate’ a better number. When you go into a project and you buy when it’s finished, you’re paying top dollar, and if you’re an investor, you’re not getting out and making money. You’ll get out, but the windfall is not gonna be there for an investor, Joe.
Joe Fairless: It’s such a smart business model, one because you’re in a luxury niche, and two, you’re solving problems for real estate brokers, for developers, and then also for the buyers, and you’re making money along the way and really giving them an offer they can’t refuse. Do you think this could be replicated if you lived in Boise, Idaho, or Houston, Texas, or Corpus Christi or somewhere like that?
Steven Gurowitz: I think it could be replicated anywhere in the United States, as long as you have as a designer the knowledge of the value of the real estate that you’re buying, versus the investment to flip. Certainly, Joe, if you’re buying a $250,000 condominium that’s a two-bedroom, you have to be cautious to what you spend on the fix-up, but I believe it’s a business model that could work anywhere. It’s all about the dollar investment and the wow factor.
We did a project in Miami, Joe – a guy builds a condominium building in downtown Miami. no parking. Think about what I just said – no parking. If you have a car, you’ve gotta find a lot to leave your car, or a meter on the streets, or figure that out.
Joe Fairless: That’s a problem for a luxury [unintelligible [00:19:01].04]
Steven Gurowitz: Yeah. And I’m gonna say luxury, but popular-priced. 450k, 550k, 650k. Those were the price points. So he came to me and he said “I want you to do 25 units.” We furnished 25 units for $18,000 a pop. He sold them overnight, because people walked in, even in that price point, and loved the fact that they could close and move right in. So I believe it’s all relevant to — I’ve got a monster project that people are talking to me now in New Orleans… Because our trucks go all over the country. So they came to me with a project, and I said to them, I said “Guys, I think you’re taking the wrong approach at this price point. And they looked at me and I said “Look, I’m doing this 44 years. I think I’m pretty glib. I say you should sell every one of these units furnished, and give the buyer five different looks to choose from, all in the same price point.”
Two days later I get a phone call, “We love your concept, let’s roll.” So again, I’m just waiting for contracts to be signed. Who takes the approach, try to do something different is the way I’ve always focused, not only for my real estate investing, but in my design business, which allows everything to happen. We’re doing between 100-125 residential design projects a year. Huge numbers. My staff is 82 at this point. We’re running six trucks. We just came back from the Hamptons in New York, we just finished a job in Kioa Island… People want the talent of the firm, and that leads to everything else. When you have a happy client, just like if you have a good real estate deal – everybody’s happy, and the broker does a great job. If you’re gonna do more real estate, you’re with that broker a second time, or third time.
We have people here that are doing the fifth, sixth, seventh job in 35 years with us.
Joe Fairless: Well, it sounds like it’s a no-brainer ROI on those deals. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Steven Gurowitz: I’ll do the best I can, Joe.
Joe Fairless: Alright, deal. First, a quick word from our Best Ever partners.
Joe Fairless: What’s the best ever book you’ve read?
Steven Gurowitz: The Art of War.
Joe Fairless: Oh yeah, good one.
Steven Gurowitz: By Sun Tzu. I couldn’t read it all at one time, Joe, because it was so complicated, but when I got through it, I actually read it a second and a third time, because I found things in that book that lent itself towards a business model, not only going to war. So I loved the book.
Joe Fairless: Another book I know you’d really like is by Robert Green, The 33 Laws of War. What is a mistake you made on a transaction?
Steven Gurowitz: Believing verbiage out of a developer’s mouth, rather than having it in black and white?
Joe Fairless: What happened?
Steven Gurowitz: 90% of what was promised was not delivered, and it was a big disappointment and I was lucky to get out with my pants, if you know what I’m saying. I closed [unintelligible [00:23:02].08] and all of the lifestyle never really happened, because there was a disclaimer kind of a thing in the contract, and I trusted. That was years ago, and I’ve learned from that if somebody makes a commitment or a promise, they shouldn’t be afraid to put it down in writing, as I do for my clients.
Joe Fairless: Best ever way you like to give back?
Steven Gurowitz: Joe, that is a very touchy subject for me, because without the hoopla, without my name having to be on a building, both personally and corporately, we are very philanthropic here… Whether it be to the [unintelligible [00:23:42].21] Foundation, whether it be to children’s autism… Last week the local newspaper (Miami Herald) put out a wishbook for Christmas; we donated a custom wheelchair for $8,800 for a young boy struggling with his parents. We have done huge hurricane relief, we have run our tractor trailers to [unintelligible [00:24:04].12] to New Orleans when they were hit; we ran tractor trailers to Baton Rouge, Louisiana, we ran to New York and New Jersey, not once, twice. We teamed up with Channel 10, they went out on the air, we filled up 53-foot tractor trailers, had the Florida Highway Patrol escort us so our trucks didn’t have to stop at weigh stations, so we would get to the North-East in 22 hours. That is what I call karma, to be able to give back when you’re blessed, and we’ve been very blessed and fortunate here in Florida.
Joe Fairless: How can the Best Ever listeners learn more about your company?
Steven Gurowitz: They could feel free to call. I love to talk to people. I’m probably the most reachable designer in the industry. They could call my cell phone at 954-592-3332 or text me, seven days and seven nights. The phone is never off.
Joe Fairless: Well, Steven, thank you for being on the show. It’s a beautiful business model (pun intended) and it’s an approach where you’re dealing with the luxury market and you’re solving problems for real estate brokers, because it helps them sell a property faster for owners who have a property that hasn’t sold, because that helps them get the sale done faster… For developers and then for luxury buyers, because it’s a turnkey operation and they don’t have to worry about hiring contractors after they move in. Then for all the poor luxury buyers, they can finance those costs versus having to pay out of pocket.
Steven Gurowitz: Joe, [unintelligible [00:25:42].04] thanks you. I’m honored to be on this show.
Joe Fairless: Thanks for being on the show, my friend. I hope you have a best ever day, and we’ll talk to you soon.
Steven Gurowitz: You too.Follow Me: