Restaurant owner tells why he is diving more into FM real estate | Daily Democrat
He likes the direction Fort Madison is heading and because of that, he continues to invest in the city’s future.
Chase Gibs is already invested as the owner of Buffalo61 in Fort Madison and the Buffalo Tavern in Burlington, and with his Fork Catering Co. A few months ago he purchased the Schoolhouse Apartments in the 1800 block of Avenue F in Fort Madison for $2.2 million. More recently, he has purchased the 37-unit Bel Air Apartments in Burlington and an 8-acre property across from Iowa State Penitentiary.
“When I started with the restaurants I really wanted to diversify my investments a lot and the way I did that was through real estate,” Gibbs told Rotarians earlier this week.
He said with inflation and the current economic climate, the restaurant business is tough.
“You’re lucky to have restaurants open in your community, so I encourage you to go to them. I’m not saying that just for mine, but any restaurants, because it’s a tough business right now. But real estate has done very well for me.”
He said restaurants are facing a 20% or more increase in food prices and are having to pay higher wages.
“My line cooks were making $12 an hour, but just to keep those cooks you now have to pay them $14 to $15 an hour.”
In addition to the before-mentioned investments, Gibbs says he purchases houses, invests to upgrade them, then sell them at a profit.
He said higher interest rates and the economy have caused mortgage applications to slow.
“People are not out looking for homes like they were even two or three months ago, so if you have a property you want to sell you better list it now because as the interest rates keep creeping up like this what’s going to happen is you’re going have people looking less, or that are unable to get approved or make the payments.”
He said real estate remains the better investment as opposed to stocks.
“We’ve all gotten hit by the stock market lately. I’ve got money in the stock market and it sucks because now I have to leave it there and hope everything goes back up.”
However, unlike the stock market, Gibbs said he is looking to invest in real products — like real estate, and while he resides in Burlington, he’s particularly attracted to Fort Madison. He said things like the marina project and Mayor Matt Mohrfeld’s push to add 1,000 new residents to the city in four years will attract investors like himself.
“I mean, if Fort Madison is going to make a push to increase its population by a thousand people, those people have to have someplace to live, right?”
He said a prime opportunity for an investor is to buy some of the houses in the city that need some work, invest to upgrade those homes, and then sell them to these new residents.
“Right now, it’s a a lot cheaper to buy a house that’s sitting, even if it’s decrepit, and flip that house into something that livable than building a new house.”
He said he recently purchased a house in Fort Madison for $32,000 and anticipates having to put $10,000 or so into it, but then expects to sell it for about $75,000.
He said transforming those homes into rental properties or acquiring apartments will also prove to be a good investment, particularly for higher-end properties. Those properties, he said, emend to have more reliable tenants and less turnover.
Staffing Woes Plague Businesses
He said he recently closed a restaurant in Monmouth, Ill. – and it wasn’t because it wasn’t making money. He said staffing issues forced its doors to close.
“We’re all dealing with staffing issues and I don’t think this is going to change. If the staffing issues are like this now, what is going to be like in 10 years? I am 43 years old. I will not own two restaurants when I’m 53 because the staffing horrible.”
He said virtually every type of business is dealing with staffing issues – trying to find qualified, dependable applicants with a work ethic.
In the restaurant business, these issues are resulting in automated ordering machines and smaller menus.
“Because the people that are working for us now are people we wouldn’t consider even interviewing three years ago, and that’s across the country. Not only that, if we would have hired them, we would have paid them $9 an hour. Now we’ve got to pay them $15 an hour and they still show up 15 minutes late and we can’t say anything to them, otherwise they’ll walk out the door and quit.”
When asked why he believes these staffing issues have surfaced, Gibbs said “that’s the million dollar question, nobody knows.” However, while he doesn’t like diving into politics, he did say the pandemic likely played a role.
“When you give a whole bunch people a whole bunch of free money, boy, they sure like that, and it makes it really hard to go back to work. When you leave everybody at home for two years and tell them they can’t go out in public then boy, they say ‘I don’t want get off this couch anymore. I’ve gotten pretty used to eating Cheetos and watching Netflix.’”
One Rotarian asked whether the 2 million immigrants entering the U.S. might help the staffing situation and added that often this sector will work for lower wages.
“Again I don’t want to get into politics, but I will say at this point, as a business owner, just legalize all of them and let them work for me because I need somebody.”
He said these immigrants are here anyway so legalizing them would allow them to work and pay taxes.
When he was attending a school in San Francisco, he found immigrants there, largely from Mexico, to be hard working. Many would work an 8-hour shift at one restaurant and then leave to work another 8-hour shift elsewhere.